Document:

Exhibit 4.1

[FACE OF CERTIFICATE]

 

[LOGO]

 

OMP

 

OBAGI MEDICAL PRODUCTS, INC.

 

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

 

SEE REVERSE FOR CERTAIN DEFINITIONS

 

COMMON STOCK

 

CUSIP 67423R 10 8

 

THIS CERTIFIES THAT:

 

is the owner of

 

fully-paid and non-assessable shares of Common Stock of $.0001 par
value each of

 

OBAGI MEDICAL PRODUCTS, INC.

 

transferable on the books of the Corporation in person or by attorney
upon surrender of this certificate duly endorsed or assigned. This certificate
and the shares represented hereby are subject to the laws of the State of
Delaware, and to the Certificate of Incorporation and Bylaws of the
Corporation, as now or hereafter amended. This certificate is not valid until
countersigned by the Transfer Agent.

 

WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

 

DATED:

 

[SIGNATURE]

SECRETARY

 

[SEAL]

 

[SIGNATURE]

CHIEF EXECUTIVE OFFICER AND PRESIDENT

 

COUNTERSIGNED AND REGISTERED:

AMERICAN STOCK TRANSFER & TRUST COMPANY

                NEW YORK, NY

 

BY

TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE

 

 

 

[REVERSE OF CERTIFICATE]

 

THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND
WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS,
PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED
TO BE ISSUED, SO FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF
ANY, OF THE BOARD TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE
AND CHANGE THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR
SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE
TRANSFER AGENT NAMED ON THIS CERTIFICATE.

 

The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

 

	
  TEN COM

  	
  —

  	
  as tenants in common

  
	
  TEN ENT

  	
  —

  	
  as tenants by the entireties

  
	
  JT TEN

  	
  —

  	
  as joint tenants with right of

  
	
   

  	
   

  	
  survivorship and not as tenants

  
	
   

  	
   

  	
  in common

  

 

UNIF GIFT MIN ACT—________________Custodian___________________

                                                     (Cust)                                         (Minor)

under Uniform Gifts to Minors

Act______________________________

                                (State)

 

Additional abbreviations may also be used though not in the above list.

 

For Value Received, __________________ hereby sell, assign and transfer
unto

 

	
  PLEASE INSERT SOCIAL SECURITY OR OTHER

  
	
  IDENTIFYING NUMBER OF ASSIGNEE

  
	
   

  	
   

  
	
   

  
	
   

  
	
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
  INCLUDING ZIP CODE, OF ASSIGNEE)

  

 

Shares of the stock represented by the within Certificate, and do
hereby irrevocably

constitute and appoint

 

Attorney to transfer the said stock on the books of the within named
Corporation

with full power of substitution in the premises.

 

	
  Dated

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NOTICE: THE SIGNATURE
  TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
  THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
  CHANGE WHATSOEVER.

  
				

 

The signature(s) must be guaranteed by an eligible guarantor
institution (Banks, Stockbrokers, Savings and Loan Associations and Credit
Unions with membership in an approved signature guarantee Medallion Program),
pursuant to S.E.C. Rule 17Ad-15.

 

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED
OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION
TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.Exhibit 10.2

 

 

 

OBAGI
MEDICAL PRODUCTS, INC.

 

2005
STOCK INCENTIVE PLAN

 

NOVEMBER
17, 2005

 

AS AMENDED (1)

 

 

 

(1)          The Plan
was amended by the Board on November 27, 2006 and the stockholders on November 28,
2006 to, among other things, increase the number of reserved shares, add
an evergreen provision and add Section 162(m) provisions.

 

 

Table of Contents

 

	
  Section 1.

  	
   

  	
  Purpose

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Administration

  	
  5

  
	
  (a)

  	
   

  	
  Power and Authority of the Committee

  	
  5

  
	
  (b)

  	
   

  	
  Power and Authority of the Board

  	
  6

  
	
  (c)

  	
   

  	
  Other Administration

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Shares Available for Awards

  	
  6

  
	
  (a)

  	
   

  	
  Shares Available

  	
  6

  
	
  (b)

  	
   

  	
  Adjustments

  	
  7

  
	
  (c)

  	
   

  	
  Award Limitations Under the Plan

  	
  7

  
	
  (d)

  	
   

  	
  Share Reserve

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Eligibility

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Awards

  	
  8

  
	
  (a)

  	
   

  	
  Options

  	
  8

  
	
  (b)

  	
   

  	
  Stock Appreciation Rights

  	
  11

  
	
  (c)

  	
   

  	
  Restricted Stock and Restricted Stock Units

  	
  11

  
	
  (d)

  	
   

  	
  Performance Awards

  	
  12

  
	
  (e)

  	
   

  	
  Dividend Equivalents

  	
  12

  
	
  (f)

  	
   

  	
  Other Stock Grants

  	
  12

  
	
  (g)

  	
   

  	
  Other Stock-Based Awards

  	
  13

  
	
  (h)

  	
   

  	
  Cash Awards

  	
  13

  
	
  (i)

  	
   

  	
  General

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  California Provisions

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Amendment and Termination; Adjustments

  	
  19

  
	
  (a)

  	
   

  	
  Amendments to the Plan

  	
  19

  
	
  (b)

  	
   

  	
  Amendments to Awards

  	
  19

  
	
  (c)

  	
   

  	
  Correction of Defects, Omissions and Inconsistencies

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Income Tax Withholding

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  General Provisions

  	
  20

  
	
  (a)

  	
   

  	
  No Rights to Awards

  	
  20

  
	
  (b)

  	
   

  	
  Award Agreements

  	
  20

  
	
  (c)

  	
   

  	
  Plan Provisions Control

  	
  20

  
	
  (d)

  	
   

  	
  No Rights of Stockholders

  	
  20

  

 

ii

 

	
  (e)

  	
   

  	
  No Limit on Other Compensation Arrangements

  	
  21

  
	
  (f)

  	
   

  	
  No Right to Employment

  	
  21

  
	
  (g)

  	
   

  	
  Governing Law

  	
  21

  
	
  (h)

  	
   

  	
  Severability

  	
  21

  
	
  (i)

  	
   

  	
  Other Benefits

  	
  21

  
	
  (j)

  	
   

  	
  No Fractional Shares

  	
  22

  
	
  (k)

  	
   

  	
  Headings

  	
  22

  
	
  (l)

  	
   

  	
  Section 16 Compliance; Section 162(m) Administration

  	
  22

  
	
  (m)

  	
   

  	
  Conditions Precedent to Issuance of Shares

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Effective Date of the Plan

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Term of the Plan

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Limitation on Liability

  	
  23

  
	
  (a)

  	
   

  	
  The Non-Issuance of Shares

  	
  23

  
	
  (b)

  	
   

  	
  Tax Consequences

  	
  23

  
	
  (c)

  	
   

  	
  Forfeiture

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Unfunded Plan

  	
  23

  

 

iii

 

OBAGI
MEDICAL PRODUCTS, INC.

2005 STOCK INCENTIVE PLAN

 

Section 1.      Purpose

 

The purpose of the Plan is to promote the interests of
the Company and its stockholders by aiding the Company in attracting and
retaining employees, officers, consultants, independent contractors and
directors capable of assuring the future success of the Company, to offer such
persons incentives to put forth maximum efforts for the success of the
Company’s business and to afford such persons an opportunity to acquire a
proprietary interest in the Company.

 

Section 2.      Definitions

 

As used in the Plan, the following terms shall have
the meanings set forth below:

 

(a)   “Affiliate” shall mean (i) any entity
that, directly or indirectly through one or more intermediaries, is controlled
by the Company and (ii) any entity in which the Company has a significant
equity interest, in each case as determined by the Committee.

 

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

 

(c)   “Award” shall mean any Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award,
Dividend Equivalent, Other Stock Grant, Other Stock-Based Award or Cash Award
granted under the Plan.

 

(d)   “Award Agreement” shall mean any written,
including electronic, agreement, contract or other instrument or document
evidencing any Award granted under the Plan. 
Each Award Agreement shall be subject to the applicable terms and conditions
of the Plan and any other terms and conditions (not inconsistent with the Plan)
determined by the Committee.

 

(e)   “Board” shall mean the Board of Directors
of the Company.

 

(f)    “Cause” for Termination of Employment shall mean (i) the willful and continued failure by Participant substantially
to perform his or her duties and obligations to the Company (other than any
such failure resulting from his or her incapacity due to physical or mental
illness), (ii) Participant’s conviction or plea bargain of any felony or
gross misdemeanor

 

 

 

 involving moral turpitude, fraud or
misappropriation of funds, (iii) unauthorized use or disclosure by Participant
of any proprietary information or trade secrets of the Company or any other
party to whom the Participant owes an obligation of nondisclosure as a result
of his or her relationship with the Company, or (iv) the willful engaging
by Participant in misconduct which causes substantial injury to the Company or
its affiliates, its other employees or the employees of its affiliates or its
clients or the clients of its affiliates, whether monetarily or otherwise.  For purposes of this paragraph, no action or
failure to act on Participant’s part shall be considered “willful” unless done or omitted to be
done, by Participant in bad faith and without reasonable belief that his or her
action or omission was in the best interests of the Company.

 

(g)   “Cash Award” means a bonus opportunity
awarded under Section 6(h) pursuant to which a Participant may become entitled
to receive an amount based on the satisfaction of such performance criteria as
are specified in the agreement or other documents evidencing the Award.

 

(h)   “Change in Control” means any of the following, unless the
Committee provides otherwise:

 

(i)            the acquisition by any person,
entity or “group,” within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than
the Company or any of its Affiliates, or any employee benefit plan of the
Company or one or more of its Affiliates, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
either the then outstanding Shares or the combined voting power of the
Company’s then outstanding voting securities in a transaction or series of
transactions;

 

(ii)           individuals who constitute members of
the Board of Directors of the Company before an election (the “Continuing Directors”) cease for any
reason to constitute at least a majority thereof after an election, provided
that any person becoming a Director whose nomination for election was approved
in advance by a vote of at least three-quarters of the Continuing Directors
(other than a nomination of an individual whose initial assumption of office is
in connection with an actual or threatened solicitation with respect to the
election or removal of the Directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a
Continuing Director;

 

(iii)          the closing of a reorganization,
merger, consolidation, liquidation or dissolution of the Company or of the sale
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company;

 

2

 

(iv)          the first purchase under any tender
offer or exchange offer, other than an offer by the Company or any of its
Affiliates pursuant to which Shares are purchased; or

 

(v)           any other event specified by the
Board or a Committee, regardless of whether at the time an Award is granted or
thereafter.

 

(i)    “Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time, and any regulations promulgated
thereunder.

 

(j)    “Committee” shall mean a committee of
Directors designated by the Board to administer the Plan, which shall initially
be the Company’s compensation committee. 
If, at any time, either Rule 16b-3 or section 162(m) of the
Code applies to the Company, (a) the Committee shall to the extent
practicable consist of at least the minimum number of directors of the Company
necessary for Awards to satisfy the requirements of Rule 16b-3 and
section 162(m) of the Code and (b) each director of the Company
appointed to the Committee shall to the extent practicable be a “non-employee
director” (within the meaning of Rule 16b-3) and an “outside director”
(within the meaning of section 162(m) of the Code).  In addition, at such time as the Company is
subject to Nasdaq or other stock exchange listing requirements, the Committee
shall to the extent practicable be constituted in a manner that complies with
all such Nasdaq or other stock exchange listing requirements.  The Committee may from time to time delegate
certain of its powers to a subcommittee or other persons permitted under
Applicable Law and the Company’s charter documents to take such actions so
delegated.

 

(k)   “Company” shall mean Obagi Medical
Products, Inc., a Delaware corporation, and any successor corporation.

 

(l)    “Director” shall mean a member of the
Board, including any Non-Employee Director.

 

(m)  “Dividend Equivalent” shall mean any right
granted under Section 6(e) of the Plan.

 

(n)   “Eligible Person” shall mean any employee,
officer, consultant, independent contractor or director providing services to
the Company or any Affiliate who the Committee determines to be an Eligible
Person.

 

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

 

(p)   “Fair Market Value” shall mean, with
respect to any property (including, without limitation, any Shares or other
securities), the fair market value of such property determined by such methods
or procedures as shall be established from time to time by the Committee.  Notwithstanding the foregoing and unless
otherwise determined by the Committee, the Fair

 

3

 

Market Value of a
Share as of a given date shall be, if the Shares are then listed on the New
York Stock Exchange or Nasdaq, the closing sales price of one Share as reported
on the New York Stock Exchange or Nasdaq, as the case may be, on such date or,
if the New York Stock Exchange or Nasdaq is not open for trading on such date,
on the most recent preceding date when it is open for trading.

 

(q)   “Incentive Stock Option” shall mean an
option granted under Section 6(a) of the Plan that is intended to qualify
as an “incentive stock option” in accordance with the terms of Section 422
of the Code or any successor provision.

 

(r)    “Nasdaq” means the Nasdaq Global Market,
the Nasdaq Global Select Market, the Nasdaq Capital Market or any successor or
affiliate.

 

(s)   “Non-Employee Director” shall mean any
Director who is not also an employee of the Company or an Affiliate within the
meaning of Rule 16b-3 and an “outside director” within the meaning of
Section 162(m) of the Code.

 

(t)    “Non-Qualified Stock Option” shall mean an
option granted under Section 6(a) of the Plan that is not an Incentive
Stock Option.

 

(u)   “Option” shall mean an Incentive Stock
Option or a Non-Qualified Stock Option.

 

(v)   “Other Stock Grant” shall mean any right
granted under Section 6(f) of the Plan.

 

(w)  “Other Stock-Based Award” shall mean any
right granted under Section 6(g) of the Plan.

 

(x)    “Participant” shall mean an Eligible Person
designated to be granted an Award under the Plan.

 

(y)   “Performance Award” shall mean any right
granted under Section 6(d) of the Plan.

 

(z)    “Person” shall mean any individual or
entity, including a corporation, partnership, limited liability company,
association, joint venture or trust.

 

(aa) “Plan” shall mean the Obagi Medical
Products, Inc. 2005 Stock Incentive Plan, as amended from time to time, the
provisions of which are set forth herein.

 

(bb) “Qualifying Performance Criteria” shall
have the meaning set forth in Section 6(i)(viii)(B) of the Plan.

 

(cc) “Restricted Stock” shall mean any Share
granted under Section 6(c) of the Plan.

 

4

 

(dd) “Restricted Stock Unit” shall mean any unit
granted under Section 6(c) of the Plan evidencing the right to receive a
Share (or a cash payment equal to the Fair Market Value of a Share) at some
future date.

 

(ee) “Rule 16b-3” shall mean
Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor rule or regulation.

 

(ff)   “Securities Act” shall mean the Securities
Act of 1933, as amended.

 

(gg) “Share” or “Shares” shall mean a share or shares of common stock, $0.001
par value per share, of the Company or such other securities or property as may
become subject to Awards pursuant to an adjustment made under Section 4(c)
of the Plan.

 

(hh) “Stock Appreciation Right” shall mean any
right granted under Section 6(b) of the Plan.

 

(ii)   “Subsidiary” means any company (other than
the Company) in an unbroken chain of companies beginning with the Company,
provided each company in the unbroken chain (other than the Company) owns, at
the time of determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other companies in such
chain.

 

(jj)     “Termination
of Employment” shall
mean ceasing to be an Eligible Person, as determined in the sole discretion of
the Committee.  However, for Incentive
Stock Option purposes, Termination of Employment will occur when the
Participant ceases to be an employee (as determined in accordance with Section 3401(c)
of the Code and the regulations promulgated thereunder) of the Company or one
of its Subsidiaries. The Committee shall determine whether any corporate
transaction, such as a sale or spin-off of a division or business unit, or a
joint venture, shall be deemed to result in a Termination of Employment.

 

(kk) “Total and Permanent Disability” shall have the meaning set forth in
Section 22(e)(3) of the Code.

 

Section 3.      Administration

 

(a)           Power
and Authority of the Committee.  The
Plan shall be administered by the Committee or the Board and/or their
delegates.  Subject to the express
provisions of the Plan and to Applicable Law, the Committee shall have full
power and authority to: 
(i) designate Participants; (ii) determine the type or types
of Awards to be granted to each Participant under the Plan;
(iii) determine the number of Shares or amount of cash to be covered by
(or the method by which payments or other rights are to be determined in
connection with) each Award; (iv) determine the terms and conditions of
any Award or Award Agreement; (v) amend the terms and conditions of any
Award or Award Agreement and accelerate the vesting and/or exercisability of
any Option or waive any restrictions relating to any Award; (vi) determine

 

5

 

whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended;
(vii) determine whether, to what extent and under what circumstances cash,
Shares, other securities, other Awards, other property and other amounts
payable with respect to an Award under the Plan shall be deferred either
automatically or at the election of the holder thereof or the Committee (provided, however,
that the par value of any Shares and Restricted Stock shall be paid in the form
of cash, services rendered, personal property, real property, any other form of
consideration permitted by Applicable Law, or a combination thereof prior to
their issuance); (viii) interpret and administer the Plan and any
instrument or agreement, including an Award Agreement, relating to the Plan;
(ix) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; (x) adopt rules and procedures relating to the operation
and administration of the Plan to accommodate the specific requirements of
local laws and procedures, including but not limited to, the Committee is
specifically authorized (A) to adopt rules and procedures regarding the
conversion of local currency, withholding procedures and handling of stock
certificates which vary with local requirements and (B) to adopt sub-plans
and Plan addenda as the Committee deems desirable, to accommodate foreign laws,
regulations and practice and (xi) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan.  Unless
otherwise expressly provided in the Plan, all designations, determinations, interpretations
and other decisions under or with respect to the Plan or any Award shall be
within the sole discretion of the Committee (or the Board if it chooses to
act), may be made at any time and shall be final, conclusive and binding upon
any Eligible Person and any holder or beneficiary of any Award.

 

(b)           Power
and Authority of the Board. 
Notwithstanding anything to the contrary contained herein, the Board
may, at any time and from time to time, without any further action of the
Committee, exercise the powers and duties of the Committee under the Plan.

 

(c)           Other
Administration.  The Board or the
Committee may delegate to an authorized officer or officers of the Company the
power to approve Awards to persons eligible to receive Awards under the Plan who
are not (i) subject to Section 16 of the Exchange Act or (ii) at
the time of such approval, “covered employees” under Section 162(m) of the
Code or (iii) any other executive officer. In addition, except to the
extent prohibited by Applicable Law, the Board or Committee may delegate to one
or more individuals the day-to-day administration of the Plan and any of the
functions assigned to it under the Plan. 
Such delegation may be revoked at any time.

 

Section 4.      Shares Available for Awards

 

(a)           Shares
Available.  Subject to adjustment as
provided in Section 4(c) of the Plan, the aggregate number of Shares that may
be issued under the Plan shall be 1,500,000.  The maximum number of Shares that may be
issued under the Plan shall be cumulatively increased on January 1, 2007 and on
each January 1 thereafter for nine years by the least of

 

6

 

(i) 500,000 Shares, (ii) 3% of the Company’s outstanding Common Stock as of the
preceding December 31 and (iii) a number of Shares determined by the Board
or Committee.  Shares to be issued under
the Plan may be either authorized but unissued Shares or Shares re-acquired and
held in treasury.  Any Shares (including
Shares underlying the affected Award) that are used by a Participant as full or
partial payment to the Company of the purchase price relating to an Award, or
in connection with the satisfaction of tax obligations relating to an Award,
shall again be available for granting Awards (other than Incentive Stock
Options) under the Plan.  In addition, if
any Shares covered by an Award or to which an Award relates are not purchased
or are forfeited, or if an Award otherwise terminates without delivery of any
Shares, then the number of Shares counted against the aggregate number of
Shares available under the Plan with respect to such Award, to the extent of
any such forfeiture or termination, shall again be available for granting
Awards under the Plan.  Notwithstanding
the foregoing, the number of Shares available for granting Incentive Stock
Options under the Plan shall not exceed 1,000,000,
subject to adjustment as provided in Section 4(c) of the Plan and subject to
the provisions of Section 422 or 424 of the Code or any successor provision.

 

(b)           Adjustments.  In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company or other similar corporate transaction or event affects the Shares,
then the Committee shall, in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan, in
such manner as it may deem equitable, proportionately adjust any or all of
(i) the number and type of Shares (or other securities or other property)
that thereafter may be made the subject of Awards (including with respect to
the Share limit specified in Section 4(d)), (ii) the number and type of
Shares (or other securities or other property) subject to outstanding Awards
and (iii) the purchase price, exercise price or repurchase price with
respect to any Award; provided, however, that the number of Shares covered by any Award or
to which such Award relates shall always be a whole number.  The adjustments determined by the Committee
shall be final, binding and conclusive. 
In no event shall any such adjustments be made in connection with the
conversion of one or more outstanding shares of the Company’s preferred stock
into shares of common stock.

 

(c)           Award
Limitations Under the Plan.  At such
time as Section 162(m) of the Code shall become applicable, no Eligible Person
may be granted any Award or Awards under the Plan for more than 1,000,000 Shares (subject to
adjustment as provided for in Section 4(c) of the Plan to the extent that
such adjustment will not affect the status of any Award intended to qualify as
“performance-based compensation” under Section 162(m) of the Code), in the
aggregate in any taxable year.  The
foregoing annual limitation specifically includes the grant of any Award or
Awards representing “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code.

 

7

 

(d)           Share
Reserve.  Notwithstanding any other
provision of this Plan to the contrary, to the extent required by Applicable
Law, the aggregate number of Shares available for Options and the aggregate
number of securities of the Company called for under any bonus or similar
award, plan or agreement may not exceed a number of securities that is equal to
thirty percent (30%) of the outstanding securities of the Company, unless a
higher percentage is approved by at least two-thirds (2/3) of the outstanding
securities of the Company entitled to vote.

 

Section 5.      Eligibility

 

Any Eligible Person shall be eligible to be designated
a Participant.  In determining which Eligible
Persons shall receive an Award and the terms of any Award, the Committee may
take into account the nature of the services rendered by the respective
Eligible Persons, their present and potential contributions to the success of
the Company or such other factors as the Committee, in its discretion, shall
deem relevant.  Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full-time or
part-time employees (which term as used herein includes, without limitation,
officers and directors who are also employees), and an Incentive Stock Option
shall not be granted to an employee of an Affiliate unless such Affiliate is
also a Subsidiary.

 

Section 6.              Awards

 

(a)           Options.  The Committee is hereby authorized to grant
Options to Eligible Persons with the following terms and conditions and with
such additional terms and conditions not inconsistent with the provisions of
the Plan as the Committee shall determine:

 

(i)            Exercise Price.  The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided,
however, that such purchase price shall
not be less than 100% of the Fair Market Value of a Share on the date of grant
of such Option.

 

(ii)           Option Term.  The term of each Option shall be fixed by the
Committee at the time of grant, but may not be more than 10 years from the
date of grant (unless a longer term is required by the laws of a jurisdiction
other than the U.S.).

 

(iii)          Time and
Method of Exercise.  The Committee
shall determine the time or times at which an Option may be exercised in whole
or in part and the method or methods by which, and the form or forms in which,
payment of the exercise price with respect thereto may be made or deemed to
have been made, including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the applicable exercise price
including through any cashless exercise or same-day-sale program authorized by
the Company or any other form of consideration and method of payment permitted
by the

 

8

 

Committee and Applicable
Law.  An Option shall be deemed exercised
when the Company receives (A) written or electronic notice of exercise (in
accordance with the Award Agreement) from the person entitled to exercise the
Option; (B) full payment for the Shares with respect to which the related
Option is exercised; and (C) payment of all applicable withholding taxes.

 

(iv)          Incentive Stock Options.  Incentive Stock Options may be granted only
to employees of the Company or a Subsidiary of the Company.  Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant of Options
which are intended to qualify as Incentive Stock Options; provided, however, that in the event the
Plan fails to be approved by the stockholders of the Company within one year of
its adoption by the Board as required in Section 10, such Incentive Stock
Options shall be deemed to be Non-Qualified Stock Options issued under the
Plan:

 

(A)  The Committee will not grant Incentive Stock
Options in which the aggregate Fair Market Value (determined as of the time the
option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by any Participant during any calendar year
(under this Plan and all other plans of the Company and its Affiliates) shall
exceed $100,000.

 

(B)   All Incentive Stock Options must be granted
within ten years from the earlier of the date on which this Plan was adopted by
the Board or the date this Plan was approved by the stockholders of the
Company.

 

(C)   Unless sooner exercised, all Incentive Stock
Options shall expire and no longer be exercisable no later than 10 years after
the date of grant; provided, however, that in the case of a grant of an Incentive Stock
Option to a Participant who, at the time such Option is granted, owns (within
the meaning of Section 422 of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of
its Affiliate, such Incentive Stock Option shall expire and no longer be
exercisable no later than 5 years from the date of grant.

 

(D)  The purchase price per Share for an Incentive
Stock Option shall be not less than 100% of the Fair Market Value of a Share on
the date of grant of the Incentive Stock Option; provided,
however, that, in the case of the grant
of an Incentive Stock Option to a Participant who, at the time such Option is
granted, owns (within the meaning of Section 422 of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its Affiliate, the purchase price per Share
purchasable under an Incentive Stock Option shall be not less than 110% of the
Fair Market Value of a Share on the date of grant of the Inventive Stock
Option.

 

9

 

(E)   Any Incentive Stock Option authorized under
the Plan shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain all
provisions required in order to qualify the Option as an Incentive Stock
Option.

 

(v)           Effect of Termination of
Employment on Options.

 

(A)  Generally.  Unless otherwise provided for by the
Committee or set forth in an Award Agreement or as required by Applicable Law,
upon a Participant’s Termination of Employment other than as a result of
circumstances described in Sections 6(a)(v)(B), 6(a)(v)(C) and 6(a)(v)(D)
below, Participant shall have three months to exercise any outstanding Option
granted to such Participant as to Shares subject to the Option that were vested
and exercisable as of the date of Participant’s Termination of Employment, but
in no event may the Option be exercised after the expiration date of the
Option.  If the Participant does not
exercise such Option within the time specified for exercise, the Option (to the
extent not exercised) shall automatically terminate.

 

(B)   Disability of Participant.  Unless otherwise provided for by the
Committee or set forth in an Award Agreement, upon a Participant’s Termination
of Employment as a result of the Participant’s disability in accordance with
the Company’s or its Subsidiaries’ policies, all outstanding Options granted to
such Participant that were vested and exercisable as of the date of the
Participant’s Termination of Employment may be exercised by the Participant
until one (1) year following Participant’s Termination of Employment as a
result of Participant’s disability, including Total and Permanent Disability;
provided, however, that in no event shall an Option be exercisable after the
expiration date of such Option.  If the
Participant does not exercise such Option within the time specified, the Option
(to the extent not exercised) shall automatically terminate.

 

(C)   Death of Participant.  Unless otherwise provided for by the
Committee or set forth in an Award Agreement, upon a Participant’s Termination
of Employment as a result of the Participant’s death, all outstanding Options
granted to such Participant that were vested and exercisable as of the date of
the Participant’s death may be exercised until the earlier of (A) one
(1) year following the Participant’s death or (B) the expiration of
the term of such Option.  If an Option is
held by the Participant when he or she dies, the Option may be exercised, to
the extent the Option is vested and exercisable, by the beneficiary designated
by the Participant (as provided in Section 6(h)(4) of the Plan), the executor or administrator of the
Participant’s estate or, if none, by the person(s) entitled to exercise the
Option under the Participant’s will or the laws of descent or
distribution.  If the Option is not so
exercised within the time specified, such Option (to the extent not exercised)
shall automatically terminate.

 

10

 

(D)  Termination
for Cause.  In the event of Participant’s Termination of
Employment for Cause, any Option (including any exercisable portion thereof)
held by such Participant shall immediately terminate in its entirety upon first
notification to the Participant of Participant’s Termination of
Employment.  If a Participant’s employment
or consulting relationship with the Company is suspended pending an
investigation of whether the Participant shall be terminated for Cause, all the
Participant’s rights under any Option likewise shall be suspended during the
investigation period and the Participant shall have no right to exercise any
Option.

 

(E)   Other Terminations of Employment.  Unless so determined by the Committee,
“Termination of Employment” shall not include a change in status from an
employee, consultant or Director to another such status.  The Committee may provide in the applicable
Award Agreement for different treatment of Options upon Termination of
Employment of the Participant than that specified above.

 

(F)   Leave of Absence.  The Committee shall have the discretion to
determine whether and to what extent the vesting of Options shall be tolled
during any unpaid leave of absence; provided, however, that in the absence of
such determination, vesting of Options shall be tolled during any leave that is
not a leave required to be provided to the Participant under Applicable
Law.  In the event of military leave,
vesting shall toll during any unpaid portion of such leave, provided that, upon
a Participant’s returning from military leave (under conditions that would
entitle him or her to protection upon such return under the Uniform Services
Employment and Reemployment Rights Act), he or she shall be given vesting
credit with respect to Options to the same extent as would have applied had the
Participant continued to provide services to the Company throughout the leave
on the same terms as he or she was providing services immediately prior to such
leave.

 

(b)           Stock
Appreciation Rights.  The Committee
is hereby authorized to grant Stock Appreciation Rights to Eligible Persons
subject to the terms of the Plan.  Each
Stock Appreciation Right granted under the Plan shall confer on the holder upon
exercise the right to receive, as determined by the Committee, cash or a number
of Shares equal to the excess of (i) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over
(ii) the grant price of the Stock Appreciation Right as determined by the
Committee, which grant price shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right.  Subject to the terms of the Plan, the grant
price, term, methods of exercise, dates of exercise, methods of settlement and
any other terms and conditions (including conditions or restrictions on the
exercise thereof) of any Stock Appreciation Right shall be as determined by the
Committee.

 

11

 

(c)           Restricted
Stock and Restricted Stock Units. 
The Committee is hereby authorized to grant Restricted Stock and
Restricted Stock Units to Eligible Persons with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:

 

(i)            Restrictions.  Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a restriction on or prohibition against the
right to receive any dividend or other right or property with respect thereto),
which restrictions may lapse separately or in combination at such time or
times, in such installments or otherwise as the Committee may deem appropriate.

 

(ii)           Stock Certificates.  Any Restricted Stock granted under the Plan
shall be evidenced by the issuance of a stock certificate or certificates,
which shall be held by the Company.  Such
certificate or certificates shall be registered in the name of the Participant
and shall bear an appropriate legend referring to the applicable Award
Agreement and possible forfeiture of such shares of Restricted Stock.

 

(iii)          Forfeiture.  Except as otherwise determined by the
Committee, upon a Participant’s Termination of Employment during the applicable
restriction period, all applicable Shares of Restricted Stock and Restricted
Stock Units at such time subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part any or
all remaining restrictions with respect to Shares of Restricted Stock or
Restricted Stock Units.

 

(iv)          Purchase Price.  Restricted Stock and Restricted Stock Units
may be issued with or without a purchase price.

 

(d)           Performance
Awards.  The Committee is hereby
authorized to grant Performance Awards to Eligible Persons subject to the terms
of the Plan.  A Performance Award granted
under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock and Restricted Stock Units),
other securities, other Awards or other property and (ii) shall confer on
the holder thereof the right to receive payments, in whole or in part, upon the
achievement of such performance goals during such performance periods as the
Committee shall establish.  Subject to
the terms of the Plan, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award, the purchase price of the Performance Award,
if any, and the means of payment for the Performance Award and any other terms
and conditions of any Performance Award shall be determined by the Committee.

 

12

 

(e)           Dividend
Equivalents.  The Committee is hereby
authorized to grant Dividend Equivalents to Eligible Persons under which the
Participant shall be entitled to receive payments (in cash, Shares, other securities,
other Awards or other property as determined in the discretion of the
Committee) equivalent to the amount of cash dividends paid by the Company to
holders of Shares with respect to a number of Shares determined by the
Committee.  Subject to the terms of the
Plan, such Dividend Equivalents may have such terms and conditions as the
Committee shall determine.

 

(f)            Other
Stock Grants.  The Committee is
hereby authorized, subject to the terms of the Plan, to grant to Eligible
Persons Shares without restrictions thereon as are deemed by the Committee to
be consistent with the purpose of the Plan.

 

(g)           Other
Stock-Based Awards.  The Committee is
hereby authorized to grant to Eligible Persons, subject to the terms of the
Plan, such other Awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan.  Shares or other securities delivered pursuant
to a purchase right granted under this Section 6(g) shall be purchased for
such consideration, which may be paid by such method or methods and in such
form or forms (including, without limitation, cash, Shares, other securities,
other Awards or other property or any combination thereof), as the Committee
shall determine, the value of which consideration, as established by the
Committee, shall not be less than 100% of the Fair Market Value of such Shares
or other securities as of the date such purchase right is granted.

 

(h)           Cash
Awards.  Each Cash Award will confer
upon the Participant the opportunity to earn a future payment tied to the level
of achievement with respect to one or more performance criteria established for
a performance period of not less than one (1) year.

 

(i)            Cash Award.  Each Cash Award shall contain provisions
regarding (i) the target and maximum amount payable to the Participant as
a Cash Award, (ii) the performance criteria and level of achievement
versus these criteria which shall determine the amount of such payment,
(iii) the period as to which performance shall be measured for
establishing the amount of any payment, (iv) the timing of any payment
earned by virtue of performance, (v) restrictions on the alienation or
transfer of the Cash Award prior to actual payment, (vi) forfeiture
provisions, and (vii) such further terms and conditions, in each case not
inconsistent with the Plan, as may be determined from time to time by the Committee.  The maximum amount payable as a Cash Award
may be a multiple of the target amount payable, but the maximum amount payable
pursuant to that portion of a Cash Award granted under this Plan for any fiscal
year to any Participant that is intended to satisfy the requirements for
“performance based compensation” under Section 162(m) of the Code shall
not exceed $              .

 

13

 

(ii)           Performance Criteria.  The Committee shall establish the performance
criteria and level of achievement versus these criteria which shall determine
the target and the minimum and maximum amount payable under a Cash Award, which
criteria may be based on financial performance and/or personal performance
evaluations.  The Committee may specify
the percentage of the target Cash Award that is intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of
the Code.  Notwithstanding anything to
the contrary herein, the performance criteria for any portion of a Cash Award
that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall be a measure
established by the Committee based on one or more Qualifying Performance
Criteria selected by the Committee and specified in writing not later than
90 days after the commencement of the period of service to which the
performance goals relates, provided that the outcome is substantially uncertain
at that time.

 

(iii)          Timing and Form of Payment.  The Committee shall determine the timing of
payment of any Cash Award.  The Committee
may provide for or, subject to such terms and conditions as the Committee may
specify, may permit a Participant to elect for the payment of any Cash Award to
be deferred to a specified date or event. 
The Committee may specify the form of payment of Cash Awards, which may
be cash or other property, or may provide for a Participant to have the option
for his or her Cash Award, or such portion thereof as the Committee may
specify, to be paid in whole or in part in cash or other property.

 

(i)            General.

 

(i)            Consideration for Awards.  Awards may be granted for no cash
consideration or for any cash or other consideration as determined by the
Committee and required by Applicable Law.

 

(ii)           Awards May Be Granted Separately
or Together.  Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted under
any plan of the Company or any Affiliate. 
Awards granted in addition to or in tandem with other Awards or in
addition to or in tandem with awards granted under any such other plan of the
Company or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.

 

(iii)          Forms of Payment under Awards.  Subject to the terms of the Plan, payments or
transfers to be made by the Company or an Affiliate upon the grant, exercise or
payment of an Award may be made in such form or forms as the Committee shall
determine (including, without limitation, cash, Shares, other securities, other
Awards or other property or any combination thereof), in each case in
accordance with rules and procedures established by the Committee.

 

14

 

(iv)          Limits on Transfer of Awards.  No Award (other than Other Stock Grants) and
no right under any such Award shall be transferable by a Participant otherwise
than by will or by the laws of descent and distribution and the Company shall
not be required to recognize any attempted assignment of such rights by any
Participant; provided, however,
that, if so determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or beneficiaries to
exercise the rights of the Participant and receive any property distributable
with respect to any Award upon the death of the Participant; provided, further, that,
if so determined by the Committee, a Participant may transfer a Non-Qualified
Stock Option to any Family Member (as such term is defined in the General
Instructions to Form S-8 (or successor to such Instructions or such Form)) at
any time that such Participant holds such Option, provided that the Participant may not receive any consideration
for such transfer, the Family Member may not make any subsequent transfers
other than by will or by the laws of descent and distribution and the Company
receives written notice of such transfer, provided, further, that, if so determined by the Committee and except
in the case of an Incentive Stock Option, Awards may be transferable as
determined by the Committee.  Except as
otherwise determined by the Committee, each Award or right under any such Award
shall be exercisable during the Participant’s lifetime only by the Participant
or, if permissible under Applicable Law, by the Participant’s guardian or legal
representative.  Except as otherwise
determined by the Committee, no Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or other encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

 

(v)           Term of Awards.  Subject to Section 6(a)(iv)(C), the term of
each Award shall be for such period as may be determined by the Committee.

 

(vi)          Restrictions; Securities Exchange
Listing.  All Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan, applicable federal or state
securities laws and regulatory requirements, and the Committee may direct
appropriate stop transfer orders and cause other legends to be placed on the certificates
for such Shares or other securities to reflect such restrictions.  If the Shares or other securities are traded
on a securities exchange, the Company shall not be required to deliver any
Shares or other securities covered by an Award unless and until such Shares or
other securities have been admitted for trading on such securities exchange.

 

(vii)         Repurchase and First Refusal Rights.  Shares issued pursuant to this Plan may be
subject to repurchase rights or a right of first refusal with respect to any
proposed disposition of such shares as shall be determined by the Committee,
and such rights shall be exercisable and shall lapse in accordance with the
terms established by the Committee and set forth in the document evidencing
such rights.

 

15

 

(viii)        Restrictions and Performance Criteria.

 

(A)  Generally.  The grant, issuance, retention, vesting
and/or settlement of each Award or the Shares subject to the Award may be
subject to such performance criteria (including Qualifying Performance
Criteria) and level of achievement versus these criteria as the Committee shall
determine, which criteria may be based on financial performance, personal
performance evaluations and/or completion of service by the Participant.
Notwithstanding anything to the contrary herein, the performance criteria for
any Award that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall be established by the
Committee based on one or more Qualifying Performance Criteria selected by the
Committee and specified in writing not later than the earlier of (a) ninety
(90) days after the commencement of the period of service to which the
performance goals relates and (b) the date on which 25% of the performance
period has elapsed, provided that the outcome is substantially uncertain at
that time.

 

(B)   Qualifying Performance Criteria.  For purposes of this Plan, the term “Qualifying Performance Criteria” shall
mean any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the
Company as a whole or to a business unit, Affiliate or business segment, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated
comparison group, in each case as specified by the Committee in the Award:
(i) cash flow; (ii) earnings (including gross margin, earnings before
interest and taxes, earnings before taxes, and net earnings);
(iii) earnings per share; (iv) growth in earnings or earnings per
share; (v) stock price; (vi) return on equity or average
stockholders’ equity; (vii) total stockholder return; (viii) return
on capital; (ix) return on assets or net assets; (x) return on
investment; (xi) revenue; (xii) income or net income;
(xiii) operating income or net operating income; (xiv) operating
profit or net operating profit; (xv) operating margin; (xvi) return
on operating revenue; (xvii) market share; (xviii) contract awards or
backlog; (xix) overhead or other expense reduction; (xx) growth in
stockholder value relative to the moving average of the S&P 500 Index or a
peer group index; (xxi) credit rating; (xxii) strategic plan
development and implementation (including individual performance objectives
that relate to achievement of the Company’s or any business unit’s strategic
plan); (xxiii) improvement in workforce diversity, and (xxiv) any
other similar criteria. The Committee may appropriately adjust any evaluation
of performance under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period: (A) asset write-downs;
(B) litigation or claim judgments or settlements; (C) the effect of
changes in tax law, accounting principles or other

 

16

 

such laws or provisions
affecting reported results; (D) accruals for reorganization and
restructuring programs; and (E) any gains or losses classified as
extraordinary or as discontinued operations in the Company’s financial
statements.

 

(C)   Certification.  Prior to the payment of any compensation under
an Award intended to qualify as “performance-based compensation” under
Section 162(m) of the Code, the Committee shall certify the extent to
which any Qualifying Performance Criteria and any other material terms under
such Award have been satisfied (other than in cases where such relate solely to
the increase in the value of the Common Stock).

 

(D)  Discretionary Adjustments Pursuant to
Section 162(m). Notwithstanding satisfaction of any completion of any
Qualifying Performance Criteria, to the extent specified at the time of grant
of an Award to “covered employees” within the meaning of Section 162(m) of
the Code, the number of Shares, Options or other benefits granted, issued,
retainable and/or vested under an Award on account of satisfaction of such
Qualifying Performance Criteria may be reduced by the Committee on the basis of
such further considerations as the Committee in its sole discretion shall
determine.

 

(ix)           Change in Control.  In the event there is a Change in Control of
the Company, as determined by the Board or a Committee, the Board or Committee
may, in its discretion, (i) provide for the assumption or substitution of,
or adjustment to, each outstanding Award; (ii) accelerate the vesting of
Options and terminate any restrictions on Stock Awards or Cash Awards; and/or
(iii) provide for termination of Awards as a result of the Change of Control on
such terms and conditions as it deems appropriate, including provide for the
cancellation of Awards for a cash payment to the Participant.  For purposes of this Section 6(i)(ix), an
Award shall be considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Change in Control, as the
case may be, each holder of an Award would be entitled to receive upon exercise
of the Award the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately
prior to such transaction, the holder of the number of Shares covered by the
Award at such time (after giving effect to any adjustments in the number of
Shares covered by the Award as provided for in Section 4(c)); provided that if
such consideration received in the transaction is not solely common stock of
the successor corporation, the Committee may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
Award to be solely common stock of the successor corporation equal to the Fair
Market Value of the per Share consideration received by holders of Common Stock
in the transaction.

 

17

 

(x)            Compliance with Section 409A.  Notwithstanding anything to the contrary
contained herein, to the extent that the Committee determines that any Award
granted under the Plan is subject to Code Section 409A and unless otherwise
specified in the applicable Award Agreement, the Award Agreement evidencing
such Award shall incorporate the terms and conditions necessary for such Award
to avoid the consequences described in Code Section 409A(a)(1), and to the
maximum extent permitted under Applicable Law (and unless otherwise stated in
the applicable Award Agreement), the Plan and the Award Agreements shall be
interpreted in a manner that results in their conforming to the requirements of
Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal
Revenue Service regulations or other interpretive guidance issued under Section
409A (whenever issued, the “Guidance”). 
Notwithstanding anything to the contrary in this Plan (and unless the
Award Agreement provides otherwise, with specific reference to this sentence),
to the extent that a Participant holding an Award that constitutes “deferred
compensation” under Section 409A and the Guidance is a “specified employee”
(also as defined thereunder), no distribution or payment of any amount shall be
made before a date that is six months following the date of such Participant’s
“separation from service” (as defined in Section 409A and the Guidance) or, if
earlier, the date of the Participant’s death.

 

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

 

18

 

Section 7.      California Provisions.

 

To the extent required by Applicable Laws,
the following provisions shall apply to any Option granted to an individual who
is eligible to receive such award under the Plan and who resides in the State
of California.

 

(a)           Option
Grant Program.  The exercise price
per share shall be fixed by the Plan Committee in accordance with the following
provisions:

 

(i)            The exercise price
per share applicable to each Option shall not be less than 100% of the Fair
Market Value per share of common stock on the date the Option is granted; provided, however, that if the person to
whom the Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than 110% of the Fair Market Value per share of common
stock on the date the option is granted. 
The term of an Option shall not exceed 10 years from the date of
grant.  The Participant shall be given a
period of time in which to exercise vested Option shares following termination
of his or her employment that shall at least equal the minimum periods set forth
in Reg. Sec. 260.140.41(g) of the California Securities Regulations.

 

(ii)           The Committee may
not impose a vesting schedule upon any Option grant or the shares of common
stock subject to that Option which is more restrictive than 20% per year
vesting, with the initial vesting to occur not later than one year after the
option grant date.  However, such
limitation shall not be applicable to any option grants made to individuals who
are officers of the Company, non-employee Board members or independent contractors.

 

(b)           Financial
Information.  The Company shall
deliver a balance sheet and an income statement at least annually to each
individual holding an outstanding Option or Stock Award, unless such individual
is a key Employee whose duties in connection with the Company (or any Parent or
Subsidiary) assure such individual access to equivalent information.

 

Section 8.      Amendment and Termination; Adjustments

 

(a)           Amendments
to the Plan.  The Board may
amend, alter or discontinue the Plan or any Award Agreement, but any such
amendment shall be subject to approval of the stockholders of the Company in
the manner and to the extent required by Applicable Law.  In addition, without limiting the foregoing,
unless approved by the stockholders of the Company, no such amendment shall be
made that would:

 

(i)            require stockholder approval in
order to not violate the rules or regulations of Nasdaq or any other securities
exchange that are applicable to the Company;

 

19

 

(ii)           increase the maximum number of Shares
for which Awards may be granted under the Plan, other than an increase pursuant
to Section 4(c) of the Plan;

 

(iii)          expand the class of persons eligible
to receive Awards under the Plan; or

 

(iv)          result in a repricing of Options by
(x) reducing the exercise price of outstanding Options, or (y) canceling
an outstanding Option held by a Participant and re-granting to the Participant
a new Option with a lower exercise price, in either case other than in
connection with a change in the Company’s capitalization pursuant to Section
4(c) of the Plan.

 

(b)           Amendments
to Awards.  The Committee may waive
any conditions of or rights of the Company under any outstanding Award,
prospectively or retroactively.  Except
as otherwise provided herein or in an Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, if such action would adversely affect the
rights of the holder of such Award, without the consent of the Participant or
holder or beneficiary thereof.

 

(c)           Correction
of Defects, Omissions and Inconsistencies. 
The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.

 

Section 9.      Income Tax Withholding

 

In order to comply with all applicable federal, state,
local or foreign income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal, state,
local or foreign payroll, withholding, income or other taxes, which are the
sole and absolute responsibility of a Participant, are withheld or collected
from such Participant.  In order to
assist a Participant in paying all or a portion of the federal, state, local
and foreign taxes to be withheld or collected upon exercise or receipt of (or
the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing
to have the Company withhold a portion of the Shares otherwise to be delivered
upon exercise or receipt of (or the lapse of restrictions relating to) such
Award with a Fair Market Value equal to the amount of such taxes (but only to
the extent of the minimum amount required to be withheld under Applicable Laws
or regulations) or (ii) delivering to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to)
such Award with a Fair Market Value equal to the amount of such taxes (but only
to the extent of the minimum amount required to be withheld under Applicable
Laws or regulations).  The election, if
any, must be made on or before the date that the amount of tax to be withheld
is determined.

 

20

 

Section 10.    General Provisions

 

(a)           No
Rights to Awards.  No Eligible Person
or other Person shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Eligible Persons or
holders or beneficiaries of Awards under the Plan.  The terms and conditions of Awards need not
be the same with respect to any Participant or with respect to different Participants.

 

(b)           Award
Agreements.  No Participant will have
rights under an Award granted to such Participant unless and until an Award
Agreement shall have been duly executed on behalf of the Company and, if
requested by the Company, signed by the Participant.

 

(c)           Plan
Provisions Control.  In the event
that any provision of an Award Agreement conflicts with or is inconsistent in
any respect with the terms of the Plan as set forth herein or subsequently
amended, the terms of the Plan shall control.

 

(d)           No
Rights of Stockholders.  Except with
respect to Shares of Restricted Stock as to which the Participant has been
granted the right to vote, neither a Participant nor the Participant’s legal
representative shall be, or have any of the rights and privileges of, a
stockholder of the Company with respect to any Shares issuable to such
Participant upon the exercise or payment of any Award, in whole or in part,
unless and until such Shares have been issued in the name of such Participant
or such Participant’s legal representative without restrictions thereto.

 

(e)           No
Limit on Other Compensation Arrangements. 
Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.

 

(f)            No
Right to Employment.  The grant of an
Award shall not be construed as giving a Participant the right to be retained
in the employ, or as giving a director of the Company or an Affiliate the right
to continue as a director or an Affiliate of the Company or any Affiliate, nor
will it affect in any way the right of the Company or an Affiliate to terminate
such employment at any time, with or without cause.  In addition, the Company or an Affiliate may
at any time dismiss a Participant from employment, or terminate the term of a
director of the Company or an Affiliate, free from any liability or any claim
under the Plan or any Award, unless otherwise expressly provided in the Plan or
in any Award Agreement.  Nothing in this Plan shall confer on any person any
legal or equitable right against the Company or any Affiliate, directly or
indirectly, or give rise to any cause of action at law or in equity against the
Company or an Affiliate.  The Awards
granted hereunder shall not form any part of the wages or salary of any
Eligible Person for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment.  Under no circumstances shall any person
ceasing to be an employee of the Company or any Affiliate be entitled to any
compensation for any loss of any right or benefit under the Plan which such
employee might otherwise have enjoyed but for

 

21

 

termination of
employment, whether such compensation is claimed by way of damages for wrongful
or unfair dismissal, breach of contract or otherwise.  By participating in the Plan, each
Participant shall be deemed to have accepted all the conditions of the Plan and
the terms and conditions of any rules and regulations adopted by the Committee
and shall be fully bound thereby.

 

(g)           Governing
Law.  The validity, construction and
effect of the Plan or any Award, and any rules and regulations relating to the
Plan or any Award, shall be determined in accordance with the internal laws of
the State of Delaware, without giving effect to principals of conflicts of
laws.

 

(h)           Severability.  If any provision of the Plan or any Award is
or becomes or is deemed to be 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 to conform to Applicable Laws, or if it cannot be so construed or
deemed amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction or Award, and the remainder of the Plan or
any such Award shall remain in full force and effect.

 

(i)            Other
Benefits.  No compensation or benefit
awarded to or realized by any Participant under the Plan shall be included for
the purpose of computing such Participant’s compensation under any compensation-based
retirement, disability, or similar plan of the Company unless required by
Applicable Law or otherwise provided by such other plan.

 

(j)            No
Fractional Shares.  No fractional
Shares shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash shall be paid in lieu of any fractional
Shares or whether such fractional Shares or any rights thereto shall be
canceled, terminated or otherwise eliminated.

 

(k)           Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Plan or any
provision thereof.

 

(l)            Section 16
Compliance; Section 162(m) Administration.  The Plan is intended to comply in all
respects with Rule 16b-3 or any successor provision, as in effect from
time to time, and in all events the Plan shall be construed in accordance with
the requirements of Rule 16b-3.

 

22

 

The Board of Directors, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the
use of any provision of the Plan with respect to persons who are officers or
directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other Eligible
Persons.  With respect to Options and
Stock Appreciation Rights, the Company intends to have the Plan administered in
accordance with the requirements for the award of “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code.

 

(m)          Conditions
Precedent to Issuance of Shares. 
Shares shall not be issued pursuant to the exercise or payment of the
purchase price relating to an Award unless such exercise or payment and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of Applicable Law, including, without limitation, the
Securities Act, the Exchange Act, the rules and regulations promulgated
thereunder, the requirements of any applicable Stock Exchange and the Delaware
General Corporation Law.  As a condition
to the exercise or payment of the purchase price relating to such Award, the
Company may require that the person exercising or paying the purchase price
represent and warrant that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation and warranty is
required by law.

 

Section 11.    Effective Date of the Plan

 

The Plan shall be effective upon its adoption by the
Board, provided, however, that in the event the Plan is not
approved by the stockholders of the Company within one year thereafter, the
Plan will be terminated and all Awards granted under the Plan will be
terminated and deemed null and void, provided,
however, that with respect to any
Shares (including Shares of Restricted Stock) issued under the Plan prior to
such termination, the Plan shall be deemed to be effective.

 

Section 12.    Term of the Plan

 

No Award shall be granted under the Plan after ten years from the latest to occur of the date of adoption of the Plan by Board or
date of stockholder approval, or the date any amendment to add shares to
the Plan is approved by stockholders of the Company or any earlier date of discontinuation or termination established
pursuant to Section 7(a) of the Plan.  However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond such date, and the authority of the Committee provided for
hereunder with respect to the Plan and any Awards, and the authority of the
Board to amend the Plan, shall extend beyond the termination of the Plan.

 

23

 

Section 13.    Limitation on Liability

 

The Company and any Affiliate which is in existence or
hereafter comes into existence shall not be liable to a Participant or any
other persons as to:

 

(a)           The
Non-Issuance of Shares.  The
non-issuance or sale of Shares (including under Section 10(n) above) as to
which the Company has been unable, or the Administrator deems it not feasible,
to obtain from any regulatory body having jurisdiction the authority deemed by
the Company’s counsel to be necessary to the lawful issuance and sale of any
shares hereunder.

 

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

 

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

 

Section 14.    Unfunded Plan

 

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

 

24

 

Adopted by the
Board on November 27, 2006

 

Adopted by the
stockholders of the Company on November 28, 2006

 

25

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]