Document:

Exhibit 10.03A

 

FIRST AMENDMENT TO THE

AMENDED & RESTATED DEMAND MEDIA, INC. 2006 EQUITY
INCENTIVE PLAN

 

Pursuant
to the authority reserved to the Board of Directors (the “Board”) of
Demand Media, Inc. (the “Company”) under Section 16(a) of
the Amended & Restated Demand Media, Inc. 2006 Equity Incentive
Plan (the “Plan”), the Board hereby amends the Plan as follows (the “First
Amendment”) effective as of June 1, 2009:

 

1.                                       In Section 3
of the Plan, the second sentence is deleted and replaced in its entirety with
the following:

 

“Subject
to the provisions of Section 14 hereof, the maximum aggregate number of
Shares which may be issued upon exercise of such Options or Stock Purchase
Rights is 55,000,000  Shares.”

 

Except as expressly provided
herein, all terms and conditions of the Plan and any awards outstanding
thereunder shall remain in full force and effect.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Board has caused this
First Amendment to be executed by a duly authorized officer of the Company as
of the date first written above.

 

	
   

  	
  Demand
  Media, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Rosenblatt

  
	
   

  	
   

  	
  Richard
  Rosenblatt

  
	
   

  	
   

  	
  Chief
  Executive Officer

  

 

[Signature Page to First
Amendment to DM Equity Incentive Plan]Exhibit 10.04

 

DEMAND MEDIA, INC.

2010 INCENTIVE AWARD PLAN

 

ARTICLE 1.

 

PURPOSE

 

The purpose of the Demand Media, Inc. 2010 Incentive Award Plan
(the “Plan”) is to promote the success and enhance the value of Demand
Media, Inc. (the “Company”) by linking the individual interests of
the members of the Board, Employees and Consultants to those of the Company’s
stockholders and by providing such individuals with an incentive for
outstanding performance to generate superior returns to the Company’s
stockholders.  The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of members of the Board, Employees and
Consultants upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.

 

ARTICLE 2.

 

DEFINITIONS
AND CONSTRUCTION

 

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

 

2.1           “Administrator” shall mean the
entity that conducts the general administration of the Plan as provided in Article 12
hereof.  With reference to the duties of
the Committee under the Plan which have been delegated to one or more persons
pursuant to Section 12.6 hereof, or which the Board has assumed, the term “Administrator”
shall refer to such person(s) unless the Committee or the Board has
revoked such delegation or the Board has terminated the assumption of such
duties.

 

2.2           “Affiliate” shall mean any
Parent or Subsidiary.

 

2.3           “Applicable Accounting Standards”
shall mean Generally Accepted Accounting Principles in the United States, International
Financial Reporting Standards or such other accounting principles or standards
as may apply to the Company’s financial statements under United States federal
securities laws from time to time.

 

2.4           “Award” shall mean an Option,
a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Award, a
Dividend Equivalent Award, a Deferred Stock Award, a Stock Payment Award, a
Stock Appreciation Right, an Other Incentive Award or a Performance Share
Award, which may be awarded or granted under the Plan.

 

2.5           “Award Agreement” shall mean
any written notice, agreement, contract or other instrument or document
evidencing an Award, including through electronic medium, which shall contain
such terms and conditions with respect to an Award as the Administrator shall
determine, consistent with the Plan.

 

 

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

 

2.7           “Cause” shall mean, with
respect to any Participant, “Cause” as defined in such Participant’s employment
agreement with the Company if such an agreement exists and contains a
definition of Cause or, if no such agreement exists or such agreement does not
contain a definition of Cause, then Cause shall mean (i) the Participant’s
unauthorized use or disclosure of confidential information or trade secrets of
the Company or any Subsidiary or any other material breach of a written
agreement between the Participant and the Company, including without limitation
a material breach of any employment or confidentiality agreement; (ii) the
Participant’s indictment for, or the entry of a plea of guilty or nolo
contendere by the Participant to, a felony under the laws of the United States
or any state thereof or other foreign jurisdiction or any crime involving
dishonesty or moral turpitude; (iii) the Participant’s gross negligence or
willful misconduct or the Participant’s willful or repeated failure or refusal
to substantially perform assigned duties; (iv) any act of fraud,
embezzlement, material misappropriation or dishonesty committed by the
Participant against the Company or any Subsidiary; or (v) any acts,
omissions or statements by a Participant which the Company reasonably
determines to be materially detrimental or damaging to the reputation,
operations, prospects or business relations of the Company or any Subsidiary.

 

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

 

(a)           The consummation of a transaction or
series of transactions (other than an offering of Shares to the general public
through a registration statement filed with the Securities and Exchange
Commission) whereby any “person” or related “group” of “persons” (as such terms
are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other
than the Company, any of its Parents or Subsidiaries, an employee benefit plan
maintained by the Company or any of its Parents or Subsidiaries or a “person”
that, prior to such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company possessing more than fifty percent
(50%) of the total combined voting power of the Company’s securities
outstanding immediately after such acquisition; or

 

(b)           During any period of two consecutive
years, individuals who, at the beginning of such period, constitute the Board
together with any new director(s) (other than a director designated by a
person who shall have entered into an agreement with the Company to effect a
transaction described in Section 2.8(a) or Section 2.8(c)) whose
election by the Board or nomination for election by the Company’s stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or

 

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

 

2

 

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

 

(ii)           After which no person or group
beneficially owns voting securities representing 50% or more of the combined
voting power of the Successor Entity; provided, however, that
no person or group shall be treated for purposes of this Section 2.8(c)(ii) as
beneficially owning 50% or more of the combined voting power of the Successor
Entity solely as a result of the voting power held in the Company prior to the
consummation of the transaction; or

 

(d)           The Company’s stockholders approve a
liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, if a Change in Control constitutes a
payment event with respect to any Award which provides for the deferral of
compensation that is subject to Section 409A of the Code, to the extent
required to avoid the imposition of additional taxes under Section 409A of
the Code, the transaction or event described in subsection (a), (b), (c) or
(d) with respect to such Award shall only constitute a Change in Control for
purposes of the payment timing of such Award if such transaction also
constitutes a “change in control event,” as defined in Treasury Regulation
§1.409A-3(i)(5).

 

Consistent with the terms of this Section 2.8, the Administrator
shall have full and final authority to determine conclusively whether a Change
in Control of the Company has occurred pursuant to the above definition, the
date of the occurrence of such Change in Control and any incidental matters
relating thereto.

 

2.9           “Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time, together with the
regulations and official guidance promulgated thereunder, whether issued prior
or subsequent to the grant of any Award.

 

2.10         “Committee” shall mean the
Compensation Committee of the Board, or another committee or subcommittee of
the Board described in Article 12 hereof.

 

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

 

2.12         “Company” shall mean Demand
Media, Inc., a Delaware corporation.

 

2.13         “Consultant” shall mean any
consultant or adviser engaged to provide services to the Company or any
Affiliate that qualifies as a consultant under the applicable rules of the
Securities and Exchange Commission for registration of shares on a Form S-8
Registration

 

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Statement or any successor Form thereto
or, prior to the Public Trading Date, under Rule 701 of the Securities
Act.

 

2.14         “Covered Employee” shall mean
any Employee who is, or could become, a “covered employee” within the meaning
of Section 162(m) of the Code.

 

2.15         “Deferred Stock” shall mean a
right to receive Shares awarded under Section 9.4 hereof.

 

2.16         “Director” shall mean a member
of the Board, as constituted from time to time.

 

2.17         “Dividend Equivalent” shall mean
a right to receive the equivalent value (in cash or Shares) of dividends paid
on Shares, awarded under Section 9.2 hereof.

 

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

 

2.19         “Effective Date” shall mean the
date the Plan is approved by the Board, subject to approval of the Plan by the
Company’s stockholders.

 

2.20         “Eligible Individual” shall mean
any person who is an Employee, a Consultant or a Non-Employee Director, as
determined by the Administrator.

 

2.21         “Employee” shall mean any
officer or other employee (as determined in accordance with Section 3401(c) of
the Code) of the Company or of any Affiliate.

 

2.22         “Equity Restructuring” shall
mean a nonreciprocal transaction between the Company and its stockholders, such
as a stock dividend, stock split, spin-off, rights offering or recapitalization
through a large, nonrecurring cash dividend, that affects the number or kind of
shares of Common Stock (or other securities of the Company) or the share price
of Common Stock (or other securities) and causes a change in the per share
value of the Common Stock underlying outstanding Awards.

 

2.23         “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended from time to time.

 

2.24         “Fair Market Value” shall mean,
as of any given date, the value of a Share determined as follows:

 

(a)           If the Common Stock is (i) listed
on any established securities exchange (such as the New York Stock Exchange,
the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed
on any national market system or (iii) listed, quoted or traded on any
automated quotation system, its Fair Market Value shall be the closing sales
price for a share of Common Stock as quoted on such exchange or system for such
date or, if there is no closing sales price for a share of Common Stock on the
date in question, the closing sales price for a share of Common Stock on the
last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

 

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(b)           If the Common Stock is not listed on
an established securities exchange, national market system or automated
quotation system, but the Common Stock is regularly quoted by a recognized
securities dealer, its Fair Market Value shall be the mean of the high bid and
low asked prices for such date or, if there are no high bid and low asked
prices for a share of Common Stock on such date, the high bid and low asked
prices for a share of Common Stock on the last preceding date for which such
information exists, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or

 

(c)           If the Common Stock is neither listed
on an established securities exchange, national market system or automated
quotation system nor regularly quoted by a recognized securities dealer, its
Fair Market Value shall be established by the Administrator in good faith.

 

2.25         “Greater Than 10% Stockholder”
shall mean an individual then-owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any “parent corporation” or “subsidiary corporation”
(as defined in Sections 424(e) and 424(f) of the Code, respectively).

 

2.26         “Incentive Stock Option” shall
mean an Option that is intended to qualify as an incentive stock option and
conforms to the applicable provisions of Section 422 of the Code.

 

2.27         “Individual Award Limit” shall
mean the cash and share limits applicable to Awards granted under the Plan, as
set forth in Section 3.3 hereof.

 

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

 

2.29         “Non-Qualified Stock Option”
shall mean an Option that is not an Incentive Stock Option or which is
designated as an Incentive Stock Option but does not meet the applicable
requirements of Section 422 of the Code.

 

2.30         “Option”
shall mean a right to purchase Shares at a specified exercise price, granted
under Article 6 hereof.  An Option
shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Non-Employee Directors and Consultants
shall only be Non-Qualified Stock Options.

 

2.31         “Other Incentive Award” shall
mean an Award denominated in, linked to or derived from Shares or value metrics
related to Shares, granted pursuant to Section 9.7 hereof.

 

2.32         “Parent” shall mean any entity
(other than the Company), whether domestic or foreign, in an unbroken chain of
entities ending with the Company if each of the entities other than the Company
beneficially owns, at the time of the determination, securities or interests
representing more than fifty percent (50%) of the total combined voting power
of all classes of securities or interests in one of the other entities in such
chain.

 

2.33         “Participant” shall mean a
person who has been granted an Award.

 

5

 

2.34         “Performance Award” shall mean
an Award that is granted under Section 9.1 hereof.

 

2.35         “Performance-Based Compensation”
shall mean any compensation that is intended to qualify as “performance-based
compensation” as described in Section 162(m)(4)(C) of the Code.

 

2.36         “Performance Criteria” shall
mean the criteria (and adjustments) that the Committee selects for an Award for
purposes of establishing the Performance Goal or Performance Goals for a
Performance Period, determined as follows:

 

(a)           The Performance Criteria that shall
be used to establish Performance Goals are limited to the following: (i) net
earnings (either before or after one or more of the following: (A) interest,
(B) taxes, (C) depreciation, (D) amortization and (E) non-cash
equity-based compensation expense); (ii) gross or net sales or revenue; (iii) net
income (either before or after taxes); (iv) adjusted net income; (v) operating
earnings or profit; (vi) cash flow (including, but not limited to,
operating cash flow and free cash flow); (vii) return on assets; (viii) return
on capital; (ix) return on stockholders’ equity; (x) total
stockholder return; (xi) return on sales; (xii) gross or net profit
or operating margin; (xiii) costs; (xiv) funds from operations; (xv) expenses;
(xvi) working capital; (xvii) earnings per share; (xviii) adjusted
earnings per share; (xix) price per share of Common Stock; (xx) regulatory
body approval for commercialization of a product; (xxi) implementation or
completion of critical projects; (xxii) market share; (xxiii) economic
value; (xxix) customer retention; and (xxx) sales-related goals, any
of which may be measured either in absolute terms for the Company or any
operating unit of the Company or as compared to any incremental increase or
decrease or as compared to results of a peer group or to market performance
indicators or indices.

 

(b)           The Administrator may, in its sole
discretion, provide that one or more objectively determinable adjustments shall
be made to one or more of the Performance Goals.  Such adjustments may include, but are not
limited to, one or more of the following: 
(i) items related to a change in accounting principle; (ii) items
relating to financing activities; (iii) expenses for restructuring or
productivity initiatives; (iv) other non-operating items; (v) items
related to acquisitions; (vi) items attributable to the business
operations of any entity acquired by the Company during the Performance Period;
(vii) items related to the disposal of a business or segment of a
business; (viii) items related to discontinued operations that do not
qualify as a segment of a business under Applicable Accounting Standards; (ix) items
attributable to any
stock dividend, stock split, combination or exchange of stock occurring during
the Performance Period; (x) any other items of significant income or
expense which are determined to be appropriate adjustments; (xi) items
relating to unusual or extraordinary corporate transactions, events or
developments, (xii)  items related to amortization of acquired
intangible assets; (xiii) items that are outside the scope of the Company’s
core, on-going business activities; (xiv) items related to acquired
in-process research and development; (xv) items relating to changes in tax
laws; (xvi) items relating to major licensing or partnership arrangements;
(xvii) items relating to asset impairment charges; (xviii) items
relating to gains or losses for litigation, arbitration and contractual
settlements; or (xix) items relating to any other unusual or nonrecurring
events or changes in applicable laws, accounting principles or business
conditions.  For all Awards intended to
qualify as Performance-Based Compensation, such

 

6

 

determinations shall be made within the time
prescribed by, and otherwise in compliance with, Section 162(m) of
the Code.

 

2.37         “Performance Goals” shall mean,
for a Performance Period, one or more goals established in writing by the Administrator
for the Performance Period based upon one or more Performance Criteria.  Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of an Affiliate,
division, business unit, or an individual. 
The achievement of each Performance Goal shall be determined in
accordance with Applicable Accounting Standards.

 

2.38         “Performance Period” shall mean
one or more periods of time, which may be of varying and overlapping durations,
as the Administrator may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s
right to, and the payment of, a Performance Award.

 

2.39         “Performance Share Award” shall
mean a contractual right awarded under Section 9.6 hereof to receive a
number of Shares or the cash value of such number of Shares based on the
attainment of specified Performance Goals or other criteria determined by the
Administrator.

 

2.40         “Permitted Transferee” shall
mean, with respect to a Participant, (a) prior to the Public Trading Date,
any “family member” of the Participant, as defined under Rule 701 of the
Securities Act and (b) on or after the Public Trading Date, any “family
member” of the Participant, as defined under the instructions to use of the Form S-8
Registration Statement under the Securities Act, or any other transferee
specifically approved by the Administrator after taking into account any state,
federal, local or foreign tax and securities laws applicable to transferable
Awards.  In addition, the Administrator,
in its sole discretion, may determine to permit a Participant to transfer
Incentive Stock Options to a trust that constitutes a Permitted Transferee if,
under Section 671 of the Code and applicable state law, the Participant is
considered the sole beneficial owner of the Incentive Stock Option while it is
held in the trust.

 

2.41         “Plan” shall mean this Demand
Media, Inc. 2010 Incentive Award Plan, as it may be amended from time to
time.

 

2.42         “Prior Plan” shall mean the
Demand Media, Inc. 2006 Equity Incentive Plan, as may be amended from time
to time.

 

2.43         “Program” shall mean any program
adopted by the Administrator pursuant to the Plan containing the terms and
conditions intended to govern a specified type of Award granted under the Plan
and pursuant to which such type of Award may be granted under the Plan.

 

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

 

7

 

2.45         “Restricted Stock” shall mean
Common Stock awarded under Article 8 hereof that is subject to certain
restrictions and may be subject to risk of forfeiture or repurchase.

 

2.46         “Restricted Stock Unit” shall
mean a contractual right awarded under Section 9.5 hereof to receive in
the future a Share or the cash value of a Share.

 

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

 

2.48         “Share Limit” shall have the
meaning provided in Section 3.1(a) hereof.

 

2.49         “Shares” shall mean shares of
Common Stock.

 

2.50         “Stock Appreciation Right” shall
mean a stock appreciation right granted under Article 10 hereof.

 

2.51         “Stock Payment” shall mean a
payment in the form of Shares awarded under Section 9.3 hereof.

 

2.52         “Subsidiary” shall mean any
entity (other than the Company), whether domestic or foreign, in an unbroken
chain of entities beginning with the Company if each of the entities other than
the last entity in the unbroken chain beneficially owns, at the time of the
determination, securities or interests representing more than fifty percent
(50%) of the total combined voting power of all classes of securities or
interests in one of the other entities in such chain.

 

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

 

2.54         “Termination of Service” shall
mean:

 

(a)  As to a Consultant, the time when
the engagement of a Participant as a Consultant to the Company and its
Affiliates is terminated for any reason, with or without Cause, including,
without limitation, by resignation, discharge, death or retirement, but excluding
terminations where the Consultant simultaneously commences or remains in
employment or service with the Company or any Affiliate.

 

(b) As to a Non-Employee Director, the time when a Participant who
is a Non-Employee Director ceases to be a Director for any reason, including,
without limitation, a termination by resignation, failure to be elected, death
or retirement, but excluding terminations where the Participant simultaneously
commences or remains in employment or service with the Company or any Affiliate.

 

(c) As to an Employee, the time when the employee-employer
relationship between a Participant and the Company and its Affiliates is
terminated for any reason, including, without 

 

8

 

limitation, a termination by resignation, discharge, death, disability
or retirement; but excluding terminations where the Participant simultaneously
commences or remains in employment or service with the Company or any
Affiliate.

 

The Administrator, in its sole discretion,
shall determine the effect of all matters and questions relating to
Terminations of Service, including, without limitation, the question of whether
a Termination of Service has occurred, whether any Termination of Service
resulted from a discharge for Cause and all questions of whether particular
leaves of absence constitute a Termination of Service; provided, however,
that, with respect to Incentive Stock Options, unless the Administrator
otherwise provides in the terms of any Program, Award Agreement or otherwise, a
leave of absence, change in status from an employee to an independent
contractor or other change in the employee-employer relationship shall
constitute a Termination of Service only if, and to the extent that, such leave
of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code.  For purposes of the Plan, a Participant’s
employee-employer relationship or consultancy relationship shall be deemed to
be terminated in the event that the Affiliate employing or contracting with
such Participant ceases to remain an Affiliate following any merger, sale of
stock or other corporate transaction or event (including, without limitation, a
spin-off).

 

ARTICLE 3.

 

SHARES
SUBJECT TO THE PLAN

 

3.1           Number of Shares.

 

(a)           Subject to Sections 3.1(b), 13.1 and
13.2 hereof, the aggregate number of Shares which may be issued or transferred
pursuant to Awards under the Plan shall be equal to the sum of (i) thirty-one
million (31,000,000) Shares, (ii) any Shares underlying awards outstanding
under the Prior Plan as of the Effective Date which, on or after the Effective
Date, terminate, expire or lapse for any reason without the delivery of Shares
to the holder thereof, and (iii) an annual increase on the first day of
each year beginning in 2011 and ending in 2020 equal to the lesser of (A) twelve million (12,000,000) shares, (B) five percent (5%) of the Shares
outstanding (on an as converted basis) on the last day of the immediately
preceding fiscal year,  assuming the
conversion of any shares of preferred stock, but excluding shares issuable upon
the exercise or payment of stock options, warrants and other equity securities
with respect to which shares have not actually been issued and (C) such
smaller number of Shares as may be determined by the Board (the “Share Limit”),
all of which may be issued as Incentive Stock Options, provided,
however, that notwithstanding the foregoing, Shares added to the
Share Limit pursuant to Section 3.1(a)(ii) or Section 3.1(a)(iii) shall
be available for issuance as Incentive Stock Options only to the extent that
making such Shares available for issuance as Incentive Stock Options would not
cause any Incentive Stock Option to cease to qualify as such.  Notwithstanding the foregoing, to the extent
permitted under applicable law and applicable stock exchange rules, Awards that
provide for the delivery of Shares subsequent to the applicable grant date may
be granted in excess of the Share Limit if such Awards provide for the forfeiture
or cash settlement of such Awards to the extent that insufficient Shares remain
under the Share Limit at the time that Shares would otherwise be issued in
respect of such Award.  As of the
Effective Date, no further awards may be granted under the Prior Plan, however,
any awards under the Prior Plan that 

 

9

 

are outstanding as of the Effective Date
shall continue to be subject to the terms and conditions of the Prior Plan.

 

(b)           The following Shares shall be
available for future grants of Awards under the Plan and shall be added back to
the Share Limit in the same number of Shares as were debited from the Share
Limit in respect of the grant of such Award (as may be adjusted in accordance
with Section 13.2 hereof): (i) Shares tendered by a Participant or
withheld by the Company in payment of the exercise price of an Option; (ii) Shares
tendered by the Participant or withheld by the Company to satisfy any tax
withholding obligation with respect to an Award; and (iii) Shares subject
to an Award that is forfeited, expires or is settled for cash (in whole or in
part), to the extent of such forfeiture, expiration or cash settlement.  Notwithstanding anything to the contrary
contained herein, the following Shares shall not be added back to the Share
Limit and will not be available for future grants of Awards: (A) Shares
subject to a Stock Appreciation Right that are not issued in connection with
the stock settlement of the Stock Appreciation Right on exercise thereof; and (B) Shares
purchased on the open market with the cash proceeds from the exercise of
Options.  Any Shares repurchased by the
Company under Section 8.4 hereof at the same price paid by the Participant
so that such shares are returned to the Company will again be available for
Awards.  The payment of Dividend
Equivalents in cash in conjunction with any outstanding Awards shall not be
counted against the shares available for issuance under the Plan.  Notwithstanding the provisions of this Section 3.1(b),
no Shares may again be optioned, granted or awarded if such action would cause
an Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.

 

(c)           Substitute Awards
shall not reduce the Shares authorized for grant under the Plan.  Additionally, in the event that a company
acquired by the Company or any Affiliate or with which the Company or any
Affiliate combines has shares available under a pre-existing plan approved by
stockholders and not adopted in contemplation of such acquisition or
combination, 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
acquisition or combination to determine the consideration payable to the
holders of common stock of the entities party to such acquisition or
combination) may be used for Awards under the Plan in the Board’s discretion at
the time of such acquisition or combination and shall not reduce the Shares
authorized for grant under the Plan; provided, however, that
Awards using such available shares shall not be made after the date awards or
grants could have been made under the terms of the pre-existing plan, absent
the acquisition or combination, and shall only be made to individuals who were
not employed by or providing services to the Company or its Affiliates
immediately prior to such acquisition or combination.

 

3.2           Stock Distributed.  Any
Shares distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Common Stock, treasury Common Stock or Common Stock
purchased on the open market.

 

3.3           Limitation on Number of Shares Subject to Awards.  Notwithstanding any provision in the Plan to
the contrary, and subject to Section 13.2 hereof, the maximum aggregate
number of Shares with respect to one or more Awards that may be granted to any
one person during any calendar year (measured from the date of any grant) shall
be ten million (10,000,000) and the maximum aggregate amount of cash that may
be paid in cash during any calendar year 

 

10

 

(measured from the date of any payment) with
respect to one or more Awards payable in cash shall be ten million dollars
($10,000,000) (together, the “Individual Award Limits”); provided, however, that the
foregoing limitations shall not apply until the earliest of the following
events to occur after the Public Trading Date: (a) the first material
modification of the Plan (including any increase in the Share Limit in
accordance with Section 3.1 hereof); (b) the issuance of all of the
Shares reserved for issuance under the Plan; (c) the expiration of the
Plan; (d) the first meeting of stockholders at which members of the Board
are to be elected that occurs after the close of the third calendar year
following the calendar year in which occurred the first registration of an
equity security of the Company under Section 12 of the Exchange Act; or
(e) such other date required by Section 162(m) of the Code.

 

ARTICLE 4.

 

GRANTING
OF AWARDS

 

4.1           Participation.  The Administrator may, from time to time,
select from among all Eligible Individuals, those to whom one or more Awards
shall be granted and shall determine the nature and amount of each Award, which
shall not be inconsistent with the requirements of the Plan.  No Eligible Individual shall have any right
to be granted an Award pursuant to the Plan.

 

4.2           Award Agreement.  Each Award shall be evidenced by an Award
Agreement stating the terms and conditions applicable to such Award, consistent
with the requirements of the Plan and any applicable Program.

 

4.3           Limitations Applicable to Section 16
Persons.  Notwithstanding anything
contained herein to the contrary, with respect to any Award granted or awarded
to any individual who is then subject to Section 16 of the Exchange Act,
the Plan, any applicable Program and the applicable Award Agreement shall be
subject to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange
Act and any amendments thereto) that are requirements for the application of
such exemptive rule, and such additional limitations shall be deemed to be
incorporated by reference into such Award to the extent permitted by applicable
law.

 

4.4           At-Will Service.  Nothing in the Plan or in any Program or
Award Agreement hereunder shall confer upon any Participant any right to
continue as an Employee, Director or Consultant of the Company or any
Affiliate, or shall interfere with or restrict in any way the rights of the
Company and any Affiliate, which rights are hereby expressly reserved, to
discharge any Participant at any time for any reason whatsoever, with or
without Cause, and with or without notice, or to terminate or change all other
terms and conditions of employment or engagement, except to the extent
expressly provided otherwise in a written agreement between the Participant and
the Company or any Affiliate.

 

4.5           Foreign Participants.  Notwithstanding any provision of the Plan to
the contrary, in order to comply with the laws in other countries in which the
Company and its Affiliates operate or have Employees, Non-Employee Directors or
Consultants, or in order to comply with the requirements of any foreign
securities exchange, the Administrator, in its sole discretion, shall have the
power and authority to: (a) determine which Affiliates shall be covered by
the 

 

11

 

Plan; (b) determine which Eligible
Individuals outside the United States are eligible to participate in the Plan; (c) modify
the terms and conditions of any Award granted to Eligible Individuals outside
the United States to comply with applicable foreign laws or listing
requirements of any such foreign securities exchange; (d) establish
subplans and modify exercise procedures and other terms and procedures, to the
extent such actions may be necessary or advisable (any such subplans and/or
modifications shall be attached to the Plan as appendices); provided, however, that no such subplans and/or modifications
shall increase the Share Limit or Individual Award Limits contained in Sections
3.1 and 3.3 hereof, respectively; and (e) take any action, before or after
an Award is made, that it deems advisable to obtain approval or comply with any
necessary local governmental regulatory exemptions or approvals or listing
requirements of any such foreign securities exchange.  Notwithstanding the foregoing, the
Administrator may not take any actions hereunder, and no Awards shall be
granted, that would violate the Code, the Exchange Act, the Securities Act, the
rules of the securities exchange or automated quotation system on which
the Shares are listed, quoted or traded or any other applicable law.

 

4.6           Stand-Alone and Tandem Awards. 
Awards granted pursuant to the Plan may, in the sole discretion of the
Administrator, be granted either alone, in addition to, or in tandem with, any
other Award granted pursuant to the Plan. 
Awards granted in addition to or in tandem with other Awards may be
granted either at the same time as or at a different time from the grant of
such other Awards.

 

ARTICLE 5.

 

PROVISIONS
APPLICABLE TO AWARDS INTENDED TO QUALIFY AS

PERFORMANCE-BASED COMPENSATION.

 

5.1           Purpose.  The Committee,
in its sole discretion, may determine whether any Award is intended to qualify
as Performance-Based Compensation. If the Committee, in its sole discretion,
decides to grant an Award to an Eligible Individual that is intended to qualify
as Performance-Based Compensation, then the provisions of this Article 5
shall control over any contrary provision contained in the Plan.  The Administrator may in its sole discretion
grant Awards to Eligible Individuals that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 5
and that are not intended to qualify as Performance-Based Compensation.  Unless otherwise specified by the
Administrator at the time of grant, the Performance Criteria with respect to an
Award intended to be Performance-Based Compensation payable to a Covered
Employee shall be determined on the basis of Applicable Accounting Standards.

 

5.2           Applicability.  The grant of an Award to an Eligible
Individual for a particular Performance Period shall not require the
grant of an Award to such Eligible Individual in any subsequent Performance
Period and the grant of an Award to any one Eligible Individual shall not
require the grant of an Award to any other Eligible Individual in such period
or in any other period.

 

5.3           Procedures with Respect to Performance-Based Awards.  To the extent necessary to comply with the
requirements of Section 162(m)(4)(C) of the Code, with respect to 

 

12

 

any Award which is intended to qualify as
Performance-Based Compensation, no later than ninety (90) days following the
commencement of any Performance Period or any designated fiscal period or
period of service (or such earlier time as may be required under Section 162(m) of
the Code), the Committee shall, in writing, (a) designate one or more
Eligible Individuals, (b) select the Performance Criteria applicable to
the Performance Period, (c) establish the Performance Goals and amounts of
such Awards, as applicable, which may be earned for such Performance Period
based on the Performance Criteria, and (d) specify the relationship
between Performance Criteria and the Performance Goals and the amounts of such
Awards, as applicable, to be earned by each Covered Employee for such
Performance Period.  Following the
completion of each Performance Period, the Committee shall certify in writing
whether and the extent to which the applicable Performance Goals have been achieved
for such Performance Period.  In determining
the amount earned under such Awards, unless otherwise provided in an Award
Agreement, the Committee shall have the right to reduce or eliminate (but not
to increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant, including the
assessment of individual or corporate performance for the Performance Period.

 

5.4           Payment of Performance-Based Awards.  Unless otherwise provided in the applicable
Program or Award Agreement (and only to the extent otherwise permitted by Section 162(m)(4)(C) of
the Code), the holder of an Award that is intended to qualify as
Performance-Based Compensation must be employed by the Company or an Affiliate
throughout the applicable Performance Period. 
Unless otherwise provided in the applicable Performance Goals, Program
or Award Agreement, a Participant shall be eligible to receive payment pursuant
to such Awards for a Performance Period only if and to the extent the
Performance Goals for such period are achieved.

 

5.5           Additional Limitations.  Notwithstanding any other provision of the
Plan and except as otherwise determined by the Administrator, any Award which
is granted to an Eligible Individual and is intended to qualify as
Performance-Based Compensation shall be subject to any additional limitations
imposed under Section 162(m) of the Code that are requirements for
qualification as Performance-Based Compensation, and the Plan, the Program and
the Award Agreement shall be deemed amended to the extent necessary to conform
to such requirements.

 

ARTICLE 6.

 

GRANTING
OF OPTIONS

 

6.1           Granting of Options to Eligible
Individuals.  The Administrator is
authorized to grant Options to Eligible Individuals from time to time, in its
sole discretion, on such terms and conditions as it may determine which shall
not be inconsistent with the Plan.

 

6.2           Qualification of Incentive Stock
Options.  No Incentive Stock Option
shall be granted to any person who is not an Employee of the Company or any “parent
corporation” or “subsidiary corporation” of the Company (as defined in Sections
424(e) and 424(f) of the Code, respectively).  No person who qualifies as a Greater Than 10%
Stockholder may be granted an Incentive Stock Option unless such Incentive
Stock Option conforms to the applicable provisions of Section 422 of the
Code.  Any Incentive Stock Option granted
under the Plan may be 

 

13

 

modified by the Administrator, with the
consent of the Participant, to disqualify such Option from treatment as an “incentive
stock option” under Section 422 of the Code. To the extent that the
aggregate fair market value of stock with respect to which “incentive stock
options” (within the meaning of Section 422 of the Code, but without
regard to Section 422(d) of the Code) are exercisable for the first
time by a Participant during any calendar year under the Plan and all other
plans of the Company and any Affiliate corporation thereof exceeds $100,000,
the Options shall be treated as Non-Qualified Stock Options to the extent
required by Section 422 of the Code. 
The rule set forth in the preceding sentence shall be applied by
taking Options and other “incentive stock options” into account in the order in
which they were granted and the Fair Market Value of stock shall be determined
as of the time the respective options were granted. In addition, to the extent
that any Options otherwise fail to qualify as Incentive Stock Options, such
Options shall be treated as Nonqualified Stock Options.

 

6.3           Option Exercise Price.  Except as provided in Section 6.6
hereof, the exercise price per Share subject to each Option shall be set by the
Administrator, but shall not be less than 100% of the Fair Market Value of a
Share on the date the Option is granted (or, as to Incentive Stock Options, on
the date the Option is modified, extended or renewed for purposes of Section 424(h) of
the Code).  In addition, in the case of
Incentive Stock Options granted to a Greater Than 10% Stockholder, such price
shall not be less than 110% of the Fair Market Value of a Share on the date the
Option is granted (or the date the Option is modified, extended or renewed for
purposes of Section 424(h) of the Code).

 

6.4           Option Term.  The term of each Option shall be set by the Administrator
in its sole discretion; provided, however, that the term shall
not be more than ten (10) years from the date the Option is granted, or
five (5) years from the date an Incentive Stock Option is granted to a
Greater Than 10% Stockholder.  The Administrator
shall determine the time period, including the time period following a
Termination of Service, during which the Participant has the right to exercise
the vested Options, which time period may not extend beyond the stated term of
the Option. Except as limited by the requirements of Section 409A or Section 422
of the Code, the Administrator may extend the term of any outstanding Option,
and may extend the time period during which vested Options may be exercised, in
connection with any Termination of Service of the Participant, and, subject to Section 13.1
hereof, may amend any other term or condition of such Option relating to such a
Termination of Service.

 

6.5           Option Vesting.

 

(a)           The terms and conditions pursuant to
which an Option vests in the Participant and becomes exercisable shall be
determined by the Administrator and set forth in the applicable Award
Agreement.  Such vesting may be based on
service with the Company or any Affiliate, any of the Performance Criteria, or
any other criteria selected by the Administrator.  At any time after grant of an Option, the
Administrator may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the vesting of the Option.

 

(b)           No portion of an Option which is
unexercisable at a Participant’s Termination of Service shall thereafter become
exercisable, except as may be otherwise provided by the Administrator either in
a Program, the applicable Award Agreement or by action of the Administrator
following the grant of the Option.

 

14

 

6.6           Substitute Awards.  Notwithstanding the foregoing provisions of
this Article 6 to the contrary, in the case of an Option that is a
Substitute Award, the price per share of the shares subject to such Option may
be less than the Fair Market Value per share on the date of grant, provided,
however, that the excess of: (a) the aggregate Fair Market Value
(as of the date such Substitute Award is granted) of the Shares subject to the
Substitute Award, over (b) the aggregate exercise price thereof does not
exceed the excess of: (x) the aggregate Fair Market Value (as of the time
immediately preceding the transaction giving rise to the Substitute Award) of
the shares of the predecessor entity that were subject to the grant assumed or
substituted for by the Company, over (y) the aggregate exercise price of
such shares.

 

6.7           Substitution of Stock Appreciation
Rights.  The Administrator may
provide in an applicable Program or the applicable Award Agreement evidencing
the grant of an Option that the Administrator, in its sole discretion, shall
have the right to substitute a Stock Appreciation Right for such Option at any
time prior to or upon exercise of such Option; provided, however, that such Stock Appreciation Right shall be exercisable
with respect to the same number of Shares for which such substituted Option
would have been exercisable, and shall also have the same exercise price and
remaining term as the substituted Option.

 

ARTICLE 7.

 

EXERCISE
OF OPTIONS

 

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

 

7.2           Manner of Exercise.  All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company, or such other person or entity designated by the
Administrator, or his, her or its office, as applicable:

 

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

 

(b)           Such representations and documents as
the Administrator, in its sole discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act, the
Exchange Act, any other federal, state or foreign securities laws or
regulations, the rules of any securities exchange or automated quotation
system on which the Shares are listed, quoted or traded or any other applicable
law.  The Administrator may, in its sole
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

 

(c)           In the event that the Option shall be
exercised pursuant to Section 11.3 hereof by any person or persons other
than the Participant, appropriate proof of the right of such 

 

15

 

person or persons to exercise the Option, as
determined in the sole discretion of the Administrator; and

 

(d)           Full payment of the exercise price
and applicable withholding taxes to the stock administrator of the Company for
the Shares with respect to which the Option, or portion thereof, is exercised,
in a manner permitted by Sections 11.1 and 11.2 hereof.

 

7.3           Notification Regarding Disposition.  The Participant shall give the Company prompt
written or electronic notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option which occurs within (a) two
years from the date of granting (including the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Participant, or (b) one year after the transfer of such
shares to such Participant.

 

ARTICLE 8.

 

RESTRICTED
STOCK

 

8.1           Award of Restricted Stock.

 

(a)           The Administrator is authorized to
grant Restricted Stock to Eligible Individuals, and shall determine the terms
and conditions, including the restrictions applicable to each award of
Restricted Stock, which terms and conditions shall not be inconsistent with the
Plan, and may impose such conditions on the issuance of such Restricted Stock
as it deems appropriate.

 

(b)           The Administrator shall establish the
purchase price, if any, and form of payment for Restricted Stock; provided,
however, that if a purchase price is charged, such purchase price shall
be no less than the par value of the Shares to be purchased, unless otherwise
permitted by applicable law.  In all
cases, legal consideration shall be required for each issuance of Restricted
Stock to the extent required by applicable law.

 

8.2           Rights as Stockholders.  Subject to Section 8.4 hereof, upon
issuance of Restricted Stock, the Participant shall have, unless otherwise provided
by the Administrator, all the rights of a stockholder with respect to said
shares, subject to the restrictions in an applicable Program or in the
applicable Award Agreement, including the right to receive dividends and other
distributions paid or made with respect to the shares; provided, however,
that, in the sole discretion of the Administrator, any extraordinary
distributions with respect to the Shares shall be subject to the restrictions
set forth in Section 8.3 hereof.

 

8.3           Restrictions.  All shares of Restricted Stock (including any
shares received by Participants thereof with respect to shares of Restricted
Stock as a result of stock dividends, stock splits or any other form of
recapitalization) shall, in the terms of an applicable Program or in the
applicable Award Agreement, be subject to such restrictions and vesting
requirements as the Administrator shall provide.  Such restrictions may include, without
limitation, restrictions concerning voting rights and transferability and such
restrictions may lapse separately or in combination at such times and pursuant
to such circumstances or based on such criteria as selected by the
Administrator, including, without limitation, criteria based on the Participant’s

 

16

 

duration of employment, directorship or
consultancy with the Company, the Performance Criteria, Company or Affiliate
performance, individual performance or other criteria selected by the
Administrator.  Restricted Stock may not
be sold or encumbered until all restrictions are terminated or expire.

 

8.4           Repurchase or Forfeiture of
Restricted Stock.  If no price was
paid by the Participant for the Restricted Stock, upon a Termination of
Service, the Participant’s rights in unvested Restricted Stock then subject to
restrictions shall lapse, and such Restricted Stock shall be surrendered to the
Company and cancelled without consideration. If a price was paid by the
Participant for the Restricted Stock, upon a Termination of Service, the
Company shall have the right to repurchase from the Participant the unvested
Restricted Stock then-subject to restrictions at a cash price per share equal
to the price paid by the Participant for such Restricted Stock or such other
amount as may be specified in an applicable Program or the applicable Award
Agreement.  The Administrator in its sole
discretion may provide that, upon certain events, including without limitation
a Change in Control, the Participant’s death, retirement or disability, any
other specified Termination of Service or any other event, the Participant’s
rights in unvested Restricted Stock shall not lapse, such Restricted Stock
shall vest and cease to be forfeitable and, if applicable, the Company cease to
have a right of repurchase.

 

8.5           Certificates for Restricted Stock.  Restricted Stock granted pursuant to the Plan
may be evidenced in such manner as the Administrator shall determine.  Certificates or book entries evidencing
shares of Restricted Stock must include an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, in it sole discretion, retain physical possession of any stock
certificate until such time as all applicable restrictions lapse.

 

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

 

ARTICLE 9.

 

PERFORMANCE
AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS,

DEFERRED STOCK, RESTRICTED STOCK UNITS; PERFORMANCE SHARE

AWARDS, OTHER INCENTIVE AWARDS

 

9.1           Performance Awards.

 

(a)           The Administrator is authorized to
grant Performance Awards to any Eligible Individual and to determine whether
such Performance Awards shall be Performance-Based Compensation.  The value of Performance Awards may be linked
to any one or more of the Performance Criteria or other specific criteria
determined by the Administrator, in each case on a specified date or dates or
over any period or periods determined by the Administrator.  

 

17

 

Performance Awards may be paid in cash,
Shares or a combination of both, as determined by the Administrator.

 

(b)           Without limiting Section 9.1(a) hereof,
the Administrator may grant Performance Awards to any Eligible Individual in
the form of a cash bonus payable upon the attainment of objective Performance
Goals, or such other criteria, whether or not objective, which are established
by the Administrator, in each case on a specified date or dates or over any
period or periods determined by the Administrator.  Any such bonuses paid to a Participant which
are intended to be Performance-Based Compensation shall be based upon
objectively determinable bonus formulas established in accordance with the
provisions of Article 5 hereof.

 

9.2           Dividend Equivalents.

 

(a)           Subject to Section 9.2(b) hereof,
Dividend Equivalents may be granted by the Administrator, either alone or in
tandem with another Award, based on dividends declared on the Common Stock, to
be credited as of dividend payment dates during the period between the date the
Dividend Equivalents are granted to a Participant and the date such Dividend
Equivalents terminate or expire, as determined by the Administrator.  Such Dividend Equivalents shall be converted
to cash or additional shares of Common Stock by such formula and at such time
and subject to such limitations as may be determined by the Administrator.  In addition, Dividend Equivalents with respect
to Shares covered by an Award shall only be paid out to the Participant at the
same time or times and to the same extent that the vesting conditions, if any,
are subsequently satisfied and the Award vests with respect to such Shares.

 

(b)           Notwithstanding the foregoing, no
Dividend Equivalents shall be payable with respect to Options or Stock
Appreciation Rights, unless otherwise determined by the Administrator.

 

9.3           Stock Payments.  The Administrator is authorized to make one
or more Stock Payments to any Eligible Individual.  The number or value of shares of any Stock
Payment shall be determined by the Administrator and may be based upon one or
more Performance Criteria or any other specific criteria, including service to
the Company or any Affiliate, determined by the Administrator.  Stock Payments may, but are not required to
be made in lieu of base salary, bonus, fees or other cash compensation
otherwise payable to such Eligible Individual.

 

9.4           Deferred Stock.  The Administrator is authorized to grant
Deferred Stock to any Eligible Individual. 
The number of shares of Deferred Stock shall be determined by the
Administrator and may be based on one or more Performance Criteria or other
specific criteria, including service to the Company or any Affiliate, as the
Administrator determines, in each case on a specified date or dates or over any
period or periods determined by the Administrator, subject to compliance with Section 409A
of the Code or an exemption therefrom. 
Shares underlying a Deferred Stock Award which is subject to a vesting
schedule or other conditions or criteria set by the Administrator will not be
issued until those conditions have been satisfied.  Unless otherwise provided by the
Administrator, a holder of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the Award
has vested and the Shares underlying the Award have been issued to the
Participant.

 

18

 

9.5           Restricted Stock Units.  The Administrator is authorized to grant
Restricted Stock Units to any Eligible Individual.  The number and terms and conditions of
Restricted Stock Units shall be determined by the Administrator.  The Administrator shall specify the date or
dates on which the Restricted Stock Units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate, including conditions based on one or more Performance Criteria or
other specific criteria, including service to the Company or any Affiliate, in
each case on a specified date or dates or over any period or periods, as
determined by the Administrator.  The
Administrator shall specify, or permit the Participant to elect, the conditions
and dates upon which the Shares underlying the Restricted Stock Units which
shall be issued, which dates shall not be earlier than the date as of which the
Restricted Stock Units vest and become nonforfeitable and which conditions and
dates shall be subject to compliance with Section 409A of the Code or an
exemption therefrom.  On the distribution
dates, the Company shall issue to the Participant one unrestricted, fully
transferable Share (or the Fair Market Value of one such Share in cash) for each
vested and nonforfeitable Restricted Stock Unit.

 

9.6           Performance Share Awards.  Any Eligible Individual selected by the
Administrator may be granted one or more Performance Share Awards which shall
be denominated in a number of Shares and the vesting of which may be linked to
any one or more of the Performance Criteria, other specific performance
criteria (in each case on a specified date or dates or over any period or
periods determined by the Administrator) and/or time-vesting or other criteria,
as determined by the Administrator.

 

9.7           Other Incentive Awards.  The
Administrator is authorized to grant Other Incentive Awards to any Eligible
Individual, which Awards may cover Shares or the right to purchase Shares or
have a value derived from the value of, or an exercise or conversion privilege
at a price related to, or that are otherwise payable in or based on, Shares,
shareholder value or shareholder return, in each case on a specified date or
dates or over any period or periods determined by the Administrator. Other
Incentive Awards may be linked to any one or more of the Performance Criteria
or other specific performance criteria determined appropriate by the
Administrator.

 

9.8           Cash Settlement.  Without limiting the generality of any other
provision of the Plan, the Administrator may provide, in an Award Agreement or
subsequent to the grant of an Award, in its discretion, that any Award may be
settled in cash, Shares or a combination thereof.

 

9.9           Other Terms and Conditions.  All applicable terms and conditions of each
Award described in this Article 9, including without limitation, as
applicable, the term, vesting and exercise/purchase price applicable to the
Award, shall be set by the Administrator in its sole discretion, provided,
however, that the value of the consideration paid by a Participant for
an Award shall not be less than the par value of a Share, unless otherwise
permitted by applicable law.

 

9.10         Exercise upon Termination of Service.  Awards described in this Article 9 are
exercisable or distributable, as applicable, only while the Participant is an
Employee, Director or Consultant, as applicable.  The Administrator, however, in its sole
discretion, may provide that such Award may be exercised or distributed
subsequent to a Termination of Service as provided under an applicable Program,
Award Agreement, payment deferral election and/or in certain 

 

19

 

events, including a Change in Control, the
Participant’s death, retirement or disability or any other specified
Termination of Service.

 

ARTICLE 10.

 

STOCK
APPRECIATION RIGHTS

 

10.1         Grant of Stock Appreciation Rights.

 

(a)           The Administrator is authorized to
grant Stock Appreciation Rights to Eligible Individuals from time to time, in
its sole discretion, on such terms and conditions as it may determine
consistent with the Plan.

 

(b)           A Stock Appreciation Right shall
entitle the Participant (or other person entitled to exercise the Stock
Appreciation Right pursuant to the Plan) to exercise all or a specified portion
of the Stock Appreciation Right (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the Stock
Appreciation Right from the Fair Market Value on the date of exercise of the
Stock Appreciation Right by the number of Shares with respect to which the
Stock Appreciation Right shall have been exercised, subject to any limitations
the Administrator may impose.  Except as
described in Section 10.1(c) hereof, the exercise price per Share
subject to each Stock Appreciation Right shall be set by the Administrator, but
shall not be less than 100% of the Fair Market Value on the date the Stock
Appreciation Right is granted.

 

(c)           Notwithstanding the foregoing
provisions of Section 10.1(b) hereof to the contrary, in the case of
a Stock Appreciation Right that is a Substitute Award, the price per share of
the shares subject to such Stock Appreciation Right may be less than the Fair
Market Value per share on the date of grant; provided, however,
that the excess of: (a) the aggregate Fair Market Value (as of the date
such Substitute Award is granted) of the Shares subject to the Substitute
Award, over (b) the aggregate exercise price thereof does not exceed the
excess of:  (x) the aggregate Fair
Market Value (as of the time immediately preceding the transaction giving rise
to the Substitute Award) of the shares of the predecessor entity that were
subject to the grant assumed or substituted for by the Company, over (y) the
aggregate exercise price of such shares.

 

10.2         Stock Appreciation Right Vesting.

 

(a)           The Administrator shall determine the
period during which a Participant shall vest in a Stock Appreciation Right and
have the right to exercise such Stock Appreciation Right in whole or in
part.  Such vesting may be based on
service with the Company or any Affiliate, or any other criteria selected by
the Administrator.  At any time after
grant of a Stock Appreciation Right, the Administrator may, in its sole discretion
and subject to whatever terms and conditions it selects, accelerate the period
during which a Stock Appreciation Right vests.

 

(b)           No portion of a Stock Appreciation
Right which is unexercisable at Termination of Service shall thereafter become
exercisable, except as may be otherwise provided by the Administrator either in
an applicable Program or Award Agreement or by action of the Administrator
following the grant of the Stock Appreciation Right.

 

20

 

10.3         Manner of Exercise.  All or a portion of an exercisable Stock
Appreciation Right shall be deemed exercised upon delivery of all of the
following to the stock administrator of the Company, or such other person or
entity designated by the Administrator, or his, her or its office, as
applicable:

 

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

 

(b)           Such representations and documents as
the Administrator, in its sole discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act and any
other federal, state or foreign securities laws or regulations.  The Administrator may, in its sole
discretion, also take whatever additional actions it deems appropriate to effect
such compliance; and

 

(c)           In the event that the Stock
Appreciation Right shall be exercised pursuant to this Section 10.3 by any
person or persons other than the Participant, appropriate proof of the right of
such person or persons to exercise the Stock Appreciation Right.

 

10.4         Stock Appreciation Right Term.  The term of each Stock Appreciation Right
shall be set by the Administrator in its sole discretion; provided, however,
that the term shall not be more than ten (10) years from the date the
Stock Appreciation Right is granted.  The
Administrator shall determine the time period, including the time period
following a Termination of Service, during which the Participant has the right
to exercise any vested Stock Appreciation Rights, which time period may not
extend beyond the expiration date of the Stock Appreciation Right term.  Except as limited by the requirements of Section 409A
of the Code, the Administrator may extend the term of any outstanding Stock
Appreciation Right, and may extend the time period during which vested Stock
Appreciation Rights may be exercised in connection with any Termination of
Service of the Participant, and, subject to Section 13.1 hereof, may amend
any other term or condition of such Stock Appreciation Right relating to such a
Termination of Service.

 

ARTICLE 11.

 

ADDITIONAL
TERMS OF AWARDS

 

11.1         Payment.  The Administrator shall determine the methods
by which payments by any Participant with respect to any Awards granted under
the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares
(including, in the case of payment of the exercise price of an Award, Shares
issuable pursuant to the exercise of the Award) held for such period of time as
may be required by the Administrator in order to avoid adverse accounting
consequences, in each case, having a Fair Market Value on the date of delivery
equal to the aggregate payments required, (c) delivery of a written or
electronic notice that the Participant has placed a market sell order with a
broker with respect to Shares then-issuable upon exercise or vesting of an
Award, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the aggregate
payments required; 

 

21

 

provided, however,
that payment of such proceeds is then made to the Company upon settlement of
such sale, or (d) other form of legal consideration acceptable to the
Administrator.  The Administrator shall
also determine the methods by which Shares shall be delivered or deemed to be
delivered to Participants. 
Notwithstanding any other provision of the Plan to the contrary, no
Participant who is a Director or an “executive officer” of the Company within
the meaning of Section 13(k) of the Exchange Act shall be permitted
to make payment with respect to any Awards granted under the Plan, or continue
any extension of credit with respect to such payment with a loan from the
Company or a loan arranged by the Company in violation of Section 13(k) of
the Exchange Act.

 

11.2         Tax Withholding.  The Company and its Affiliates shall have the
authority and the right to deduct or withhold, or require a Participant to
remit to the Company or an Affiliate, an amount sufficient to satisfy federal,
state, local and foreign taxes (including the Participant’s social security,
Medicare and any other employment tax obligation) required by law to be
withheld with respect to any taxable event concerning a Participant arising as
a result of the Plan.  The Administrator
may in its sole discretion and in satisfaction of the foregoing requirement
allow a Participant to elect to have the Company or an Affiliate withhold
Shares otherwise issuable under an Award (or allow the surrender of Shares).  Unless determined otherwise by the
Administrator, the number of Shares which may be so withheld or surrendered
shall be limited to the number of shares which have a Fair Market Value on the
date of withholding or repurchase no greater than the aggregate amount of such
liabilities based on the minimum statutory withholding rates or federal, state,
local and foreign income tax and payroll tax purposes that are applicable to
such supplemental taxable income.  The
Administrator shall determine the fair market value of the Shares, consistent
with applicable provisions of the Code, for tax withholding obligations due in
connection with a broker-assisted cashless Option or Stock Appreciation Right
exercise involving the sale of shares to pay the Option or Stock Appreciation Right
exercise price or any tax withholding obligation.

 

11.3         Transferability of Awards.

 

(a)           Except as otherwise provided in Section 11.3(b) or
(c) hereof:

 

(i)            No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws
of descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until such Award has been exercised, or the
shares underlying such Award have been issued, and all restrictions applicable
to such shares have lapsed;

 

(ii)           No Award or interest or right therein
shall be liable for the debts, contracts or engagements of the Participant or
his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy) unless and until such Award has
been exercised, or the Shares underlying such Award have been issued, and all
restrictions applicable to such Shares have lapsed, and any attempted
disposition of an Award prior to the satisfaction of these conditions shall be
null and 

 

22

 

void and of no effect, except to the extent
that such disposition is permitted by clause (i) of this provision; and

 

(iii)          During the lifetime of the
Participant, only the Participant may exercise an Award (or any portion
thereof) granted to him under the Plan, unless it has been disposed of pursuant
to a DRO; after the death of the Participant, any exercisable portion of an
Award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Program or Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

(b)           Notwithstanding Section 11.3(a) hereof,
the Administrator, in its sole discretion, may determine to permit a
Participant or a Permitted Transferee of such Participant to transfer an Award
other than an Incentive Stock Option to any one or more Permitted Transferees
of such Participant, subject to the following terms and conditions: (i) an
Award transferred to a Permitted Transferee shall not be assignable or
transferable by the Permitted Transferee (other to another Permitted Transferee
of the applicable Participant) other than by will or the laws of descent and
distribution; (ii) an Award transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Award as
applicable to the original Participant (other than the ability to further transfer
the Award); and (iii) the Participant (or transferring Permitted
Transferee) and the Permitted Transferee shall execute any and all documents
requested by the Administrator, including without limitation, documents to (A) confirm
the status of the transferee as a Permitted Transferee, (B) satisfy any
requirements for an exemption for the transfer under applicable federal, state
and foreign securities laws and (C) evidence the transfer.

 

(c)           Notwithstanding Section 11.3(a) hereof,
a Participant may, in the manner determined by the Administrator, designate a
beneficiary to exercise the rights of the Participant and to receive any
distribution with respect to any Award upon the Participant’s death.  A beneficiary, legal guardian, legal
representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Program or Award
Agreement applicable to the Participant, except to the extent the Plan, the
Program and the Award Agreement otherwise provide, and to any additional
restrictions deemed necessary or appropriate by the Administrator.  If the Participant is married or a domestic
partner in a domestic partnership qualified under applicable law and resides in
a “community property” state, a designation of a person other than the
Participant’s spouse or domestic partner, as applicable, as his or her
beneficiary with respect to more than 50% of the Participant’s interest in the
Award shall not be effective without the prior written or electronic consent of
the Participant’s spouse or domestic partner. 
If no beneficiary has been designated or survives the Participant,
payment shall be made to the person entitled thereto pursuant to the
Participant’s will or the laws of descent and distribution.  Subject to the foregoing, a beneficiary
designation may be changed or revoked by a Participant at any time provided the
change or revocation is filed with the Administrator prior to the Participant’s
death.

 

23

 

11.4         Conditions
to Issuance of Shares.

 

(a)           Notwithstanding anything herein to
the contrary, neither the Company nor its Affiliates shall be required to issue
or deliver any certificates or make any book entries evidencing Shares pursuant
to the exercise of any Award, unless and until the Administrator has
determined, with advice of counsel, that the issuance of such Shares is in
compliance with all applicable laws, regulations of governmental authorities
and, if applicable, the requirements of any exchange on which the Shares are
listed or traded, and the Shares are covered by an effective registration
statement or applicable exemption from registration.  In addition to the terms and conditions
provided herein, the Administrator may require that a Participant make such
reasonable covenants, agreements, and representations as the Administrator, in
its discretion, deems advisable in order to comply with any such laws,
regulations, or requirements.

 

(b)           All Share certificates delivered
pursuant to the Plan and all shares issued pursuant to book entry procedures
are subject to any stop-transfer orders and other restrictions as the
Administrator deems necessary or advisable to comply with federal, state, or
foreign securities or other laws, rules and regulations and the rules of
any securities exchange or automated quotation system on which the Shares are
listed, quoted, or traded.  The
Administrator may place legends on any Share certificate or book entry to
reference restrictions applicable to the Shares.

 

(c)           The
Administrator shall have the right to require any Participant to comply with any timing or other
restrictions with respect to the settlement, distribution or exercise of any
Award, including a window-period limitation, as may be imposed in the sole discretion
of the Administrator.

 

(d)           No fractional Shares shall be issued
and the Administrator shall determine, in its sole discretion, whether cash
shall be given in lieu of fractional shares or whether such fractional shares
shall be eliminated by rounding down.

 

(e)           Notwithstanding any other provision
of the Plan, unless otherwise determined by the Administrator or required by
any applicable law, rule or regulation, the Company and/or its Affiliates
may, in lieu of delivering to any Participant certificates evidencing Shares
issued in connection with any Award, record the issuance of Shares in the books
of the Company (or, as applicable, its transfer agent or stock plan
administrator).

 

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

 

24

 

further defined by the Administrator or (iii) the
Participant incurs a Termination of Service for Cause.

 

11.6         Repricing.  Subject to limitations imposed by Section 409A
of the Code or other applicable law and the limitations contained in Section 13.1
below, the Administrator shall have the authority, without the approval of the
stockholders of the Company, to amend any outstanding Award, in whole or in
part, to increase or reduce the price per share or to cancel and replace an
Award, in whole or in part, with cash and/or another Award, including without
limitation, another Option or Stock Appreciation Right having a price per share
that is less than, greater than or equal to the price per share of the original
Award.

 

ARTICLE 12.

ADMINISTRATION

 

12.1         Administrator.  The Committee (or another committee or a
subcommittee of the Board assuming the functions of the Committee under the
Plan) shall administer the Plan (except as otherwise permitted herein) and,
unless otherwise determined by the Board, shall consist solely of two or more
Non-Employee Directors appointed by and holding office at the pleasure of the
Board, each of whom is intended to qualify as a “non-employee director” as
defined by Rule 16b-3 of the Exchange Act, an “outside director” for purposes
of Section 162(m) of the Code and an “independent director” under the
rules of any securities exchange or automated quotation system on which
the Shares are listed, quoted or traded, in each case, to the extent required
under such provision; provided, however, that any action taken by
the Committee shall be valid and effective, whether or not members of the
Committee at the time of such action are later determined not to have satisfied
the requirements for membership set forth in this Section 12.l or otherwise
provided in any charter of the Committee. 
Except as may otherwise be provided in any charter of the Committee,
appointment of Committee members shall be effective upon acceptance of
appointment.  Committee members may
resign at any time by delivering written or electronic notice to the
Board.  Vacancies in the Committee may
only be filled by the Board. 
Notwithstanding the foregoing, (a) the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Awards granted to Non-Employee Directors and (b) the
Board or Committee may delegate its authority hereunder to the extent permitted
by Section 12.6 hereof.

 

12.2         Duties and Powers of Administrator.  It shall be the duty of the Administrator to
conduct the general administration of the Plan in accordance with its
provisions.  The Administrator shall have
the power to interpret the Plan and all Programs and Award Agreements, and to
adopt such rules for the administration, interpretation and application of
the Plan and any Program as are not inconsistent with the Plan, to interpret,
amend or revoke any such rules and to amend any Program or Award Agreement
provided that the rights or obligations of the holder of the Award that is the
subject of any such Program or Award Agreement are not affected adversely by
such amendment, unless the consent of the Participant is obtained or such
amendment is otherwise permitted under Section 13.10 hereof.  Any such grant or award under the Plan need
not be the same with respect to each Participant.  Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the 

 

25

 

provisions of Section 422 of the
Code.  In its sole discretion, the Board
may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan except with respect to matters which under Rule 16b-3
under the Exchange Act, Section 162(m) of the Code, or the rules of
any securities exchange or automated quotation system on which the Shares are
listed, quoted or traded are required to be determined in the sole discretion
of the Committee.

 

12.3           Action by the Committee. 
Unless otherwise established by the Board or in any charter of the
Committee, a majority of the Committee shall constitute a quorum and the acts
of a majority of the members present at any meeting at which a quorum is
present, and acts approved in writing by all members of the Committee in lieu
of a meeting, shall be deemed the acts of the Committee.  Each member of the Committee is entitled to,
in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Affiliate,
the Company’s independent certified public accountants, or any executive
compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.

 

12.4         Authority of Administrator. 
Subject to any specific designation in the Plan, the Administrator has
the exclusive power, authority and sole discretion to:

 

(a)     Designate
Eligible Individuals to receive Awards;

 

(b)     Determine the type or types of Awards
to be granted to each Eligible Individual;

 

(c)     Determine
the number of Awards to be granted and the number of Shares to which an Award
will relate;

 

(d)     Determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
performance criteria, any restrictions or limitations on the Award, any
schedule for vesting, lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, and any
provisions related to non-competition and recapture of gain on an Award, based
in each case on such considerations as the Administrator in its sole discretion
determines;

 

(e)     Determine
whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in cash, Shares,
other Awards, or other property, or an Award may be canceled, forfeited, or
surrendered;

 

(f)     Prescribe
the form of each Award Agreement, which need not be identical for each
Participant;

 

(g)     Decide
all other matters that must be determined in connection with an Award;

 

(h)     Establish,
adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

 

26

 

(i)     Interpret
the terms of, and any matter arising pursuant to, the Plan, any Program or any
Award Agreement; and

 

(j)     Make
all other decisions and determinations that may be required pursuant to the
Plan or as the Administrator deems necessary or advisable to administer the
Plan.

 

12.5         Decisions Binding.  The
Administrator’s interpretation of the Plan, any Awards granted pursuant to the
Plan, any Program, any Award Agreement and all decisions and determinations by
the Administrator with respect to the Plan are final, binding, and conclusive
on all parties.

 

12.6         Delegation of Authority.  To the extent permitted by applicable law or
the rules of any securities exchange or automated quotation system on
which the Shares are listed, quoted or traded, the Board or Committee may from
time to time delegate to a committee of one or more members of the Board or one
or more officers of the Company the authority to grant or amend Awards or to
take other administrative actions pursuant to this Article 12; provided,
however, that in no event shall an officer of the Company be delegated
the authority to grant awards to, or amend awards held by, the following
individuals: (a) individuals who are subject to Section 16 of the
Exchange Act, (b) Covered Employees with respect to Awards intended to
constitute Performance-Based Compensation, or (c) officers of the Company
(or Directors) to whom authority to grant or amend Awards has been delegated
hereunder; provided  further, that any delegation of
administrative authority shall only be permitted to the extent it is
permissible under Section 162(m) of the Code and applicable
securities laws or the rules of any securities exchange or automated
quotation system on which the Shares are listed, quoted or traded.  Any delegation hereunder shall be subject to
the restrictions and limits that the Board or Committee specifies at the time
of such delegation, and the Board may at any time rescind the authority so
delegated or appoint a new delegatee.  At
all times, the delegatee appointed under this Section 12.6 shall serve in
such capacity at the pleasure of the Board and the Committee.

 

ARTICLE 13.

 

MISCELLANEOUS
PROVISIONS

 

13.1         Amendment, Suspension or Termination
of the Plan.  Except as otherwise
provided in this Section 13.1, the Plan may be wholly or partially amended
or otherwise modified, suspended or terminated at any time or from time to time
by the Board.  However, without approval
of the Company’s stockholders given within twelve (12) months before or after
the action by the Administrator, no action of the Administrator may, except as
provided in Section 13.2 hereof, increase the Share Limit. Except as
provided in Section 13.10 hereof, no amendment, suspension or termination
of the Plan shall, without the consent of the Participant, impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. 
No Awards may be granted or awarded during any period of suspension or
after termination of the Plan. The annual increase to the Share Limit (set
forth in Section 3.1(a)(iii) hereof) shall terminate on the tenth (10th) anniversary of the Effective
Date and, from and after such tenth (10th) anniversary, no additional share increases shall occur

 

27

 

pursuant to Section 3.1(a)(iii) hereof.  In addition, notwithstanding anything herein
to the contrary, no ISO shall be granted under the Plan after the tenth
anniversary of the Effective Date.

 

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

 

(a)           In the event of any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of the Company’s stock
or the share price of the Company’s stock other than an Equity Restructuring,
the Administrator shall make equitable adjustments, if any, to reflect such
change with respect to (i) the aggregate number and kind of shares that
may be issued under the Plan (including, but not limited to, adjustments
of the Share Limit and Individual Award Limits); (ii) the number and kind of shares of Common
Stock (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of
any outstanding Awards (including, without limitation, any applicable
performance targets or criteria with respect thereto); and/or (iv) the
grant or exercise price per share for any outstanding Awards under the
Plan.  Any adjustment affecting an Award
intended as Performance-Based Compensation shall be made consistent with the
requirements of Section 162(m) of the Code unless otherwise
determined by the Administrator.

 

(b)           In the event of any transaction or
event described in Section 13.2(a) hereof or any unusual or
nonrecurring transactions or events affecting the Company, any Affiliate of the
Company, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations or accounting principles, the
Administrator, in its sole discretion, and on such terms and conditions as it
deems appropriate, either by the terms of the Award or by action taken prior to
the occurrence of such transaction or event and either automatically or upon
the Participant’s request, is hereby authorized to take any one or more of the
following actions whenever the Administrator determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any Award under the Plan, to facilitate such transactions or events or to
give effect to such changes in laws, regulations or principles:

 

(i)            To provide for either (A) termination
of any such Award in exchange for an amount of cash, if any, equal to the
amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as
of the date of the occurrence of the transaction or event described in this Section 13.2,
the Administrator determines in good faith that no amount would have been
attained upon the exercise of such Award or realization of the Participant’s
rights, then such Award may be terminated by the Company without payment) or (B) the
replacement of such Award with other rights or property selected by the
Administrator in its sole discretion having an aggregate value not exceeding
the amount that could have been attained upon the exercise of such Award or
realization of the Participant’s rights had such Award been currently
exercisable or payable or fully vested;

 

(ii)           To provide that such Award be assumed
by the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent 

 

28

 

or subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices;

 

(iii)          To make adjustments in the number and
type of securities subject to outstanding Awards and Awards which may be
granted in the future and/or in the terms, conditions and criteria included in
such Awards (including the grant or exercise price, as applicable);

 

(iv)          To provide that such Award shall be
exercisable or payable or fully vested with respect to all securities covered
thereby, notwithstanding anything to the contrary in the Plan or an applicable
Program or Award Agreement; and

 

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

 

(c)           In connection with the
occurrence of any Equity Restructuring, and notwithstanding anything to the
contrary in Sections 13.2(a) and 13.2(b) hereof:

 

(i)            The number and type of
securities subject to each outstanding Award and/or the exercise price or grant
price thereof, if applicable, shall be equitably adjusted.  The adjustment provided under this Section 13.2(c)(i) shall
be nondiscretionary and shall be final and binding on the affected Participant
and the Company.

 

(ii)           The
Administrator shall make such equitable adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such Equity Restructuring
with respect to the aggregate number and kind of shares that may be issued
under the Plan (including, but not limited to, adjustments to the
Share Limit and the Individual Award Limits).  The adjustments
provided under this Section 13.2(c) shall be nondiscretionary and
shall be final and binding on the affected Participant and the Company.

 

(d)           Change in Control.

 

(i)            Notwithstanding any other provision
of the Plan, in the event of a Change in Control, each outstanding Award shall
be assumed or an equivalent Award substituted by the successor corporation or a
parent or subsidiary of the successor corporation.  For the purposes of this Section 13.2(d)(i),
an Award shall be considered assumed or substituted if, following the Change in
Control, the assumed or substituted Award confers the right to purchase or
receive, for each share of Common Stock subject to the Award immediately prior
to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the Change in Control
was not solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the assumed or
substituted Award, for each share of Common Stock subject to such Award, to be
solely common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the Change in Control.

 

29

 

(ii)           In the event that the successor
corporation in a Change in Control and its parents and subsidiaries refuse to
assume or substitute for any Award in accordance with Section 13.2(d)(i) hereof,
each such non-assumed/substituted Award shall become fully vested and, as
applicable, exercisable and shall be deemed exercised, immediately prior to the
consummation of such transaction, and all forfeiture restrictions on any or all
such Awards shall lapse at such time.  If
an Award vests and, as applicable, is exercised in lieu of assumption or
substitution in connection with a Change in Control, the Administrator shall notify
the Participant of such vesting and any applicable exercise , and the Award
shall terminate upon the Change in Control. 
For the avoidance of doubt, if the value of an Award that is terminated
in connection with this Section 13.2(d)(ii) is zero or negative at
the time of such Change in Control, such Award shall be terminated upon the
Change in Control without payment of consideration therefor.

 

(e)           The Administrator may, in its sole
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company that are not inconsistent with the provisions of the Plan.

 

(f)            With respect to Awards which are
granted to Covered Employees and are intended to qualify as Performance-Based
Compensation, no adjustment or action described in this Section 13.2 or in
any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify as
Performance-Based Compensation, unless the Administrator determines that the
Award should not so qualify.  No
adjustment or action described in this Section 13.2 or in any other
provision of the Plan shall be authorized to the extent that such adjustment or
action would cause the Plan to violate Section 422(b)(1) of the
Code.  Furthermore, no such adjustment or
action shall be authorized with respect to any Award to the extent such
adjustment or action would result in short-swing profits liability under Section 16
or violate the exemptive conditions of Rule 16b-3 unless the Administrator
determines that the Award is not to comply with such exemptive conditions.

 

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

 

(h)           No action shall be taken under this Section 13.2
which shall cause an Award to fail to comply with Section 409A of the Code
or an exemption therefrom, in either case, to the extent applicable to such
Award, unless the Administrator determines any such adjustments to be
appropriate.

 

(i)            In the event of any pending stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other distribution (other than normal cash 

 

30

 

dividends) of Company assets to stockholders,
or any other change affecting the shares of Common Stock or the share price of
the Common Stock including any Equity Restructuring, for reasons of
administrative convenience, the Company in its sole discretion may refuse to
permit the exercise of any Award during a period of thirty (30) days prior to
the consummation of any such transaction.

 

13.3         Approval of Plan by Stockholders.  The Plan will be submitted for the approval
of the Company’s stockholders within twelve (12) months after the date of the
Board’s initial adoption of the Plan.

 

13.4         No Stockholders Rights. 
Except as otherwise provided herein or in an Award Agreement, a
Participant shall have none of the rights of a stockholder with respect to
shares of Common Stock covered by any Award until the Participant becomes the
record owner of such shares of Common Stock.

 

13.5         Paperless Administration.  In the event that the Company establishes,
for itself or using the services of a third party, an automated system for the
documentation, granting or exercise of Awards, such as a system using an
internet website or interactive voice response, then the paperless
documentation, granting or exercise of Awards by a Participant may be permitted
through the use of such an automated system.

 

13.6         Effect of Plan upon Other Compensation
Plans.  The adoption of the Plan
shall not affect any other compensation or incentive plans in effect for the
Company or any Affiliate.  Nothing in the
Plan shall be construed to limit the right of the Company or any Affiliate:
(a) to establish any other forms of incentives or compensation for
Employees, Directors or Consultants of the Company or any Affiliate, or
(b) to grant or assume options or other rights or awards otherwise than
under the Plan in connection with any proper corporate purpose including
without limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

 

13.7         Compliance with Laws.  The Plan, the granting and vesting of Awards
under the Plan and the issuance and delivery of Shares and the payment of money
under the Plan or under Awards granted or awarded hereunder are subject to
compliance with all applicable federal, state, local and foreign laws, rules and
regulations (including but not limited to state, federal and foreign securities
law and margin requirements), the rules of any securities exchange or
automated quotation system on which the Shares are listed, quoted or traded,
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith.  Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements.  To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

 

31

 

13.8         Titles and Headings, References to
Sections of the Code or Exchange Act. 
The titles and headings of the sections in the Plan are for convenience
of reference only and, in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control. References to sections of
the Code or the Exchange Act shall include any amendment or successor thereto.

 

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

 

13.10       Section 409A.  To the extent that the Administrator
determines that any Award granted under the Plan is subject to Section 409A
of the Code, the Plan, any applicable Program and the Award Agreement covering
such Award shall be interpreted in accordance with Section 409A of the
Code.  Notwithstanding any provision of
the Plan to the contrary, in the event that, following the Effective Date, the
Administrator determines that any Award may be subject to Section 409A of
the Code, the Administrator may adopt such amendments to the Plan, any
applicable Program and the Award Agreement or adopt other policies and
procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Administrator determines are
necessary or appropriate to avoid the imposition of taxes on the Award under Section 409A
of the Code, either through compliance with the requirements of Section 409A
of the Code or with an available exemption therefrom.

 

13.11       No Rights to Awards.  No
Eligible Individual or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Administrator is
obligated to treat Eligible Individuals, Participants or any other persons
uniformly.

 

13.12       Unfunded Status of Awards. 
The Plan is intended to be an “unfunded” plan for incentive
compensation.  With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Program or Award Agreement shall give the Participant any
rights that are greater than those of a general creditor of the Company or any
Affiliate.

 

13.13       Indemnification.  To the
extent allowable pursuant to applicable law, each member of the Board and any
officer or other employee to whom authority to administer any component of the
Plan is delegated shall be indemnified and held harmless by the Company from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by such member in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her; provided,
however, that he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. 
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled pursuant
to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

 

32

 

13.14       Relationship to other Benefits.  No payment pursuant to the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Affiliate except to the extent otherwise expressly provided in writing
in such other plan or an agreement thereunder.

 

13.15       Expenses.  The expenses
of administering the Plan shall be borne by the Company and its Affiliates.

 

[signature page follows]

 

33

 

* 
*  *  *  *

 

I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Demand Media, Inc. on August 3, 2010.

 

* 
*  *  *  *

 

I hereby certify that the foregoing Plan was approved by the
stockholders of Demand Media, Inc. on August 5, 2010.

 

Executed on this 5 day of August, 2010.

 

	
   

  	
  /s/ Matthew P. Polesetsky

  
	
   

  	
  Matthew P. Polesetsky

  

 

34

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