Document:

Exhibit 10.1

 

EARTHLINK, INC.

2006 EQUITY AND CASH INCENTIVE PLAN

 

 

	
  EARTHLINK,
  INC.

  	
   

  	
  2006 EQUITY AND CASH INCENTIVE PLAN

  

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.01
  Affiliate

  	
   

  	
  1

  
	
  1.02
  Agreement

  	
   

  	
  1

  
	
  1.03
  Award

  	
   

  	
  1

  
	
  1.04
  Board

  	
   

  	
  1

  
	
  1.05
  Cause

  	
   

  	
  1

  
	
  1.06
  Change in Control

  	
   

  	
  2

  
	
  1.07
  Code

  	
   

  	
  3

  
	
  1.08
  Committee

  	
   

  	
  3

  
	
  1.09
  Common Stock

  	
   

  	
  3

  
	
  1.10
  Company

  	
   

  	
  3

  
	
  1.11
  Control Change Date

  	
   

  	
  3

  
	
  1.12
  Corresponding SAR

  	
   

  	
  3

  
	
  1.13
  Deferred Compensation Program

  	
   

  	
  3

  
	
  1.14
  Deferred Stock Benefit

  	
   

  	
  4

  
	
  1.15
  Exchange Act

  	
   

  	
  4

  
	
  1.16
  Fair Market Value

  	
   

  	
  4

  
	
  1.17
  Incentive Award

  	
   

  	
  4

  
	
  1.18
  Incumbent Board

  	
   

  	
  4

  
	
  1.19
  Initial Value

  	
   

  	
  5

  
	
  1.20
  Named Executive Officer

  	
   

  	
  5

  
	
  1.21
  Option

  	
   

  	
  5

  
	
  1.22
  Participant

  	
   

  	
  5

  
	
  1.23
  Plan

  	
   

  	
  5

  
	
  1.24
  Person

  	
   

  	
  5

  
	
  1.25
  Restricted Stock Award

  	
   

  	
  6

  
	
  1.26
  Restricted Stock Unit

  	
   

  	
  6

  
	
  1.27
  SAR

  	
   

  	
  6

  
	
  1.28
  Ten Percent Shareholder

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  PURPOSES

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  ADMINISTRATION

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  ELIGIBILITY

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  COMMON STOCK SUBJECT TO PLAN

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  5.01
  Common Stock Issued

  	
   

  	
  11

  
	
  5.02
  Aggregate Limit

  	
   

  	
  11

  
	
  5.03
  Individual Limit

  	
   

  	
  11

  
	
  5.04
  Awards Settled in Cash; Reissue of Awards and Shares

  	
   

  	
  12

  
	
  5.05
  Deferred Stock Benefits.

  	
   

  	
  12

  

 

i

 

	
  ARTICLE VI
  OPTIONS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  6.01
  Grant

  	
   

  	
  13

  
	
  6.02
  Option Price

  	
   

  	
  13

  
	
  6.03
  Maximum Option Period

  	
   

  	
  13

  
	
  6.04
  Nontransferability

  	
   

  	
  13

  
	
  6.05
  Transferable Options

  	
   

  	
  13

  
	
  6.06
  Exercise

  	
   

  	
  14

  
	
  6.07
  Payment

  	
   

  	
  14

  
	
  6.08
  Employee Status

  	
   

  	
  15

  
	
  6.09
  Change in Control

  	
   

  	
  15

  
	
  6.10
  Stockholder Rights

  	
   

  	
  16

  
	
  6.11
  Disposition of Shares

  	
   

  	
  16

  
	
  6.12
  No Liability of Company

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  SARS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  
	
  7.01
  Grant

  	
   

  	
  17

  
	
  7.02
  Maximum SAR Period

  	
   

  	
  17

  
	
  7.03
  Nontransferability

  	
   

  	
  17

  
	
  7.04
  Transferable SARs

  	
   

  	
  17

  
	
  7.05
  Exercise

  	
   

  	
  18

  
	
  7.06
  Settlement

  	
   

  	
  18

  
	
  7.07
  Employee Status

  	
   

  	
  18

  
	
  7.08
  Change in Control

  	
   

  	
  18

  
	
  7.09
  Stockholder Rights

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  RESTRICTED STOCK AWARDS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  8.01
  Award

  	
   

  	
  20

  
	
  8.02
  Payment.

  	
   

  	
  20

  
	
  8.03
  Vesting

  	
   

  	
  20

  
	
  8.04
  Maximum Restriction Period

  	
   

  	
  21

  
	
  8.05
  Employee Status

  	
   

  	
  21

  
	
  8.06
  Change in Control

  	
   

  	
  21

  
	
  8.07
  Stockholder Rights

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX
  RESTRICTED STOCK UNITS

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  9.01
  Grant

  	
   

  	
  23

  
	
  9.02
  Earning the Award

  	
   

  	
  23

  
	
  9.03
  Maximum Restricted Stock Unit Award Period

  	
   

  	
  23

  
	
  9.04
  Payment

  	
   

  	
  23

  
	
  9.05
  Nontransferability

  	
   

  	
  23

  
	
  9.06
  Transferable Restricted Stock Units

  	
   

  	
  24

  
	
  9.07
  Employee Status

  	
   

  	
  24

  
	
  9.08
  Change in Control

  	
   

  	
  24

  
	
  9.09
  Stockholder Rights

  	
   

  	
  25

  

 

ii

 

	
  ARTICLE X
  INCENTIVE AWARDS

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  10.01
  Grant

  	
   

  	
  26

  
	
  10.02
  Earning the Award

  	
   

  	
  26

  
	
  10.03
  Maximum Incentive Award Period

  	
   

  	
  26

  
	
  10.04
  Payment

  	
   

  	
  26

  
	
  10.05
  Nontransferability

  	
   

  	
  26

  
	
  10.06
  Transferable Incentive Awards

  	
   

  	
  27

  
	
  10.07
  Employee Status

  	
   

  	
  27

  
	
  10.08
  Change in Control

  	
   

  	
  27

  
	
  10.09
  Stockholder Rights

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI
  QUALIFIED PERFORMANCE-BASED COMPENSATION

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  11.01
  Performance Conditions

  	
   

  	
  29

  
	
  11.02
  Establishing the Amount of the Award

  	
   

  	
  29

  
	
  11.03
  Earning the Award

  	
   

  	
  30

  
	
  11.04
  Definitions of Performance Criteria

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII
  ADJUSTMENT UPON CHANGE IN COMMON STOCK

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII
  COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  13.01
  Compliance.

  	
   

  	
  33

  
	
  13.02
  Postponement of Exercise or Payment.

  	
   

  	
  33

  
	
  13.03
  Forfeiture of Payment.

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV
  LIMITATION ON BENEFITS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV
  GENERAL PROVISIONS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  15.01
  Effect on Employment and Service

  	
   

  	
  36

  
	
  15.02
  Unfunded Plan

  	
   

  	
  36

  
	
  15.03
  Rules of Construction

  	
   

  	
  36

  
	
  15.04
  Tax Withholding and Reporting.

  	
   

  	
  36

  
	
  15.05
  Reservation of Shares.

  	
   

  	
  37

  
	
  15.06
  Governing Law.

  	
   

  	
  37

  
	
  15.07
  Other Actions.

  	
   

  	
  37

  
	
  15.08
  Repurchase of Common Stock

  	
   

  	
  37

  
	
  15.09
  Other Conditions.

  	
   

  	
  37

  
	
  15.10
  Forfeiture Provisions.

  	
   

  	
  38

  
	
  15.11
  Repricing of Awards.

  	
   

  	
  38

  
	
  15.12
  Deferred Benefits

  	
   

  	
  38

  

 

iii

 

	
  ARTICLE XVI
  CLAIMS PROCEDURES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII
  AMENDMENT

  	
   

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII
  DURATION OF PLAN

  	
   

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX
  EFFECTIVE DATE OF PLAN

  	
   

  	
  43

  

 

iv

 

ARTICLE I

DEFINITIONS

 

1.01        Affiliate

 

Affiliate, as it relates to any limitations or requirements with
respect to incentive stock options, means any “subsidiary” or “parent” corporation
(as such terms are defined in Code Section 424) of the Company.  Affiliate otherwise means any entity that is
part of a controlled group of corporations or is under common control with the
Company within the meaning of Code Sections 1563(a), 414(b) or 414(c),
except that, in making any such determination, 50 percent shall be substituted
for 80 percent under such Code Sections and the related regulations.

 

1.02        Agreement

 

Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Award granted to such Participant.

 

1.03        Award

 

Award means an Incentive Award, Option, Restricted Stock Award,
Restricted Stock Unit or SAR granted under this Plan.

 

1.04        Board

 

Board means the Board of Directors of the Company.

 

1.05        Cause

 

Cause has the same definition as under any employment or service
agreement between the Company or any Affiliate and the Participant or, if no
such employment or service agreement exists or if such employment or service
agreement does not contain any such definition, Cause means (i) the
Participant’s willful and repeated failure to comply with the lawful directives
of the Board, the Board of Directors of any Affiliate or any supervisory personnel
of the Participant; (ii) any criminal act or act of dishonesty or willful
misconduct by the Participant that has a material adverse effect on the
property, operations, business or reputation of the Company or any Affiliate; (iii) the
material breach by the Participant of the terms of any confidentiality,
noncompetition, non-solicitation or other agreement that the Participant has
with the Company or any Affiliate or (iv) acts by the Participant of
willful malfeasance or gross negligence in a matter of material importance to
the Company or any Affiliate.  For
purposes of the Plan, other than where the definition of Cause is determined
under any employment or service agreement between the Company or any Affiliate
and the Participant, in which case such employment or service agreement shall
control, in no event shall any termination of employment be deemed for Cause
unless the Company’s Chief Executive Officer concludes that the situation
warrants a determination that the Participant’s employment terminated for
Cause; in the case of the Chief

 

1

 

Executive Officer, any determination that the
Chief Executive Officer’s employment terminated for Cause shall be made by the
Board acting without the Chief Executive Officer.

 

1.06        Change
in Control

 

Change in Control means the occurrence of any of the following events:

 

(a)           The accumulation in any number of related or unrelated
transactions by any Person of beneficial ownership (as such term is used in Rule 13d-3
promulgated under the Exchange Act) of more than fifty percent (50%) of the
combined voting power of the Company’s voting stock; provided that for purposes
of this subsection (a), a Change in Control will not be deemed to have
occurred if the accumulation of more than fifty percent (50%) of the voting
power of the Company’s voting stock results from any acquisition of voting
stock (i) directly from the Company that is approved by the Incumbent
Board, (ii) by the Company, (iii) by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Affiliate, or (iv) by
any Person pursuant to a merger, consolidation or reorganization (a “Business
Combination”) that would not cause a Change in Control under clauses (i) and
(ii) of subsection (b) below; or

 

(b)           Consummation of a Business Combination, unless, immediately
following that Business Combination, (i) all or substantially all of the
Persons who were the beneficial owners of voting stock of the Company
immediately prior to that Business Combination beneficially own, directly or
indirectly, at least fifty percent (50%) of the then outstanding shares of common stock and at least fifty percent (50%) of
the combined voting power of the then outstanding voting stock entitled to vote
generally in the election of directors of the entity resulting from that
Business Combination (including, without limitation, an entity that as a result
of that transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions relative to each other as their ownership, immediately
prior to that Business Combination, of the voting stock of the Company, and (ii) at
least sixty percent (60%) of the
members of the Board of Directors of the entity resulting from that Business
Combination holding at least sixty percent (60%) of the voting power of such Board of Directors were members
of the Incumbent Board at the time of the execution of the initial agreement or
of the action of the Board of Directors providing for that Business Combination
and as a result of or in connection with such Business Combination, no Person
has a right to dilute either of such percentages by appointing additional
members to the Board of Directors or otherwise without election or other action
by the shareholders; or

 

(c)           A sale or other disposition of all or substantially all of
the assets of the Company, except pursuant to a Business Combination that would
not cause a Change in Control under clauses (i) and (ii) of subsection (b) above;
or

 

(d)           Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that would not cause a Change in Control under clauses (i) and
(ii) of subsection (b) above; or

 

2

 

(e)           The acquisition by any Person,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Company (i) through the ownership of
securities which provide the holder with such power, excluding voting rights
attendant with such securities, or (ii) by contract; provided that a
Change in Control will not be deemed to have occurred if such power was
acquired (x) directly from the Company in a transaction approved by the
Incumbent Board, (y) by an employee benefit plan (or related trust) sponsored
or maintained by the Company or any Affiliate or (z) by any person pursuant to
a Business Combination that would not cause a Change in Control under clauses (i) and
(ii) of subsection (b) above.

 

1.07        Code

 

Code means the Internal Revenue Code of 1986 and any amendments
thereto.

 

1.08        Committee

 

Committee means the Compensation Committee of the Board, or the Board
itself if no Compensation Committee exists. 
If such Compensation Committee exists, if and to the extent deemed
necessary by the Board, such Compensation Committee shall consist of two or
more directors, all of whom are “non-employee directors” within the meaning of Rule 16b-3
under the Exchange Act and “outside directors” within the meaning of Code Section 162(m).

 

1.09        Common
Stock

 

Common Stock means the common stock, $0.01 par value per share, of the
Company.

 

1.10        Company

 

Company means EarthLink, Inc., a Delaware corporation, and any
successor thereto.

 

1.11        Control
Change Date

 

Control Change Date means the date on which a Change in Control
occurs.  If a Change in Control occurs on
account of a series of transactions, the “Control Change Date” is the date of
the last of such transactions.

 

1.12        Corresponding
SAR

 

Corresponding SAR means a SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.

 

1.13        Deferred
Compensation Program

 

Deferred Compensation Program means any plan or program that the
Company may establish that is intended to constitute a deferred compensation
plan for a select group of management and highly compensated employees of the
Company and its Affiliates, pursuant to

 

3

 

which eligible individuals may elect to defer
the receipt of specified benefits or to which specified benefits otherwise
deferred will be credited on behalf of eligible individuals (whether or not
such benefits are deferred in connection with Awards granted under this Plan).

 

1.14        Deferred
Stock Benefit

 

Deferred Stock Benefit means the specified benefit that the eligible
individual elected to defer under the Deferred Compensation Program or that
otherwise was deferred and credited under the Deferred Compensation Program
that must be distributed or paid, if at all, in shares of Common Stock.  A Deferred Stock Benefit will be paid
pursuant to the terms of the Deferred Compensation Program and at such time or
times as are set forth therein (which may be more than ten years from the date
of grant of the Award in connection with which the receipt of Common Stock or
cash or other consideration was deferred).

 

1.15        Exchange
Act

 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

1.16        Fair
Market Value

 

Fair Market Value of a share of Common Stock means, on any given date,
the fair market value of a share of Common Stock as the Committee in its
discretion shall determine; provided, however, that the Committee shall
determine Fair Market Value without regard to any restriction other than a
restriction which, by its terms, will never lapse and, if the shares of Common
Stock are traded on any national stock exchange or quotation system, the Fair
Market Value of a share of Common Stock shall be the closing price of a share
of Common Stock as reported on such stock exchange or quotation system on such
date, or if the shares of Common Stock are not traded on such stock exchange or
quotation system on such date, then on the next preceding day that the shares
of Common Stock were traded on such stock exchange or quotation system, all as
reported by such source as the Committee shall select.  The Fair Market Value that the Committee
determines shall be final, binding and conclusive on the Company, any Affiliate
and each Participant.

 

1.17        Incentive
Award

 

Incentive Award means an award stated with reference to a specified
dollar amount or number of shares of Common Stock which, subject to such terms
and conditions as may be prescribed by the Committee, entitles the Participant
to receive shares of Common Stock, cash or a combination thereof from the
Company or an Affiliate.

 

1.18        Incumbent
Board

 

Incumbent Board means a Board of Directors at least a majority of whom
consist of individuals who either are (a) members of the Company’s Board
as of the effective date of the adoption of this Plan or (b) members who
become members of the Company’s Board subsequent

 

4

 

to the date of the adoption of this Plan
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least sixty percent (60%) of the directors then
comprising the Incumbent Board (either by a specific vote or by approval of the
proxy statement of the Company in which that person is named as a nominee for
director, without objection to that nomination), but excluding, for that
purpose, any individual whose initial assumption of office occurs as a result
of an actual or threatened election contest (within the meaning of Rule 14a-11
of the Exchange Act) 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 of Directors.

 

1.19        Initial
Value

 

Initial Value means, with respect to a Corresponding SAR, the Option
price per share of the related Option and, with respect to a SAR granted
independently of an Option, the Fair Market Value of one share of Common Stock
on the date of grant.

 

1.20        Named
Executive Officer

 

Named Executive Officer means a Participant who, as of the last day of
a taxable year, is the Chief Executive Officer of the Company (or is acting in
such capacity) or one of the four highest compensated officers of the Company
(other than the Chief Executive Officer) or is otherwise one of the group of “covered
employees,” as defined in the regulations promulgated under Code Section 162(m).

 

1.21        Option

 

Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.

 

1.22        Participant

 

Participant means an employee of the Company or an Affiliate, a member
of the Board or the Board of Directors of an Affiliate (whether or not an
employee), or a person or entity that provides services to the Company or an
Affiliate and who satisfies the requirements of Article IV and is selected
by the Committee to receive an Award.

 

1.23        Plan

 

Plan means this EarthLink, Inc. 2006 Equity and Cash Incentive
Plan, in its current form and as hereafter amended.

 

1.24        Person

 

Person means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint-stock company, trust, unincorporated

 

5

 

organization or government or other agency or
political subdivision thereof or any other entity of any kind.

 

1.25        Restricted
Stock Award

 

Restricted Stock Award means shares of Common Stock granted to a
Participant under Article VIII.

 

1.26        Restricted
Stock Unit

 

Restricted Stock Unit means an award, stated with respect to a
specified number of shares of Common Stock, that entitles the Participant to
receive one share of Common Stock with respect to each Restricted Stock Unit
that becomes payable under the terms and conditions of the Plan and the
applicable Agreement.

 

1.27        SAR

 

SAR means a stock appreciation right that in accordance with the terms
of an Agreement entitles the holder to receive cash or a number of shares of
Common Stock based on the increase in the Fair Market Value of the shares
underlying the stock appreciation right during a stated period specified by the
Committee.  References to “SARs” include
both Corresponding SARs and SARs granted independently of Options, unless the
context requires otherwise.

 

1.28        Ten
Percent Shareholder

 

Ten Percent Shareholder means any individual who (considering the stock
attribution rules described in Code Section 424(d)) owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any Affiliate.

 

6

 

ARTICLE II

PURPOSES

 

The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates by associating their interests with those of the Company and its
stockholders.  The Plan is intended to
permit the grant of Options qualifying under Code Section 422 (“incentive
stock options”) and Options not so qualifying, SARs, Restricted Stock Awards,
Restricted Stock Units and Incentive Awards in accordance with the Plan and
procedures that may be established by the Committee.  No Option that is intended to be an incentive
stock option shall be invalid for failure to qualify as an incentive stock
option.  The proceeds received by the
Company from the sale of shares of Common Stock pursuant to this Plan may be
used for general corporate purposes.

 

7

 

ARTICLE III

ADMINISTRATION

 

The Plan shall be administered by the Committee.  The Committee shall have authority to grant
Awards upon such terms (not inconsistent with the provisions of this Plan) as
the Committee may consider appropriate. 
Such terms may include conditions (in addition to those contained in
this Plan) on the exercisability, transferability, and forfeitability of all or
any part of an Option or SAR, the transferability or forfeitability of a
Restricted Stock Award, or the grant, settlement, forfeitability, or
transferability of a Restricted Stock Unit or an Incentive Award, among other
terms.  Notwithstanding any such
conditions, the Committee may, in its discretion and whether or not in
connection with a Change in Control, accelerate the time at which any Option or
SAR may be exercised, or the time at which a Restricted Stock Award may become
transferable or nonforfeitable or the time at which an Incentive Award or award
of Restricted Stock Units may be earned and settled.  In addition, the Committee shall have
complete authority to interpret all provisions of this Plan; to prescribe the
form of Agreements; to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan.  The express grant in the Plan of any specific
power to the Committee shall not be construed as limiting any power or
authority of the Committee.  Any decision
made, or action taken, by the Committee in connection with the administration
of this Plan shall be final and conclusive. 
The members of the Committee shall not be liable for any act done in
good faith with respect to this Plan or any Agreement or Award.

 

To the extent applicable law so permits, the Committee, in its
discretion, may delegate to one or more officers of the Company all or part of the
Committee’s authority and duties with respect to Awards to be granted to
individuals who are not subject to the reporting and other provisions of Section 16
of the Exchange Act and who are not Named Executive Officers.  The Committee may revoke or amend the terms
of a delegation at any time but such action shall not invalidate any prior
actions of the Committee’s delegate or delegates that were consistent with the
terms of the Plan and the Committee’s prior delegation.  If and to the extent deemed necessary by the
Board, (i) all Awards granted to any individual who is subject to the
reporting and other provisions of Section 16 of the Exchange Act shall be
made by a Committee comprised solely of two or more directors, all of whom are “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act and (ii) all
Awards granted to an individual who is a Named Executive Officer shall be made
by a Committee comprised solely of two or more directors, all of whom are “outside
directors” within the meaning of Code Section 162(m).

 

The Company shall bear all expenses of administering this Plan.  The Company shall indemnify and hold harmless
each person who is or shall have been a member of the Committee acting as
administrator of the Plan, or any delegate of such, against and from any cost,
liability, loss or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any action, claim, suit, or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action taken or not taken under the Plan and against
and from any and all amounts paid by such person in settlement thereof, with
the Company’s approval, or paid by such person in satisfaction of any judgment
in any such

 

8

 

action, suit, or proceeding against such
person, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. 
Notwithstanding the foregoing, the Company shall not indemnify and hold
harmless any such person if (i) applicable law or the Company’s
Certificate of Incorporation or Bylaws prohibit such indemnification or (ii) such
person did not act in good faith and in a manner that such person believed to
be consistent with the Plan or (iii) such person’s conduct constituted
gross negligence or willful misconduct. 
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company’s Certificate of Incorporation or Bylaws, as a matter of law or
otherwise, or under any other power that the Company may have to indemnify such
person or hold him or her harmless.  The
provisions of the foregoing indemnity shall survive indefinitely the term of
this Plan.

 

9

 

ARTICLE IV

ELIGIBILITY

 

Any employee of the Company or an Affiliate (including an entity that
becomes an Affiliate after the adoption of this Plan), a member of the Board or
the Board of Directors of an Affiliate (including an entity that becomes an
Affiliate after the adoption of the Plan) (whether or not such board member is
an employee) and any other person or entity that provides services to the
Company or an Affiliate (including an entity that becomes an Affiliate after
the adoption of the Plan) is eligible to participate in this Plan if the
Committee, in its sole discretion, determines that such person or entity has
contributed significantly or can be expected to contribute significantly to the
profits or growth of the Company or any Affiliate or if it is otherwise in the
best interest of the Company or any Affiliate for such person or entity to
participate in this Plan.

 

10

 

ARTICLE V

COMMON STOCK SUBJECT TO PLAN

 

5.01        Common
Stock Issued

 

Upon the issuance of shares of Common Stock pursuant to an Award, the
Company may deliver to the Participant (or the Participant’s broker if the
Participant so directs) shares of Common Stock from its authorized but unissued
Common Stock, treasury shares or reacquired shares, whether reacquired on the
open market or otherwise.  On the
distribution or payment of Deferred Stock Benefits, the Company may issue
shares of Common Stock from its authorized but unissued Common Stock, treasury
shares or reacquired shares, whether reacquired on the open market or
otherwise.

 

5.02        Aggregate
Limit

 

The maximum aggregate number of shares of Common Stock that may be
issued under this Plan and to which Awards may relate or which may be
distributed or paid in settlement of Deferred Stock Benefits shall be
10,000,000 shares.  One hundred percent
(100%) of such shares may be issued pursuant to Options or in settlement of
Deferred Stock Benefits that represent deferred shares of Common Stock
previously subject to Options. 
Alternatively, one hundred percent (100%) of such shares may be issued pursuant
to SARs, Restricted Stock Awards, Restricted Stock Units or Incentive Awards or
any other Deferred Stock Benefits to be distributed or paid under the Deferred
Compensation Program, including without limitation, those with respect to SARs,
Restricted Stock Awards, Restricted Stock Units or Incentive Awards.  The maximum number of shares of Common Stock
that may be issued in each instance shall be subject to adjustment as provided
in Article XII.

 

5.03        Individual
Limit

 

In any calendar year, no Participant may be granted Options, SARs, Restricted
Stock Awards, Restricted Stock Units or any combination thereof that relate to
more than one million shares of Common Stock. 
For purposes of the foregoing limit, an Option and its Corresponding SAR
shall be treated as a single Award.  In
any calendar year, no Participant may be granted an Incentive Award (i) with
reference to a specified dollar limit for more than $1,000,000 and (ii) with
reference to a specified number of shares of Common Stock for more than one
million shares of Common Stock.  If an
Award that a Participant holds is cancelled or subject to a repricing within
the meaning of the regulations under Code Section 162(m) (after
shareholder approval as required herein), the cancelled Award shall continue to
be counted against the maximum number of shares of Common Stock for which
Awards may be granted to the Participant in any calendar year as required under
Code Section 162(m).  The maximum
number of shares that may be granted in any calendar year to any Participant
shall be subject to adjustment as provided in Article XII.

 

11

 

5.04        Awards
Settled in Cash; Reissue of Awards and Shares

 

To the extent that an Award is settled in cash or a form other than
shares of Common Stock, the shares of Common Stock that would have been
delivered had there been no such cash or other settlement shall not be counted
against the shares of Common Stock available for issuance under the Plan;
however, the number of underlying shares of Common Stock with respect to which
the Award related shall be counted against the applicable Common Stock limit
under Section 5.02 above as opposed to counting the number of shares of
Common Stock that would have been delivered had there been no such cash or
other settlement.  To the extent that any
shares of Common Stock are issued pursuant to an Award, the number of shares of
Common Stock that shall be counted against the applicable Common Stock limit
under Section 5.02 above shall be the greater of (i) the number of
underlying shares of Common Stock with respect to which the Award related or (ii) the
number of shares of Common Stock actually issued in settlement of such
Award.  Shares of Common Stock that are
subject to or underlie Awards that expire, or for any reason are cancelled,
terminated or forfeited, fail to vest, or for any other reason are not paid or
delivered under the Plan, shall again be available for issuance pursuant to
subsequent Awards under the Plan.  Such
shares of Common Stock, with respect to the portion of that Award that is
cancelled, terminated, forfeited, fails to vest or is otherwise not paid or
delivered, will be treated for purposes of Section 5.02 above as if they
had never been issued.  Shares of Common
Stock that are otherwise reacquired from the Participant or the Participant’s
transferee to pay the exercise or purchase price of an Award or to satisfy the
minimum applicable tax withholding obligation of the Company or an Affiliate
with respect to an Award shall not be treated, for purposes of Section 5.02
above, as shares of Common Stock available for issuance under the Plan and
shall not be so available.

 

5.05        Deferred
Stock Benefits

 

Shares of Common Stock issued or distributed in settlement of Deferred
Stock Benefits, shares of Common Stock subject to Awards with respect to which
there is a Deferred Stock Benefit and any other Deferred Stock Benefits to be
paid or distributed under the Deferred Compensation Program shall be counted
against the maximum number of shares of Common Stock that may be issued under
this Plan and to which Awards may relate unless and until such shares of Common
Stock shall not be issued because of the surrender, lapse, expiration,
forfeiture or termination of any rights in such shares of Common Stock or the
Deferred Stock Benefits; provided, however, that shares of Common Stock shall
be counted toward the foregoing limits only once (so that in the case of shares
of Common Stock subject to Awards that are cancelled in connection with the
Deferred Stock Benefits, such shares of Common Stock shall only be counted
once).  If a Deferred Stock Benefit is
forfeited, in whole or in part, the number of shares of Common Stock allocated
to such Deferred Stock Benefit or portion thereof may be reallocated to other
Awards to be granted under the Plan or to settle other Deferred Stock
Benefits.  However, shares of Common
Stock issued in settlement of or representing Deferred Stock Benefits that
constitute earnings on deferred shares of Common Stock shall be counted
separately towards the foregoing Common Stock limit under Section 5.02
above.

 

12

 

ARTICLE VI

OPTIONS

 

6.01        Grant

 

In accordance with the provisions of Article IV, the Committee
will designate each individual or entity to whom an Option is to be granted and
will specify the number of shares of Common Stock covered by such grant and
whether the Option is an incentive stock option or a nonqualified stock
option.  Notwithstanding any other
provision of the Plan or any Agreement, the Committee may only grant an
incentive stock option to an individual who is an employee of the Company or an
Affiliate.  An Option may be granted with
or without a corresponding SAR.

 

6.02        Option
Price

 

The price per share of Common Stock purchased on the exercise of an
Option shall be determined by the Committee on the date of grant, but shall not
be less than the Fair Market Value of a share of Common Stock on the date the
Option is granted.  However, if at the
time of grant of an Option that is intended to be an incentive stock option,
the Participant is a Ten Percent Shareholder, the price per share of Common
Stock purchased on the exercise of such Option shall not be less than 110% of
the Fair Market Value of a share of Common Stock on the date the Option is granted.

 

6.03        Maximum
Option Period

 

The maximum period in which an Option may be exercised shall be
determined by the Committee on the date of grant, except that no Option shall
be exercisable after the expiration of ten years from the date such Option was
granted (five years from the date such Option was granted in the event of an
incentive stock option granted to a Ten Percent Shareholder).

 

6.04        Nontransferability

 

Except as provided in Section 6.05, each Option granted under this
Plan shall be nontransferable except by will or by the laws of descent and
distribution.  In the event of any
transfer of an Option (by the Participant or his transferee), the Option and
any Corresponding SAR that relates to such Option must be transferred to the
same person or persons or entity or entities. 
Except as provided in Section 6.05, during the lifetime of the
Participant to whom the Option is granted, the Option may be exercised only by
the Participant.  No right or interest of
a Participant in any Option shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.

 

6.05        Transferable
Options

 

Section 6.04 to the contrary notwithstanding, if the Agreement so
provides, an Option that is not an incentive stock option may be transferred by
a Participant to the Participant’s children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a

 

13

 

partnership in which such family members are
the only partners, on such terms and conditions as are appropriate for such
transferees to be included in the class of transferees who may rely on a Form S-8
Registration Statement under the Securities Act of 1933 to sell shares issuable
upon exercise of Options granted under the Plan.  Any such transfer will be permitted only if (i) the
Participant does not receive any consideration for the transfer and (ii) the
Committee expressly approves the transfer. 
The holder of an Option transferred pursuant to this Section shall
be bound by the same terms and conditions that governed the Option during the
period that it was held by the Participant; provided, however, that such
transferee may not transfer the Option except by will or the laws of descent
and distribution.  In the event of any transfer
of an Option (by the Participant or his transferee), the Option and any
Corresponding SAR that relates to such Option must be transferred to the same
person or persons or entity or entities.

 

6.06        Exercise

 

Subject to the provisions of this Plan and the applicable Agreement, an
Option may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Committee shall
determine; provided, however, that incentive stock options (granted under the
Plan and all plans of the Company and its Affiliates) may not be first
exercisable in a calendar year for shares of Common Stock having a Fair Market
Value (determined as of the date the Option is granted) exceeding $100,000.  If the limitation is exceeded, the Options
that cause the limitation to be exceeded shall be treated as nonqualified stock
options.  An Option granted under this
Plan may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised.  A partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option.  The exercise of
an Option shall result in the termination of the Corresponding SAR to the
extent of the number of shares with respect to which the Option is exercised.

 

6.07        Payment

 

Subject to rules established by the Committee and unless otherwise
provided in an Agreement, payment of all or part of the Option price shall be
made in cash or cash equivalent acceptable to the Committee.  If the Agreement so provides, the Committee,
in its discretion and provided applicable law so permits, may allow a
Participant to pay all or part of the Option price (i) by surrendering
shares of Common Stock to the Company that the Participant already owns; (ii) by
a cashless exercise through a broker; (iii) by such other medium of
payment as the Administrator in its discretion shall authorize or (iv) by
any combination of the aforementioned methods of payment.  If shares of Common Stock are used to pay all
or part of the Option price, the sum of the cash and cash equivalent and the
Fair Market Value (determined as of the day preceding the date of exercise) of
the shares surrendered must not be less than the Option price of the shares for
which the Option is being exercised.

 

14

 

6.08        Employee
Status

 

For purposes of determining the applicability of Code Section 422
(relating to incentive stock options), or in the event that the terms of any
Option provide that it may be exercised only during employment or continued
service or within a specified period of time after termination of employment or
continued service, the Committee may decide to what extent leaves of absence
for governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment or service.

 

6.09        Change
in Control

 

Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Committee in its discretion may (i) declare
that some or all outstanding Options previously granted under the Plan, whether
or not then exercisable, shall terminate as of a date before or on the Control
Change Date without any payment to the holder of the Option, provided the
Committee gives prior written notice to the Participants of such termination
and gives such Participants the right to exercise their outstanding Options for
at least seven (7) days before such date to the extent then exercisable
(or to the extent such Options would have been exercisable as of the Control
Change Date), (ii) terminate before or on the Control Change Date some or
all outstanding Options previously granted under the Plan, whether or not then
exercisable, in consideration of payment to the holder of the Option, with
respect to each share of Common Stock for which the Option is then exercisable
(or for which the Option would have been exercisable as of the Control Change
Date), of the excess, if any, of the Fair Market Value on such date of the
Common Stock subject to such portion of the Option over the Option price
(provided that outstanding Options that are not then exercisable and that would
not become exercisable on the Control Change Date, and Options with respect to
which the Fair Market Value of the Common Stock subject to the Options does not
exceed the Option price, shall be cancelled without any payment therefor) or (iii) take
such other action as the Committee determines to be reasonable under the
circumstances to permit the Participant to realize the value of the Option
(which value for purposes of Options that are not then exercisable and that
would not become exercisable as of the Control Change Date, and Options with
respect to which the Fair Market Value of the Common Stock subject to the
Options does not exceed the Option price, shall be deemed to be zero).  The payment described in (ii) above may
be made in any manner the Committee determines, including in cash, stock or
other property.  The Committee may take
the actions described in (i) or (ii) above with respect to Options
that are not then exercisable whether or not the Participant will receive any
payment therefor.  The Committee in its
discretion may take any of the actions described in this Section 6.09
contingent on consummation of the Change in Control and with respect to some or
all outstanding Options, whether or not then exercisable, or on an Option-by-Option
basis, which actions need not be uniform with respect to all outstanding
Options.  However, the Options shall not
be terminated to the extent that written provision is made for their
continuance, assumption or substitution by the Company or a successor employer
or its parent or subsidiary in connection with the Change in Control.  The Committee may provide in an applicable
Agreement that a Participant’s outstanding Options shall be fully exercisable
on and after a Control Change Date or

 

15

 

immediately before the date the Options will
be terminated in connection with the Change in Control, as described above.

 

6.10        Stockholder
Rights

 

No Participant shall have any rights as a stockholder with respect to
shares subject to his or her Option until the date of exercise of such Option.

 

6.11        Disposition
of Shares

 

A Participant shall notify the Company of any sale or other disposition
of shares of Common Stock acquired pursuant to an Option that was an incentive
stock option if such sale or disposition occurs (i) within two years of
the grant of an Option or (ii) within one year of the issuance of shares
of Common Stock to the Participant.  Such
notice shall be in writing and directed to the Secretary of the Company.

 

6.12        No
Liability of Company

 

The Company shall not be liable to any Participant or any other person
if the Internal Revenue Service or any court or other authority having
jurisdiction over such matter determines for any reason that an Option intended
to be an incentive stock option and granted hereunder does not qualify as an
incentive stock option.

 

16

 

ARTICLE VII

SARS

 

7.01        Grant

 

In accordance with the provisions of Article IV, the Committee
will designate each individual or entity to whom SARs are to be granted and
will specify the number of shares of Common Stock covered by such grant.  In addition, no Participant may be granted
Corresponding SARs (under this Plan and all other incentive stock option plans
of the Company and its Affiliates) that are related to incentive stock options
which are first exercisable in any calendar year for shares of Common Stock
having an aggregate Fair Market Value (determined as of the date the related
Option is granted) that exceeds $100,000.

 

7.02        Maximum
SAR Period

 

The term of each SAR shall be determined by the Committee on the date
of grant, except that no SAR shall have a term of more than ten years from the
date such SAR was granted (five years for a Corresponding SAR that is related
to an incentive stock option and that is granted to a Ten Percent
Shareholder).  No Corresponding SAR shall
be exercisable or continue in existence after the expiration of the Option to
which the Corresponding SAR relates.

 

7.03        Nontransferability

 

Except as provided in Section 7.04, each SAR granted under this
Plan shall be nontransferable except by will or by the laws of descent and
distribution.  In the event of any such
transfer, a Corresponding SAR and the related Option must be transferred to the
same person or persons or entity or entities. 
Except as provided in Section 7.04, during the lifetime of the
Participant to whom the SAR is granted, the SAR may be exercised only by the
Participant.  No right or interest of a Participant
in any SAR shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.

 

7.04        Transferable
SARs

 

Section 7.03 to the contrary notwithstanding, if the Agreement so
provides, a SAR, other than a Corresponding SAR that is related to an incentive
stock option, may be transferred by a Participant to the Participant’s
children, grandchildren, spouse, one or more trusts for the benefit of such
family members or a partnership in which such family members are the only
partners, on such terms and conditions as are appropriate for such transferees
to be included in the class of transferees who may rely on a Form S-8
Registration Statement under the Securities Act of 1933 to sell shares received
pursuant to Awards granted under the Plan. 
Any such transfer will be permitted only if (i) the Participant
does not receive any consideration for the transfer and (ii) the Committee
expressly approves the transfer.  The
holder of a SAR transferred pursuant to this Section shall be bound by the
same terms and conditions that governed the SAR during the period that it was
held by the Participant; provided, however, that such transferee may not
transfer the SAR except by will or the laws of descent and distribution.  In the event of any

 

17

 

transfer of a Corresponding SAR (by the
Participant or his or her transferee), the Corresponding SAR and the related
Option must be transferred to the same person or person or entity or entities.

 

7.05        Exercise

 

Subject to the provisions of this Plan and the applicable Agreement, a
SAR may be exercised in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Committee shall
determine; provided, however, that a SAR may be exercised only when the Fair
Market Value of the Common Stock that is subject to the exercise exceeds the
Initial Value of the SAR and a Corresponding SAR may be exercised only to the
extent that the related Option is exercisable. 
A SAR granted under this Plan may be exercised with respect to any
number of whole shares less than the full number for which the SAR could be
exercised.  A partial exercise of a SAR
shall not affect the right to exercise the SAR from time to time in accordance
with this Plan and the applicable Agreement with respect to the remaining
shares subject to the SAR.  The exercise
of a Corresponding SAR shall result in the termination of the related Option to
the extent of the number of shares with respect to which the SAR is exercised.

 

7.06        Settlement

 

The amount payable as a result of the exercise of a SAR shall be
settled in cash, by the issuance of shares of Common Stock or by a combination
thereof.  No fractional share will be
deliverable upon the exercise of a SAR but a cash payment will be made in lieu
thereof.

 

7.07        Employee
Status

 

If the terms of any SAR provide that it may be exercised only during
employment or continued service or within a specified period of time after
termination of employment or continued service, the Committee may decide to
what extent leaves of absence for governmental or military service, illness,
temporary disability or other reasons shall not be deemed interruptions of
continuous employment or service.

 

7.08        Change
in Control

 

Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Committee in its discretion may (i) declare
that some or all outstanding SARs previously granted under the Plan, whether or
not then exercisable, shall terminate as of a date before or on the Control
Change Date without any payment to the holder of the SAR, provided the
Committee gives prior written notice to the Participants of such termination
and gives such Participants the right to exercise their outstanding SARs at
least seven (7) days before
such termination date to the extent then exercisable (or to the extent such
SARs would have been exercisable as of the Control Change Date), (ii) terminate
before or on the Control Change Date some or all outstanding SARs previously
granted under the Plan, whether or not then exercisable, in consideration of
payment to the holder of the SARs, with respect to each share of Common Stock
for which the SARs are then exercisable (or for which the SARs would have been

 

18

 

exercisable as of the Control Change Date),
of the excess, if any, of the Fair Market Value of such Common Stock on such
date over the Initial Value of the SARs (provided that outstanding SARs that
are not then exercisable and that would not become exercisable on the Control
Change Date, and SARs with respect to which the Fair Market Value of the Common
Stock does not exceed the Initial Value, shall be cancelled without any payment
therefor) or (iii) take such other action as the Committee determines to
be reasonable under the circumstances to permit the Participant to realize the
value of the SARs (which value for purposes of SARs that are not then
exercisable and that would not become exercisable as of the Control Change
Date, and SARs with respect to which the Fair Market Value of the Common Stock
does not exceed the Initial Value, shall be deemed to be zero).  The payment described in (ii) above may
be made in any manner the Committee determines, including in cash, stock or
other property.  The Committee may take
the actions described in (i) or (ii) above with respect to SARs that
are not then exercisable whether or not the Participant will receive any
payment therefor.  The Committee in its
discretion may take any of the actions described in this Section 7.08
contingent on consummation of the Change in Control and with respect to some or
all outstanding SARs, whether or not then exercisable, or on a SAR-by-SAR
basis, which actions need not be uniform with respect to all outstanding
SARs.  Notwithstanding the foregoing, no
payment shall be made with respect to a Corresponding SAR to the extent the
Committee made a payment with respect to the Option that relates to the Corresponding
SAR.  No SARs shall be terminated to the
extent that written provision is made for their assumption, continuance or
substitution by the Company or a successor employer or its parent or subsidiary
in connection with the Change in Control. 
The Committee may provide in an applicable Agreement that a Participant’s
outstanding SARs shall be fully exercisable on and after a Control Change Date
or immediately before the date the SARs will be terminated in connection with
the Change in Control, as described above.

 

7.09        Stockholder
Rights

 

No Participant shall, as a result of receiving a SAR, have any rights
as a stockholder of the Company or any Affiliate until the date that the SAR is
exercised and then only to the extent that the SAR is settled by the issuance
of Common Stock.

 

19

 

ARTICLE VIII

RESTRICTED STOCK AWARDS

 

8.01        Award

 

In accordance with the provisions of Article IV, the Committee
will designate each individual or entity to whom a Restricted Stock Award is to
be granted, will specify the number of shares of Common Stock covered by such
grant and the price, if any, to be paid for each share of Common Stock covered
by the grant.

 

8.02        Payment.

 

Unless the Agreement provides otherwise, if
the Participant must pay for a Restricted Stock Award, payment of the Award
shall be made in cash or cash equivalent acceptable to the Committee.  If the Agreement so provides, the Committee,
in its discretion and provided applicable law so permits, may allow a Participant
to pay all or part of the purchase price (i) by surrendering shares of
Common Stock to the Company the Participant already owns, (ii) by such
other medium of payment as the Committee in its discretion shall authorize or (iii) by
any combination of the foregoing methods of payment.  If Common Stock is used to pay all or part of
the purchase price, the sum of cash and cash equivalent and other payments and
the Fair Market Value (determined as of the day preceding the date of purchase)
of the Common Stock surrendered must not be less than the purchase price of the
Restricted Stock Award.

 

8.03        Vesting

 

The Committee, on the date of grant may, but need not, prescribe that a
Participant’s rights in the Restricted Stock Award shall be forfeitable and
nontransferable for a period of time or subject to such conditions as may be
set forth in the Agreement. 
Notwithstanding any provision herein to the contrary, the Committee, in
its sole discretion may grant Restricted Stock Awards that are nonforfeitable and
transferable immediately upon grant.  By
way of example and not of limitation, the Committee may prescribe that a
Participant’s rights in a Restricted Stock Award shall be forfeitable and
nontransferable subject to (a) the attainment of objectively determinable
performance conditions based on the criteria described in Article XI, (b) the
Participant’s completion of a specified period of employment or service with
the Company or an Affiliate, (c) the Participant’s death, disability or
retirement or (d) satisfaction of a combination of any of the foregoing
factors.  Notwithstanding the preceding
sentence, if and to the extent deemed necessary by the Committee, Restricted
Stock Awards granted to Named Executive Officers shall be forfeitable and
nontransferable subject to attainment of objectively determinable performance
conditions based on the criteria described in Article XI and shall be
subject to the other requirements set forth in Article XI so as to enable
such Restricted Stock Award to qualify as “qualified performance-based
compensation” under the regulations promulgated under Code Section 162(m).  A Restricted Stock Award can only become
nonforfeitable and transferable during the Participant’s lifetime in the hands
of the Participant.

 

20

 

8.04        Maximum
Restriction Period

 

To the extent the Participant’s rights in a Restricted Stock Award are
forfeitable and nontransferable for a period of time, the Committee on the date
of grant shall determine the maximum period over which the rights may become
nonforfeitable and transferable, except that such period shall not exceed ten
years from the date of grant.

 

8.05        Employee
Status

 

In the event that the terms of any Restricted Stock Award provide that
shares shall become nonforfeitable and transferable thereunder only after
completion of a specified period of employment or continuous service, the
Committee may decide in each case to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment or service.

 

8.06        Change
in Control

 

Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Committee in its discretion may (i) terminate
before or on the Control Change Date outstanding Restricted Stock Awards
previously granted under the Plan that are not then nonforfeitable and
transferable (and that will not have become nonforfeitable and transferable as
of the Control Change Date) without any payment to the holder of the Restricted
Stock Awards other than return of the purchase price, if any, paid for the
Restricted Stock Award, (ii) terminate before or on the Control Change
Date outstanding Restricted Stock Awards previously granted under the Plan that
are not then nonforfeitable and transferable (but that would have become
nonforfeitable and transferable as of the Control Change Date) in exchange for
a payment equal to the difference between the then Fair Market Value of the
shares of Common Stock subject to the Restricted Stock Award less the unpaid
purchase price, if any, for such shares or (iii) take such other action as
the Committee determines to be reasonable under the circumstances to permit the
Participant to realize the value of the Restricted Stock Award (which value for
purposes of a Restricted Stock Award that is forfeitable and nontransferable
and that would not have become nonforfeitable and transferable as of the
Control Change Date shall be deemed to be zero).  The payment described in (ii) above may
be made in any manner the Committee determines, including in cash, stock or
other property.  The Committee in its
discretion may take any of the actions described in this Section 8.06
contingent on the consummation of the Change in Control and with respect to
some or all outstanding Restricted Stock Awards or on a Restricted Stock
Award-by-Restricted Stock Award basis, which actions need not be uniform with
respect to all outstanding Restricted Stock Awards.  The preceding sentences to the contrary
notwithstanding, the Restricted Stock Awards shall not be terminated to the
extent that written provision is made for their assumption, continuance or
substitution by the Company or a successor employer or its parent or subsidiary
in connection with the Change in Control. 
The Committee may provide in an applicable Agreement that a Participant’s
outstanding Restricted Stock Awards shall be nonforfeitable and transferable on
and after a Control Change Date or immediately before the date the Restricted
Stock Awards would otherwise be terminated in connection with the Change in
Control, as described above.

 

21

 

8.07        Stockholder
Rights

 

Prior to their forfeiture (in accordance with the applicable Agreement
and while the shares of Common Stock granted pursuant to the Restricted Stock
Award may be forfeited and are nontransferable), a Participant will have all
rights of a stockholder with respect to a Restricted Stock Award, including the
right to receive dividends and vote the shares; provided, however, that during
such period (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares granted pursuant to a Restricted
Stock Award, (ii) the Company shall retain custody of the certificates
evidencing shares granted pursuant to a Restricted Stock Award, and (iii) the
Participant will deliver to the Company a stock power, endorsed in blank, with
respect to each Restricted Stock Award. 
Notwithstanding the preceding sentence, if and to the extent deemed
necessary by the Committee, dividends payable with respect to Restricted Stock
Awards shall accumulate (without interest) and become payable to the
Participant at the time, and only to the extent that, the portion of the
Restricted Stock Award to which the dividends relate has become transferable
and nonforfeitable.  The limitations set
forth in the preceding sentences shall not apply after the shares granted under
the Restricted Stock Award are transferable and are no longer forfeitable.

 

22

 

ARTICLE IX

RESTRICTED STOCK UNITS

 

9.01        Grant

 

In accordance with the provisions of Article IV, the Committee
will designate each individual or entity to whom a grant of Restricted Stock
Units is to be made and will specify the number of shares covered by such
grant.

 

9.02        Earning
the Award

 

The Committee, on the date of grant of the Restricted Stock Units,
shall prescribe that the Restricted Stock Units will be earned and become
payable subject to such conditions as are set forth in the Agreement.  By way of example and not of limitation, the
Committee may prescribe that the Restricted Stock Units will be earned and
become payable upon (a) the satisfaction of objectively determinable
performance conditions based on the criteria described in Article XI, (b) the
Participant’s completion of a specified period of employment or service with
the Company or an Affiliate, (c) the Participant’s death, disability or
retirement or (d) satisfaction of a combination of any of the foregoing
factors.  If and to the extent deemed
necessary by the Committee, Restricted Stock Units granted to Named Executive
Officers shall become payable upon the satisfaction of objectively determinable
performance conditions based on the criteria described in Article XI and
shall be subject to the other requirements set forth in Article XI so as
to enable such Restricted Stock Units to qualify as “qualified
performance-based compensation” under the regulations promulgated under Code Section 162(m).

 

9.03        Maximum
Restricted Stock Unit Award Period

 

The Committee, on the date of grant, shall determine the maximum period
over which Restricted Stock Units may be earned, except that such period shall
not exceed ten years from the date of grant.

 

9.04        Payment

 

The amount payable when an award of Restricted Stock Units is earned
shall be settled by the issuance of one share of Common Stock for each
Restricted Stock Unit that is earned.  A
fractional share of Common Stock shall not be deliverable when an award of
Restricted Stock Units is earned, but a cash payment will be made in lieu
thereof.

 

9.05        Nontransferability

 

Except as provided in Section 9.06, Restricted Stock Units granted
under this Plan shall be nontransferable except by will or by the laws of
descent and distribution.  No right or
interest of a Participant in any Restricted Stock Units shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.

 

23

 

9.06        Transferable
Restricted Stock Units

 

Section 9.05 to the contrary notwithstanding, if the Agreement
provides, an award of Restricted Stock Units may be transferred by a
Participant to the Participant’s children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a partnership in which such
family members are the only partners, on such terms and conditions as are appropriate
for such transferees to be included in the class of transferees who may rely on
a Form S-8 Registration Statement under the Securities Act of 1933 to sell
shares received pursuant to Awards granted under the Plan.  Any such transfer will be permitted only if (i) the
Participant does not receive any consideration for the transfer and (ii) the
Committee expressly approves the transfer. 
The holder of Restricted Stock Units transferred pursuant to this Section shall
be bound by the same terms and conditions that governed the Restricted Stock
Units during the period that they were held by the Participant; provided,
however that such transferee may not transfer Restricted Stock Units except by
will or the laws of descent and distribution.

 

9.07        Employee
Status

 

In the event that the terms of any Restricted Stock Unit award provide
that no payment will be made unless the Participant completes a stated period
of employment or continued service, the Committee may decide to what extent
leaves of absence for government or military service, illness, temporary
disability, or other reasons shall not be deemed interruptions of continuous
employment or service.

 

9.08        Change
in Control

 

Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Committee in its discretion may (i) terminate
before or on the Control Change Date some or all outstanding Restricted Stock
Units previously granted under the Plan that are not then earned and payable
(and that will not become earned and payable as of the Control Change Date)
without any payment to the holder of the Restricted Stock Units, (ii) terminate
before or on the Control Change Date some or all outstanding Restricted Stock
Units previously granted under the Plan that are not then earned and payable
(but that will become earned and payable as of the Control Change Date) in
exchange for a payment equal to the then Fair Market Value of the Common Stock
covered by the Restricted Stock Units or (iii) take such other action as
the Committee determines to be reasonable under the circumstances to permit the
Participant to realize the value of the Restricted Stock Units (which value for
purposes of Restricted Stock Units that are not then earned and payable and
that will not become earned and payable as of the Control Change Date shall be
deemed to be zero).  The payment
described in (ii) above may be made in any manner the Committee
determines, including in cash, stock or other property.  The Committee in its discretion may take the
actions described in this Section 9.08 contingent on consummation of the
Change in Control and with respect to some or all outstanding Restricted Stock
Units or on a Restricted Stock Unit-by-Restricted Stock Unit basis, which
actions need not be uniform with respect to all outstanding Restricted Stock
Units.  The Restricted Stock Units shall
not be terminated to the extent that written provision is made for their
assumption, continuance or substitution by the Company or a successor employer
or its

 

24

 

parent or subsidiary in connection with the
Change in Control.  The Committee may
provide in an applicable Agreement that a Participant’s outstanding Restricted
Stock Units shall be deemed earned (and any shares of Common Stock to be paid
in settlement of such Restricted Stock Units shall be nonforfeitable and
transferable) as of a Control Change Date or immediately before the date the
Restricted Stock Units would otherwise be terminated in connection with the Change
in Control, as described above.

 

9.09        Stockholder
Rights

 

No Participant shall, as a result of receiving a grant of Restricted
Stock Units, have any rights as a stockholder until and then only to the extent
that the Restricted Stock Units are earned and settled in shares of Common
Stock.  However, notwithstanding the
foregoing, the Committee in its sole discretion may set forth in the Agreement
that, for so long as the Participant holds any Restricted Stock Units, if the
Company pays any cash dividends on its Common Stock, then (a) the Company
may pay the Participant in cash for each outstanding Restricted Stock Unit
covered by the Agreement as of the record date of such dividend, less than any
required withholdings, the per share amount of such dividend or (b) the
number of outstanding Restricted Stock Units covered by the Agreement may be
increased by the number of Restricted Stock Units, rounded down to the nearest
whole number, equal to (i) the product of the number of the Participant’s
outstanding Restricted Stock Units as of the record date for such dividend
multiplied by the per share amount of the dividend divided by (ii) the
fair market value of a share of Common Stock on the payment date of such
dividend.  In the event additional
Restricted Stock Units are awarded, such Restricted Stock Units shall be
subject to the same terms and conditions set forth in the Plan and the
Agreement as the outstanding Restricted Stock Units with respect to which they
were granted.

 

25

 

ARTICLE X

INCENTIVE AWARDS

 

10.01      Grant

 

In accordance with the provisions of Article IV, the Committee
will designate each individual or entity to whom Incentive Awards are to be
granted.  All Incentive Awards shall be
determined exclusively by the Committee under the procedures established by the
Committee.

 

10.02      Earning
the Award

 

The Committee, on the date of grant of an Incentive Award, shall
specify in the applicable Agreement the terms and conditions which govern the
grant, including without limitation, whether the Participant, to be entitled to
payment, must be employed or providing services to the Company or an Affiliate
at the time the Incentive Award is to be paid. 
By way of example and not of limitation, the Committee may prescribe
that the Incentive Award shall be earned and payable upon (a) the
satisfaction of objectively determinable performance conditions based on the
criteria described in Article XI, (b) the Participant’s completion of
a specified period of employment or service with the Company or an Affiliate, (c) the
Participant’s death, disability or retirement or (d) satisfaction of a
combination of any of the foregoing factors. 
If and to the extent deemed necessary by the Committee, Incentive Awards
granted to Named Executive Officers shall be earned and become payable upon the
satisfaction of objectively determinable performance conditions based on the
criteria described in Article XI and shall be subject to the other
requirements set forth in Article XI so as to enable the Incentive Awards
to qualify as “qualified performance-based compensation” under the regulations
promulgated under Code Section 162(m).

 

10.03      Maximum
Incentive Award Period

 

The Committee, at the time an Incentive Award is made, shall determine the
maximum period over which the Incentive Award may be earned, except that such
period shall not exceed ten years from the date of grant.

 

10.04      Payment

 

The amount payable when an Incentive Award is earned may be settled in
cash, by the issuance of shares of Common Stock or by a combination thereof, as
the Committee, in its sole discretion determines and sets forth in the
applicable Agreement.  A fractional share
of Common Stock shall not be deliverable when an Incentive Award is earned, but
a cash payment will be made in lieu thereof.

 

10.05      Nontransferability

 

Except as provided in Section 10.06, Incentive Awards granted
under this Plan shall be nontransferable except by will or by the laws of
descent and distribution.  No right or
interest of

 

26

 

a Participant in an Incentive Award shall be
liable for, or subject to, any lien, obligation, or liability of such
Participant.

 

10.06      Transferable
Incentive Awards

 

Section 10.05 to the contrary notwithstanding, if an Agreement so
provides, an Incentive Award may be transferred by a Participant to the
Participant’s children, grandchildren, spouse, one or more trusts for the
benefit of such family members or to a partnership in which such family members
are the only partners, on such terms and conditions as are appropriate for such
transferees to be included in the class of transferees who may rely on a Form S-8
Registration Statement under the Securities Act of 1933 to sell shares received
pursuant to Awards granted under the Plan. 
Any such transfer will be permitted only if (i) the Participant
does not receive any consideration for the transfer and (ii) the Committee
expressly approves the transfer.  The
holder of an Incentive Award transferred pursuant to this Section shall be
bound by the same terms and conditions that governed the Incentive Award during
the period that it was held by the Participant; provided, however, that such
transferee may not transfer the Incentive Award except by will or the laws of
descent and distribution.

 

10.07      Employee
Status

 

If the terms of an Incentive Award provide that a payment will be made
thereunder only if the Participant completes a stated period of employment or
continuous service, the Committee may decide to what extent leaves of absence
for governmental or military service, illness, temporary disability or other
reasons shall not be deemed interruptions of continuous employment or service.

 

10.08      Change
in Control

 

Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Committee in its discretion may (i) terminate
before or on the Control Change Date some or all outstanding Incentive Awards
previously granted under the Plan that are not then earned and payable (and that
will not become earned and payable as of the Control Change Date) without any
payment to the holder of the Incentive Award or (ii) take such other
action as the Committee determines to be reasonable under the circumstances to
permit the Participant to realize the value of the Incentive Awards (which
value for purposes of Incentive Awards that are not then earned and payable and
that will not become earned and payable as of the Control Change Date shall be
deemed to be zero).  The Committee in its
discretion may take the actions described in this Section 10.08 contingent
on consummation of the Change in Control and with respect to some or all
outstanding Incentive Awards or on an Incentive Award-by-Incentive Award basis,
which actions need not be uniform with respect to all outstanding Incentive
Awards.  The Incentive Awards shall not
be terminated to the extent that written provision is made for their
assumption, continuance or substitution by the Company or a successor employer
or its parent or subsidiary in connection with the Change in Control.  The Committee may provide in an applicable
Agreement that a Participant’s outstanding Incentive Awards shall be deemed
earned (and any shares of Common Stock to be paid in settlement of

 

27

 

such Incentive Awards shall be nonforfeitable
and transferable) as of a Control Change Date or immediately before the date
the Incentive Awards would otherwise be terminated in connection with the
Change in Control, as described above.

 

10.09      Stockholder
Rights

 

No Participant shall, as a result of receiving an Incentive Award, have
any rights as a stockholder of the Company or any Affiliate on account of such
Incentive Award, unless and then only to the extent that the Incentive Award is
earned and settled in shares of Common Stock.

 

28

 

ARTICLE XI

QUALIFIED PERFORMANCE-BASED COMPENSATION

 

11.01      Performance
Conditions

 

In accordance with the Plan, the Committee may prescribe that Awards
will become exercisable, nonforfeitable and transferable, and earned and
payable, based on objectively determinable performance conditions.  Objectively determinable performance
conditions are performance conditions (i) that are established in writing (a) at
the time of grant or (b) no later than the earlier of (x) 90 days after
the beginning of the period of service to which they relate and (y) before the
lapse of 25% of the period of service to which they relate; (ii) that are
uncertain of achievement at the time they are established and (iii) the
achievement of which is determinable by a third party with knowledge of the
relevant facts.  The performance
conditions may be stated with respect to the Company’s, an Affiliate’s, a
product’s or business unit’s (a) gross, operating or net earnings before
or after taxes; (b) return on equity; (c) return on capital; (d) return
on sales; (e) return on investments; (f) return on assets or net
assets; (g) earnings per share; (h) cash flow per share; (i) book
value per share; (j) sales; (k) customers or subscribers; (l) cash flow; (m)
Fair Market Value of the Company or any Affiliate or shares of Common Stock;
(n) share price or total shareholder return; (o) market share; (p) level of
expenses or other costs; (q) “net contributions”; (r) “adjusted after-tax GAAP
profit,” (s) gross, operating or net revenue; (t) EBIT; (u) service revenue; (v) profitability;
(w) net income; (x) EBITDA; (y) Adjusted EBIDTA; (z) Free Cash Flow;
(aa) Churn or Churn Rate; (bb) product launches; (cc) market
launches; (dd) serviceable units or households; or (ee) peer group
comparisons of any of the aforementioned performance conditions.  Products include (a) premium narrowband;
(b) value narrowband; (c) retail broadband; (d) wholesale
broadband; (e) web hosting; (f) advertising, content and commerce; (g) value-added
services; (h) retail and wholesale municipal wireless broadband services; (i) SME
services, including software-based and connectivity-based services; and (j) any
future products of the Company or an Affiliate that the Committee determines is
appropriate to base performance conditions. 
The performance conditions may, but need not, be based upon an increase
or positive result under the aforementioned business criteria and could include,
for example and not by way of limitation, maintaining the status quo or
limiting the economic losses (measured, in each case, by reference to the
specific business criteria).  The
performance conditions may not include solely the mere continued employment of
the Participant.  However, the Award may
become exercisable, nonforfeitable and transferable or earned and payable
contingent on the Participant’s continued employment or service, and/or
employment or service at the time the Award becomes exercisable, nonforfeitable
and transferable or earned and payable, in addition to the performance
conditions described above.

 

11.02      Establishing
the Amount of the Award

 

The amount of the Award that will become exercisable, nonforfeitable
and transferable or earned and payable if the performance conditions are
obtained (or an objective formula for, or method of, computing such amount)
also must be established at the time set forth in Section 11.01
above.  Notwithstanding the preceding
sentence, the Committee may, in its sole discretion,

 

29

 

reduce the amount of the Award that will
become exercisable, nonforfeitable and transferable or earned and payable, as
applicable, if the Committee determines that such reduction is appropriate
under the facts and circumstances.  In no
event shall the Committee have the discretion to increase the amount of the
Award that will become exercisable, nonforfeitable and transferable or earned
and payable.

 

11.03      Earning
the Award

 

If the Committee, on the date of grant, prescribes that an Award shall
become exercisable, nonforfeitable and transferable or earned and payable only
upon the attainment of any of the above performance conditions, the Award shall
become exercisable, nonforfeitable and transferable or earned and payable only
to the extent that the Committee certifies in writing that such conditions have
been achieved.  An Award will not satisfy
the requirements of this Article XI to constitute “qualified
performance-based compensation” if the facts and circumstances indicate the
Award will become exercisable, nonforfeitable and transferable or earned and
payable regardless of whether the performance conditions are attained.  However, an Award does not fail to meet the
requirements of this Article XI merely because the Award would become
exercisable, nonforfeitable and transferable or earned and payable upon the
Participant’s death or disability or upon a Change in Control, although an
Award that actually becomes exercisable, nonforfeitable and transferable or
earned and payable on account of those events prior to the attainment of the
performance conditions would not constitute “qualified performance-based
compensation” under Code Section 162(m). 
In determining if the performance conditions have been achieved, the
Committee may adjust the performance targets in the event of any unbudgeted
acquisition, divestiture or other unexpected fundamental change in the business
of the Company, an Affiliate or business unit or in any product that is
material taken as a whole as appropriate to fairly and equitably determine if
the Award is to become exercisable, nonforfeitable and transferable or earned
and payable pursuant to the conditions set forth in the Award.

 

11.04      Definitions
of Performance Criteria

 

“Adjusted After-Tax GAAP Profit” means GAAP net income before stock
option or other equity compensation expense and before any income tax credits
caused by recognizing net operating loss carryforwards or income tax expense
that is offset by applying net operating loss carryforwards, but after any
other income tax expense or any asset write-downs or other one-time charges.

 

“Adjusted EBITDA” means EBITDA excluding facility exit and
restructuring costs, equity method loss of affiliates, and gain (loss) on
investments in other companies.

 

“Churn” means the number of customers or accounts discontinuing
services during a period, net of reactivations during the same period.

 

“Churn Rate” means average Churn during a period divided by the average
number of ending customers or accounts during the same period.

 

30

 

“EBIT” means earning before interest and taxes.

 

“EBITDA” means earnings before interest, taxes, depreciation and
amortization.

 

“Free Cash Flow” means Adjusted EBITDA less capital expenditures and
cash used to purchase customer bases.

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Net contributions” means as determined in the Company’s internal
management reporting which shall be prepared on a basis consistent with past
practice and is determined after all operating costs and sales and marketing
expenses, but before amortization, interest income or expense, and income tax
expense.

 

“SME” means small and medium-sized enterprises.

 

31

 

ARTICLE XII

ADJUSTMENT UPON CHANGE IN COMMON STOCK

 

The maximum number of shares of Common Stock that may be issued
pursuant to Awards and Deferred Stock Benefits, the terms of outstanding Awards
and Deferred Stock Benefits, and the per individual limitations on the number
of shares of Common Stock that may be issued pursuant to Awards shall be
adjusted as the Board shall determine to be equitably required in the event (i) there
occurs a reorganization, recapitalization, stock split, spin-off, split-off,
stock dividend, issuance of stock rights, combination of shares, merger,
consolidation, or distribution to stockholders other than a cash dividend; (ii) the
Company engages in a transaction Code Section 424 describes or (iii) there
occurs any other transaction or event which, in the judgment of the Board
necessitates such action.  In addition,
the Committee may make such other adjustments to the terms of any Awards and
Deferred Stock Benefits to the extent equitable and necessary to prevent an
enlargement or dilution of the Participant’s rights thereunder as a result of
any such event or similar transaction. 
Any determination made under this Article XII by the Board shall be
final and conclusive.

 

The issuance by the Company of stock of any class, or securities
convertible into stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of stock or obligations of the Company
convertible into such stock or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the maximum number
of shares that may be issued pursuant to Awards and Deferred Stock Benefits,
the per individual limitations on the number of shares that may be issued
pursuant to Awards or the terms of outstanding Awards and Deferred Stock
Benefits.

 

The Committee may grant Awards in substitution for stock options, stock
appreciation rights, restricted stock, restricted stock units, incentive
awards, or similar awards held by an individual who becomes an employee of the
Company or an Affiliate in connection with a transaction described in the first
paragraph of this Article XII. 
Notwithstanding any provision of the Plan (other than the limitation of Section 5.02),
the terms of such substituted Awards shall be as the Committee, in its
discretion, determines is appropriate.

 

32

 

ARTICLE XIII

COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES

 

13.01      Compliance

 

No Option or SAR shall be exercisable, no Restricted Stock Award or
Restricted Stock Unit shall be granted, no shares of Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company’s
shares may be listed.  The Company shall
have the right to rely on an opinion of its counsel as to such compliance.  Any stock certificate evidencing shares of
Common Stock issued pursuant to an Award may bear such legends and statements
as the Committee may deem advisable to assure compliance with federal and state
laws and regulations and to reflect any other restrictions applicable to such
shares as the Committee otherwise deems appropriate.  No Option or SAR shall be exercisable, no
Restricted Stock Award or Restricted Stock Unit shall be granted, no shares of
Common Stock shall be issued, no certificate for shares of Common Stock shall be
delivered, and no payment shall be made under this Plan until the Company has
obtained such consent or approval as the Committee may deem advisable from
regulatory bodies having jurisdiction over such matters.

 

13.02      Postponement
of Exercise or Payment

 

The Committee may postpone any grant, exercise, vesting or payment of
an Award for such time as the Committee in its sole discretion may deem
necessary in order to permit the Company (i) to effect, amend or maintain
any necessary registration of the Plan or the shares of Common Stock issuable
pursuant to the Award under the securities laws; (ii) to take any action
in order to (A) list such shares of Common Stock or other shares of stock
of the Company on a stock exchange if shares of Common Stock or other shares of
stock of the Company are not then listed on such exchange or (B) comply
with restrictions or regulations incident to the maintenance of a public market
for its shares of Common Stock or other shares of stock of the Company,
including any rules or regulations of any stock exchange on which the
shares of Common Stock or other shares of stock of the Company are listed; (iii) to
determine that such shares of Common Stock in the Plan are exempt from such
registration or that no action of the kind referred to in (ii)(B) above
needs to be taken; (iv) to comply with any other applicable law, including
without limitation, securities laws; (v) to comply with any legal or
contractual requirements during any such time the Company or any Affiliate is
prohibited from doing any of such acts under applicable law, including without
limitation, during the course of an investigation of the Company or any
Affiliate, or under any contract, loan agreement or covenant or other agreement
to which the Company or any Affiliate is a party or (vi) to otherwise
comply with any prohibition on such acts or payments during any applicable
blackout period; and the Company shall not be obligated by virtue of any terms
and conditions of any Agreement or any provision of the Plan to recognize the
grant, exercise, vesting or payment of an Award or to grant, sell or issue
shares of Common Stock or make any such payments in violation of the

 

33

 

securities laws or the laws of any government
having jurisdiction thereof or any of the provisions hereof.  Any such postponement shall not extend the
term of the Award and neither the Company nor its directors and officers nor
the Committee shall have any obligation or liability to any Participant or to
any other person with respect to shares of Common Stock or payments as to which
the Award shall lapse because of such postponement.

 

Additionally, the Committee shall postpone any grant, exercise vesting
or payment of an Award if the Company reasonably believes the Company’s or any
applicable Affiliate’s deduction with respect to such Award would be limited or
eliminated by application of Code Section 162(m); provided, however, such
delay will last only until the earliest date at which the Company reasonably
anticipates that the deduction with respect to the Award will not be limited or
eliminated by the application of Code Section 162(m) or the calendar year
in which the Participant separates from service.

 

13.03      Forfeiture of Payment

 

A Participant shall be required to forfeit any and all rights under
Awards or to reimburse the Company for any payment under any Award (with
interest as necessary to avoid imputed interest or original issue discount
under the Code or as otherwise required by applicable law) to the extent
applicable law requires such forfeiture or reimbursement.

 

34

 

ARTICLE XIV

LIMITATION ON BENEFITS

 

Despite any other provisions of this Plan to the contrary, if the
receipt of any payments or benefits under this Plan would subject a Participant
to tax under Code Section 4999, the Committee may determine whether some
amount of payments or benefits would meet the definition of a “Reduced Amount.”
If the Committee determines that there is a Reduced Amount, the total payments
or benefits to the Participant hereunder must be reduced to such Reduced
Amount, but not below zero.  If the
Committee determines that the benefits and payments must be reduced to the
Reduced Amount, the Company must promptly notify the Participant of that
determination, with a copy of the detailed calculations by the Committee.  All determinations of the Committee under
this Article XIV are final, conclusive and binding upon the Company and
the Participant.  It is the intention of
the Company and the Participant to reduce the payments under this Plan only if
the aggregate Net After Tax Receipts to the Participant would thereby be
increased.  As result of the uncertainty
in the application of Code Section 4999 at the time of the initial
determination by the Committee under this Article XIV, however, it is
possible that amounts will have been paid under the Plan to or for the benefit
of a Participant which should not have been so paid (“Overpayment”) or that
additional amounts which will not have been paid under the Plan to or for the
benefit of a Participant could have been so paid (“Underpayment”), in each case
consistent with the calculation of the Reduced Amount.  If the Committee, based either upon the
assertion of a deficiency by the Internal Revenue Service against the Company
or the Participant, which the Committee believes has a high probability of
success, or controlling precedent or other substantial authority, determines
that an Overpayment has been made, any such Overpayment must be treated for all
purposes as a loan which the Participant must repay to the Company together
with interest at the applicable federal rate under Code Section 7872(f)(2);
provided, however, that no such loan may be deemed to have been made and no
amount shall be payable by the Participant to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Participant is subject to tax under Code Section 1, 3101 or 4999 or
generate a refund of such taxes.  If the
Committee, based upon controlling precedent or other substantial authority,
determines that an Underpayment has occurred, the Committee must promptly
notify the Company of the amount of the Underpayment, which then shall be paid
to the Participant.  For purposes of this
Section, (i) “Net After Tax Receipt” means the Present Value of a payment
under this Plan net of all taxes imposed on Participant with respect thereto
under Code Sections 1, 3101 and 4999, determined by applying the highest
marginal rate under Code Section 1 which applies to the Participant’s
taxable income for the applicable taxable year; (ii) “Present Value” means
the value determined in accordance with Code Section 280G(d)(4) and (iii) “Reduced
Amount” means the smallest aggregate amount of all payments and benefits under
this Plan which (a) is less than the sum of all payments and benefits
under this Plan and (b) results in aggregate Net After Tax Receipts which
are equal to or greater than the Net After Tax Receipts which would result if
the aggregate payments and benefits under this Plan were any other amount less
than the sum of all payments and benefits to be made under this Plan.

 

35

 

ARTICLE XV

GENERAL PROVISIONS

 

15.01      Effect
on Employment and Service

 

Neither the adoption of this Plan, its operation, nor any documents
describing or referring to this Plan (or any part thereof), shall confer upon
any individual or entity any right to continue in the employ or service of the
Company or an Affiliate or in any way affect any right and power of the Company
or an Affiliate to terminate the employment or service of any individual or
entity at any time with or without assigning a reason therefor.

 

15.02      Unfunded
Plan

 

This Plan, insofar as it provides for Awards, shall be unfunded, and
the Company shall not be required to segregate any assets that may at any time
be represented by Awards under this Plan. 
Any liability of the Company to any person with respect to any Award
under this Plan shall be based solely upon any contractual obligations that may
be created pursuant to this Plan.  No
such obligation of the Company shall be deemed to be secured by any pledge of,
or other encumbrance on, any property of the Company.

 

15.03      Rules of
Construction

 

Headings are given to the articles and sections of this Plan solely as
a convenience to facilitate reference. 
The reference to any statute, regulation, or other provision of law
shall be construed to refer to any amendment to or successor of such provision
of law.

 

15.04      Tax
Withholding and Reporting

 

Unless an Agreement provides otherwise, each Participant shall be
responsible for satisfying in cash or cash equivalent acceptable to the
Committee any income and employment (including without limitation Social
Security and Medicare) tax withholding obligations attributable to
participation in the Plan and the grant, exercise, vesting or payment of Awards
granted thereunder (including the making of a Code Section 83(b) election
with respect to an Award).  In accordance
with procedures that the Committee establishes, the Committee, to the extent
applicable law permits, may allow a Participant to pay such amounts (i) by
surrendering shares of Common Stock that the Participant already owns (but only
for the minimum required withholding); (ii) by a cashless exercise through
a broker; (iii) by such other medium of payment as the Committee in its
discretion shall authorize or (iv) by any combination of the
aforementioned methods of payment.  The
Company shall comply with all such reporting and other requirements relating to
the administration of this Plan and the grant, exercise, vesting or payment of
any Award hereunder as applicable law requires. 
Nevertheless, shares of Common Stock that the Company reacquires in
connection with any tax withholding will still be deemed issued and will not be
available for issuance pursuant to future Awards or Deferred Stock Benefits
under the plan.

 

36

 

15.05      Reservation
of Shares.

 

The Company, during the term of this Plan, shall at all times reserve
and keep available such number of shares of Common Stock as shall be sufficient
to satisfy the requirements of the Plan. 
Additionally, the Company, during the term of this Plan, shall use its
best efforts to seek to obtain from appropriate regulatory agencies any
requisite authorizations needed in order to issue and to sell such number of
shares of Common Stock as shall be sufficient to satisfy the requirements of
the Plan.  However, the inability of the
Company to obtain from any such regulatory agency the requisite authorizations
the Company’s counsel deems to be necessary for the lawful issuance and sale of
any shares of Common Stock hereunder, or the inability of the Company to
confirm to its satisfaction that any issuance and sale of any shares of Common
Stock hereunder will meet applicable legal requirements, shall relieve the
Company of any liability in respect to the failure to issue or to sell such
shares of Common Stock as to which such requisite authority shall not have been
obtained.

 

15.06      Governing
Law.

 

This Plan and all Awards granted hereunder shall be governed by the
laws of the State of Delaware, except to the extent federal law applies.

 

15.07      Other
Actions

 

Nothing in the Plan shall be construed to limit the authority of the
Company to exercise its corporate rights and powers, including, by way of
illustration and not by way of limitation, the right to grant options, stock
appreciation rights, restricted stock awards, incentive awards or restricted
stock units for proper corporate purposes otherwise than under the Plan to any
employee or to any other person, firm, corporation, association or other
entity, or to grant options, stock appreciation rights, restricted stock
awards, incentive awards or restricted stock units to, or assume such awards of
any person in connection with, the acquisition, purchase, lease, merger,
consolidation, reorganization or otherwise, of all or any part of the business
and assets of any person, firm, corporation, association or other entity.

 

15.08      Repurchase
of Common Stock

 

The Company or its designee may have the option and right to purchase
any Award or any shares of Common Stock issued pursuant to any Award in
accordance with the terms and conditions set forth in the applicable
Agreement.  However, shares of Common
Stock repurchased pursuant to an Agreement will still be deemed issued pursuant
to the Plan and will not be available for issuance pursuant to future Awards or
Deferred Stock Benefits under the Plan.

 

15.09      Other
Conditions

 

The Committee, in its discretion, may, as a condition to the grant,
exercise, payment or settlement of an Award, require the Participant on or
before the date of grant, exercise, payment

 

37

 

or settlement of the Award to enter into (i) a
covenant not to compete (including a confidentiality, non-solicitation,
non-competition or other similar agreement) with the Company or any Affiliate,
which may become effective on the date of termination of employment or service
of the Participant with the Company or any Affiliate or any other date the
Committee may specify and shall contain such terms and conditions as the
Committee shall otherwise specify, (ii) an agreement to cancel any other
employment agreement, service agreement, fringe benefit or compensation
arrangement in effect between the Company or any Affiliate and such Participant
and/or (iii) a shareholders’ agreement with respect to shares of Common
Stock to be issued pursuant to the Award. 
If the Participant shall fail to enter into any such agreement at the
Committee’s request, then no Award shall be granted, exercised, paid or settled
and the number of shares of Common Stock that would have been subject to such
Award, if any, shall be added to the remaining shares of Common Stock available
under the Plan.

 

15.10      Forfeiture
Provisions.

 

Notwithstanding any other provisions of the Plan or any Agreement, all
rights to any Award that a Participant has will be immediately discontinued and
forfeited, and the Company shall not have any further obligation hereunder to
the Participant with respect to any Award and the Award will not be exercisable
(whether or not previously exercisable) or become vested or payable on and
after the time the Participant is discharged from employment or service with
the Company or any Affiliate for Cause.

 

15.11      Repricing
of Awards.

 

Notwithstanding any other provisions of this Plan, this Plan does not
permit (i) any repricing or decrease in the exercise price of any
outstanding Awards, (ii) the issuance of any replacement Options or SARs,
which shall be deemed to occur if a Participant agrees to forfeit an existing
Option or SAR in exchange for a new Option or SAR with a lower exercise price
or base value, or (iii) the Company to repurchase underwater or
out-of-the-money Options or SARs, which shall be deemed to be those Options or
SARs with exercise prices or base values in excess of the current Fair Market
Value of the shares of Common Stock underlying the Option or SAR.

 

15.12      Deferred
Benefits

 

In accordance with rules that the Committee prescribes, any
Participant who is eligible for the Deferred Compensation Program may elect to
defer the receipt of Common Stock issuable or cash or other consideration
payable to the Participant pursuant to an Award if so designated by the
Committee.  The Committee in its
discretion will prescribe (i) the types of Awards that are subject to the
Deferred Compensation Program, (ii) the Participants eligible to
participate in the Deferred Compensation Program and (iii) all
administrative rules thereto relating to Awards and the deferral of shares
of Common Stock to be received thereunder. 
No Awards may be subject to the Deferred Compensation Program unless and
until the Administrator in its discretion prescribes that those types of Awards
are subject thereto.  Awards that are
granted before the Committee in its discretion prescribes that type of Award to
be subject to the Deferred Compensation Program, or after the type of Award is
no longer subject to the

 

38

 

Deferred Compensation Program, shall not be
eligible for the Deferred Compensation Program. 
Additionally, shares of Common Stock available under the Plan may be
issued in payment of any other Deferred Stock Benefits under the Deferred
Compensation Program.

 

39

 

ARTICLE XVI

CLAIMS PROCEDURES

 

If a Participant has exercised an Option or a SAR or if shares of
Restricted Stock have become vested or Restricted Stock Units or Incentive
Awards have become payable, and the Participant has not received the benefits
to which the Participant believes he or she is entitled under such Award, then
the Participant must submit a written claim for such benefits to the Committee
within 90 days of either the date the Participant tried to exercise the Option
or SAR, the date the Participant contends the Restricted Stock vested or the
date the Participant contends the Restricted Stock Units or Incentive Awards
became payable or the claim will be forever barred.

 

If a claim of a Participant is wholly or partially denied, the
Participant or his duly authorized representative may appeal the denial of the
claim to the Committee.  Such appeal must
be made at any time within 30 days after the Participant receives written
notice from the Company of the denial of the claim.  In connection therewith, the Participant or
his duly authorized representative may request a review of the denied claim,
may review pertinent documents, and may submit issues and comments in
writing.  Upon receipt of an appeal, the
Committee shall make a decision with respect to the appeal and, not later than
60 days after receipt of such request for review, shall furnish the Participant
with the decision on review in writing, including the specific reasons for the
decision written in a manner calculated to be understood by the Participant, as
well as specific references to the pertinent provisions of the Plan upon which
the decision is based.

 

The Committee has the discretionary and final authority under the Plan
to determine the validity of a claim. 
Accordingly, any decision the Committee makes on a Participant’s appeal
will be administratively final.  If a
Participant disagrees with the Committee’s final decision, the Participant may
sue, but only after the claim on appeal has been denied.  Any lawsuit must be filed within 90 days of
receipt of the Committee’s final written denial of the Participant’s claim or
the claim will be forever barred.

 

40

 

ARTICLE XVII

AMENDMENT

 

The Board may amend or terminate this Plan at any time; provided,
however, that no amendment to the Plan may adversely impair the rights of a
Participant with respect to outstanding Awards without the Participant’s
consent.  No amendment shall, without the
consent of a Participant in the Deferred Compensation Program, adversely affect
any rights of such Participant under the Deferred Compensation Program as in
effect at that time.  Notwithstanding the
foregoing, the Plan may not be terminated so long as the Deferred Compensation
Program remains in effect unless all Deferred Stock Benefits payable with
shares of Common Stock under this Plan have been paid or distributed in full or
the Deferred Compensation Program is terminated in accordance with its terms on
or before such time.  In addition, an
amendment will be contingent on approval of the Company’s stockholders, to the
extent required by law or by the rules of any stock exchange on which the
Company’s securities are traded or if the amendment would (i) increase the
benefits accruing to Participants under the Plan, including without limitation,
any amendment to the Plan or any Agreement to permit a repricing or decrease in
the exercise price of any outstanding Awards, (ii) increase the aggregate
number of shares of Common Stock that may be issued under the Plan, (iii) modify
the requirements as to eligibility for participation in the Plan or, (iv) change
the performance conditions set forth in Article XI.  Additionally, to the extent the Board deems
necessary to continue to comply with the performance-based exception to the
deduction limits of Code Section 162(m), the Board will submit the
material terms of the performance conditions set forth in Article XI to
the Company’s stockholders for approval no later than the first stockholder
meeting that occurs in the fifth year following the year in which the
stockholders previously approved the performance objectives.

 

The Committee may amend any outstanding Awards to the extent it deems
appropriate; provided, however, that no amendment to an outstanding Award may
adversely impair the rights of a Participant without the Participant’s
consent.  Notwithstanding the preceding
sentence, however, the Committee may amend any outstanding Award without
Participant consent if, as determined by the Committee in its sole discretion,
such amendment is required to either (i) comply with Code Section 409A
or (ii) prevent the Participant from being subject to any excise tax or
penalty under Code Section 409A. 
Notwithstanding the foregoing, none of the Company and its Affiliates or
the Committee shall be liable to the Participant if an Award is subject to Code
Section 409A or 280G or the Participant otherwise is subject to any excise
tax or penalty under Code Section 409A or 4999.

 

41

 

ARTICLE XVIII

DURATION OF PLAN

 

No Award may be granted under this Plan on and after January 24,
2016 (10 years following the effective date of the Plan).  Awards granted before that date shall remain
valid in accordance with their terms.

 

42

 

ARTICLE XIX

EFFECTIVE DATE OF PLAN

 

The Plan is effective on January 24, 2006, the date of adoption by
the Board, contingent, however, on approval of the Plan by the Company’s
stockholders within 12 months of such date. 
Awards may be granted under this Plan as of the effective date, provided
that no Award shall be effective, exercisable, vested, earned or payable unless
the Company’s stockholders approve the Plan within 12 months of the Board’s
adoption of the Plan.  Shares of Common
Stock shall not be available to pay Deferred Stock Benefits unless and until
the Company’s stockholders approve the Plan within such 12-month period.

 

43Exhibit 10.2

 

EARTHLINK, INC.

2006 EQUITY AND CASH INCENTIVE PLAN

 

Incentive Stock Option Agreement

 

No. of shares subject to

Incentive Stock Option:          

 

THIS INCENTIVE STOCK OPTION AGREEMENT (this “Agreement”)
dated as of the        day of                ,
20      , by and between EarthLink, Inc., a
Delaware corporation (the “Company”), and                                                   
(the “Participant”), is made pursuant and subject to the provisions of the
Company’s 2006 Equity and Cash Incentive Plan (the “Plan”), a copy of which is
attached hereto.  All terms used herein
that are defined in the Plan have the same meaning given them in the Plan.

 

1.             Grant of Option.  Pursuant to the Plan, the Company, on                            ,
20       (the “Date of Grant”), granted to the
Participant, subject to the terms and conditions of the Plan and subject
further to the terms and conditions herein set forth, the right and option to
purchase from the Company all or any part of an aggregate of                      
shares of the Common Stock of the Company at the exercise price of $                        
per share.  Such price per share is not
less than the Fair Market Value of a share of the Common Stock on the Date of
Grant (or, in the case of a Ten Percent Shareholder, not less than
110 percent of the Fair Market Value of a share of the Common Stock on the
Date of Grant).  This Option is intended
to be treated as an Incentive Stock Option, but only to the extent the
aggregate Fair Market Value (determined as of the Date of Grant) of the shares
for which this Option (and all other options of the Participant that are
intended to be Incentive Stock Options whether granted under the Plan or any
other plan of the Company or any of its Affiliates) becomes exercisable for the
first time in any calendar year does not exceed One Hundred Thousand Dollars
($100,000).  If that limitation is
exceeded, this Option may be exercised for the excess number of shares as a
Nonqualified Stock Option.  The Company
shall not be liable to the Participant if this Option or any portion thereof
does not qualify as an Incentive Stock Option. 
This Option is exercisable as hereinafter provided.

 

2.             Terms and Conditions.  This Option is subject to the following terms
and conditions:

 

(a)           Expiration Date.  This Option shall expire at 11:59 p.m. on                                
, 20      (the “Expiration Date”) or such earlier time
as set forth in Sections 3, 4, 5 or 6 of this Agreement.  In no event shall the Expiration Date be later
than 10 years from the Date of Grant (or, in the case of a Ten Percent
Shareholder, five years from the Date of Grant).

 

(b)           Exercise of Option.  Except as provided in the Plan and in
Sections 3, 4, 5 or 6 of this Agreement, this Option shall become exercisable
with respect to                
percent (       %) of the shares of Common
Stock subject to the Option on each of the                    
annual anniversaries of the Date of Grant, provided that the Participant has
been continuously employed by the Company or an Affiliate from

 

 

the Date of Grant until each such time.  Once this Option has become exercisable, it
shall continue to be exercisable until the earlier of the termination of the
Participant’s rights hereunder pursuant to Sections 3, 4, 5 or 6 of this
Agreement or until the Expiration Date. 
A partial exercise of this Option shall not affect the Participant’s
right to exercise the Option with respect to the remaining shares, subject to
the conditions of the Plan and this Agreement.

 

(c)           Method of Exercise and Payment
for Shares.  This Option shall be exercised by delivering
written notice of exercise, along with the Option price for the portion of the
Option being exercised and any applicable tax withholdings, to the attention of
the Company’s Secretary at the Company’s address specified in Section 12
below.  The exercise date shall be the
date of delivery.  The Participant shall
pay the Option price and any applicable tax withholdings in cash or cash
equivalent acceptable to the Committee. 
However, the Committee in its discretion may, but is not required to,
allow the Participant to pay the Option price and tax withholdings (i) by
surrendering shares of Common Stock the Participant already owns, (ii) by a
cashless exercise through a broker, (iii) by such other medium of payment as
the Committee shall authorize or (iv) by any combination of the allowable
methods of payment set forth herein.

 

(d)           Nontransferability.  This Option is nontransferable except by will
or the laws of descent and distribution. 
During the Participant’s lifetime, only the Participant may exercise
this Option.  No right or interest of a
Participant in this Option shall be liable for, or subject to, any lien,
obligation or liability of the Participant.

 

3.             Exercise in the Event of Death.  This Option shall be exercisable for all or
part of the number of shares of Common Stock that the Participant is entitled
to purchase pursuant to Section 2(b) as of the date of the Participant’s death,
reduced by the number of shares for which the Participant previously exercised
the Option, in the event the Participant dies while employed by the Company or
any Affiliate and prior to the Expiration Date and the termination of the
Participant’s rights under Sections 4, 5 or 6 of this Agreement.  In that event, this Option may be exercised
by the Participant’s estate, or the person or persons to whom his rights under
this Option shall pass by will or the laws of descent and distribution, for the
remainder of the period preceding the Expiration Date or within 180 days of the
date the Participant dies, whichever period is shorter.

 

4.             Exercise in the Event of
Disability.  This Option shall be exercisable for all or
part of the number of shares of Common Stock that the Participant is entitled to
purchase pursuant to Section 2(b) as of the date the Participant becomes
disabled within the meaning of Code Section 22(e)(3) (“Disabled”), reduced by
the number of shares for which the Participant previously exercised the Option,
if the Participant becomes Disabled while employed by the Company or any
Affiliate and prior to the Expiration Date and the termination of the
Participant’s rights under Sections 3, 5 or 6 of this Agreement.  In that event, the Participant may exercise
this Option for the remainder of the period preceding the Expiration Date or
within 180 days of the date he ceases to be employed by the Company or any
Affiliate on account of being Disabled, whichever period is shorter.  The Committee, in its sole discretion, shall
determine whether the Participant is Disabled for purposes of this Agreement.

 

2

 

5.             Exercise After Termination of
Employment.  This Option shall be exercisable for all or
part of the number of shares that the Participant is entitled to purchase
pursuant to Section 2(b) as of the date the Participant ceases to be employed
by the Company or any Affiliate, reduced by the number of shares for which the
Participant previously exercised the Option, if the Participant ceases to be
employed by the Company or any Affiliate other than on account of death,
becoming Disabled or being terminated for Cause and prior to the Expiration
Date and the termination of the Participant’s rights under Sections 3, 4
or 6 of this Agreement.  In that event,
the Participant may exercise this Option for the remainder of the period
preceding the Expiration Date or until the date that is 30 days after the date
he ceases to be employed by the Company or any Affiliate, whichever period is
shorter.

 

6.             Termination of Employment for
Cause.  Notwithstanding any other provision of this
Agreement, all rights hereunder will be immediately discontinued and forfeited,
and the Company shall not have any further obligation hereunder to the
Participant and this Option will not be exercisable for any number of shares of
Common Stock (even if the Option previously became exercisable), on and after
the time the Participant is discharged from employment with the Company or any
Affiliate for Cause.

 

7.             Agreement to Terms of the Plan
and Agreement.  The Participant has received a copy of the
Plan, has read and understands the terms of the Plan and this Agreement, and
agrees to be bound by their terms and conditions.

 

8.             Tax Consequences.  The Participant acknowledges (i) that there
may be adverse tax consequences upon acquisition or disposition of the shares
of Common Stock received upon exercise of this Option and (ii) that Participant
should consult a tax adviser prior to any such acquisition or disposition.  This Option is intended to be exempt from
Code Section 409A.  However, the
Participant is solely responsible for determining the tax consequences of the
Option and for satisfying the Participant’s tax obligations with respect to the
Option (including, but not limited to, any income or excise taxes resulting
from the application of Code Section 409A), and the Company shall not be liable
if this Option is subject to Code Section 409A.

 

9.             Fractional Shares.  Fractional shares shall not be issuable
hereunder, and when any provision hereof may entitle the Participant to a
fractional share, such fractional share shall be disregarded.

 

10.           Change in Capital Structure.  The terms of this Option shall be adjusted in
accordance with the terms and conditions of the Plan as the Committee
determines is equitably required in the event the Company effects one or more
stock dividends, stock splits, subdivisions or consolidations of shares or
other similar changes in capitalization.

 

11.           Notification Upon Sale.  The Participant shall give written notice of
any sale or other disposition of any Common Stock acquired under this Option to
the Company’s Secretary at the Company’s address specified in Section 12 below,
if the Participant sells or otherwise disposes of any shares of Common Stock
acquired under this Option before the expiration of the later of the two-year
period beginning on the Date of Grant or the one-year period beginning on the
date that the Participant exercised this Option with respect to such shares.

 

3

 

12.           Notice.  Any notice or other communication given
pursuant to this Agreement, or in any way with respect to this Option, shall be
in writing and shall be personally delivered or mailed by United States
registered or certified mail, postage prepaid, return receipt requested, to the
following addresses:

 

	
  If to the Company:

  	
  EarthLink, Inc.

  
	
   

  	
  1375 Peachtree Street - Level A

  
	
   

  	
  Atlanta, Georgia 30309

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  
	
  If to the Participant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

13.           Shareholder Rights.  The Participant shall not have any rights as a shareholder
with respect to shares of Common Stock subject to this Option until the
issuance of the shares upon exercise of the Option.

 

14.           No Right to Continued Employment.  This Option does not confer upon the
Participant any right with respect to continued employment by the Company or
any Affiliate, nor shall it interfere in any way with the right of the Company
or any Affiliate to terminate the Participant’s employment at any time without
assigning a reason therefor.

 

15.           Binding Effect.  Subject to the limitations stated above and
in the Plan, this Agreement shall be binding upon and inure to the benefit of
the legatees, distributees, transferees and personal representatives of the
Participant and the successors of the Company.

 

16.           Conflicts.  In the event of any conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.  All references
herein to the Plan shall mean the Plan as in effect on the date hereof.

 

17.           Counterparts.  This Agreement may be executed in a number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same instrument.

 

18.           Miscellaneous.  The parties agree to execute such further
instruments and take such further actions as may be necessary to carry out the
intent of the Plan and this Agreement. 
This Agreement and the Plan shall constitute the entire agreement of the
parties with respect to the subject matter hereof.

 

19.           Governing Law.  This Agreement shall be governed by the laws
of the State of Delaware, except to the extent federal law applies.

 

4

 

IN WITNESS WHEREOF, the Company has caused
this Agreement to be signed by a duly authorized officer, and the Participant
has affixed his signature hereto.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EARTHLINK, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Participant Name]

  
						

 

5

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