Document:

exv4w3

EXHIBIT 4.3 

EXCEED COMPANY LTD.

2010 EQUITY INCENTIVE PLAN

     1. Purpose. The purpose of the Exceed Company Ltd. 2010 Equity Incentive Plan is to
attract and retain directors, officers, other employees and consultants of Exceed Company Ltd., a
British Virgin Islands corporation, and its Subsidiaries and to provide to such persons incentives
and rewards for superior performance.

     2. Definitions. As used in this Plan,

          (a) “Appreciation Right” means a right granted pursuant to Section 5 or Section 9 of
this Plan, and will include both Tandem Appreciation Rights and Free-Standing Appreciation Rights.

          (b) “Base Price” means the price to be used as the basis for determining the Spread
upon the exercise of a Free-Standing Appreciation Right or a Tandem Appreciation Right.

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

          (d) “Change of Control” means, except as otherwise provided for in an Evidence of
Award, the occurrence of any of the following events:

	 	(i)	 	the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of voting securities of the Company where such acquisition causes such Person
to own 30% or more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not be deemed to result in a Change of Control:

	 	(A)	 	any acquisition directly from the Company that is approved by
the Incumbent Board (as defined in subsection (ii) below),

	 	(B)	 	any acquisition by the Company,

	 	(C)	 	any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or

	 	(D)	 	any acquisition by any corporation pursuant to a transaction
that complies with clauses (A), (B) and (C) of subsection (iii) below;

	 	 	 	provided, further, that if any Person’s beneficial ownership
of the Outstanding Company Voting Securities reaches or exceeds 30% as a
result of a transaction described in clause (A) or (B) above, and such
Person subsequently acquires beneficial ownership of additional voting
securities of the Company, such subsequent acquisition shall be treated as
an acquisition that causes such Person

 

 

	 	 	 	to own 30% or more of the Outstanding Company Voting Securities; and
provided, further, that if at least a majority of the
members of the Incumbent Board determines in good faith that a Person has
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of the Outstanding Company Voting
Securities inadvertently, and such Person divests as promptly as practicable
a sufficient number of shares so that such Person beneficially owns (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) less than 30%
of the Outstanding Company Voting Securities, then no Change of Control
shall have occurred as a result of such Person’s acquisition;

	 	(ii)	 	individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board” as modified by this subsection (ii)) cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (either by specific vote or by approval of any proxy statement
of the Company in which such person is named as a nominee for director, without
objection to such nomination) shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;

	 	(iii)	 	the consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation or other
transaction (“Business Combination”) excluding, however, such a Business
Combination pursuant to which (A) the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries), (B) no Person (excluding any employee benefit plan (or
related trust) of the Company, the Company or such entity resulting from such
Business Combination) beneficially owns, directly or indirectly, 30% or more of
the combined voting power of the then outstanding securities entitled to vote
generally in the election of directors of the entity resulting from such
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

	 	(iv)	 	approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company except pursuant to a Business Combination that
complies with clauses (A), (B) and (C) of subsection (iii) above.

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          (e) “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to
time.

          (f) “Committee” means the Board or any committee of the Board appointed by the Board
to administer the Plan, which committee must consist of at least two Directors who qualify as
Non-Employee Directors and “outside directors” within the meaning of Section 162(m) of the Code,
and who satisfy any applicable standards of independence, including under the federal securities
and tax laws and the listing standards of The NASDAQ Stock Market or, if not listed on such
exchange, on any other national securities exchange on which the Common Stock is listed as in
effect from time to time.

          (g) “Common Stock” means the common shares, par value $0.0001, of the Company or any
security into which such common shares may be changed by reason of any transaction or event of the
type referred to in Section 12 of this Plan.

          (h) “Company” means Exceed Company Ltd., a British Virgin Islands corporation, and
its successors.

          (i) “Covered Employee” means a Participant who is, or is determined by the Committee
to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or
any successor provision).

          (j) “Date of Grant” means the date specified by the Committee on which a grant of
Option Rights, Appreciation Rights, Performance Shares, Performance Units or other awards
contemplated by Section 10 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock
Units, or other awards contemplated by Section 10 of this Plan, will become effective (which date
will not be earlier than the date on which the Committee takes action with respect thereto).

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

          (l) “Effective Date” means the date that this Plan is approved by the stockholders
of the Company.

          (m) “Evidence of Award” means an agreement, certificate, resolution or other type or
form of writing or other evidence approved by the Committee that sets forth the terms and
conditions of the awards granted. An Evidence of Award may be limited to notation on the books and
records of the Company and, unless otherwise determined by the Committee, need not be signed by a
representative of the Company or a Participant.

          (n) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, as such law, rules and regulations may be amended from time
to time.

          (o) “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant
to Section 5 or Section 9 of this Plan that is not granted in tandem with an Option Right.

          (p) “Incentive Stock Options” means Option Rights that are intended to qualify as
“incentive stock options” under Section 422 of the Code or any successor provision.

          (q) “Management Objectives” means the measurable performance objective or objectives
established pursuant to this Plan for Participants who have received grants of Performance

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Shares or Performance Units or, when so determined by the Committee, Option Rights,
Appreciation Rights, Restricted Stock, Restricted Stock Units, dividend credits or other awards
pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives
or objectives that are related to the performance of the individual Participant or of the
Subsidiary, division, department, region or function within the Company or Subsidiary in which the
Participant is employed. The Management Objectives may be made relative to the performance of one
or more other companies or subsidiaries, divisions, departments, regions or functions within such
other companies, and may be made relative to an index or one or more of the performance objectives
themselves. The Committee may grant awards subject to Management Objectives that are either
Qualified Performance-Based Awards or are not Qualified Performance-Based Awards. The Management
Objectives applicable to any Qualified Performance-Based Award to a Covered Employee will be based
on one or more, or a combination, of the criteria provided in Appendix A attached to this
Plan.

               If the Committee determines that a change in the business, operations, corporate structure or
capital structure of the Company, or the manner in which it conducts its business, or other events
or circumstances render the Management Objectives unsuitable, the Committee may in its discretion
modify such Management Objectives or the related level or levels of achievement, in whole or in
part, as the Committee deems appropriate and equitable, except in the case of a Qualified
Performance-Based Award (other than in connection with a Change of Control) where such action would
result in the loss of the otherwise available exemption of the award under Section 162(m) of the
Code. In such case, the Committee will not make any modification of the Management Objectives or
level or levels of achievement with respect to such Covered Employee.

          (r) “Market Value per Share” means as of any particular date the closing sale price
of a share of Common Stock as reported on The NASDAQ Stock Market or, if not listed on such
exchange, on any other national securities exchange on which the Common Stock is listed. If the
Common Stock is not traded as of any given date, the Market Value per Share means the closing price
for a share of Common Stock on the principal exchange on which the Common Stock is traded for the
immediately preceding date on which the Common Stock is traded. If there is no regular public
trading market for the Common Stock, the Market Value per Share shall be the fair market value of a
share of Common Stock as determined in good faith by the Committee. The Committee is authorized to
adopt another fair market value pricing method, provided such method is stated in the Evidence of
Award, and is in compliance with the fair market value pricing rules set forth in Section 409A of
the Code.

          (s) “Non-Employee Director” means a person who is a “Non-Employee Director” of the
Company within the meaning of Rule 16b-3 of the Securities and Exchange Commission promulgated
under the Exchange Act.

          (t) “Optionee” means the optionee named in an Evidence of Award evidencing an
outstanding Option Right.

          (u) “Option Price” means the purchase price payable on exercise of an Option Right.

          (v) “Option Right” means the right to purchase Common Stock upon exercise of an
option granted pursuant to Section 4 or Section 9 of this Plan.

          (w) “Participant” means a person who is selected by the Committee to receive
benefits under this Plan and who is at the time an officer, other key employee or a consultant of
the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of
such capacities within 90 days of the Date of Grant and such Date of Grant will be the first day of
employment, and will also include each non-employee Director who receives Common Stock or an award
of Option

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Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units or other awards under
this Plan. The term “Participant” shall also include any person who provides services to the
Company or a Subsidiary that are substantially equivalent to those typically provided by an
employee.

          (x) “Performance Period” means, in respect of a Performance Share or Performance
Unit, a period of time established pursuant to Section 8 of this Plan within which the Management
Objectives relating to such Performance Share or Performance Unit are to be achieved.

          (y) “Performance Share” means a bookkeeping entry that records the equivalent of one
Common Share awarded pursuant to Section 8 of this Plan.

          (z) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of
this Plan that records a unit equivalent to $1.00 or such other value as is determined by the
Committee.

          (aa) “Plan” means this Exceed Company Ltd. 2010 Equity Incentive Plan, as may be
amended from time to time.

          (bb) “Qualified Performance-Based Award” means any award of Performance Shares,
Performance Units, Restricted Stock, Restricted Stock Units or other awards under Section 10 of
this Plan, or portion of such award, to a Covered Employee that is intended to satisfy the
requirements for “qualified performance-based compensation” under Section 162(m) of the Code.

          (cc) “Restricted Stock” means Common Stock granted or sold pursuant to Section 6 or
Section 9 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition
on transfers has expired.

          (dd) “Restriction Period” means the period of time during which Restricted Stock
Units are subject to restrictions, as provided in Section 7 or Section 9 of this Plan.

          (ee) “Restricted Stock Unit” means an award made pursuant to Section 7 or Section 9
of this Plan of the right to receive Common Stock or cash at the end of a specified period.

          (ff) “Spread” means the excess of the Market Value per Share on the date when an
Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of
the Option Price of other Option Rights, over the Option Price or Base Price provided for in the
related Option Right or Free-Standing Appreciation Right, respectively.

          (gg) “Subsidiary” means a corporation, company or other entity (i) more than 50
percent of whose outstanding shares or securities (representing the right to vote for the election
of directors or other managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or unincorporated association), but
more than 50 percent of whose ownership interest representing the right generally to make decisions
for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the
Company except that for purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which at
the time the Company owns or controls, directly or indirectly, more than 50 percent of the total
combined voting power represented by all classes of stock issued by such corporation.

          (hh) “Substitute Awards” means awards granted or Common Stock issued by the Company
in assumption of, or in substitution or exchange for, awards previously granted, or the right or

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obligation to make future awards, in each case by a company acquired by the Company or any
Subsidiary or with which the Company or any Subsidiary combines.

          (ii) “Tandem Appreciation Right” means an Appreciation Right granted pursuant to
Section 5 or Section 9 of this Plan that is granted in tandem with an Option Right.

          (jj) “Ten Percent Participant” means a Participant who, immediately prior to the grant of an
Option Right, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company as defined in U.S. Treasury Regulation 1.422-2(f)(1) and
(2).

     3. Shares Available Under the Plan.

          (a) Maximum Shares Available Under Plan.

	 	(i)	 	Subject to adjustment as provided in Section 12 of this Plan, the
number of shares of Common Stock that may be issued or transferred (A) upon the
exercise of Option Rights or Appreciation Rights, (B) in payment of Restricted
Stock and released from substantial risks of forfeiture thereof, (C) in payment
of Restricted Stock Units, (D) in payment of Performance Shares or Performance
Units that have been earned, (E) as awards to Non-Employee Directors, (F) as
awards contemplated by Section 10 of this Plan, or (G) in payment of dividend
equivalents paid with respect to awards made under the Plan, shall be 1,000,000
Shares of Common Stock plus, during each calendar year of the Company during
which this Plan is in effect, an additional number of shares equal to the
lesser of (1) 1,000,000 shares of Common Stock, (2) ten percent (10%) of the
number of shares of all classes of common stock of the Company outstanding on
the first business day of the Company’s fiscal year, and (3) such lesser number
as may be determined by the Committee, in the aggregate not to exceed
10,000,000 Shares of Common Stock plus, in each case, any shares of Common
Stock relating to awards that expire or are forfeited or cancelled under this
Plan. Such Common Stock may be shares of original issuance or treasury shares
or a combination of the foregoing.

	 	(ii)	 	Shares of Common Stock covered by an award granted under the Plan
shall not be counted as used unless and until they are actually issued and
delivered to a Participant and, therefore, the total number of shares of Common
Stock available under the Plan as of a given date shall not be reduced by any
Common Stock relating to prior awards that have expired or have been forfeited
or cancelled. Upon payment in cash of the benefit provided by any award
granted under the Plan, any shares of Common Stock that are covered by that
award will be available for issue or transfer hereunder. Notwithstanding
anything to the contrary contained herein: (A) if shares of Common Stock are
tendered or otherwise used in payment of the Option Price of an Option Right,
the total number of shares of Common Stock covered by the Option Right being
exercised shall count against the aggregate plan limit described above; (B)
shares of Common Stock withheld by the Company to satisfy the tax withholding
obligation shall count against the aggregate plan limit described above; and
(C) the number of shares of Common Stock covered by an Appreciation Right, to
the extent that it is exercised and settled in Common Stock, and whether or not
the shares of Common Stock are actually issued to the Participant upon exercise
of

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	 	 	 	the Appreciation Right, shall be considered issued or transferred pursuant
to the Plan. In the event that the Company repurchases Common Stock with
Option Right proceeds, those shares of Common Stock will not be added to the
aggregate plan limit described above. If, under this Plan, a Participant
has elected to give up the right to receive compensation in exchange for
Common Stock based on fair market value, such shares of Common Stock will
not count against the aggregate plan limit described above.

	 	(iii)	 	Substitute Awards shall not reduce the Common Stock authorized for
grant under the Plan or the applicable limitations for grant to a Participant,
nor shall shares of Common Stock subject to a Substitute Award again be
available for awards under the Plan to the extent of any forfeiture,
cancellation, expiration or cash settlement as provided in Sections 3(a)(i) and
3(a)(ii) above. Additionally, in the event that a company acquired by the
Company or any Subsidiary or with which the Company or any Subsidiary combines
has shares available under a pre-existing plan approved by 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 and shall not reduce the Common Stock authorized for
grant under the Plan; provided, 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 employees or Directors prior to
such acquisition or combination.

          (b) Life of Plan Limits. Notwithstanding anything in this Section 3, or elsewhere
in this Plan, to the contrary, and subject to adjustment as provided in Section 12 of this Plan:

	 	(i)	 	The aggregate number of shares of Common Stock actually issued or
transferred by the Company upon the exercise of Incentive Stock Options will
not exceed five million (5,000,000) shares of Common Stock;

	 	(ii)	 	The number of shares of Common Stock issued as Restricted Stock,
Restricted Stock Units, Performance Shares and Performance Units and other
awards under Section 10 of this Plan (after taking into account any forfeitures
and cancellations) will not during the life of the Plan in the aggregate exceed
five million (5,000,000) shares of Common Stock; and

	 	(iii)	 	Awards to be granted under the Plan during any calendar year may not
be more than one million (1,000,000) shares of Common Stock in the aggregate.

          (c) Individual Participant Limits. Notwithstanding anything in this Section 3, or
elsewhere in this Plan, to the contrary, and subject to adjustment as provided in Section 12 of
this Plan:

	 	(i)	 	No Participant will be granted Option Rights or Appreciation Rights,
in the aggregate, for more than three hundred thousand (300,000) shares of
Common Stock during any calendar year;

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	 	(ii)	 	No Participant will be granted Qualified Performance Based Awards of
Restricted Stock, Restricted Stock Units, Performance Shares or other awards
under Section 10 of this Plan, in the aggregate, for more than three hundred
thousand (300,000) shares of Common Stock during any calendar year; and

	 	(iii)	 	In no event will any Participant in any calendar year receive a
Qualified Performance-Based Award of Performance Units or other awards payable
in cash under Section 10 of this Plan having an aggregate maximum value as of
their respective Dates of Grant in excess of US$2,000,000.

     4. Option Rights. The Committee may, from time to time and upon such terms and
conditions as it may determine, authorize the granting to Participants of options to purchase
Common Stock. Each such grant may utilize any or all of the provisions, and will be subject to all
of the requirements contained in the following provisions:

          (a) Each grant will specify the number of shares of Common Stock to which it
pertains subject to the limitations set forth in Section 3 of this Plan.

          (b) Each grant will specify an Option Price per share, which may not be less than
the Market Value per Share on the Date of Grant. In the case of an Incentive Stock Option granted
to a Ten Percent Participant, the Option Price per share will be determined as of the Date of Grant
by the Committee as an amount not less than 110% of the then Market Value per Share of the shares
of Common Stock covered by the Option Rights.

          (c) Each grant will specify whether the Option Price will be payable (i) in cash or
by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the
actual or constructive transfer to the Company of Common Stock owned by the Optionee (or other
consideration authorized pursuant to Section 4(d)) having a value at the time of exercise equal to
the total Option Price, (iii) by a combination of such methods of payment, or (iv) by such other
methods as may be approved by the Committee.

          (d) To the extent permitted by law, any grant may provide for deferred payment of
the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.

          (e) Successive grants may be made to the same Participant whether or not any Option
Rights previously granted to such Participant remain unexercised.

          (f) Each grant will specify the period or periods of continuous service by the
Optionee with the Company or any Subsidiary that is necessary before the Option Rights or
installments thereof will become exercisable. A grant of Option Rights may provide for the earlier
exercise of such Option Rights in the event of the retirement, death or disability of a
Participant, or a Change of Control.

          (g) Any grant of Option Rights may specify Management Objectives that must be
achieved as a condition to the exercise of such rights.

          (h) Option Rights granted under this Plan may be (i) options, including, without
limitation, Incentive Stock Options, that are intended to qualify under particular provisions of
the Code, (ii) options that are not intended so to qualify, or (iii) combinations of the foregoing.
Incentive Stock Options may only be granted to Participants who meet the definition of “employees”
under Section

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3401(c) of the Code.

          (i) No grant of Option Rights may be accompanied by a tandem award of dividend
equivalents or provide for dividends, dividend equivalents or other distributions to be paid on
such Option Rights.

          (j) The exercise of an Option Right will result in the cancellation on a
share-for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan.

          (k) No Option Right will be exercisable more than ten (10) years from the Date of
Grant; provided that no Incentive Stock Option Right granted to a Ten Percent Participant
will be exercisable more than five (5) years from the Date of Grant.

          (l) The Committee reserves the discretion at or after the Date of Grant to provide
for the right to tender in satisfaction of the Option Price nonforfeitable, unrestricted shares of
Common Stock, which are already owned by the Optionee and have a value at the time of exercise that
is equal to the Option Price.

          (m) Each grant of Option Rights will be evidenced by an Evidence of Award. Each
Evidence of Award shall be subject to the Plan and shall contain such terms and provisions as the
Committee may approve.

     5. Appreciation Rights.

          (a) The Committee may, from time to time and upon such terms and conditions as it
may determine, authorize the granting (i) to any Optionee, of Tandem Appreciation Rights in respect
of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing Appreciation
Rights. A Tandem Appreciation Right will be a right of the Optionee, exercisable by surrender of
the related Option Right, to receive from the Company an amount determined by the Committee, which
will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of
exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or
termination of the related Option Rights; provided, however, that a Tandem
Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. A Free-Standing Appreciation Right will be a right of the
Participant to receive from the Company an amount determined by the Committee, which will be
expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

          (b) Each grant of Appreciation Rights may utilize any or all of the provisions, and
will be subject to all of the requirements, contained in the following provisions:

	 	(i)	 	Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Stock or in
any combination thereof and may either grant to the Participant or retain in
the Committee the right to elect among those alternatives.

	 	(ii)	 	Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Committee at the
Date of Grant.

	 	(iii)	 	Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.

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	 	(iv)	 	Any grant may specify that such Appreciation Right may be exercised
only in the event of, or earlier in the event of, the retirement, death or
disability of a Participant, or a Change of Control.

	 	(v)	 	No grant of Appreciation Rights may be accompanied by a tandem award
of dividend equivalents or provide for dividends, dividend equivalents or other
distributions to be paid on such Appreciation Rights.

	 	(vi)	 	Any grant of Appreciation Rights may specify Management Objectives
that must be achieved as a condition of the exercise of such Appreciation
Rights.

	 	(vii)	 	Each grant of Appreciation Rights will be evidenced by an Evidence
of Award, which Evidence of Award will describe such Appreciation Rights,
identify the related Option Rights (if applicable), and contain such other
terms and provisions, consistent with this Plan, as the Committee may approve.

          (c) Any grant of Tandem Appreciation Rights will provide that such Tandem
Appreciation Rights may be exercised only at a time when the related Option Right is also
exercisable and at a time when the Spread is positive, and by surrender of the related Option Right
for cancellation. Successive grants of Tandem Appreciation Rights may be made to the same
Participant regardless of whether any Tandem Appreciation Rights previously granted to the
Participant remain unexercised.

          (d) Regarding Free-Standing Appreciation Rights only:

	 	(i)	 	Each grant will specify in respect of each Free-Standing Appreciation
Right a Base Price, which will be equal to or greater than the Market Value per
Share on the Date of Grant;

	 	(ii)	 	Successive grants of Free-Standing Appreciation Rights may be made to
the same Participant regardless of whether any Free-Standing Appreciation
Rights previously granted to the Participant remain unexercised; and

	 	(iii)	 	No Free-Standing Appreciation Right granted under this Plan may be
exercised more than 10 years from the Date of Grant.

     6. Restricted Stock. The Committee may, from time to time and upon such terms and
conditions as it may determine, also authorize the grant or sale of Restricted Stock to
Participants. Each such grant or sale may utilize any or all of the provisions, and will be subject
to all of the requirements, contained in the following provisions:

          (a) Each such grant or sale will constitute an immediate transfer of the ownership
of Common Stock to the Participant in consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.

          (b) Each such grant or sale may be made without additional consideration or in
consideration of a payment by such Participant that is less than the Market Value per Share at the
Date of Grant.

          (c) Each such grant or sale will provide that the Restricted Stock covered by such

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grant or sale that vests upon the passage of time will be subject to a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the
Committee at the Date of Grant or upon achievement of Management Objectives referred to in
subparagraph (e) below.

          (d) Each such grant or sale will provide that during or after the period for which
such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock
will be prohibited or restricted in the manner and to the extent prescribed by the Committee at the
Date of Grant (which restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial
risk of forfeiture in the hands of any transferee).

          (e) Any grant of Restricted Stock may specify Management Objectives that, if
achieved, will result in termination or early termination of the restrictions applicable to such
Restricted Stock Each grant may specify in respect of such Management Objectives a minimum
acceptable level of achievement and may set forth a formula for determining the number of shares of
Restricted Stock on which restrictions will terminate if performance is at or above the minimum or
threshold level or levels, or is at or above the target level or levels, but falls short of maximum
achievement of the specified Management Objectives.

          (f) Notwithstanding anything to the contrary contained in this Plan, any grant or
sale of Restricted Stock may provide for the earlier termination of restrictions on such Restricted
Stock in the event of the retirement, death or disability of a Participant, or a Change of Control.

          (g) Any such grant or sale of Restricted Stock may require that any or all dividends
or other distributions paid thereon during the period of such restrictions be automatically
deferred and reinvested in additional shares of Restricted Stock, which may be subject to the same
restrictions and risk of forfeiture as the underlying award; provided, however,
that dividends or other distributions on Restricted Stock with restrictions that lapse as a result
of the achievement of Management Objectives shall be deferred until and paid contingent upon the
achievement of the applicable Management Objectives.

          (h) Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award
and will contain such terms and provisions, consistent with this Plan, as the Committee may
approve. Unless otherwise directed by the Committee, (i) all certificates representing shares of
Restricted Stock will be held in custody by the Company until all restrictions thereon will have
lapsed, together with a stock power or powers executed by the Participant in whose name such
certificates are registered, endorsed in blank and covering such Shares, or (ii) all shares of
Restricted Stock will be held at the Company’s transfer agent in book entry form with appropriate
restrictions relating to the transfer of such shares of Restricted Stock.

     7. Restricted Stock Units. The Committee may, from time to time and upon such terms
and conditions as it may determine, also authorize the granting or sale of Restricted Stock Units
to Participants. Each such grant or sale may utilize any or all of the provisions, and will be
subject to all of the requirements contained in the following provisions:

          (a) Each such grant or sale will constitute the agreement by the Company to deliver
Common Stock or cash to the Participant in the future in consideration of the performance of
services, but subject to the fulfillment of such conditions (which may include the achievement of
Management Objectives) during the Restriction Period as the Committee may specify. Each grant may
specify in respect of such Management Objectives a minimum acceptable level of achievement and may
set forth a formula for determining the number of Restricted Stock Units on which restrictions will
terminate if

11

 

performance is at or above the minimum or threshold level or levels, or is at or above the
target level or levels, but falls short of maximum achievement of the specified Management
Objectives.

          (b) Each such grant or sale may be made without additional consideration or in
consideration of a payment by such Participant that is less than the Market Value per Share at the
Date of Grant.

          (c) Notwithstanding anything to the contrary contained in this Plan, any grant or
sale of Restricted Stock Units may provide for the earlier lapse or modification of the Restriction
Period in the event of the retirement, death or disability of a Participant, or a Change of
Control.

          (d) During the Restriction Period, the Participant will have no right to transfer
any rights under his or her award and will have no rights of ownership in the Common Stock
deliverable upon payment of the Restricted Stock Units and shall have no right to vote them, but
the Committee may at the Date of Grant authorize the payment of dividend equivalents on such
Restricted Stock Units on either a current, deferred or contingent basis, either in cash or in
additional shares of Common Stock; provided, however, that dividends or other
distributions on Common Stock underlying Restricted Stock Units with restrictions that lapse as a
result of the achievement of Management Objectives shall be deferred until and paid contingent upon
the achievement of the applicable Management Objectives.

          (e) Each grant or sale of Restricted Stock Units will specify the time and manner of
payment of the Restricted Stock Units that have been earned.

          (f) Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of
Award and will contain such terms and provisions, consistent with this Plan, as the Committee may
approve.

     8. Performance Shares and Performance Units. The Committee may, from time to time
and upon such terms and conditions as it may determine, also authorize the granting of Performance
Shares and Performance Units that will become payable to a Participant upon achievement of
specified Management Objectives during the Performance Period. Each such grant may utilize any or
all of the provisions, and will be subject to all of the requirements, contained in the following
provisions:

          (a) Each grant will specify the number of Performance Shares or Performance Units to
which it pertains, which number may be subject to adjustment to reflect changes in compensation or
other factors; provided, however, that no such adjustment will be made in the case
of a Qualified Performance-Based Award (other than in connection with the death or disability of
the Participant or a Change of Control) where such action would result in the loss of the otherwise
available exemption of the award under Section 162(m) of the Code.

          (b) The Performance Period with respect to each Performance Share or Performance
Unit will be such period of time (not less than one year), commencing with the Date of Grant as
will be determined by the Committee at the time of grant which may be subject to earlier lapse or
other modification in the event of the retirement, death or disability of a Participant, or a
Change of Control.

          (c) Any grant of Performance Shares or Performance Units will specify Management
Objectives which, if achieved, will result in payment or early payment of the award, and each grant
may specify in respect of such Management Objectives a minimum acceptable level of achievement and
may set forth a formula for determining the number of Performance Shares or Performance Units that
will be earned if performance is at or above the minimum or threshold level or levels, or is at or
above the target

12

 

level or levels, but falls short of maximum achievement of the specified Management
Objectives. The grant of Performance Shares or Performance Units will specify that, before the
Performance Shares or Performance Units will be earned and paid, the Committee must certify that
the Management Objectives have been satisfied.

          (d) Each grant will specify the time and manner of payment of Performance Shares or
Performance Units that have been earned. Any grant may specify that the amount payable with
respect thereto may be paid by the Company in cash, in Common Stock or in any combination thereof
and may either grant to the Participant or retain in the Committee the right to elect among those
alternatives.

          (e) Any grant of Performance Shares or Performance Units may specify that the amount
payable or the number of shares of Common Stock issued with respect thereto may not exceed maximums
specified by the Committee at the Date of Grant.

          (f) The Committee may at the Date of Grant of Performance Shares provide for the
payment of dividend equivalents to the holder thereof either in cash or in additional shares of
Common Stock subject in all cases to deferral and payment on a contingent basis based on the
Participant’s earning of the Performance Shares with respect to which such dividend equivalents are
paid.

          (g) Each grant of Performance Shares or Performance Units will be evidenced by an
Evidence of Award and will contain such other terms and provisions, consistent with this Plan, as
the Committee may approve.

     9. Awards to Non-Employee Directors. The Committee may, from time to time and upon
such terms and conditions as it may determine, authorize the granting to non-employee Directors of
Option Rights, Appreciation Rights or other awards contemplated by Section 10 of this Plan and may
also authorize the grant or sale of Common Stock, Restricted Stock or Restricted Stock Units to
non-employee Directors. Each grant of an award to a non-employee Director will be upon such terms
and conditions as approved by the Committee, will not be required to be subject to any minimum
vesting period, and will be evidenced by an Evidence of Award in such form as will be approved by
the Committee. Each grant will specify in the case of an Option Right, an Option Price per share,
and in the case of a Free-Standing Appreciation Right, a Base Price per share, which will not be
less than the Market Value per Share on the Date of Grant. Each Option Right and Free-Standing
Appreciation Right granted under the Plan to a non-employee Director will expire not more than 10
years from the Date of Grant and will be subject to earlier termination as hereinafter provided.
If a non-employee Director subsequently becomes an employee of the Company or a Subsidiary while
remaining a member of the Board, any award held under this Plan by such individual at the time of
such commencement of employment will not be affected thereby. Non-employee Directors, pursuant to
this Section 9, may be awarded, or may be permitted to elect to receive, pursuant to procedures
established by the Committee, all or any portion of their annual retainer, meeting fees or other
fees in Common Stock, Restricted Stock, Restricted Stock Units or other awards under the Plan in
lieu of cash.

     10. Other Awards.

          (a) The Committee may, subject to limitations under applicable law, grant to any
Participant such other awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, shares of Common Stock or factors that may
influence the value of such shares, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Common Stock, purchase rights for Common
Stock, awards with value and payment contingent upon performance of the Company or specified
Subsidiaries, affiliates or other business units thereof or any other factors designated by the
Committee, and awards valued by

13

 

reference to the book value of shares of Common Stock or the value of securities of, or the
performance of specified Subsidiaries or affiliates or other business units of the Company. The
Committee shall determine the terms and conditions of such awards. Shares of Common Stock
delivered pursuant to an award in the nature of a purchase right granted under this Section 10
shall be purchased for such consideration, paid for at such time, by such methods, and in such
forms, including, without limitation, cash, shares of Common Stock, other awards, notes or other
property, as the Committee shall determine.

          (b) Cash awards, as an element of or supplement to any other award granted under
this Plan, may also be granted pursuant to this Section 10 of this Plan.

          (c) The Committee may grant Common Stock as a bonus, or may grant other awards in
lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this
Plan or under other plans or compensatory arrangements, subject to such terms as shall be
determined by the Committee in a manner that complies with Section 409A of the Code.

          (d) Share-based awards pursuant to this Section 10 are not required to be subject to
any minimum vesting period.

     11. Transferability.

          (a) Except as otherwise determined by the Committee, no Option Right, Appreciation
Right or other derivative security granted under the Plan shall be transferable by the Participant
except by will or the laws of descent and distribution, and in no event shall any such award
granted under this Plan be transferred for value. Except as otherwise determined by the Committee,
Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by
him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian
or legal representative acting on behalf of the Participant in a fiduciary capacity under state law
and/or court supervision. Notwithstanding anything herein to the contrary, a Participant
shall have the option to cause the awards to be granted to one or more of his or her family
members.

               For purposes of this Plan:

	 	•	 	“Family member” includes any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in- law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the Participant’s household (other than a tenant or
employee), a trust in which these persons have more than fifty percent
of the beneficial interest, a foundation in which these persons (or the
employee) control the management of assets, and any other entity in
which these persons (or the employee) own more than fifty percent of
the voting interests; and
	 
	 	•	 	“Transferred for value” shall not include the following: (i) a
transfer under a domestic relations order in settlement of marital
property rights; and (ii) a transfer to an entity in which more than
fifty percent of the voting interests are owned by family members (or
the employee) in exchange for an interest in that entity.

          (b) The Committee may specify at the Date of Grant that part or all of the shares of
Common Stock that are (i) to be issued or transferred by the Company upon the exercise of Option
Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to
Restricted Stock

14

 

Units or upon payment under any grant of Performance Shares or Performance Units or other
awards under the Plan or (ii) no longer subject to the substantial risk of forfeiture and
restrictions on transfer referred to in Section 6 of this Plan, will be subject to further
restrictions on transfer.

     12. Adjustments. The Committee shall make or provide for such adjustments in the
numbers of shares of Common Stock covered by outstanding Option Rights, Appreciation Rights,
Restricted Stock Units, Performance Shares and Performance Units granted hereunder and, if
applicable, in the number of shares of Common Stock covered by other awards granted pursuant to
Section 10 hereof, in the Option Price and Base Price provided in outstanding Option Rights and
Appreciation Rights, and in the kind of shares covered thereby, as the Committee, in its sole
discretion, exercised in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization or other change in the capital
structure of the Company, (b) any merger, consolidation, spin-off, split- off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets, issuance of rights
or warrants to purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or
in the event of a Change of Control, the Committee, in its discretion, may provide in substitution
for any or all outstanding awards under this Plan such alternative consideration (including cash),
if any, as it, in good faith, may determine to be equitable in the circumstances and may require in
connection therewith the surrender of all awards so replaced in a manner that complies with Section
409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or
Base Price greater than the consideration offered in connection with any such transaction or event
or Change of Control, the Committee may in its sole discretion elect to cancel such Option Right or
Appreciation Right without any payment to the person holding such Option Right or Appreciation
Right. The Committee shall also make or provide for such adjustments in the numbers of shares of
Common Stock specified in Section 3 of this Plan as the Committee in its sole discretion, exercised
in good faith, may determine is appropriate to reflect any transaction or event described in this
Section 12; provided, however, that any such adjustment to the number specified in
Section 3(c)(i) will be made only if and to the extent that such adjustment would not cause any
option intended to qualify as an Incentive Stock Option to fail to so qualify.

     13. Administration of the Plan.

          (a) This Plan will be administered by the Committee. The Committee may from time to
time delegate all or any part of its authority under this Plan to any subcommittee thereof. To the
extent of any such delegation, references in this Plan to the Committee will be deemed to be
references to such subcommittee. A majority of the Committee will constitute a quorum, and the
action of the members of the Committee present at any meeting at which a quorum is present, or acts
unanimously approved in writing, will be the acts of the Committee.

          (b) The interpretation and construction by the Committee of any provision of this
Plan or of any agreement, notification or document evidencing the grant of Option Rights,
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units or other awards pursuant to Section 10 of this Plan and any determination by the Committee
pursuant to any provision of this Plan or of any such agreement, notification or document will be
final and conclusive. No member of the Committee will be liable for any such action or
determination made in good faith.

          (c) The Committee or, to the extent of any delegation as provided in Section 13(a),
the subcommittee, may delegate to one or more of its members or to one or more officers of the
Company, or to one or more agents or advisors, such administrative duties or powers as it may deem
advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been

15

 

delegated as aforesaid, may employ one or more persons to render advice with respect to any
responsibility the Committee, the subcommittee or such person may have under the Plan. The
Committee or the subcommittee may, by resolution, authorize one or more officers of the Company to
do one or both of the following on the same basis as the Committee or the subcommittee: (i)
designate employees to be recipients of awards under this Plan; and (ii) determine the size of any
such awards; provided, however, that (A) the Committee or the subcommittee shall
not delegate such responsibilities to any such officer for awards granted to an employee who is an
officer, Director, or more than 10% beneficial owner of any class of the Company’s equity
securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the
Committee in accordance with Section 16 of the Exchange Act; (B) the resolution providing for such
authorization sets forth the total number of shares of Common Stock such officer(s) may grant; and
(C) the officer(s) shall report periodically to the Committee or the subcommittee, as the case may
be, regarding the nature and scope of the awards granted pursuant to the authority delegated.

     14. Recoupment Provisions. Notwithstanding anything in the Plan to the contrary,
any Evidence of Award may provide for the cancellation or forfeiture of an award or the forfeiture
and repayment to the Company of any gain related to an award, or other provisions intended to have
a similar effect, upon such terms and conditions as may be determined by the Committee from time to
time.

     15. Non U.S. Participants. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such special terms for awards
to Participants who are employed by the Company or any Subsidiary outside of the United States of
America or who provide services to the Company under an agreement with a nation other than the
United States of America or an agency located other than in the United States of America, as the
Committee may consider necessary or appropriate to accommodate differences in local law, tax policy
or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or
alternative versions of this Plan (including without limitation, sub-plans) as it may consider
necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in
effect for any other purpose, and the Secretary or other appropriate officer of the Company may
certify any such document as having been approved and adopted in the same manner as this Plan. No
such special terms, supplements, amendments or restatements, however, will include any provisions
that are inconsistent with the terms of this Plan as then in effect unless this Plan could have
been amended to eliminate such inconsistency without further approval by the stockholders of the
Company.

     16. Withholding Taxes. To the extent that the Company is required to withhold
federal, state, local or non-U.S. taxes in connection with any payment made or benefit realized by
a Participant or other person under this Plan, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes required to be withheld, which
arrangements (in the discretion of the Committee) may include relinquishment of a portion of such
benefit. If a Participant’s benefit is to be received in the form of Common Stock, and such
Participant fails to make arrangements for the payment of tax, the Company shall withhold such
shares of Common Stock having a value equal to the amount required to be withheld. Notwithstanding
the foregoing, when a Participant is required to pay the Company an amount required to be withheld
under applicable income and employment tax laws, the Participant may elect to satisfy the
obligation, in whole or in part, by electing to have withheld, from the shares required to be
delivered to the Participant, shares of Common Stock having a value equal to the amount required to
be withheld, or by delivering to the Company other shares of Common Stock held by such Participant.
The shares used for tax withholding will be valued at an amount equal to the Market Value per
Share of such Common Stock on the date the benefit is to be included in Participant’s income. In
no event shall the Market Value per Share of the Common Stock to be withheld and delivered pursuant
to this Section 16 to satisfy applicable withholding taxes in connection with the benefit exceed
the minimum required amount

16

 

of taxes required to be withheld. Participants shall also make such arrangements as the
Company may require for the payment of any withholding tax obligation that may arise in connection
with the disposition of shares of Common Stock acquired upon the exercise of Option Rights.

     17. Amendments, Etc.

          (a) The Board may at any time and from time to time amend the Plan in whole or in
part; provided, however, that if an amendment to the Plan (i) would materially
increase the benefits accruing to participants under the Plan, (ii) would materially increase the
number of securities which may be issued under the Plan, (iii) would materially modify the
requirements for participation in the Plan or (iv) must otherwise be approved by the stockholders
of the Company in order to comply with applicable law or the rules of The NASDAQ Stock Market or,
if the Common Stock is not traded on The NASDAQ Stock Market, the principal national securities
exchange upon which the Common Stock is traded or quoted, then, such amendment will be subject to
stockholder approval and will not be effective unless and until such approval has been obtained.

          (b) Except in connection with a corporate transaction or event described in Section
12 of this Plan, the terms of outstanding awards may not be amended to reduce the Option Price of
outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel
outstanding Option Rights or Appreciation Rights in exchange for cash, other awards or Option
Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than
the Option Price of the original Option Rights or Base Price of the original Appreciation Rights,
as applicable, without stockholder approval. This Section 17(b) is intended to prohibit the
repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to
prohibit the adjustments provided for in Section 12 of the Plan. Notwithstanding any provision of
the Plan to the contrary, this Section 17(b) may not be amended without approval by the Company’s
stockholders.

          (c) If permitted by Section 409A of the Code, but subject to the paragraph that
follows, in case of termination of employment by reason of death, disability or normal or early
retirement, or in the case of unforeseeable emergency or other special circumstances, of a
Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or
any shares of Restricted Stock as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction
Period has not been completed, or any Performance Shares or Performance Units which have not been
fully earned, or any other awards made pursuant to Section 10 subject to any vesting schedule or
transfer restriction, or who holds Common Stock subject to any transfer restriction imposed
pursuant to Section 11(b) of this Plan, or in the case of a Change of Control, the Committee may,
in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or other
award may be exercised or the time at which such substantial risk of forfeiture or prohibition or
restriction on transfer will lapse or the time when such Restriction Period will end or the time at
which such Performance Shares or Performance Units will be deemed to have been fully earned or the
time when such transfer restriction will terminate or may waive any other limitation or requirement
under any such award.

          Subject to Section 17(b) hereof, the Committee may amend the terms of any award theretofore
granted under this Plan prospectively or retroactively, except in the case of a Qualified
Performance-Based Award (other than in connection with the Participant’s death or disability, or a
Change of Control) where such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code. In such case, the Committee will not make any
modification of the Management Objectives or the level or levels of achievement with respect to
such Qualified Performance-Based Award. Subject to Section 12 above, no such amendment shall
impair the rights of any Participant without his or her consent. The Board may, in its discretion,
terminate this Plan at any

17

 

time. Termination of this Plan will not affect the rights of Participants or their successors
under any awards outstanding hereunder and not exercised in full on the date of termination.

     18. Compliance with Section 409A of the Code.

          (a) To the extent applicable, it is intended that this Plan and any grants made hereunder
comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of
Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made
hereunder shall be administered in a manner consistent with this intent. Any reference in this
Plan to Section 409A of the Code will also include any regulations or any other formal guidance
promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal
Revenue Service.

          (b) Neither a Participant nor any of a Participant’s creditors or beneficiaries shall have the
right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable
under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the
Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a
Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced
by, or offset against, any amount owing by a Participant to the Company or any of its affiliates.

          (c) If, at the time of a Participant’s separation from service (within the meaning of Section
409A of the Code), (i) the Participant shall be a specified employee (within the meaning of Section
409A of the Code and using the identification methodology selected by the Company from time to
time) and (ii) the Company shall make a good faith determination that an amount payable hereunder
constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of
which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of
the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company
shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without
interest, on the tenth business day of the seventh month after such separation from service.

          (d) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light
of the uncertainty with respect to the proper application of Section 409A of the Code, the Company
reserves the right to make amendments to this Plan and grants hereunder as the Company deems
necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the
Code. In any case, a Participant shall be solely responsible and liable for the satisfaction of
all taxes and penalties that may be imposed on a Participant or for a Participant’s account in
connection with this Plan and grants hereunder (including any taxes and penalties under Section
409A of the Code), and neither the Company nor any of its affiliates shall have any obligation to
indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.

     19. Governing Law. The Plan and all grants and awards and actions taken thereunder
shall be governed by and construed in accordance with the laws of Hong Kong.

     20. Effective Date/Termination. This Plan will be effective as of the Effective
Date. No grant will be made under this Plan after the tenth anniversary of the Effective Date, but
all grants made on or prior to such date will continue in effect thereafter subject to the terms
thereof and of this Plan.

     21. Miscellaneous.

          (a) The Company will not be required to issue any fractional shares of Common Stock
pursuant to this Plan. The Committee may provide for the elimination of fractions or for the

18

 

settlement of fractions in cash.

          (b) This Plan will not confer upon any Participant any right with respect to
continuance of employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate
such Participant’s employment or other service at any time.

          (c) To the extent that any provision of this Plan would prevent any Option Right
that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision
will be null and void with respect to such Option Right. Such provision, however, will remain in
effect for other Option Rights and there will be no further effect on any provision of this Plan.

          (d) No award under this Plan may be exercised by the holder thereof if such
exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected
by the Committee, contrary to law or the regulations of any duly constituted authority having
jurisdiction over this Plan.

          (e) Absence or leave approved by a duly constituted officer of the Company or any of
its Subsidiaries shall not be considered interruption or termination of service of any employee for
any purposes of this Plan or awards granted hereunder.

          (f) No Participant shall have any rights as a stockholder with respect to any shares
subject to awards granted to him or her under this Plan prior to the date as of which he or she is
actually recorded as the holder of such shares upon the stock records of the Company.

          (g) The Committee may condition the grant of any award or combination of awards
authorized under this Plan on the surrender or deferral by the Participant of his or her right to
receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the
Participant.

          (h) Notwithstanding any other provision of the Plan, the terms of Substitute Awards
may vary from the terms set forth in the Plan to the extent the Committee deems appropriate to
conform, in whole or in part, to the provisions of the awards in substitution for which they are
granted.

          (i) If any provision of the Plan is or becomes invalid, illegal or unenforceable in
any jurisdiction, or would disqualify the Plan or any award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended or limited in scope to conform to
applicable laws or, in the discretion of the Committee, it shall be stricken and the remainder of
the Plan shall remain in full force and effect.

19

 

APPENDIX A

MANAGEMENT OBJECTIVES FOR

QUALIFIED PERFORMANCE-BASED AWARDS

	(1)	 	Profits (e.g., operating income, EBIT, EBT, net income, earnings per
share, residual or economic earnings, economic profit — these profitability metrics
could be measured before special items and/or subject to GAAP definition);

	(2)	 	Cash Flow (e.g., EBITDA, free cash flow, free cash flow with or without
specific capital expenditure target or range, including or excluding divestments and/or
acquisitions, total cash flow, cash flow in excess of cost of capital or residual cash
flow or cash flow return on investment);

	(3)	 	Returns (e.g., Profits or Cash Flow returns on: assets, invested
capital, net capital employed, and equity);

	(4)	 	Working Capital (e.g., working capital divided by sales, days’ sales
outstanding, days’ sales inventory, and days’ sales in payables);

	(5)	 	Profit Margins (e.g., Profits divided by revenues, gross margins and
material margins divided by revenues, and material margin divided by sales pounds);

	(6)	 	Liquidity Measures (e.g., debt-to-capital, debt-to-EBITDA, total debt
ratio);

	(7)	 	Sales Growth, Gross Margin Growth, Cost Initiative and Stock Price Metrics
(e.g., revenues, revenue growth, revenue growth outside the United States,
gross margin and gross margin growth, material margin and material margin growth, stock
price appreciation, total return to stockholders, sales and administrative costs
divided by sales, and sales and administrative costs divided by profits); and

	(8)	 	Strategic Initiative Key Deliverable Metrics consisting of one or more of the
following: product development, strategic partnering, research and development,
vitality index, market penetration, geographic business expansion goals, cost targets,
customer satisfaction, employee satisfaction, management of employment practices and
employee benefits, supervision of litigation and information technology, and goals
relating to acquisitions or divestitures of subsidiaries, affiliates and joint
ventures.exv10w1

Exhibit 10.1

SEPARATION AGREEMENT AND RELEASE

     THIS SEPARATION AGREEMENT AND RELEASE (“Agreement”), by and between DELBERT HUMENIK
(“Employee,” or “you”) and PAYCHEX, INC. (the “Company”) and its parents,
subsidiaries, divisions, affiliates, and/or related business entities, and with respect to each of
them, their predecessors, successors and assigns, employee benefit plans or funds, and with
respect to each such entity, all of its or their past and/or present shareholders, directors,
officers, attorneys, fiduciaries, agents, trustees, administrators, employees and assigns, whether
acting on behalf of the Company or in their individual capacities (collectively the
“Company”) is entered into on October 25, 2010 and becomes effective as described in
paragraph 15 below.

	1.	 	Separation Date. Your voluntary separation date, which shall be your last day of
employment with the Company, will be October 15, 2010 (the “Separation Date”).

	2.	 	Separation Payment. In consideration of and exchange for your release and waiver of
all claims against the Company and your compliance with all other terms and conditions of
this Agreement: (a) within ten (10) business days following six (6) months after your
Separation Date, Paychex will pay you $210,000.00 (which is the equivalent of six (6)
months of your usual base pay compensation), less required withholdings; and (b) if you
timely elect COBRA coverage for yourself and/or your eligible dependents, the Company will
pay the premiums for such coverage for six (6) months following your Separation Date
(together, the “Separation Payment”). Subsequent to that six (6) month period, you
may be eligible to elect to continue health coverage on a self-pay basis in accordance
with your rights and obligations under COBRA. Information regarding your rights under
COBRA will be provided to you under separate cover.

	3.	 	Good and Valuable Consideration. You acknowledge and agree that the Separation Payment
and other consideration provided to you under this Agreement represent good and valuable
consideration for your General Release and your obligations hereunder.

	4.	 	Release and Waiver of All Claims. In exchange for the Separation Payment and other
good and valuable consideration set forth herein, Employee hereby releases and discharges
Paychex, its present and former officers, directors, employees, representatives, agents,
subsidiaries, affiliates, benefit plans and their plan administrators, successors and
assigns and their respective directors, officers, employees and agents (hereinafter
collectively referred to as the “Releasees”), both individually and in their official
capacity, from all claims, actions and causes of action of any kind, which he, or his
agents, executors, heirs, or assigns ever had, now have, or may have, whether known or
unknown, as a result of his employment by, or separation from employment with,
Paychex from the beginning of time through the date this Agreement is
executed. This includes, but is not limited to, any claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 1981 et seq., the Equal Pay Act, the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act the Family and Medical Leave Act,
the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974,
the New York State Human Rights Law, New York State Labor Law, all the foregoing as
amended, or any other claims of employment discrimination, wrongful termination,
claim

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	 	 	for wages, or breach of contract under federal, state or local laws, insofar as release of such
claims is allowed by law.

	5.	 	Administrative Remedies. Employee agrees not to file a lawsuit or other action asserting any
claim or right that he has waived herein. The Parties acknowledge that this Agreement does
not limit Employee’s right to file a charge or participate in an investigative proceeding
before the Equal Employment Opportunity Commission or any federal, state or local
governmental agency with which the right to file or participate in such proceedings may not
be waived. To the extent permitted by law, if such an administrative claim is made, Employee
agrees to waive and otherwise forego recovery of any individual monetary or equitable relief
directly or indirectly related to such claim.

	6.	 	No Admission of Wrongdoing. This Agreement is not intended, and shall not be construed, as
an admission that you or the Company have violated any law (statutory or decisional),
ordinance or regulation, breached any contract or policy, or committed any wrongdoing.
	 
	7.	 	Post Termination Obligations and Existing Contractual Obligations. You
acknowledge that by virtue of your employment by the Company as Sr. Vice-President of Sales
and Marketing, you have had unfettered access to a range of sensitive and confidential
information regarding the business operations, strategies, customers, prospects, employees and
finances of the Company and its affiliates. You acknowledge that you are bound by the terms of
the Employee Confidentiality, Non-Solicitation and Non-Compete Agreement as signed by you on
September 14, 2009 (“Confidentiality Agreement”), and that the provisions of the
Confidentiality Agreement shall continue in full force and effect following the Separation
Date. You also acknowledge that you continue to be bound by the Non-competition,
Non-solicitation, Confidentiality, and Detrimental Conduct provisions of your 2009 and 2010
equity compensation agreements with the Company.
	 
	8.	 	Non-Disparagement. Employee agrees that he will not disparage or defame or
encourage or induce others to disparage or defame the Company, including comments that would
adversely affect or damage in any manner (or otherwise portray  in a false or negative
light) the conduct of the business of, or business reputation of, the Company or any of its
officers, directors, affiliates, or personnel.
	 
	9.	 	Return of Property. On or before the Separation Date you shall comply in all respects with
the Confidentiality Agreement and shall immediately return to the Company all property
belonging to the Company and/or the Company Entities, including but not limited to laptop,
cell phone, keys, card access to the building and office floors, work papers, notes, files,
documents, internal policies and other confidential business financial information and
documents, such as files and material in your possession (including any computers, pagers,
Blackberry, cellular phones, etc.), and all copies of computerized databases and related
materials regarding the Company.

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	10.	 	Cooperation. You agree that, following your Separation Date, you will cooperate with the
Company and its counsel (i) with respect to all matters, for which you had responsibility or
oversight while employed and (ii) any claims and/or lawsuits involving the Company of which you may
have particular knowledge or in which you may be a witness, and following your termination of
employment, you agree to cooperate with, and make yourself available on a reasonable basis to
respond to inquiries from, representatives of any of the Company
regarding any matters arising
during the course of your employment or in connection with any investigation, administrative
proceeding, arbitration, mediation or litigation.

	11.	 	Material Breach. Any breach of the provisions of Paragraphs 4, 7, 8, 9 and/or 10 above,
shall be considered a material breach of this Agreement. In the event that you have committed
a material breach of this Agreement, in addition to any remedies available to the Company
under this or any other applicable agreement, Employee acknowledges that Company shall no
longer be obligated to make the payment set forth in paragraph 2 and Employee further
consents to the entry of injunctive relief (without posting of a bond), in addition to the
Company’s right to pursue any and all other remedies under the law. The Company shall be
entitled to recover its attorneys’ fees and costs incurred in any such action.

	12.	 	References. All reference inquiries relating to your employment with the Company shall be
directed to the Vice President of Organizational Development.

	13.	 	Governing Law and Enforcement. This Agreement shall be construed and enforced in accordance
with the laws of the State of New York without regard to the principles of conflicts of law.
Additionally, any action concerning this Agreement shall be commenced exclusively in the state
courts of Monroe Country, New York or United States District Court for the Western District of
New York, in Rochester, New York. Both parties consent to the exclusive jurisdiction of such
state and federal courts and waive any claim under the doctrine of
forum non conveniens.
	 
	14.	 	Entire Agreement; Confidentiality. You understand that, except as otherwise provided herein,
this Agreement constitutes the complete understanding between the Company and you, and, supersedes
any and all agreements, understandings, and discussions, whether written or oral, between you and
the Company. No other promises or agreements, or modifications, waivers or amendments to this
Agreement, shall be binding unless in writing and signed by both the Company and you after the
execution of this Agreement. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which counterparts, when executed
together, shall constitute but one and the same Agreement. The parties further agree that if any
part or any provision of this Agreement is determined to be invalid or unenforceable under
applicable law by a court of competent jurisdiction, that part shall be ineffective to the extent
of such invalidity only, without in any way affecting the remaining parts of said provision or the
remaining provisions of the Agreement. You further agree that you will keep the terms of this
Agreement confidential and will not disclose the Agreement to third-parties, except immediate
family members and your financial or legal advisors, all of whom shall also maintain the
confidentiality of the terms of the Agreement.

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	15.	 	Right of Revocation. Employee may exercise his right to revoke this Agreement by
submitting his intent to revoke in writing to Paychex’ Chief Legal Officer within seven (7)
days from the date he executes the Agreement. This Agreement does not become effective until
the eighth day following Employee’s execution of this Agreement and is expressly conditioned
on this Agreement not being revoked during the seven (7) day revocation period (the
“Effective Date”).

	16.	 	Knowing and Voluntary Execution. Employee understands and agrees that he:

	 	a.	 	Has had the opportunity of a full twenty-one (21) days within which to
consider this Agreement before executing it.
	 
	 	b.	 	Has carefully read and fully understands each provision herein.
	 
	 	c.	 	Is, through this Agreement, releasing the Company and the Releasees
from any and all claims he may have against the Company and/or the Releasees.
	 
	 	d.	 	Knowingly and voluntarily agrees to each term in this Agreement.
	 
	 	e.	 	Knowingly and voluntarily intends to be legally bound by the same.
	 
	 	f.	 	Has been advised by the Company to consult with his own counsel regarding the
terms of this Agreement prior to executing this Agreement.
	 
	 	g.	 	Has a full seven (7) days following the execution of this Agreement to revoke
this
Agreement and has been and hereby is advised in writing that this Agreement
shall not become effective or enforceable until the revocation period has expired.

	17.	 	409A Considerations. The intent of the parties is that payments and benefits under this
Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and the regulations and guidance promulgated thereunder (collectively
“Code Section 409A”) and, accordingly, to the maximum extent permitted, this
Agreement shall be interpreted to be in compliance therewith. In no event whatsoever
shall the Company be liable for any additional tax, interest or penalties that may be
imposed on Employee by Code Section 409A or any damages for failing to comply with
Code Section 409A hereunder or otherwise. Any reimbursement payment for costs or
expenses or otherwise, except as permitted by Code Section 409A, shall (i) be made no
later than the end of the calendar year following the calendar year in which such costs,
expenses or in-kind benefits were incurred or provided; (ii) the amount of expenses
eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not
affect the amounts of expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year (other than with regard to a limit related to the period
in which an arrangement is in effect (other than with regard to a limit related to the period
in which the arrangement is in effect with regard to an arrangement subject to Section
105(b) of the Code), and (iii) the reimbursement or in-kind benefit cannot be liquidated
or exchanged for any other benefit.

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     IN WITNESS WHEREOF, the parties hereto have approved and executed this Agreement as of the
date set forth above:

	 	 	 	 	 	 	 

	PAYCHEX, INC.	 	DELBERT HUMENIK
	 
	 	 	 	 	 	 
	BY:

	 	/s/ Will Kuchta
	 	BY:
	 	/s/ Delbert Humenik
	 

	 	 
	 	 	 	 
	 

	 	Name: Will Kuchta
	 	 	 	Delbert Humenik
	 

	 	Title:   Vice President, Organizational
Development	 	 	 	 

5

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