Document:

EX-4.4

Exhibit 4.4

2008 EQUITY INCENTIVE PLAN

Approved by Stockholders on May 2, 2008

Termination Date: May 1, 2018

1. PURPOSE

1.1 General Purpose.  The purpose of the Plan, which will serve as the successor to
the Company’s Amended and Restated 2000 Equity Incentive Plan (the “2000 Plan”), is to
promote the success of Heartland Payment Systems, Inc. (the “Company”) by creating an
incentive compensation arrangement that will assist the Company and its Affiliates in
(i) encouraging ownership in the Company by service personnel, and thereby encouraging such
persons to act in the stockholders’ interest, and (ii) attracting and retaining service
personnel with exceptional abilities.

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

1.3 Available Awards.  The types of Awards that may be granted under the Plan
include, but are not limited to: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Restricted Stock Bonuses, (iv) Stock Appreciation Rights, (v) Phantom Stock
Units, (vi) Restricted Stock Units, (vii) Performance Share Bonuses, (viii) Performance
Share Units and (ix) Performance Cash Bonuses.

2. DEFINITIONS

2.1 “Administrator”  means the Board, any Committee or such delegates as shall be
administering the Plan in accordance with Section 3 of the Plan.

2.2 “Affiliate”  means an entity that is directly or indirectly controlled by the Company or
any entity in which the Company has significant ownership interest as determined by the
Administrator.

2.3 “Applicable Laws”  means the requirements relating to the administration of stock option
and stock award plans under U.S. federal and state laws, any stock exchange or quotation
system on which the Company has listed or submitted for quotation the Common Stock to the
extent provided under the terms of the Company’s agreement with such exchange or quotation
system and, with respect to Awards subject to the laws of any foreign jurisdiction where
Awards are, or will be, granted under the Plan, the laws of such jurisdiction.

 

 

2.4 “Award” means an Option, Stock Award or Performance Cash Bonus granted in accordance
with the terms of the Plan.

2.5 “Awardee”  means an Employee, Consultant or Director of the Company or any Affiliate who
has been granted an Award under the Plan.

2.6 “Award Agreement”  means a Cash Award Agreement, Stock Award Agreement and/or Option
Agreement, which may be in written or electronic format, in such form and with such terms
and conditions as may be specified by the Administrator, evidencing the terms and conditions
of an individual Award. Each Award Agreement is subject to the terms and conditions of the
Plan.

2.7 “Beneficial Owner”  shall have the meaning ascribed to such term in Rule 13d-3
promulgated under the Exchange Act.

2.8 “Board”  means the board of directors of the Company.

2.9 “Cause”  shall have the meaning ascribed in any individual written agreement between the
Company or any of its Affiliates and the Awardee with respect to Awards subject to such
individual agreement. If no definition of the term Cause is set forth in such an individual
written agreement, “Cause”  shall include but not be limited to, insubordination,
dishonesty, other significant misconduct of any kind and the refusal to perform Awardee’s
duties and responsibilities for any reason other than illness or incapacity.

2.10 “Change of Control”  means the occurrence of any of the following events:

(a) The sale, exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to a “person”
or “group” (as such terms are defined or described in Sections 3(a)(9), 13(d)(3) or
14(d)(2) of the Exchange Act);

(b) Any person or group is or becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the total voting power of the voting stock of the Company (or
any successor to all or substantially all of the assets of the Company or any entity
which controls the Company), including by way of merger, consolidation or otherwise;

(c) Either a merger or consolidation of the Company with or into another person (as
defined by Section 13(d) or 14(d) of the Exchange Act) if the stockholders of the
Common Stock of the Company immediately prior to such transaction are not the
Beneficial Owners of a majority of the outstanding common stock of the surviving
company or its parent immediately after the transaction;

(d) During any period of two (2) consecutive years, individuals who at the beginning
of such period constituted the Board (together with any new Directors whose election
by such Board or whose nomination for election by the stockholders of the Company
was approved by a vote of at least two-thirds of the Directors of the Company then
still in office, who were either Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board then in office; or

 

 

(e) A dissolution or liquidation of the Company.

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

2.12 “Committee”  means a committee of one or more members of the Board (or other
individuals who are not members of the Board to the extent allowed by Applicable
Law) appointed by the Board in accordance with Section 3.1 of the Plan.

2.13 “Common Stock”  means the common stock of the Company, par value $0.001 per share.

2.14 “Company”  means Heartland Payment Systems, Inc., a Delaware corporation.

2.15 “Consultant”  means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services
or (ii) who is a member of the board of directors of the Company whether compensated for
such services or not.

2.16 “Continuous Service”  means that the Awardee’s service with the Company or an
Affiliate, whether as an Employee, Director, or Consultant, is not interrupted or
terminated, as determined in the sole discretion of the Administrator. The Awardee’s
Continuous Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Awardee renders service to the Company or an Affiliate as an Employee,
Consultant, or Director, or a change in the entity for which the Awardee renders such
service, provided that there is no interruption or termination of the Awardee’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 may determine whether Continuous Service shall be considered interrupted in
the case of any given leave of absence; provided, however, that for purposes of the Plan
(i) a leave of absence, duly authorized in writing by the Company for military leave or
sickness, or for any other purpose approved by the Company if the period does not exceed
ninety (90) days, and (ii) in the case of an Employee, a leave of absence in excess of
ninety (90) days, duly authorized in writing by the Company, provided the Employee’s right
to employment is guaranteed either by statute or contract, shall not be considered an
interruption of Continuous Service. For Incentive Stock Option purposes, an Awardee’s
Continuous Service will be deemed to have been interrupted when the Awardee ceases to be an
employee of the Company or a Subsidiary as determined in accordance with Section 3401(c) of
the Code and the regulations promulgated thereunder.

2.17 “Conversion Award”  shall mean an Award issued by the Company in assumption of, or in
substitution or exchange for, awards previously granted by an entity acquired by the Company
or any Subsidiary.

2.18 “Covered Employee”  means an officer of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code, as such determination may be amended from time to time.

2.19 “Director”  means a member of the Board of Directors of the Company.

2.20
“Disability”  means the permanent and total disability of a person within the meaning
of Section 22(e)(3) of the Code for all Incentive Stock Options. For all other Awards,
“Disability”

 

 

means the Awardee (a) is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not less than
twelve (12) months or (b) is
qualified to receive long-term disability benefits under an applicable accident and health
plan of the Company or an Affiliate.

2.21 “Dividend Equivalent”  means a credit, made at the discretion of the Administrator, to
the account of a Participant in an amount equal to the cash dividends paid on one (1) share
of Common Stock for each share of Common Stock represented by a Full-Value Stock Award held
by such Participant.

2.22 “Employee”  means any person employed by the Company or an Affiliate. Service as a
Director or compensation by the Company or an Affiliate solely for services as a Director
shall not be sufficient to constitute “employment” by the Company or an Affiliate. The
Administrator shall determine whether or not the chairman of the Board qualifies as an
“Employee.” Within the limitations of Applicable Law, the Administrator shall have the
discretion to determine the effect upon an Award and upon an individual’s status as an
Employee in the case of (i) any individual who is classified by the Company or its Affiliate
as leased from or otherwise employed by a third party or as intermittent or temporary, even
if any such classification is changed retroactively as a result of an audit, litigation or
otherwise, and (ii) at the request of the Company or an Affiliate an Employee becomes
employed by any partnership, joint venture or corporation not meeting the requirements of an
Affiliate in which the Company or an Affiliate is a party.

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

2.24 “Fair Market Value”  means, as of any date, the value of a Share of Common Stock or
other property as determined by the Administrator, in its discretion, or by the Company, in
its discretion, if such determination is expressly allocated to the Company herein, subject
to the following:

(a) If the Common Stock is listed on a national or regional securities exchange or
market system, including without limitation the NASDAQ Stock Market, the Fair Market
Value of a Share of Common Stock shall be the closing sales price for such stock, as
quoted on such exchange or market constituting the primary market for the Common
Stock on the date of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable. If the relevant date does not
fall on a day on which the Common Stock has traded on such securities exchange or
market system, the date on which the Fair Market Value shall be established shall be
the last day on which the Common Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Administrator, in its
discretion.

(b) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common Stock
shall be the mean between the high bid and low asked prices for the Common Stock on
the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable.

(c) In the absence of such markets for the Common Stock, the Fair Market Value shall
be determined in good faith by the Administrator.

 

 

(d) Notwithstanding the foregoing, the Fair Market Value of the Common Stock shall
at all times be determined in a manner consistent with the regulations under Section
409A of the Code, as they may be amended from time to time, with respect to Awards
issued to Participants subject to Section 409A of the Code.

2.25 “Full-Value Stock Award”  shall mean any of a Restricted Stock Bonus award, Restricted
Stock Unit award, Phantom Stock Unit award, Performance Share Bonus award, or Performance
Share Unit award.

2.26 “Grant Date”  means, for all purposes, the date on which the Administrator approves the
grant of an Award, or such later date as is determined by the Administrator, provided that
in the case of any Incentive Stock Option, the grant date shall be the later of the date on
which the Administrator makes the determination granting such Incentive Stock Option or the
date of commencement of the Awardee’s employment relationship with the Company.

2.27 “Harmful Conduct”  means a breach in any material respect of an agreement not to reveal
confidential information regarding the business operations of the Company or any Affiliate,
or to refrain from solicitation of customers, suppliers or employees of the Company or any
Affiliate.

2.28 “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.

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

2.30 “Nonstatutory Stock Option”  means an Option not intended to qualify as an Incentive
Stock Option.

2.31 “Officer”  means 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.

2.32 “Option”  means a right granted under Section 6 to purchase a number of Shares at such
exercise price, at such times, and on such other terms and conditions as are specified in
the agreement or other documents evidencing the Option (the “Option Agreement”). Both
Options intended to qualify as Incentive Stock Options and Nonstatutory Stock Options may be
granted under the Plan.

2.33 “Outside Director”  means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations
promulgated under Section 162(m) of the Code), is not a former employee of the Company or an
“affiliated corporation” receiving compensation for prior services (other than benefits
under a tax

 

 

qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving direct or indirect remuneration from
the Company or an
“affiliated corporation” for services in any capacity other than as a Director; or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

2.34 “Participant”  means the Awardee or any person (including any estate) to whom an Award
has been assigned or transferred as permitted hereunder.

2.35 “Performance Cash Bonus”  means a bonus opportunity awarded under Section 7 pursuant to
which a Participant may become entitled to receive an amount based on the satisfaction of
such performance criteria as are specified in the agreement or other documents evidencing
the Award (the “Cash Award Agreement”).

2.36 “Performance Share Bonus”  means a grant of Shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration, and subject to the
provisions of Section 8.6 of the Plan.

2.37 “Performance Share Unit”  means the right to receive one (1) Share of the Company’s
Common Stock at the time the Performance Share Unit vests, subject to the provisions of
Section 8.7 of the Plan.

2.38 “Phantom Stock Unit”  means the right to receive the value of one (1) Share of the
Company’s Common Stock, subject to the provisions of Section 8.4 of the Plan.

2.39 “Plan”  means this Heartland Payment Systems, Inc. 2008 Equity Incentive Plan.

2.40 “Qualifying Performance Criteria”  shall have the meaning set forth in Section 12.2(a)
of the Plan.

2.41 “Restricted Stock Bonus” means a grant of Shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration, subject to the
provisions of Section 8.2 of the Plan.

2.42 ”Restricted Stock Unit” means the right to receive one (1) Share of the Company’s
Common Stock at the time the Restricted Stock Unit vests, subject to the provisions of
Section 8.5 of the Plan.

2.43 “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.

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

2.45 “Share”  means one (1) share of the Common Stock, as adjusted in accordance with
Section 13 of the Plan.

2.46 “Stock Appreciation Right”  means the right to receive an amount equal to the Fair
Market Value of one (1) Share of the Company’s Common Stock on the day the Stock
Appreciation Right is exercised and redeemed, reduced by the deemed exercise price or base
price of such right, subject to the provisions of Section 8.3 of the Plan.

 

 

2.47 “Stock Award”  means an award or issuance of Shares, Restricted Stock Bonus award,
Stock Appreciation Right award, Phantom Stock Unit award, Restricted Stock Unit award,
Performance Share Bonus award, Performance Share Unit award, or other stock-based award made
under Section 8 of the Plan, the grant, issuance, retention, vesting, settlement, and/or
transferability of which is subject during specified periods of time to such conditions
(including continued employment or performance conditions) and terms as are expressed in the
agreement or other documents evidencing the Award (the “Stock Award Agreement”).

2.48 “Subsidiary”  means any subsidiary corporation of the Company, whether now or hereafter
existing, as such term is defined in Section 424(f) of the Code.

2.49 “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 ten percent (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 Procedure.

(a) Multiple Administrative Bodies.   The Plan shall be administered by the
Board, a Committee and/or their delegates.

(b) Section 162(m).   To the extent that the Administrator determines it to
be desirable to qualify Awards granted hereunder as “performance-based compensation”
within the meaning of Section 162(m) of the Code, Awards to Covered Employees or
Employees that the Administrator determines may be Covered Employees in the future
shall be made by a Committee of two or more Outside Directors.

(c) Rule 16b-3.   To the extent desirable to qualify transactions hereunder
as exempt under Rule 16b-3, Awards to Officers and Directors shall be made by the
entire Board or a Committee of two or more Non-Employee Directors.

(d) Delegation of Authority.   The Board or a Committee may delegate to an
authorized officer or officers of the Company the power to approve Awards to persons
eligible to receive Awards under the Plan who are not (i) subject to Section 16 of
the Exchange Act or (ii) at the time of such approval, Covered Employees or
(iii) any other executive officer. Except to the extent prohibited by Applicable
Law, the Administrator may delegate to one or more individuals the day-to-day
administration of the Plan and any of the functions assigned to it in this Plan.
Such delegation may be revoked at any time.

(e) Compliance with Listing Requirements.   The Plan will be administered in
a manner that complies with any applicable NASDAQ or stock exchange listing
requirements.

3.2 Powers of the Administrator.   Subject to the provisions of the Plan and, in the
case of a Committee or delegates acting as the Administrator, subject to the specific duties
delegated to such Committee or delegates, the Administrator shall have the authority, in its
discretion:

 

 

(a) To determine from time to time which of the persons eligible under the Plan
shall be granted Awards; when and how each Award shall be granted; what type or
combination of types of Awards shall be granted; the provisions of each Award
granted (which need not be identical), including the number of Shares of Common
Stock or amount of cash to be covered by each Award granted hereunder, the exercise
and/or purchase price (if applicable), the vesting schedule, any vesting and/or
exercisability acceleration or waiver of forfeiture restrictions, the acceptable
forms of consideration, the time or times when a person shall be permitted to
receive cash and/or Common Stock pursuant to an Award (which may or may not be based
on performance criteria), the term, and any restriction or limitation regarding any
Award or the Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine and may be established at the
time an Award is granted or thereafter.

(b) To construe and interpret the Plan and Awards granted under it, and to
establish, amend and revoke rules and procedures for its administration, including
rules and procedures relating to sub-plans, Plan addenda and Conversion Awards. The
Administrator, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Award Agreement, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.

(c) To amend the Plan or an Award as provided in Section 14 of the Plan.

(d) To adopt rules and procedures (including sub-plans and/or special
provisions) relating to the operation and administration of the Plan to accommodate
the specific requirements of local laws and procedures of a jurisdiction other than
and outside of the United States, including without limitation determining: (i)  the
exercise or redemption price of Awards, (ii) the definition of “Fair Market Value”
for purposes of the Plan, (iii) the applicable vesting schedule, (iv) the
permissible methods of exercise, (v) the conversion of local currency, withholding
procedures and handling of stock certificates which vary with local requirements,
(vi) the procedure for designating a beneficiary in the event of a Participant’s
death, if such designation is to be permitted, (vii) the term of an Award, and
(viii) the terms and conditions of the applicable Award Agreement. Such rules and
procedures may take precedence over other provisions of the Plan, with the exception
of Section 4 and Section 11 of the Plan; however, unless otherwise superseded by the
terms of such rules and procedures, the provisions of the Plan shall govern.

(e) To authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Award previously granted by the
Administrator.

(f) To determine whether Awards will be settled in shares of Common Stock, cash or
in any combination thereof.

(g) To determine whether Full-Value Stock Awards, but not Options or Stock
Appreciation Rights, will be adjusted for Dividend Equivalents.

(h) To impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or other
subsequent transfers by the Participant of any shares of Common Stock issued as a
result of or under an

 

 

Award, including, without limitation, (i) restrictions under an insider trading
policy or under any other Company policy relating to Company stock and stock
ownership and (ii) restrictions as to the use of a specified brokerage firm for such
resales or other transfers.

(i) To provide, either at the time an Award is granted or by subsequent action, that
an Award shall contain as a term thereof, a right, either in tandem with the other
rights under the Award or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of shares of Common Stock, cash or a
combination thereof, the amount of which is determined by reference to the value of
the Award.

(j) To allow Participants to satisfy any U.S. federal, state, local, or foreign tax
withholding obligation relating to the grant, issuance, vesting, exercise or
settlement of 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: (i) tendering a cash payment; (ii) authorizing the
Company to withhold Shares of Common Stock from the Shares of Common Stock otherwise
issuable to the Participant, 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; or (iii) subject to the provisions of Section 12.6(d) below, delivering to the
Company Shares of Common Stock owned by such Participant and unencumbered.

(k) Generally, to exercise such powers and to perform such acts as the Administrator
deems necessary, desirable, convenient or expedient to promote the best interests of
the Company that are not in conflict with the provisions of the Plan.

3.3 Effect of Administrator’s Decision.   All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules and regulations under the
Plan and the terms and conditions of any Award granted hereunder, shall be final and binding
on all Participants and on all other persons. The Administrator shall consider such factors
as it deems relevant, in its sole and absolute discretion, to making such decisions,
determinations and interpretations including, without limitation, the recommendations or
advice of any officer or other employee of the Company and such attorneys, consultants and
accountants as it may select.

4. SHARES SUBJECT TO THE PLAN

4.1 Share Reserve.   

(a) Subject to the provisions of Section 13 of the Plan relating to adjustments upon
changes in Common Stock, the maximum aggregate number of Shares of Common Stock that
may be issued pursuant to Awards shall not exceed 7,250,000 Shares (the “Share
Reserve”), minus (x) one (1) Share of Common Stock for every one (1) Share of Common
Stock that was subject to outstanding Options or Stock Appreciation Rights under the
2000 Plan granted between January 1, 2008 and the Effective Date, and (y) two and
seven tenths (2.7) Shares for every one (1) Share of Common Stock that was subject
to outstanding Full-Value Awards under the 2000 Plan granted between January 1, 2008
and the Effective Date. After the Effective Date, no awards may be granted under the
2000 Plan. Notwithstanding any other provision of the Plan to the contrary, the
maximum aggregate number of Shares of Common Stock that may be issued under the

 

 

Plan pursuant to Incentive Stock Options is 7,250,000 Shares of Common Stock (“ISO
Limit”), subject to the adjustments provided for in Section 13 of the Plan.

(b) Each Share of Common Stock issued pursuant to an Option shall reduce the Share
Reserve by one (1) Share; each Share of Common Stock issued pursuant to an exercised
or redeemed portion of a Stock Appreciation Right shall reduce the Share Reserve by
one (1) Share; and each Share of Common Stock issued pursuant to a Full-Value Stock
Award shall reduce the Share Reserve by two and seven tenths (2.7) Shares (for each
such Option, Stock Appreciation Right or Full-Value Award, as applicable, the
“Reserve Deduction Rate”).

(c) Notwithstanding the foregoing, the Share Reserve shall not be reduced in the
case of issuance of Conversion Awards. Additionally, in the event that an entity
acquired by the Company or any Subsidiary or with which the Company or any
Subsidiary combines has shares available under a pre-existing plan approved by the
stockholders of such entity and not adopted in contemplation of such transaction,
the shares available for grant pursuant to the terms of such pre-existing plan (as
adjusted, to the extent appropriate, using the exchange ratio or other adjustment or
valuation ratio or formula used in such transaction to determine the consideration
payable to the holders of common stock of the entities party to such transaction)
may be used for Awards under the Plan and shall not reduce the Share Reserve;
provided that the issuance of such Awards shall comply in all cases with NASD Rule
4350(i)(1)(A).

4.2 Reversion of Shares to the Share Reserve.   If any Award granted under the Plan
or the 2000 Plan shall for any reason (i) expire, be cancelled, be settled in cash (in whole
or in part), or otherwise terminate, in whole or in part, without having been exercised or
redeemed in full, (ii) be reacquired by the Company prior to vesting, or (iii) be
repurchased at cost by the Company prior to vesting, the Shares of Common Stock that are
terminated or acquired under such Award shall revert or be added to the Share Reserve using
the same Reserve Deduction Rate as set forth in Section 4.1(b) above, and thereafter, become
available for issuance under the Plan. Notwithstanding the foregoing, Shares of Common Stock
(whether awarded under the Plan or the 2000 Plan) shall not revert nor be added back to the
Share Reserve, and such Shares shall not thereafter become available for issuance under the
Plan upon or in respect of: (a) Shares tendered in payment, in whole or in part, of the
exercise price of Options, (b) Shares withheld by the Company to satisfy any tax withholding
obligation, and (c) Shares repurchased by the Company on the open market using option
exercise proceeds.

4.3 Source of Shares.   The Shares of Common Stock subject to the Plan may be
unissued Shares or reacquired Shares, bought on the market or otherwise, subject to the
limitations set forth in Section 4.2 of the Plan.

4.4 Annual Section 162(m) Limitation.   Subject to the provisions of Section 13 of
the Plan relating to adjustments upon changes in the Shares of Common Stock, solely for
purposes of Awards intended to comply with Code Section 162(m), no Participant shall be
eligible to be granted Incentive Stock Options, Nonstatutory Stock Options or Stock
Appreciation Rights covering more than 1,812,500 Shares of Common Stock during any fiscal
year, and no Participant shall be eligible to receive Restricted Stock Bonus awards,
Restricted Stock Unit awards, Phantom Stock Unit awards, Performance Share Bonus awards or
Performance Share Unit awards covering more than 671,296 Shares of Common Stock during any
fiscal year; provided that in connection with his or her first commencing service with the
Company or an Affiliate, an

 

 

Awardee may be granted Options or Stock Appreciation Rights covering not more than an
additional 1,812,500 Shares of Common Stock, and Restricted Stock Bonus awards, Restricted
Stock Unit awards, Phantom Stock Unit awards, Performance Share Bonus awards or Performance
Share Unit awards covering not more than an additional 671,296 Shares of Common Stock,
during the year in which such service commences, which shall not count against the limit set
forth in the preceding sentence. Notwithstanding anything to the contrary in the Plan, the
limitations set forth in this Section 4.4 shall be subject to adjustment under Section 13 of
the Plan only to the extent that such adjustment will not affect the status of any Award
intended to qualify as “performance based compensation” under Code Section 162(m).

5. ELIGIBILITY

5.1 Eligibility for Specific Awards.   Incentive Stock Options may be granted only
to Employees of the Company or a Subsidiary of the Company. 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 one hundred ten
percent (110%) of the Fair Market Value of the Common Stock at the Grant Date and the Option
is not exercisable after the expiration of five (5) years from the Grant Date.

5.3 Consultants.   A Consultant shall not be eligible for the grant of an Award if,
at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form
S-8”) is not available to register either the offer or the sale of the Company’s securities
to such Consultant because of the nature of the services that the Consultant is providing to
the Company, or because the Consultant is not a natural person, or as otherwise provided by
the rules governing the use of Form S-8, unless the Company determines both (1) that such
grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form
S-3 Registration Statement) or (B) does not require registration under the Securities Act in
order to comply with the requirements of the Securities Act, if applicable, and (2) that
such grant complies with the securities laws of all other relevant jurisdictions. (Form S-8
generally is available to consultants and advisors only if (A) they are natural persons;
(B) they provide bona fide services to the issuer, its parent or its majority owned
subsidiaries; and (C) the 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 issuer’s securities.)

6. OPTION PROVISIONS

6.1 Option Agreement.   Each Option shall be in such form and shall contain such
terms and conditions as the Administrator shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory 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. The
provisions of separate Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the substance of
each of the following provisions:

6.2 Term.   Subject to the provisions of Section 5.2 of the Plan regarding grants of
Incentive Stock Options to Ten Percent Stockholders, no Option shall be exercisable after
the expiration of five (5) years from the Grant Date or such shorter term as may be provided
in the Award

 

 

Agreement. In the absence of a provision to the contrary in the individual Awardee’s Option
Agreement, the term of the Option shall be five (5) years from the Grant Date.

6.3 Exercise Price of an Option.   Subject to the provisions of Section 5.2 of the
Plan regarding Ten Percent Stockholders and the provisions of Section 3.2(d) of the Plan
regarding terms applicable to non-U.S. Participants, the exercise price of each Option shall
be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to a Conversion Award or otherwise in a manner
satisfying the provisions of Section 424 of the Code.

6.4 Consideration.   The purchase price of Common Stock acquired pursuant to an
Option shall be payable, to the extent permitted by Applicable Law, by any of the following
methods, as determined at the discretion of the Administrator and set forth in an Option
Agreement:

(a) in cash or by check or wire transfer at the time the Option is exercised
(denominated in U.S. dollars);

(b) subject to the Company’s discretion to refuse for any reason and at any time to
accept such consideration and subject to any conditions or limitations established
by the Administrator, other Shares held by the Participant which have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares
as to which said Option shall be exercised;

(c) consideration received by the Company under a broker-assisted sale and
remittance program acceptable to the Administrator;

(d) cashless “net exercise” arrangement pursuant to which the Company will reduce
the number of Shares issued upon exercise by the largest whole number of Shares
having an aggregate Fair Market Value that does not exceed the aggregate exercise
price; provided that the Company shall accept a cash or other payment from the
Participant to the extent of any remaining balance of the exercise price not
satisfied by such reduction in the number of whole Shares to be issued;

(e) any other form of consideration or method of payment permitted by Applicable
Law; or

(f) by some combination of the foregoing.

6.5 Transferability of an Incentive Stock Option.   An Incentive Stock Option shall
not be transferable except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Awardee only by the Awardee.

6.6 Transferability of a Nonstatutory Stock Option.   A Nonstatutory Stock Option
issued under this Plan shall be transferable only to the extent the Administrator, in its
sole discretion, permits such Nonstatutory Stock Option to be assigned or transferred for
estate planning purposes, subject to the applicable limitations set forth in the General
Instructions to Form S-8 Registration Statement under the Securities Act and any other
requirements of Applicable Law. Any such permitted transfers shall require the transferee to
become subject to all of the terms and

 

 

conditions applicable to the Awardee, including, but not limited to, the terms and
conditions set forth in this Plan and the applicable Option Agreement. If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Awardee only by the Awardee.

6.7 Vesting Generally.   Options granted under the Plan shall be exercisable at such
time and upon such terms and conditions as may be determined by the Administrator. The
vesting provisions of individual Options may vary. The provisions of this Section 6.7 are
subject to any Option provisions governing the minimum number of Shares of Common Stock as
to which an Option may be exercised.

6.8 Termination of Continuous Service.   In the event an Awardee’s Continuous
Service terminates (other than upon the Awardee’s death or Disability), the Awardee may
exercise his or her Option (to the extent that the Awardee was entitled to exercise such
Option as of the date of termination) but only within such period of time as is specified in
the Option Agreement (and in no event later than the expiration of the term of such Option
as set forth in the Option Agreement). If, after termination, the Awardee does not exercise
his or her Option within the time specified in the Option Agreement, the Option shall
terminate. In the absence of a provision to the contrary in the individual Awardee’s Option
Agreement, the Option shall remain exercisable for a period of (i) one (1) month in the case
of a voluntary termination, and (ii) three (3) months in the case of an involuntary
dismissal other than for Cause, following the termination of the Awardee’s Continuous
Service, subject to the provisions of Section 12.9.

6.9 Extension of Termination Date.   An Awardee’s Option Agreement may also provide
that if the exercise of the Option following the termination of the Awardee’s Continuous
Service (other than upon the Awardee’s death or Disability or termination for Cause) would
be prohibited at any time solely because the issuance of Shares of Common Stock would
violate the registration requirements under the Securities Act or other applicable
securities laws, then the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the Option Agreement and (ii) the expiration of a period of
three (3) months after the termination of the Awardee’s Continuous Service during which the
exercise of the Option would not be in violation of such registration requirements or other
applicable securities law. The provisions of this Section 6.9 notwithstanding, in the event
that a sale of the Shares of Common Stock received upon exercise of his or her Option would
subject the Awardee to liability under Section 16(b) or Rule 10b-5 of the Exchange Act, then
the Option will terminate on the earlier of (A) the fifteenth (15th) day after
the last date upon which such sale would result in liability, or (B) two hundred ten
(210) days following the date of termination of the Awardee’s Continuous Service (and in no
event later than the expiration of the term of the Option).

6.10 Disability of Awardee.   In the event that an Awardee’s Continuous Service
terminates as a result of the Awardee’s Disability, the Awardee may exercise his or her
Option to the extent that the Awardee was entitled to exercise such Option as of the date of
termination, but only within such period of time as is specified in the Option Agreement
(and in no event later than the expiration of the term of such Option as set forth in the
Option Agreement). If, after termination, the Awardee does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate. In the
absence of a provision to the contrary in the individual Awardee’s Option Agreement, the
Option shall remain exercisable until the earlier of (A) six (6) months following
termination of Awardee’s Continuous Service as a result of the Awardee’s Disability, or
(B) the expiration of the term of such Option.

 

 

6.11 Death of Awardee.   In the event (i) an Awardee’s Continuous Service terminates
as a result of the Awardee’s death or (ii) the Awardee dies within the post-termination
exercise period (if any) specified in the Option Agreement after the termination of the
Awardee’s Continuous Service for a reason other than death, then, subject to the terms of
the applicable Option Agreement, the Option may be exercised (to the extent the Awardee was
entitled to exercise such Option as of the date of death) by the Awardee’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 Awardee’s death pursuant to Section 12.10
of the Plan, but only within such period of time as is specified in the Option Agreement
(and in no event later than 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 in
the Option Agreement, the Option shall terminate. In the absence of a provision to the
contrary in the individual Awardee’s Option Agreement, the Option shall remain exercisable
until the earlier of (A) twelve (12) months following termination of Awardee’s Continuous
Service as a result of the Awardee’s death, or (B) the expiration of the term of such
Option.

6.12 Termination of Unvested Options.   Unless otherwise specified in the applicable
Option Agreement, and subject to Sections 6.10, 6.11 and 12.1 of the Plan, any Option or
portion thereof that is not vested at the time of termination of Continuous Service shall
lapse and terminate, and shall not be exercisable by the Optionee or any other person.

6.13 Early Exercise Generally Not Permitted.   The Company’s general policy is not
to allow the Awardee to exercise the Option as to any part or all of the Shares of Common
Stock subject to the Option prior to the vesting of the Option. If, however, an Option
Agreement does permit such early exercise, any unvested Shares of Common Stock so purchased
may be subject to a repurchase option in favor of the Company or to any other restriction
the Administrator determines to be appropriate.

6.14 Incentive Stock Option $100,000 Limitation.   To the extent that the aggregate
Fair Market Value (determined at the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Awardee during any
calendar year (under all plans of the Company and its Affiliates) exceeds one hundred
thousand dollars ($100,000), or such other limit as may be set by law, the Options or
portions thereof which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.

6.15 Rights as a Stockholder.   The Company shall issue (or cause to be issued) such
Shares as soon as administratively practicable after the Option is exercised. Shares issued
upon exercise of an Option shall be issued in the name of the Participant or, if requested
by the Participant, in the name of the Participant and his or her spouse. Unless provided
otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any other rights as
a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding
the exercise of the Option.

7. PERFORMANCE CASH BONUS PROVISIONS

7.1 Performance Cash Bonus Terms.   Each Performance Cash Bonus shall contain
provisions regarding (i) the target, minimum and maximum amount payable to the Awardee as a
Performance Cash Bonus, (ii) the performance criteria (including Qualifying Performance

 

 

Criteria) and level of achievement versus these criteria which shall determine the amount of
such payment, (iii) the period as to which performance shall be measured for establishing
the amount of any payment, (iv) the timing of any payment earned by virtue of performance,
(v) restrictions on the alienation or transfer of the Performance Cash Bonus prior to actual
payment, (vi) forfeiture provisions, and (vii) such further terms and conditions, in each
case not inconsistent with the Plan, as may be determined from time to time by the
Administrator.

7.2 Maximum Cash Bonus Amount.   The maximum amount payable as a Performance Cash
Bonus may be a multiple of the target amount payable, but in all cases the maximum amount
payable pursuant to that portion of a Performance Cash Bonus granted under this Plan for any
fiscal year to any Awardee that is intended to satisfy the requirements for “performance
based compensation” under Section 162(m) of the Code shall not exceed U.S. $9,000,000.

7.3 Performance Criteria.   The Administrator shall establish the performance
criteria and level of achievement versus these criteria which shall determine the target and
the minimum and maximum amount payable under a Performance Cash Bonus, which criteria may be
based on financial performance and/or personal performance evaluations. The Committee may
specify the percentage of the target Performance Cash Bonus that is intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code.
Notwithstanding anything to the contrary herein, the performance criteria for any portion of
a Performance Cash Bonus that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall comply with the provisions of Section
12.2 of the Plan.

7.4 Timing and Form of Payment.   The Administrator shall determine the timing of
payment of any Performance Cash Bonus. The Administrator may provide for or, subject to
such terms and conditions as the Administrator may specify, may permit an Awardee to elect
for the payment of any Performance Cash Bonus to be deferred to a specified date or event,
subject to the provisions contained in Section 12.8 of the Plan. The Administrator may
specify the form of payment of Performance Cash Bonus, which may be cash or other property,
or may provide for an Awardee to have the option for his or her Performance Cash Bonus, or
such portion thereof as the Administrator may specify, to be paid in whole or in part in
cash or other property.

7.5 Termination of Participant’s Continuous Service.   In the event a Participant’s
Continuous Service terminates, the Administrator shall have the discretion to determine the
effect such termination due to Disability or death shall have on any Performance Cash Bonus.

8. STOCK AWARD PROVISIONS

8.1 Stock Award Agreement.   Each Stock Award Agreement shall be in such form and
shall contain such terms and conditions as the Administrator shall deem appropriate. The
provisions of each category of Stock Award may change from time to time, and the terms and
conditions of separate individual Stock Award Agreements within a particular category of
Stock Award need not be identical, but each Stock Award Agreement shall include (through
incorporation of provisions hereof by reference in the Stock Award or otherwise) the
substance of each of the following provisions:

(a) Transferability. Rights to acquire Shares of Common Stock under the
Stock Award Agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the Stock Award Agreement, as the Administrator
shall

 

 

determine in its discretion, so long as Common Stock awarded under the Stock Award
remains subject to the terms of the Stock Award Agreement.

(b) Rights as a Stockholder.   Unless otherwise provided by the
Administrator in the Award Agreement, the Participant shall have the rights
equivalent to those of a stockholder and shall be a stockholder only after Shares
are issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company) to the Participant.

(c) Extension of Stock Award.    A Participant’s Award Agreement may provide
that if the issuance of Shares of Common Stock would be prohibited at any time
solely because such issuance would violate the registration requirements under the
Securities Act or other applicable securities laws, then the Participant shall be
entitled to exercise, redeem or receive the Shares of Common Stock underlying such
Stock Award, as applicable, on the date that is the earlier of (i) the expiration of
the term of the Award, if applicable, and (ii) a period of three (3) months after
the date on which such exercise, redemption or delivery of Shares of Common Stock
would not be in violation of such registration requirement or other applicable
securities laws. The provisions of this Section 8.1 notwithstanding, in the event
that a sale of the Shares of Common Stock received pursuant to the Award would
subject the Participant to liability under Section 16(b) or Rule 10b-5 of the
Exchange Act, then, if applicable, the Award will terminate on the fifteenth
(15th) day after the last date upon which such sale would result in
liability, but in no event later than the expiration of the term of the Award.

8.2 Restricted Stock Bonus Awards.   Restricted Stock Bonuses shall be paid by the
Company in Shares of the Common Stock of the Company. Each Restricted Stock Bonus agreement
shall include (through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

(a) Consideration. At the discretion of the Administrator, a Restricted
Stock Bonus may be awarded in consideration for past services actually rendered to
the Company or an Affiliate for its benefit; provided, however, that in the case of
a Restricted Stock Bonus to be made to a new Employee, Director, or Consultant who
has not performed prior services for the Company, the Company will require payment
of the par value of the Common Stock by cash or check to the extent required by
Delaware General Corporation Law.

(b) Vesting. Vesting shall generally be based on the Participant’s
Continuous Service. The Administrator shall determine the vesting schedule
applicable to any Restricted Stock Bonus award. Shares of Common Stock awarded under
the Restricted Stock Bonus agreement shall be subject to a Share reacquisition right
in favor of the Company in accordance with a vesting schedule to be determined by
the Administrator.

(c) Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company shall automatically
reacquire without cost 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 Stock Bonus agreement.

8.3 Stock Appreciation Rights.   Two types of Stock Appreciation Rights
(“SARs”) shall be authorized for issuance under the Plan: (1) stand-alone SARs and
(2) stapled SARs.

 

 

(a) Generally.

i. The number of Shares of Common Stock underlying each SAR and the exercise
price in effect for those Shares shall be determined by the Administrator in
its sole discretion at the time the SAR is granted. In no event, however,
may the exercise price per Share be less than one hundred percent (100%) of
the Fair Market Value per underlying Share of Common Stock on the grant
date. Notwithstanding the foregoing, a SAR may be granted with an exercise
price lower than that set forth in the preceding sentence if such SAR is
granted pursuant to a Conversion Award or otherwise in a manner satisfying
the provisions of Section 424 of the Code.

ii. No SAR shall be exerciseable or redeemable after the expiration of
five (5) years after the date it was granted. In the absence of a provision
to the contrary in the individual’s Award Agreement, the term of the SAR
shall be five (5) years from the Grant Date.

iii. A SAR issued under this Plan shall be transferable only to the extent
the Administrator, in its sole discretion, permits such SAR to be assigned
or transferred for estate planning purposes, subject to the applicable
limitations set forth in the General Instructions to Form S-8 Registration
Statement under the Securities Act and any other requirements of Applicable
Law. Any such permitted transfers shall require the transferee to become
subject to all of the terms and conditions applicable to the Awardee,
including, but not limited to, the terms and conditions set forth in this
Plan and the applicable Award Agreement. If the SAR does not provide for
transferability, then the SAR shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable or redeemable
during the lifetime of the Awardee only by the Awardee.

(b) Stand-Alone SARs. The following terms and conditions shall govern the
grant and redeemability of stand-alone SARs:

     i. The stand-alone SAR shall cover a specified number of underlying Shares
of Common Stock and shall be exercisable and redeemable upon such terms and
conditions as the Administrator may establish. Upon the exercise and
redemption of the stand-alone SAR, the holder shall be entitled to receive a
distribution from the Company in an amount equal to the excess of (i) the
aggregate Fair Market Value (on the exercise and redemption date) of the
Shares of Common Stock underlying the redeemed right over (ii) the aggregate
exercise price in effect for those Shares.

     ii. The distribution with respect to any exercised and redeemed stand-alone
SAR may be made in Shares of Common Stock valued at Fair Market Value on the
exercise and redemption date, in cash, or partly in Shares and partly in
cash, as the Administrator shall in its sole discretion deem appropriate.

(c) Stapled SARs. The following terms and conditions shall govern the grant
and redemption of stapled SARs:

 

 

i. Stapled SARs may only be granted concurrently with an Option to acquire
the same number of Shares of Common Stock as the number of such Shares
underlying the stapled SARs.

ii. Stapled SARs shall be exercisable and redeemable upon such terms and
conditions as the Administrator may establish and shall grant a holder the
right to elect among (A) the exercise of the concurrently granted Option for
Shares of Common Stock, whereupon the number of Shares of Common Stock
subject to the stapled SARs shall be reduced by an equivalent number,
(B) the exercise and redemption of such stapled SARs in exchange for a
distribution from the Company in an amount equal to the excess of the Fair
Market Value (on the exercise and redemption date) of the number of vested
Shares which the holder redeems over the aggregate exercise price for such
vested Shares, whereupon the number of Shares of Common Stock subject to the
concurrently granted Option shall be reduced by any equivalent number, or
(C) a combination of (A) and (B).

iii. The distribution to which the holder of stapled SARs shall become
entitled under this Section 8 upon the redemption of stapled SARs as
described in Section 8.3(c)ii)(B) above may be made in Shares of Common
Stock valued at Fair Market Value on the exercise and redemption date, in
cash, or partly in Shares and partly in cash, as the Administrator shall in
its sole discretion deem appropriate.

8.4 Phantom Stock Units.   The following terms and conditions shall govern the grant
and redeemability of Phantom Stock Units:

(a) Phantom Stock Unit awards shall be exercisable and redeemable by the Participant
to the Company upon such terms and conditions as the Administrator may establish.
The value of a single Phantom Stock Unit shall be equal to the Fair Market Value of
a Share of Common Stock, unless the Administrator otherwise provides in the terms of
the Award Agreement.

(b) The distribution with respect to any exercised Phantom Stock Unit award may be
made in Shares of Common Stock valued at Fair Market Value on the exercise and
redemption date, in cash, or partly in Shares and partly in cash, as the
Administrator shall in its sole discretion deem appropriate.

8.5 Restricted Stock Units.   A Restricted Stock Unit is the right to receive
one (1) Share of the Company’s Common Stock at the time the Restricted Stock Unit vests.
Restricted Stock Units shall be settled as soon as administratively practicable following
the vesting of the Restricted Stock Unit. Each Restricted Stock Unit agreement shall
include (through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

(a) Vesting.   Vesting shall generally be based on the Participant’s
Continuous Service. The Administrator shall determine the vesting schedule
applicable to any such Restricted Stock Unit award. Shares of Common Stock awarded
under the Restricted Stock Unit agreement may be subject to a Share reacquisition
right in favor of the Company in accordance with a vesting schedule to be determined
by the Administrator.

 

 

(b) Termination of Participant’s Continuous Service.   In the event an
Participant’s Continuous Service terminates, the Participant shall automatically
forfeit any or all of the Shares of Common Stock that have not vested as of the date
of termination under the terms of the Restricted Stock Unit agreement.

8.6 Performance Share Bonus Awards.   Performance Share Bonuses shall be paid by the
Company in Shares of the Common Stock of the Company. Each Performance Share Bonus agreement
shall include (through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

(a) Consideration. At the discretion of the Administrator, a Performance
Share Bonus may be awarded in consideration for past services actually rendered to
the Company or an Affiliate for its benefit. In the event that a Performance Share
Bonus is granted to a new Employee, Director, or Consultant who has not performed
prior services for the Company, the Company will require payment of the par value of
the Common Stock by cash or check to the extent required by Delaware General
Corporation Law.

(b) Vesting. Vesting shall be based on the achievement of certain
performance criteria, whether financial, transactional or otherwise, as determined
by the Administrator. Vesting shall be subject to the terms and conditions of the
Performance Share Bonus agreement. Upon failure to meet performance criteria, Shares
of Common Stock awarded under the Performance Share Bonus agreement shall be subject
to a Share reacquisition right in favor of the Company in accordance with a vesting
schedule to be determined by the Administrator.

(c) Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company shall automatically
reacquire without cost 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 Performance Share Bonus agreement.

8.7 Performance Share Units.   A Performance Share Unit is the right to receive
one (1) Share of the Company’s Common Stock at the time the Performance Share Unit vests.
Performance Share Units shall be settled as soon as administratively practicable following
the vesting of the Performance Share Unit. Each Performance Share Unit agreement shall
include (through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

(a) Vesting. Vesting shall be based on the achievement of certain
performance criteria, whether financial, transactional or otherwise, as determined
by the Administrator. Vesting shall be subject to the terms and conditions of the
Performance Share Unit agreement. Upon failure to meet performance criteria, Shares
of Common Stock awarded under the Performance Share Unit agreement may be subject to
a Share reacquisition right in favor of the Company in accordance with a vesting
schedule to be determined by the Administrator.

(b) Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Participant shall automatically
forfeit any or all of the Shares of Common Stock that have not vested as of the date
of termination under the terms of the Performance Share Unit agreement.

 

 

9. COVENANTS OF THE COMPANY

9.1 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.

9.2 Securities Law Compliance.   The Company shall 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,
redemption or satisfaction of the Awards; provided, however, that this undertaking shall not
require the Company to register under the Securities Act, or under any foreign law of
similar effect, the Plan, any Award or any Common Stock issued or issuable pursuant to any
such Award nor shall it require the Company to comply with any applicable securities laws or
regulations if such compliance would be unduly burdensome or costly, as determined by the
Administrator in its sole discretion. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell Common Stock
related to such Awards unless and until such authority is obtained.

10. USE OF PROCEEDS FROM STOCK

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

11. CANCELLATION AND RE-GRANT OF OPTIONS AND SARS

   The Administrator shall not have the authority to effect, at any time, (i) the repricing of
any outstanding Options or SARs under the Plan, which includes reduction in exercise price, base
price, or replacement of underwater Options or SARs with any other form of equity award or with
cash, (ii) the cancellation of any outstanding Options or SARs under the Plan that are underwater
and the grant in substitution therefor of new Options or SARs under the Plan covering the same or
different number of Shares of Common Stock, and/or (iii) cancellation of underwater Options or SARs
and replacement with Full Value Awards or cash. Notwithstanding the foregoing, the Administrator
may grant an Option or SAR with an exercise or redemption price lower than that set forth above if
such Option or SAR is granted as part of a transaction to which Section 424 or Section 409A of the
Code applies.

12. OTHER PROVISIONS APPLICABLE TO AWARDS

12.1 Acceleration of Exercisability and Vesting; Treatment Upon Death or
Disability.   The Administrator shall have the power to accelerate exercisability and/or
vesting when it deems fit, such as upon a Change of Control. The Administrator shall have
the power to accelerate the time at which an Option or Stock Award may first be exercised or
the time during which an Option or Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in such Award stating the time at which it may
first be exercised or the time during which it will vest. If an Awardee who is an Employee
or a Director of the Company ceases to be an Employee or Director of the Company (i) by
reason of his or her death, or (ii) solely in the case of an Employee, because of his or her
Disability, then notwithstanding any contrary exercisability or vesting provisions in an
Option or Stock Award (as applicable), each such outstanding Award shall immediately become
vested and exercisable (as applicable) in full in respect of the aggregate number of shares
covered by each such Award, provided that

 

 

Performance-Based Awards, including Performance Cash Awards, shall not be eligible for such
automatic acceleration.

12.2 Performance-Based Awards.   Notwithstanding anything to the contrary herein,
any Awards granted under this Plan may be granted in a manner which may be deductible by the
Company under Section 162(m) of the Code (or any successor section thereto) and/or compliant
with the requirements of Section 409A of the Code for performance-based compensation
(“Performance-Based Awards”). To the extent required by Section 162(m) of the Code, a
Participant’s Performance-Based Award shall be determined based on the attainment of
Qualifying Performance Criteria approved by the Administrator and established in writing for
a performance period established by the Administrator (i) while the outcome for that
performance period is substantially uncertain and (ii) no more than ninety (90) days after
the commencement of the performance period to which the performance goal relates or, if
less, the number of days which is equal to twenty-five percent (25%) of the relevant
performance period.

(a) Qualifying Performance Criteria.   For purposes of this Plan, the term
“Qualifying Performance Criteria” shall mean any one or more of the following
objective business criteria and measured against past Company performance, as the
Committee determines: (a) pre-tax income; (b) revenue or sales; (c) operating
income; (d) operating profit; (e) net earnings; (f) net income; (g) cash flow;
(h) earnings per Share or book value per Share; (i) return on equity; (j) return on
invested capital or assets; (k) cost reductions or savings or expense management;
(l) funds from operations; (m) improvements in capital structure; (n) maintenance or
improvement of profit margins; (o) market share; (p) working capital; (q) stock
price; (r) consolidated earnings before any one or more of the following items:
interest, taxes, depreciation or amortization; (s) implementation of the Company’s
targets, critical processes and/or projects; (t) gross margins, (u) specified
product sales, (v) inventory turns; (w) distributor, executive distributor, and/or
preferred customer numbers, (x) product subscription numbers; or (y) distributor and
customer retention rates.

The foregoing criteria may relate to the Company, one or more of its Affiliates, or
one or more of its markets, divisions, units or product lines, or any combination of
the foregoing, and may be applied on an absolute basis and/or be relative to one or
more peer group companies or indices, or any combination thereof, all as the
Committee shall determine. In addition, to the degree consistent with Section
162(m) of the Code and/or Section 409A of the Code, the performance goals may be
calculated without regard to extraordinary items. Without limiting the generality of
the foregoing, the Committee may appropriately adjust any evaluation of performance
under a performance target to exclude any of the following events that occurs during
an Incentive Period: (A) the effects of currency fluctuations, (B) any or all items
that are excluded from the calculation of non-GAAP earnings, (C) asset write-downs,
(D) litigation or claim judgments or settlements, (D) the effect of changes in tax
law, accounting principles or other such laws or provisions affecting reported
results, (F) accruals for recapitalization, reorganization and restructuring
programs, (G) the discontinuation, disposal or acquisition of a business or
division, and (H) any other extraordinary, infrequent or non-operational items or
events thereof, all as the Administrator shall determine.

(b) Award Limits and Requirements for Performance-Based Awards.   The
maximum amounts of a Performance-Based Awards payable during a fiscal year to any
Participant is set forth in Section 4.4 and Section 7.2 of the Plan. To the extent
required

 

 

by Section 162(m) of the Code, the Administrator shall determine whether,
with respect to a performance period, the applicable performance goals have been met
with respect to a given Participant and, if they have, to so certify and ascertain
the amount of the applicable Performance-Based Award. No Performance-Based Awards
will be paid for such performance period until such certification is made by the
Administrator in writing. The amount of the Performance-Based Award actually paid to
a given Participant may be less than the amount determined by the applicable
performance goal formula, at the discretion of the Administrator. The amount of the
Performance-Based Award determined by the Administrator for a performance period
shall be paid to the Participant at such time as determined by the Administrator in
its sole discretion after the end of such performance period; provided, however,
that such payment or delivery shall be made in compliance with Section 409A of the
Code and the regulations thereunder.

(c) Other. The grant of a Performance-Based Award may be made solely under
this Plan or may be made pursuant to such other plan or program as the Committee
shall determine in its sole discretion.

12.3 No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Award granted pursuant thereto shall 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 shall affect the right of the Company or an Affiliate to terminate (i)
the employment of an Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate; or (iii) the service of a Director pursuant to the Bylaws of the
Company, and any applicable provisions of the corporate law of the state or other
jurisdiction in which the Company is domiciled, as the case may be.

12.4 Investment Assurances. The Company may require a Participant, as a condition
of exercising or redeeming an Award or acquiring Common Stock under any Award, (i) 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 acquiring the Common Stock; (ii) 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; and (iii) to give such
other written assurances as the Company may determine are reasonable in order to comply with
Applicable Law. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the Shares of Common Stock under
the Award has been registered under a then currently effective registration statement under
the Securities Act or (2) 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, and in either case otherwise complies with Applicable Law.

12.5 Legends. 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 Laws, including, but not limited to, legends restricting the transfer
of the Common Stock.

 

 

12.6 Tax Withholding Obligations.

(a) As a condition of the grant, issuance, vesting, exercise or settlement of an
Award granted under the Plan, the Participant shall make such arrangements as the
Administrator may require for the satisfaction of any applicable U.S. federal,
state, local or foreign withholding tax obligations that may arise in connection
with such grant, issuance, vesting, exercise or settlement of the Award. The
Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied.

(b) In the case of an Employee and in the absence of any other arrangement, the
Employee shall be deemed to have directed the Company to withhold or collect from
his or her compensation an amount sufficient to satisfy such tax obligations from
the next payroll payment otherwise payable after the date of an exercise of an
Option or Stock Award.

(c) In the case of Participant other than an Employee (or in the case of an Employee
where the next payroll payment is not sufficient to satisfy such tax obligations,
with respect to any remaining tax obligations), in the absence of any other
arrangement and to the extent permitted under the Applicable Laws, the Participant
shall be deemed to have elected to have the Company withhold from the Shares to be
issued upon exercise of the Option or Stock Purchase Right that number of Shares
having a Fair Market Value determined as of the applicable Tax Date (as defined
below) equal to the amount required to be withheld. For purposes of this Section
12.6, the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the Applicable
Laws (the “Tax Date”).

(d) If permitted by the Administrator, in its discretion, a Participant may satisfy
his or her tax withholding obligations upon exercise of an Option or Stock Award by
surrendering to the Company Shares that have a Fair Market Value determined as of
the applicable Tax Date equal to the amount required to be withheld. In the case of
 shares previously acquired from the Company that are surrendered under this Section
12.6(d), such Shares must have been owned by the Participant for such period of time
as is required for the Company to avoid adverse accounting charges.

(e) Any election or deemed election by a Participant to have Shares withheld to
satisfy tax withholding obligations under Section 12.6(c) or (d) above shall be
irrevocable as to the particular Shares as to which the election is made and shall
be subject to the consent or disapproval of the Administrator. Any election by a
Participant under Section 12.6(d) above must be made on or prior to the applicable
Tax Date.

(f) In the event an election to have Shares withheld is made by a Participant and
the Tax Date is deferred under Section 83 of the Code because no election is filed
under Section 83(b) of the Code, the Participant shall receive the full number of
Shares with respect to which the Option or Stock Purchase Right is exercised but
such Participant shall be unconditionally obligated to tender back to the Company
the proper number of Shares on the Tax Date.

12.7 Section 409A. Notwithstanding anything in the Plan to the contrary, it is the
intent of the Company that the administration of the Plan, and the granting of all Awards
under this Plan, shall be done in accordance with Section 409A of the Code and the
Department of Treasury

 

 

regulations and other interpretive guidance issued thereunder,
including any guidance or regulations that may be issued after the effective date of this
Plan, and shall not cause the acceleration of, or the imposition of the additional, taxes
provided for in Section 409A of the Code. Any Award shall be granted, deferred, paid out or
modified under this Plan in a manner that shall be intended to avoid resulting in the
acceleration of taxation, or the imposition of penalty taxation, under Section 409A upon a
Participant. In the event that it is reasonably determined by the Administrator that any
amounts payable in respect of any Award under the Plan will be taxable to a Participant
under Section 409A of the Code prior to the payment and/or delivery to such Participant of
such amounts or will be subject to the acceleration of taxation or the imposition of penalty
taxation under Section 409A of the Code, the Company may either (i) adopt such amendments to
the Plan and related Award, and appropriate policies and procedures, including amendments
and policies with retroactive effect, that the Administrator determines necessary or
appropriate to preserve the intended tax treatment of the benefits provided by the Plan and
Awards hereunder, and/or (ii) take such other actions as the Administrator determines
necessary or appropriate to comply with the requirements of Section 409A of the Code.

12.8 Deferral of Award Benefits. The Administrator may in its discretion and upon
such terms and conditions as it determines appropriate permit one or more Participants whom
it selects to defer compensation payable pursuant to the terms of an Award. Any such
deferral arrangement shall be evidenced by an Award Agreement in such form as the
Administrator shall from time to time establish, and no such deferral arrangement shall be a
valid and binding obligation unless evidenced by a fully executed Award Agreement, the form
of which the Administrator has approved, including through the Administrator’s establishing
a written program (the “Deferral Program”) under this Plan to govern the form of Award
Agreements participating in such Program. Any such Award Agreement or Deferral Program
shall specify the treatment of dividends or Dividend Equivalents (if any) that apply to
Awards governed thereby, and shall further provide that any elections governing payment of
amounts pursuant to such Deferral Program shall be in writing, shall be delivered to the
Company or its agent in a form and manner that complies with Code Section 409A, and shall
specify the amount to be distributed in settlement of the deferral arrangement, as well as
the time and form of such distribution in a manner that complies with Code Section 409A.

12.9 Forfeiture of Awards. To the extent set forth in an Award Agreement, if an
Awardee is terminated for Cause, or an Awardee has engaged in Harmful Conduct at any time
during or following the termination of the Awardee’s Continuous Service, then the
Administrator may, in its sole discretion, direct that:

(a) all outstanding Awards held by such Awardee shall terminate in full;

(b) the Awardee shall pay to the Company an amount equal to the taxable income
realized upon the exercise or redemption of any Options, Stock Appreciation Rights
and Phantom Stock Units or any sale of the underlying Shares obtained from such
Awards (x) during the twelve (12) months immediately preceding Awardee’s termination
of Continuous Service and, (y) in the case where Participant has engaged in Harmful
Conduct following such termination of Continuous Service, during the three (3) month
period following Awardee’s termination of Continuous Service; and

(c) the Awardee shall forfeit and return to the Company, as applicable, any unvested
Shares pursuant to all outstanding Awards (other than Options, Stock Appreciation

 

 

Rights and Phantom Stock Units) and/or pay to the Company the taxable income
realized from the grant, vesting or sale of any Shares obtained pursuant to such
Awards (x) during the twelve (12) months immediately preceding Awardee’s termination
of Continuous Service and, (y) in the case where Participant has engaged in Harmful
Conduct following such termination of Continuous Service, during the three (3) month
period following Awardee’s termination of Continuous Service.

(d) The Administrator shall determine the manner of the recovery of any such amounts
which may be due to the Company and which may include, without limitation, set-off
against any amounts which may be owed by the Company to the Awardee subject, in all
cases, to Applicable Law and the terms and conditions of the applicable plan,
arrangement or agreement.

(e) If any provision contained in this Section shall for any reason, whether by
application of existing Applicable Law or law which may develop after the Awardee’s
acceptance of the grant of Awards hereunder be determined by a court of competent
jurisdiction to be overly broad, the Awardee agrees to join the Company or any of
its Affiliates in requesting such court to construe such provision by limiting or
reducing it so as to be enforceable to the extent compatible with then Applicable
Law.

12.10 Designation of Beneficiary.

(a) An Awardee may file a written designation of a beneficiary who is to receive the
Awardee’s rights pursuant to Awardee’s Award or the Awardee may include his or her
Awards in an omnibus beneficiary designation for all benefits under the Plan. To
the extent that Awardee has completed a designation of beneficiary while employed
with the Company, such beneficiary designation shall remain in effect with respect
to any Award hereunder until changed by the Awardee to the extent enforceable under
Applicable Law.

(b) Such designation of beneficiary may be changed by the Awardee at any time by
written notice. In the event of the death of an Awardee and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Awardee’s death, the Company shall allow the executor or administrator of the estate
of the Awardee to exercise the Award, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its discretion,
may allow the spouse or one or more dependents or relatives of the Awardee to
exercise the Award to the extent permissible under Applicable Law or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.

13. ADJUSTMENTS UPON CHANGES IN STOCK

13.1 Capitalization Adjustments. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by each
outstanding Award, the number of shares of Common Stock which have been authorized for
issuance under the Plan, but as to which no Awards have yet been granted or which have been
returned to the Plan upon cancellation, forfeiture or expiration of an Award, the price per
Share subject to each such outstanding Award and each of the share limits set forth in
Section 4.1 (including the ISO Limit)
and Section 4.4, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, payment of a dividend
or

 

 

distribution in a form other than stock (excepting normal cash dividends) that has a
material effect on the Fair Market Value of the shares of Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Administrator, whose determination in
that respect shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities convertible into
 shares of stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to an Award.

13.2 Adjustments Upon a Change of Control. In the event of a Change of Control, as
defined in Sections 2.10(a) through 2.10(d), such as an asset sale, merger, or change in
Board composition, then the Administrator or the board of directors of any surviving entity
or acquiring entity may provide or require that the surviving or acquiring entity shall: (i)
assume or continue all or any part of the Awards outstanding under the Plan; (ii) substitute
substantially equivalent stock awards (including an award to acquire substantially the same
consideration paid to the stockholders in the transaction by which the Change of Control
occurs) for those outstanding under the Plan; (iii) redeem or purchase such Awards for
consideration determined in a manner consistent with the per Share consideration being paid
to the other stockholders of the Company; or (iv) any combination of the foregoing. In the
event any surviving entity or acquiring entity refuses to take such actions, then with
respect to Awards held by Participants whose Continuous Service has not terminated, the
Administrator in its sole discretion and without liability to any person may: (1) provide
for the payment of a cash amount in exchange for the cancellation of an Award equal to the
product of (x) the excess, if any, of the Fair Market Value per Share of Common Stock at
such time over the exercise, redemption or purchase price, if any, times (y) the
total number of Shares then subject to such Award; (2) continue the Awards upon such terms
as the Administrator determines in its sole discretion; (3) provide for issuance of
substitute awards that will substantially preserve the otherwise applicable terms of any
affected Awards (including any unrealized value immediately prior to the Change of Control)
previously granted hereunder, as determined by the Administrator in its sole discretion; or
(4) notify Participants holding an Option, Stock Appreciation Right, Phantom Stock Unit,
Restricted Stock Unit, or Performance Share Unit that they must exercise or redeem any
portion of such Award (including, at the discretion of the Administrator, any unvested
portion of such Award) at or prior to the closing of the transaction by which the Change of
Control occurs and that the Awards shall terminate if not so exercised or redeemed at or
prior to the closing of the transaction by which the Change of Control occurs. With respect
to any other Awards outstanding under the Plan, such Awards shall terminate if not exercised
or redeemed prior to the closing of the transaction by which the Change of Control occurs.
The Administrator shall not be obligated to treat all Awards, even those that are of the
same type, in the same manner.

13.3 Adjustments Upon a Dissolution or Liquidation. In the event of a Change of
Control as defined in Section 2.10(e), such as a dissolution or liquidation of the Company,
the Administrator shall notify each Participant as soon as practicable prior to the
effective date of such proposed transaction. To the extent it has not been previously
exercised or the Shares subject thereto issued to the Awardee and unless otherwise
determined by the Administrator, an Award will terminate immediately prior to the
consummation of such event.

 

 

14. AMENDMENT OF THE PLAN AND AWARDS

14.1 Amendment of Plan. The Administrator at any time, and from time to time, may
amend the Plan. However, except as provided in Section 13.1 of the Plan relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless approved by
the stockholders of the Company: (i) to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, any New York Stock Exchange, NASDAQ or
other securities exchange listing requirements, or other Applicable Law or regulation; (ii)
in respect of any proposed amendment to Sections 6.5, 6.6 or 8.3(a)ii) hereof; or (iii) in
respect of any proposed amendment to Section 11 hereof that would permit the repricing or
cancellation and regrant of Options or Stock Appreciation Rights.

14.2 Stockholder Approval. The Administrator may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval or may resubmit the Plan for
reapproval by stockholders, including, but not limited to, amendments to or reapproval of
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.

14.3 Contemplated Amendments. It is expressly contemplated that the Administrator
may amend the Plan in any respect the Administrator 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
and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance
therewith.

14.4 No Material Impairment of Rights. Rights under any Award granted before
amendment of the Plan shall not be materially impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant consents in
writing.

14.5 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 rights under any
Award shall not be materially impaired by any such amendment unless: (i) the Company
requests the consent of the Participant and the Participant consents in writing, (ii) such
amendment is necessary pursuant to Section 12.7 hereof or otherwise to meet the minimum
requirements of the Code or Applicable Law.

15. TERMINATION OR SUSPENSION OF THE PLAN

15.1 Plan Term. The Administrator may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the later of the date that the Plan is approved by the
stockholders of the Company or the date any amendment to add shares to the Plan is approved
by the stockholders of the Company. No Awards may be granted under the Plan while the Plan
is suspended or after it is terminated.

15.2 No Material Impairment of Rights. Suspension or termination of the Plan shall
not materially impair rights and obligations under any Award granted while the Plan is in
effect except with the written consent of the Participant. Suspension or termination of the
Plan shall not affect the Administrator’s ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of such
termination.

 

 

16. MISCELLANEOUS

16.1 Effective Date of Plan. The Plan shall become effective immediately upon its
adoption by the Board of Directors of the Company and approval by the stockholders of the
Company (the “Effective Date”).

16.2 Governing Law; Interpretation of Plan and Awards.

(a) This Plan and all determinations made and actions taken pursuant hereto shall be
governed by the substantive laws, but not the choice of law rules, of the state of
New Jersey.

(b) In the event that any provision of the Plan or any Award granted under the Plan
is declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the extent
necessary to render it legal, valid and enforceable, or otherwise deleted, and the
remainder of the terms of the Plan and/or Award shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.

(c) The headings preceding the text of the sections hereof are inserted solely for
convenience of reference, and shall not constitute a part of the Plan, nor shall
they affect its meaning, construction or effect.

(d) The terms of the Plan and any Award shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted heirs, beneficiaries,
successors and assigns.

16.3 Limitation on Liability. The Company and any Affiliate which is in existence
or hereafter comes into existence shall not be liable to a Participant, an Employee, an
Awardee or any other persons as to:

(a) The Non-Issuance of Shares. The non-issuance or sale of Shares
(including under Section 9.2 above) as to which the Company has been unable, or the
Arbitration deems it infeasible, to obtain from any regulatory body having
jurisdiction the authority deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any shares hereunder.

(b) Tax Consequences. Any tax consequence realized by any Participant,
Employee, Awardee or other person due to the receipt, vesting, exercise or
settlement of any Option or other Award granted hereunder or due to the transfer of
any Shares issued hereunder. The Participant is responsible for, and by accepting
an Award under the Plan agrees to bear, all taxes of any nature that are legally
imposed upon the Participant in connection with an Award, and the Company does not
assume, and will not be liable to any party for, any cost or liability arising in
connection with such tax liability legally imposed on the Participant. In
particular, Awards issued under the Plan may be characterized by the Internal
Revenue Service (the “IRS”) as “deferred compensation” under the Code resulting in
additional taxes, including in some cases interest and penalties. In the event the
IRS determines that an Award constitutes deferred compensation under the Code or
challenges any good faith characterization made by the Company or any other party of
the tax treatment applicable to an Award, the Participant

 

 

will be responsible for the additional taxes, and interest and penalties, if any,
that are determined to apply if such challenge succeeds, and the Company will not
reimburse the Participant for the amount of any additional taxes, penalties or
interest that result.

(c) Forfeiture. The requirement that Participant forfeit an Award, or the
benefits received or to be received under an Award, pursuant to any Applicable Law.

16.4 Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or officers or employees of the Company or an Affiliate,
members of the Board and any officers or employees of the Company or an Affiliate to whom
authority to act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in any such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in duties.

16.5 Unfunded Plan. Insofar as it provides for Awards, the Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to Awardees who are granted
Stock Awards under this Plan, any such accounts will be used merely as a bookkeeping
convenience. The Company shall not be required to segregate any assets which may at any
time be represented by Awards, nor shall this Plan be construed as providing for such
segregation, nor shall the Company nor the Administrator be deemed to be a trustee of stock
or cash to be awarded under the Plan. Any liability of the Company to any Participant with
respect to an Award shall be based solely upon any contractual obligations which may be
created by the Plan; no such obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company nor the
Administrator shall be required to give any security or bond for the performance of any
obligation which may be created by this Plan.EX-4.5

Exhibit 4.5

HEARTLAND PAYMENT SYSTEMS, INC.

2008 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

Optionee Name:                                         

     You have been granted an option to purchase Common Stock of Heartland Payment Systems, Inc.
(the “Company”) as follows:

	 	 	 
	Board Approval Date:

	 	[                                        ]
	 
	 	 
	Date of Grant:

	 	[                                        ]
	 
	 	 
	Exercise Price per Share:

	 	$[                                        ]
	 
	 	 
	Total Number of Shares Granted:

	 	[                                        ]
	 
	 	 
	Total Exercise Price:

	 	$[                                        ]
	 
	 	 
	Type of Option:

	 	                     Shares Incentive Stock Option
	 
	 	 
	 

	 	                     Shares Nonstatutory Stock Option
	 
	 	 
	Expiration Date:

	 	[                                        ]
	 
	 	 
	Vesting Commencement Date:

	 	[                                        ]
	 
	 	 
	Vesting/Exercise Schedule:

	 	So long as you are in Continuous Service status with the Company
(as defined in the Heartland Payment Systems, Inc. 2008 Equity Incentive Plan), the
Shares underlying this Option shall vest and become exercisable in accordance with the
following schedule:
	 
	 	 
	Termination Period:

	 	This Option may be exercised (as to vested shares only) for (A) one (1)
month after a voluntary termination of Optionee’s employment or consulting
relationship, and (B) three (3) months after an involuntary termination of Optionee’s
employment or consulting relationship except as set out in Section 5
of the Option Agreement (but in no event later than the
Expiration Date).

1

 

	 	 	 
	 

	 	Optionee is responsible for keeping track of these
exercise periods following termination for any
reason of his or her service relationship with the
Company. The Company will not provide further
notice of such periods.
	 
	 	 
	     Transferability:

	 	This Option may not be transferred.

     No Employment or Service Contract. In addition, you agree and acknowledge that your
rights to any Shares underlying the Option will be earned only as you provide services to the
Company over time, that the grant of the Option is not as consideration for services you rendered
to the Company prior to your Vesting Commencement Date, and that nothing in this Notice or the
attached documents confers upon you any right to continue your employment or consulting
relationship with the Company for any period of time, nor does it interfere in any way with your
right or the Company’s right to terminate that relationship at any time, for any reason, with or
without Cause.

     Definitions. All capitalized terms in this Notice shall have the meaning assigned to
them in this Notice, the attached Stock Option Agreement or the Plan.

     By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the Heartland
Payment Systems, Inc. 2008 Equity Incentive Plan and the Stock Option Agreement, both of which are
attached and made a part of this document. You further acknowledge receipt of a copy of the Plan
and the Stock Option Agreement, represent that you have read and are familiar with their
provisions, and hereby accept the Option subject to all of their terms and conditions.

	 	 	 	 	 	 	 
	 	 	HEARTLAND PAYMENT SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

«Optionee»

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we
inform you that any tax advice contained in this communication (including any attachments) (i) was
not intended or written to be used, and cannot be used, for the purpose of avoiding any tax penalty
and (ii) was not written to promote, market or recommend the transaction or matter addressed in the
communication. Each taxpayer should seek advice based on the taxpayer’s particular circumstances
from an independent tax advisor.

-2-

 

HEARTLAND PAYMENT SYSTEMS, INC.

2008 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

     1. Grant of Option. Heartland Payment Systems, Inc., a Delaware corporation (the
“Company”), hereby grants to [                    ] (“Optionee”), an option (the
“Option”) to purchase the total number of shares of Common Stock (the “Shares”) set
forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share
set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and
provisions of the Heartland Payment Systems, Inc. 2008 Equity Incentive Plan (the “Plan”)
adopted by the Company, which is incorporated in this Agreement by reference. Unless otherwise
defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the
Plan.

     2. Designation of Option. This Option is intended to be an Incentive Stock Option as
defined in Section 422 of the Code only to the extent so designated in the Notice, and to the
extent it is not so designated or to the extent the Option does not qualify as an Incentive Stock
Option under Applicable Law, then it is intended to be and will be treated as a Nonstatutory Stock
Option.

     Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the
Shares subject to this Option (and all other Incentive Stock Options granted to Optionee by the
Company or any Parent or Subsidiary, including under other plans of the Company) that first become
exercisable in any calendar year have an aggregate fair market value (determined for each Share as
of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess
of $100,000 shall be treated as subject to a Nonstatutory Stock Option, in accordance with Section
5(c) of the Plan.

     3. Exercise of Option. This Option shall be exercisable during its term in accordance
with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 6 of
the Plan as follows:

          (a) Right to Exercise.

               (i) This Option may not be exercised for a fraction of a share.

               (ii) In the event of Optionee’s death, Disability or other termination of employment, the
exercisability of the Option is governed by Section 5 below, subject to the limitations contained
in this Section 3.

               (iii) In no event may this Option be exercised after the Expiration Date of the Option as set
forth in the Notice.

 

 

          (b) Method of Exercise.

               (i) This Option shall be exercisable by execution and delivery of any form of written notice
approved for such purpose by the Company which shall state Optionee’s election to exercise the
Option and the number of Shares in respect of which the Option is being exercised. Such written
notice shall be signed by Optionee and shall be delivered to the Company by such means as are
determined by the Plan Administrator in its discretion to constitute adequate delivery. The
written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed
to be exercised upon receipt by the Company of such written notice accompanied by the Exercise
Price.

               (ii) As a condition to the exercise of this Option and as further set forth in Section 12.6 of
the Plan, Optionee agrees to make adequate provision for U.S. federal, state, local or foreign tax
withholding obligations, if any, which arise upon the vesting or exercise of the Option, or
disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.

               (iii) The Company is not obligated, and will have no liability for failure, to issue or
deliver any Shares upon exercise of the Option unless such issuance or delivery would comply with
the Applicable Laws, with such compliance determined by the Company in consultation with its legal
counsel. This Option may not be exercised until such time as the Plan has been approved by the
stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any applicable federal or
state securities or other law or regulation, including any rule under Part 221 of Title 12 of the
Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by the Applicable Laws. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the date on which the Option is
exercised with respect to such Shares.

     4. Method of Payment. Payment of the Exercise Price shall be by any of the following,
or a combination of the following, at the election of Optionee:

          (a) cash or by check or wire transfer at the time the Option is exercised (denominated in U.S.
dollars);

          (b) cancellation of indebtedness;

          (c) subject to any requirements of Applicable Laws and if approved by the Administrator,
delivery of Optionee’s promissory note having such recourse, interest, security and redemption
provisions as the Administrator determines to be appropriate;

          (d) by surrender of other shares (meaning, shares not subject to this Option) of Common Stock
of the Company that have an aggregate Fair Market Value on the date of surrender equal to the
Exercise Price of the Shares as to which the Option is being exercised. In
the case of shares acquired directly or indirectly from the Company, such shares must have
been

 

 

owned by Optionee for such period of time as is necessary to avoid the Company’s incurring
adverse accounting charges;

          (e) through a cashless “net exercise” arrangement pursuant to which the Company will reduce
the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate
Fair Market Value that does not exceed the aggregate exercise price; provided that the Company
shall accept a cash or other payment from the Optionee to the extent of any remaining balance of
the exercise price not satisfied by such reduction in the number of whole Shares to be issued; or

          (f) if the Company is at such time permitting broker-assisted sale and remittance cashless
exercises (a “same-day sale”), delivery of a properly executed exercise notice together with
irrevocable instructions to a broker participating in such cashless brokered exercise program to
deliver promptly to the Company the amount required to pay the exercise price (and applicable
withholding taxes).

     5. Termination of Relationship; Early Termination of Option. Following the date of
termination of Optionee’s Continuous Service status for any reason (the “Termination
Date”), Optionee may exercise the Option only as set forth in the Notice and this Section 5.
To the extent that Optionee is not entitled to exercise this Option as of the Termination Date, or
if Optionee does not exercise this Option within the Termination Period set forth in the Notice or
the termination periods set forth below, the Option shall terminate in its entirety. In no event,
may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.

          (a) Termination. In the event of termination of Optionee’s Continuous Service status
other than as a result of Optionee’s death, Disability or for Cause (each as defined in the Plan),
Optionee may, to the extent Optionee is vested in the Option Shares at the Termination Date,
exercise this Option during the Termination Period set forth in the Notice.

          (b) Other Terminations of Relationship. In connection with any termination other than
a termination covered by Section 5(a), Optionee may exercise the Option only as described below:

               (i) Termination upon Disability of Optionee. In the event of termination of
Optionee’s Continuous Service status as a result of Optionee’s Disability, Optionee may, but only
within six (6) months from the Termination Date, exercise this Option to the extent Optionee was
vested in the Option Shares as of such Termination Date.

               (ii) Death of Optionee. In the event of the death of Optionee (a) during the term of
this Option and while an Employee or Consultant of the Company and having been in Continuous
Service status since the date of grant of the Option, or (b) within thirty (30) days after
Optionee’s Termination Date, the Option may be exercised at any time within twelve (12) months
following the date of death by Optionee’s estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent Optionee was vested in the Option as
of the Termination Date.

 

 

               (iii) Termination for Cause; Harmful Conduct; Forfeiture. In the event Optionee’s
Continuous Service status is terminated for Cause, or Optionee has engaged in Harmful Conduct (as
defined in the Plan) at any time during or following the termination of Optionee’s Continuous
Service status, the Option shall terminate immediately upon such termination for Cause or such date
that the Company has notified Optionee in writing regarding the Harmful Conduct. The Administrator
shall have authority to effect such procedures and take such actions as are necessary to carry out
the legal intent of this Section 5(b)(iii), including such procedures and actions as are required
to cause Optionee to forfeit and return to the Company unvested Shares purchased under the Option,
if applicable, and/or remit to the Company the taxable income realized upon the exercise of the
Option or the sale of the underlying Shares issued upon exercise of the Option, as set forth in
Section 12.9 of the Plan.

          (c) Termination of Option. This Option may terminate prior to its Expiration Date and
prior to the dates specified under Section 5(a) and (b) above under certain circumstances as set
forth in Section 15 of the Plan.

     6. Non-Transferability of Option. Except as otherwise set forth in the Notice, this
Option may not be transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by him or her. The terms of
this Option shall be binding upon the executors, administrators, heirs, successors and assigns of
Optionee.

     7. Tax Consequences. The Company has not provided any tax advice with respect to this
Option or the disposition of the Shares. Optionee should obtain advice from an appropriate
independent professional adviser with respect to the taxation implications of the grant, exercise,
assignment, release, cancellation or any other disposal of this Option (each, a “Trigger
Event”) and on any subsequent sale or disposition of the Shares. Optionee should also take
advice in respect of the taxation indemnity provisions under Section 8 below. The per share
Exercise Price of the Option is intended to be at least equal to the fair market value of the
Company’s Common Stock at the date of grant. The Company has attempted in good faith to make the
fair market value determination in compliance with applicable tax law although there can be no
certainty that the IRS will agree. If the IRS does not agree and asserts the fair market value at
the time of grant is higher than the Exercise Price, the IRS could seek to impose greater taxes on
Optionee, including interest and penalties under Internal Revenue Code Section 409A. While the
Company thinks this is an unlikely event, the Company cannot provide absolute assurance and
Optionee may want to consult Optionee’s own tax adviser with any questions.

     8. Optionee’s Taxation Indemnity.

          (a) To the extent permitted by law, Optionee hereby agrees to indemnify and keep indemnified
the Company and the Company as trustee for and on behalf of any affiliate entity, in respect of any
liability or obligation of the Company and/or any affiliate entity to account for income tax or any
other taxation provisions under the laws of Optionee’s country or citizenship and/or residence to
the extent arising from a Trigger Event or arising out of the acquisition, retention and disposal
of the Shares.

 

 

          (b) The Company shall not be obliged to allot and issue any of the Shares or any interest in
the Shares unless and until Optionee has paid to the Company such sum as is, in the opinion of the
Company, sufficient to indemnify the Company in full against any liability the Company has for any
amount of, or representing, income tax or any other tax arising from a Trigger Event (the
“Option Tax Liability”), or Optionee has made such other arrangement as in the opinion of
the Company will ensure that the full amount of any Option Tax Liability will be recovered from
Optionee within such period as the Company may then determine.

     9. Data Protection.

          (a) To facilitate the administration of the Plan and this Agreement, it will be necessary for
the Company (or its payroll administrators) to collect, hold and process certain personal
information about Optionee and to transfer this data to certain third parties such as brokers with
whom Optionee may elect to deposit any share capital under the Plan. Optionee consents to the
Company (or its payroll administrators) collecting, holding and processing Optionee’s personal data
and transferring this data to the Company or any other third parties insofar as is reasonably
necessary to implement, administer and manage the Plan.

          (b) Optionee understands that Optionee may, at any time, view Optionee’s personal data,
require any necessary corrections to it or withdraw the consents herein in writing by contacting
the Company, but acknowledges that without the use of such data it may not be practicable for the
Company to administer Optionee’s involvement in the Plan in a timely fashion or at all and this may
be detrimental to Optionee.

     10. Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of New Jersey, without giving effect to principles of
conflicts of law.

     11. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions thereof (and has had an
opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and
agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby
agrees to accept as binding, conclusive and final all decisions and interpretations of the Plan
Administrator regarding any questions relating to the Option. In the event of a conflict between
the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement,
the Plan terms and provisions shall prevail. The Option, including the Plan, constitutes the
entire agreement between Optionee and the Company on the subject matter hereof and supersedes all
proposals, written or oral, and all other communications between the parties relating to such
subject matter.

     12. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

[Signature Page Follows]

 

 

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.

	 	 	 	 	 	 	 	 	 
	OPTIONEE	 	HEARTLAND PAYMENT SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	(Signature)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 
	(Printed Name)	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	Title:

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