Document:

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EXHIBIT 4.1

 

EFFICIENT CHANNEL CODING, INC.

2000 LONG TERM INCENTIVE PLAN

Adopted Effective November 6, 2000

 

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1. PURPOSE OF PLAN
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2. EFFECTIVE DATE AND TERM OF PLAN
	 	 	1	 
	 
	 	 	 	 
	2.1 Term of Plan
	 	 	 1	 
	2.2 Effect on Awards
	 	 	 1	 
	2.3 Stockholder Approval
	 	 	 1	 
	 
	 	 	 	 
	ARTICLE 3. SHARES SUBJECT TO PLAN
	 	 	1	 
	 
	 	 	 	 
	3.1 Reserved Number of Shares
	 	 	 1	 
	3.2 Source of Shares
	 	 	 1	 
	3.3 Availability of Unused Shares
	 	 	 1	 
	3.4 Adjustment Provisions
	 	 	 2	 
	3.5 Substitute Awards
	 	 	 3	 
	 
	 	 	 	 
	ARTICLE 4. ADMINISTRATION OF PLAN
	 	 	3	 
	 
	 	 	 	 
	4.1 Administering Body
	 	 	 3	 
	4.2 Authority of Administering Body
	 	 	 4	 
	4.3 Eligibility
	 	 	 5	 
	4.4 No Liability
	 	 	 5	 
	4.5 Amendments
	 	 	 5	 
	4.6 Other Compensation Plans
	 	 	 6	 
	4.7 Plan Binding on Successors
	 	 	 6	 
	4.8 References to Successor Statutes, Regulations and Rules
	 	 	 6	 
	4.9 Issuances for Compensation Purposes Only
	 	 	 6	 
	4.10 Invalid Provisions
	 	 	 6	 
	4.11 Governing Law
	 	 	 6	 
	 
	 	 	 	 
	ARTICLE 5. GENERAL AWARD PROVISIONS
	 	 	6	 
	 
	 	 	 	 
	5.1 Participation in the Plan
	 	 	 6	 
	5.2 Award Agreements
	 	 	 7	 
	5.3 Exercise of Awards
	 	 	 7	 
	5.4 Payment for Awards
	 	 	 8	 
	5.5 No Employment or Other Continuing Rights
	 	 	 8	 
	5.6 Restrictions Under Applicable Laws and Regulations
	 	 	 9	 
	5.7 Additional Conditions
	 	 	10	 
	5.8 No Privileges of Stock Ownership
	 	 	10	 
	5.9 Non-Transferable
	 	 	11	 
	5.10 Information to Recipients
	 	 	11	 
	5.11 Withholding Taxes
	 	 	12	 
	5.12 Legends on Common Stock Certificates
	 	 	12	 
	5.13 Effect of Termination of Employment on Awards—Employees Only
	 	 	12	 
	5.14 Effect of Termination of Engagement on Awards—Non-Employees Only
	 	 	13	 
	5.15 Transfer; Leave of Absence
	 	 	13	 
	5.16 Limits on Awards to Certain Eligible Persons
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 6. STOCK OPTIONS
	 	 	14	 
	 
	 	 	 	 
	6.1 Nature of Stock Options
	 	 	14	 
	6.2 Option Exercise Price
	 	 	14	 
	6.3 Option Period and Vesting
	 	 	15	 
	6.4 Special Provisions Regarding Incentive Stock Options
	 	 	15	 

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	6.5 Reload Options
	 	 	15	 
	6.6 Restrictions
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 7. RESTRICTED STOCK AWARDS
	 	 	16	 
	 
	 	 	 	 
	7.1 Nature of Restricted Stock Awards
	 	 	16	 
	7.2 Rights as a Stockholder
	 	 	16	 
	7.3 Restrictions
	 	 	16	 
	7.4 Repurchase of Restricted Stock
	 	 	17	 
	7.5 Escrows
	 	 	17	 
	7.6 Vesting of Restricted Stock
	 	 	17	 
	7.7 Waiver, Deferral and Reinvestment of Dividends
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 8. REORGANIZATIONS
	 	 	17	 
	 
	 	 	 	 
	8.1 Reorganizations Not Involving a Change in Control
	 	 	17	 
	8.2 Reorganizations Involving a Change in Control
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 9. DEFINITIONS
	 	 	18	 

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Efficient Channel Coding, Inc.

2000 LONG TERM INCENTIVE PLAN

 

1. PURPOSE OF PLAN

The Company adopted this Plan to promote the interests of the Company, its Affiliated Entities and
their respective stockholders by using investment interests in the Company to attract, retain and
motivate management and other persons, including officers, directors, employees and certain
consultants of the Company and the Affiliated Entities to encourage and reward such persons’
contributions to the performance of the Company and to align their interests with the interests of
the Company’s stockholders. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in Article 9.

2. EFFECTIVE DATE AND TERM OF PLAN

     2.1 Term of Plan. This Plan became effective as of the Effective Date and shall
continue in effect until the Expiration Date, at which time this Plan shall automatically
terminate.

     2.2 Effect on Awards. Awards may be granted during the Plan Term, but no Awards may
be granted after the Plan Term. Notwithstanding the foregoing, each Award properly granted under
this Plan during the Plan Term shall remain in effect after termination of this Plan until such
Award has been exercised, terminated or expired, as applicable, in accordance with its terms and
the terms of this Plan.

     2.3 Stockholder Approval. This Plan shall be approved by the Company’s stockholders
within twelve (12) months after the Effective Date. The effectiveness of any Awards granted prior
to such stockholder approval shall be specifically subject to, and conditioned upon, such
stockholder approval.

3. SHARES SUBJECT TO PLAN

     3.1 Reserved Number of Shares. The maximum number of shares of Common Stock reserved
and available for issuance under this Plan shall be one hundred thousand (100,000), subject to
adjustment as set forth in Section 3.4.

     3.2 Source of Shares. The Common Stock to be issued under this Plan will be made
available, at the discretion of the Board, either from authorized but unissued shares of Common
Stock or from previously issued shares of Common Stock reacquired by the Company, including shares
purchased on the open market.

     3.3 Availability of Unused Shares. Shares of Common Stock subject to and/or
underlying any unexercised, unearned or yet-to-be acquired portions of any Award granted under

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

 

 

this
Plan that expire, terminate or are canceled, and shares of Common Stock issued pursuant to Awards
under this Plan that are reacquired by the Company pursuant to the terms under which such shares
were issued, will again become available for the grant of further Awards under this Plan.
Notwithstanding the provisions of this Section 3.3, no shares of Common Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the IRC or any successor statute thereto.

     3.4 Adjustment Provisions.

     (a) If (i) the outstanding shares of Common Stock of the Company are increased,
decreased or exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed in respect
of such shares of Common Stock (or any stock or securities received with respect to such
Common Stock), through merger, consolidation, sale or exchange of all or substantially all
of the assets of the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to such Common
Stock), or (ii) the value of the outstanding shares of Common Stock of the Company is
reduced by reason of an extraordinary cash dividend, an appropriate and proportionate
adjustment may be made in (1) the maximum number and kind of shares or securities available
for issuance under this Plan, (2) the number and kind of shares or other securities that can
be granted to any one individual Recipient under his or her Awards, (3) the number and kind
of shares or other securities subject to then outstanding Awards under this Plan, and/or (4)
the price for each share or other unit of any other securities subject to then outstanding
Awards under this Plan, without changing the aggregate exercise price (i.e., the exercise
price multiplied by the number of securities comprising such Awards) as to which such Awards
remain exercisable.

     (b) No fractional interests will be issued under this Plan resulting from any
adjustments, but the Administering Body, in its sole discretion, may make a cash payment in
lieu of any fractional shares of Common Stock issuable as a result of such adjustments.

     (c) To the extent any adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Administering Body, whose determination in that respect
shall be final, binding and conclusive.

     (d) The grant of Awards pursuant to this Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.

     (e) No adjustment to the terms of an Incentive Stock Option shall be made unless such
adjustment either (i) would not cause such Incentive Stock Option to lose its

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status as an incentive stock option under the provisions of the IRC or (ii) is agreed
to in writing by the Administering Body and the Recipient.

     3.5 Substitute Awards. The Administering Body may grant Awards under this Plan in
substitution for stock and stock based awards held by employees of another corporation who become
employees of the Company or an Affiliated Entity as a result of a merger, consolidation or other
business combination of the employing corporation with the Corporation or an Affiliated Entity or
the acquisition by the Company or an Affiliated Entity of property or stock of the employing
corporation. The Administering Body may direct that the substitute Awards be granted on such terms
and conditions as the Administering Body considers appropriate in the circumstances.

     4. ADMINISTRATION OF PLAN

     4.1 Administering Body.

     (a) Subject to the provisions of Section 4.1(b)(ii), this Plan shall be
administered by the Board or by the Stock Plan Committee of the Board appointed pursuant to
Section 4.1(b)(i). The Stock Plan Committee may be (but is not required to be), in
the discretion of the Board, the same as the compensation committee of the Board, if such
committee has been appointed.

(b) (i) The Board in its sole discretion may from time to time appoint a Stock Plan
Committee of not less than two (2) Board members to administer this Plan and,
subject to applicable law, to exercise all of the powers, authority and discretion
of the Board under this Plan. The Board may from time to time increase or decrease
(but not below two (2)) the number of members of the Stock Plan Committee, remove
from membership on the Stock Plan Committee all or any portion of its members,
and/or appoint such person or persons as it desires to fill any vacancy existing on
the Stock Plan Committee, whether caused by removal, resignation or otherwise. The
Board may disband the Stock Plan Committee at any time and thereby revest in the
Board the administration of this Plan.

     (ii) Notwithstanding the foregoing provisions of Section 4.1(b)(i) to
the contrary, upon becoming and so long as the Company remains an Exchange Act
Registered Company and if the Company has not, by action of the Board, elected to
opt out of the provisions of this Section 4.1(b)(ii), (1) the Board shall
appoint the Stock Plan Committee, (2) this Plan shall be administered by the Stock
Plan Committee and (3) each member of the Stock Plan Committee shall be a
Non-Employee Director, and, in addition, if Awards are to be made to persons subject
to Section 162(m) of the IRC and such Awards are intended to constitute
Performance-Based Compensation, then each member of the Stock Plan Committee shall,
in addition to being a Non-Employee Director, be an Outside Director.

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     (iii) The Stock Plan Committee shall report to the Board the names of Eligible
Persons granted Awards, the precise type of Award granted, the number of shares of
Common Stock issuable pursuant to such Award, if any, and the terms and conditions
of each such Award.

     4.2 Authority of Administering Body.

     (a) Subject to the express provisions of this Plan, the Administering Body shall have
the power to interpret and construe this Plan and any agreements or other documents defining
the rights and obligations of the Company and such Eligible Persons who have been granted
Awards hereunder and thereunder, to determine all questions arising hereunder and
thereunder, to adopt and amend such rules and regulations for the administration hereof and
thereof as it may deem desirable, and otherwise to carry out the terms of this Plan and such
agreements and other documents. The interpretation and construction by the Administering
Body of any provisions of this Plan or of any Award shall be conclusive and binding. Any
action taken by, or inaction of, the Administering Body relating to this Plan or any Award
shall be within the absolute discretion of the Administering Body and shall be conclusive
and binding upon all persons. Subject only to compliance with the express provisions
hereof, the Administering Body may act in its absolute discretion in matters related to this
Plan and any and all Awards.

     (b) Subject to the express provisions of this Plan, the Administering Body may from
time to time, in its discretion, select the Eligible Persons to whom, and the time or times
at which such Awards shall be granted, the nature of each Award, including, without limiting
the foregoing, any restrictions on transfer, rights and restrictions on co-sale, forfeiture
and noncompete and nonsolicitation provisions, the number of shares of Common Stock that
comprise or underlie each Award, the vesting period for each Award, the period for the
purchase or exercise of each Award, as applicable, the Performance Criteria applicable to
the Award, if any, and such other terms and conditions applicable to the Award as the
Administering Body shall determine. The Administering Body may grant, at any time, new
Awards to an Eligible Person who has previously received Awards whether such prior Awards
are still outstanding, have previously been canceled, disposed of or exercised in whole or
in part, as applicable, or are canceled in connection with the issuance of new Awards. The
Administering Body may grant Awards singly, in combination or in tandem with other Awards,
as it determines in its discretion. Any and all terms and conditions of the Awards,
including the purchase or exercise price, may be established by the Administering Body
without regard to existing Awards.

     (c) Any action of the Administering Body with respect to the administration of this
Plan shall be taken pursuant to a majority vote of the authorized number of members of the
Administering Body or by the unanimous written consent of its members; provided, however,
that (i) if the Administering Body is the Stock Plan Committee and consists of two (2)
members, then actions of the Administering Body must be unanimous and (ii) if the
Administering Body is the Board, actions taken at a meeting of the Board

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     shall be valid if approved by directors constituting a majority of the required quorum for such
meeting.

     4.3 Eligibility. Only Eligible Persons shall be eligible to receive Awards under this
Plan as shall be selected and determined from time to time by the Administering Body, in its sole
and absolute discretion.

     4.4 No Liability. No member of the Board or the Stock Plan Committee or any designee
thereof will be liable for any action or inaction with respect to this Plan or any Award or any
transaction arising under this Plan or any Award, except in circumstances constituting bad faith or
willful misconduct of such member.

     4.5 Amendments.

     (a) The Administering Body may, insofar as permitted by applicable law, rule or
regulation, from time to time suspend or discontinue this Plan or revise or amend it in any
respect whatsoever, and this Plan as so revised or amended will govern all Awards hereunder,
including those granted before such revision or amendment; provided, however, that no such
revision or amendment shall alter, impair or diminish any rights or obligations under any
Award previously granted under this Plan, without the written consent of the Recipient.
Without limiting the generality of the foregoing, the Administering Body is authorized to
amend this Plan to comply with or take advantage of amendments to applicable laws, rules or
regulations, including amendments to the Securities Act, Exchange Act or the IRC or any
rules or regulations promulgated thereunder. No stockholder approval of any amendment or
revision shall be required unless such approval is required by (i) applicable law, rule or
regulation or (ii) any stock exchange or automated quotation system then listing the shares
of Common Stock.

     (b) The Administering Body may, with the written consent of a Recipient, make such
modifications in the terms and conditions of an Award as it deems advisable. Without
limiting the generality of the foregoing, the Administering Body may, in its discretion with
the written consent of Recipient, at any time and from time to time after the grant of any
Award (i) accelerate or extend the vesting or exercise period of any Award as a whole or in
part, (ii) adjust or reduce the purchase or exercise price, as applicable, of Awards held by
such Recipient by cancellation of such Awards and granting of Awards at lower purchase or
exercise prices or by modification, extension or renewal of such Awards and (iii) reduce or
otherwise modify the Performance Criteria applicable to any Award. In the case of Incentive
Stock Options, Recipients acknowledge that extensions of the exercise period and other
modifications may result in the loss of the favorable tax treatment afforded incentive stock
options under Section 422 of the IRC.

     (c) Except as otherwise provided in this Plan or in the applicable Award Agreement, no
amendment, revision, suspension or termination of this Plan will, without the written
consent of the Recipient, alter, terminate, impair or adversely affect any right or
obligation under any Award previously granted under this Plan.

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

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     4.6 Other Compensation Plans. The adoption of this Plan shall not affect any other
stock option, securities purchase, incentive or other compensation plans in effect for the Company
or an Affiliated Entity, and this Plan shall not preclude the Company or an Affiliated Entity from
establishing any other forms of incentive or other compensation for Employees, Directors,
Consultants or others, whether or not approved by stockholders.

     4.7 Plan Binding on Successors. This Plan shall be binding upon the successors and
assigns of the Company.

     4.8 References to Successor Statutes, Regulations and Rules. Any reference in this
Plan to a particular statute, regulation or rule shall also refer to any successor provision of
such statute, regulation or rule.

     4.9 Issuances for Compensation Purposes Only. This Plan constitutes an “employee
benefit plan” as defined in Rule 405 promulgated under the Securities Act. Awards to eligible
Employees or Directors shall be granted for any lawful consideration, including compensation for
services rendered, promissory notes or otherwise. Awards to eligible Consultants shall be granted
only in exchange for bona fide services rendered by such consultants or advisors and such services
must not be in connection with the offer and sale of securities in a capital-raising transaction.

     4.10 Invalid Provisions. In the event that any provision of this Plan is found to be
invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein invalid or unenforceable,
and all such other provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.

     4.11 Governing Law. This Plan shall be governed by and interpreted in accordance with
the internal laws of the State of Ohio, without giving effect to the principles of the conflicts of
laws thereof.

5. GENERAL AWARD PROVISIONS

     5.1 Participation in the Plan.

     (a) A person shall be eligible to receive Award grants under this Plan if, at the time
of the grant of such Award, such person is an Eligible Person.

     (b) Incentive Stock Options may be granted only to Employees meeting the employment
requirements of Section 422 of the IRC, or a similar statute governing Incentive Stock
Options.

     (c) Notwithstanding anything to the contrary herein, the Administering Body may, in
order to fulfill the purposes of this Plan, modify grants of Awards to Recipients
who are foreign nationals or employed outside of the United States to recognize
differences in applicable law, tax policy or local custom.

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     5.2 Award Agreements.

     (a) Each Award granted under this Plan shall be evidenced by an Award Agreement duly
executed on behalf of the Company and by the Recipient or, in the Administering Body’s
discretion, a confirming memorandum issued by the Company to the Recipient, setting forth
such terms and conditions applicable to such Award as the Administering Body may in its
discretion determine. Award Agreements may but need not be identical and shall comply with
and be subject to the terms and conditions of this Plan, a copy of which shall be provided
to each Recipient and incorporated by reference into each Award Agreement. Any Award
Agreement may contain such other terms, provisions and conditions not inconsistent with this
Plan as may be determined by the Administering Body.

     (b) In case of any conflict between this Plan and any Award Agreement, this Plan shall
control except as specifically provided in the Award Agreement.

     (c) In case of any conflict between the Plan and any Award Agreement, on the one hand,
and any Employment Agreement or other agreement pursuant to which services are rendered, as
applicable, between a Recipient and either the Company and/or an Affiliated Entity, on the
other hand, the terms and conditions of the Employment Agreement or such other agreement, as
applicable, shall apply with respect to those items specifically addressed in the Employment
Agreement or such other agreement, as applicable.

     (d) In consideration of the granting of an Award under the Plan and if requested by the
Company, the Recipient shall agree, in the Award Agreement, to remain in the employ of (or
to consult for or to serve as a Non-Employee Director of, as applicable) the Company or any
Affiliated Entity for a period of at least one (1) year (or such shorter period as may be
fixed in the Award Agreement or by action of the Administering Body following grant of the
Award) after the Award is granted (or, in the case of a Non-Employee Director, until the
next annual meeting of stockholders of the Company).

     5.3 Exercise of Awards. No Award granted hereunder shall be issuable or exercisable
except in respect of whole shares, and fractional share interests shall be disregarded. Not less
than 100 shares of Common Stock (or such other amount as is set forth in the applicable Award
Agreement) may be purchased at one time, and Stock Options or other Awards, as applicable, must be
purchased or exercised, as applicable, in multiples of 100 unless the number purchased is the total
number at the time available for purchase under the terms of the Award. An Award shall be deemed
to be claimed or exercised when the Secretary or other designated official of the Company receives
appropriate written notice, on such form acceptable to the Company, from the Recipient, together
with payment of the applicable purchase or exercise price made in accordance with the Award
Agreement and any amounts required under Section 5.11 of this Plan. Notwithstanding any
other provision of this
Plan, the Administering Body may impose, by rule and/or in Award Agreements, such conditions
upon the exercise of Awards (including conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements, including Rule 16b-3 and
Rule 10b-5 under the

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Exchange Act, and any amounts required under Section 5.11 of this Plan
or other applicable section under the IRC, or the regulations promulgated thereunder.

     5.4 Payment for Awards.

     (a) Awards requiring payment of a purchase or exercise price shall be payable upon the
exercise of such Award pursuant to any Award granted hereunder by delivery of legal tender
of the United States or payment of such other consideration as the Administering Body may
from time to time deem acceptable in any particular instance.

     (b) The Company may assist any person to whom Awards are granted hereunder (including
any Employee, Director or Consultant of the Company and/or an Affiliated Entity) in the
payment of the exercise price or other amounts payable in connection with the receipt or
exercise of such Award, by lending such amounts to such person on such terms and at such
rates of interest and upon such security (if any) as shall be approved by the Administering
Body.

     (c) In the discretion of the Administering Body, payments for purchase or exercise of
Awards may be by matured capital stock of the Company (i.e., capital stock owned longer than
six (6) months) delivered in transfer to the Company by or on behalf of the person
exercising the Award and duly endorsed in blank or accompanied by stock powers duly endorsed
in blank, with signatures guaranteed in accordance with the Exchange Act if required by the
Administering Body (valued at Fair Market Value as of the exercise date), or such other
consideration as the Administering Body may from time to time in the exercise of its
discretion deem acceptable in any particular instance; provided, however, that the
Administering Body may, in the exercise of its discretion, (i) allow exercise of Stock
Options in a broker-assisted or similar transaction in which the exercise price is not
received by the Company until promptly after exercise, and/or (ii) allow the Company to loan
the applicable purchase or exercise price to the Recipient, if the purchase or exercise will
be followed by a prompt sale of some or all of the underlying shares and a portion of the
sale proceeds is dedicated to full payment of the purchase or exercise price and amounts
required pursuant to Section 5.11 of this Plan.

     5.5 No Employment or Other Continuing Rights. Nothing contained in this Plan (or in
any Award Agreement or in any other agreement or document related to this Plan or to Awards granted
hereunder) shall confer upon any Eligible Person or Recipient any right to continue in the employ
or engagement of the Company or any Affiliated Entity or constitute any contract or agreement of
employment or engagement, or interfere in any way with the right of the Company or any Affiliated
Entity to reduce such person’s compensation or other benefits or to terminate the employment or
engagement of such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any Award Agreement pursuant to this Plan, the Company shall have the
right to deal with each Recipient in the same manner as if this Plan and any such Award Agreement
did not exist, including with respect to all matters related to the hiring, retention,
discharge, compensation and conditions of the employment or engagement of the Recipient. Any
questions as to whether and when there has been a termination of a Recipient’s employment or
engagement, the reason (if any) for such termination, and/or the consequences thereof under the
terms of this Plan or any statement evidencing the grant of

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Awards pursuant to this Plan shall be
determined by the Administering Body, and the Administering Body’s determination thereof shall be
final and binding.

     5.6 Restrictions Under Applicable Laws and Regulations.

     (a) All Awards granted under this Plan shall be subject to the requirement that, if at
any time the Company shall determine, in its discretion, that the listing, registration or
qualification of the shares subject to any such Award granted under this Plan upon any
securities exchange or under any federal, state or foreign law, or the consent or approval
of any government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Awards or the issuance, if any, or purchase of shares
in connection therewith, such Awards may not be granted or exercised as a whole or in part
unless and until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company. During the
term of this Plan, the Company will use reasonable efforts to seek to obtain from the
appropriate regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common Stock as shall
be sufficient to satisfy the requirements of this Plan. The inability of the Company to
obtain from any such regulatory agency having jurisdiction thereof the qualifications,
consents, approvals or authorizations deemed by the Company to be necessary for the lawful
issuance and sale of any shares of its Common Stock hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such stock as to which such requisite
qualification, consent, approval or authorization shall not have been obtained.

     (b) The Company shall be under no obligation to register or qualify the issuance of
Awards or underlying shares of Common Stock under the Securities Act or applicable state
securities laws. Unless the shares of Common Stock applicable to any such Award have been
registered under the Securities Act and qualified or registered under applicable state
securities laws, the Company shall be under no obligation to issue any shares of Common
Stock covered by any Award unless the Award and underlying shares of Common Stock, as
applicable, may be issued pursuant to applicable exemptions from such registration or
qualification requirements. In connection with any such exempt issuance, the Administering
Body may require the Recipient to provide a written representation and undertaking to the
Company, satisfactory in form and scope to the Company and upon which the Company may
reasonably rely, that such Recipient is acquiring such securities for his or her own account
as an investment and not with a view to, or for sale in connection with, the distribution of
any such shares of stock, and that such person will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer under the
Securities Act and other applicable law, and that if shares of stock are issued without such
registration, a legend to this effect (together with any other legends deemed appropriate by
the Administering
Body) may be endorsed upon the securities so issued. The Company may also order its
transfer agent to stop transfers of such securities. The Administering Body may also
require the Recipient to provide the Company such information and other documents as the
Administering Body may request in order to satisfy the Administering Body as to the

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investment sophistication and experience of the Recipient and as to any other conditions for
compliance with any such exemptions from registration or qualification.

     5.7 Additional Conditions. The grant and/or exercise of an Award and the issuance of
shares in connection with the exercise of an Award may also be conditioned upon or subject to such
other provisions (whether or not applicable to any other Award or Eligible Person) as the
Administering Body, in its sole discretion, determines appropriate, including (a) provisions to
assist the Recipient in financing the purchase of Common Stock issuable as a result of such Award,
(b) provisions for the forfeiture of or restrictions on resale or other disposition of shares of
Common Stock acquired under any Award, (c) provisions giving the Company the right to repurchase
shares of Common Stock acquired under any Award in the event the Recipient elects to dispose of
such shares, (d) provisions to comply with federal and state securities laws and federal and state
income tax withholding requirements, (e) provisions conditioned upon the declaration of
effectiveness by the SEC of a registration statement relating to a primary offering of the Common
Stock, filed by the Company with the SEC under the Securities Act, (f) provisions conditioned upon
the satisfaction of withholding tax or other withholding liabilities, (g) provisions conditioned
upon the listing, registration or qualification of any to-be-issued shares upon any securities
exchange, any NASDAQ or other trading or quotation system or under any state or federal law, (h)
provisions conditioned upon the consent or approval of any regulatory body, (i) provisions
conditioned upon the execution of a lock-up agreement with one or more prospective underwriters, or
(j) provisions conditioned upon the execution of a buy-sell or stockholders agreement with other
stockholders of the Company. The Administering Body shall, in its sole discretion, determine
whether any one or more of these conditions is necessary or desirable to be satisfied in connection
with the exercise of an Award or the delivery or purchase of shares pursuant to the exercise of an
Award. If the Administering Body determines that any one or more of the foregoing conditions must
be satisfied, the exercise of an Award shall not be effective unless and until such condition shall
have been satisfied free of any conditions not acceptable to the Company in its sole discretion.

     5.8 No Privileges of Stock Ownership. Except as otherwise set forth herein, a
Recipient shall have no rights as a stockholder with respect to any shares issuable or issued in
connection with an Award until the date of the receipt by the Company of all amounts payable in
connection with the purchase or exercise, as applicable, of the Award, the satisfaction or waiver
of all applicable Performance Criteria and the performance by the Recipient of all obligations
applicable thereto. Status as an Eligible Person shall not be construed as a commitment that any
Award will be granted under this Plan to an Eligible Person or to Eligible Persons generally. No
person shall have any right, title or interest in any fund or in any specific asset (including
shares of capital stock) of the Company by reason of any Award granted hereunder. Neither this
Plan (nor any documents related hereto) nor any action taken pursuant hereto (or thereto) shall be
construed to create a trust of any kind or a fiduciary relationship between the Company and any
Person. To the extent that any Person
acquires a right to receive Awards hereunder, such right shall be no greater than the right of
any unsecured general creditor of the Company.

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     5.9 Non-Transferable.

     (a) No Award under the Plan may be sold, pledged, assigned or transferred in any manner
other than by will or the laws of descent and distribution or, subject to the consent of the
Administering Body, pursuant to a DRO, unless and until such Award has been exercised, or
the securities underlying such Award have been issued, and all restrictions applicable to
such securities have lapsed. No Award or interest or right therein shall be liable for the
debts, contracts, liabilities or contractual obligations of the Recipient or his or her
successors in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.

     (b) During the lifetime of the Recipient, only he or his court appointed guardian may
exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been
disposed of with the consent of the Administering Body pursuant to a DRO. After the death of
the Recipient, any exercisable portion of an Award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his
personal representative or by any person empowered to do so under the deceased Recipient’s
will or under the then applicable laws of descent and distribution.

     (c) Notwithstanding the foregoing, no Stock Option owned by a Recipient subject to
Section 16 of the Exchange Act may be assigned or transferred in any manner inconsistent
with Rule 16b-3. Furthermore, notwithstanding the foregoing, Incentive Stock Options (or
other Stock Options subject to transfer restrictions under the IRC) may not be assigned or
transferred in violation of Section 422 of the IRC (or any comparable or successor
provision) or the regulations thereunder.

     5.10 Information to Recipients.

     (a) The Administering Body in its sole discretion shall determine what, if any,
financial and other information shall be provided to Recipients and when such financial and
other information shall be provided after giving consideration to applicable federal and
state laws, rules and regulations, including applicable federal and state securities laws,
rules and regulations.

     (b) The furnishing of financial and other information that is confidential to the
Company shall be subject to the Recipient’s agreement that the Recipient shall maintain the
confidentiality of such financial and other information, shall not disclose such information
to third parties, and shall not use the information for any purpose other than evaluating an
investment in the Company’s securities under this Plan. The Administering
Body may impose other restrictions on the access to and use of such confidential
information and may require a Recipient to acknowledge the Recipient’s obligations

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     under this Section 5.10(b) (which acknowledgment shall not be a condition to the
Recipient’s obligations under this Section 5.10(b)).

     5.11 Withholding Taxes. Whenever the granting, vesting or exercise of any Award
granted under this Plan, or the transfer of any shares issued upon exercise of any Award, gives
rise to tax or tax withholding liabilities or obligations, the Administering Body shall have the
right to require the Recipient to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to issuance of such shares. The Administering
Body may, in the exercise of its discretion, allow satisfaction of tax withholding requirements by
accepting delivery of stock of the Company (or by withholding a portion of the stock otherwise
issuable in connection with such Awards).

     5.12 Legends on Common Stock Certificates. Each certificate representing shares
acquired as a result of any Award granted hereunder shall be endorsed with all legends, if any,
required by applicable federal and state securities and other laws to be placed on the certificate.
The determination of which legends, if any, shall be placed upon such certificates shall be made
by the Administering Body in its sole discretion and such decision shall be final and binding.

     5.13 Effect of Termination of Employment on Awards—Employees Only.

     (a) Termination for Just Cause Dismissal. Subject to Section 5.13(c),
and except as otherwise provided in a written agreement between the Company and/or an
Affiliated Entity and the Recipient, which may be entered into at any time before or after
termination of employment of the Recipient, in the event of a Just Cause Dismissal of an
Employee Recipient, all of the Recipient’s unvested Awards shall be terminated and become
void and all of the Recipient’s unexercised Awards (whether or not vested) shall be
forfeited, expire and become void as of the date of such Just Cause Dismissal.

     (b) Termination Other than for Just Cause Dismissal. Subject to Section
5.13(c) and except as otherwise provided in a written agreement between the Company
and/or an Affiliated Entity and the Recipient, which may be entered into at any time before
or after termination of employment, in the event of an Employee Recipient’s termination of
employment for:

     (i) any reason other than for Just Cause Dismissal, death, Permanent Disability
or normal retirement, the Recipient’s unvested and/or unexercised Awards (whether or
not vested) shall expire and become void as of the earlier of (A) the date such
Awards would have expired in accordance with their terms had the Recipient remained
employed and (B) three (3) months after the date of termination of employment; or

     (ii) death, Permanent Disability or normal retirement, the Recipient’s unvested
and/or unexercised (whether or not vested) Awards shall expire and
become void as of the earlier of (A) the date such Awards would have expired in
accordance with their terms had the Recipient remained employed and (B) one (1) year
after the date of employment termination; provided, however, that the one-

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year period provided in (B) shall be three (3) months for Incentive Stock Options
following termination of employment for normal retirement.

     (c) Alteration of Vesting and Exercise Periods. Notwithstanding anything to
the contrary in Section 5.13(a) or Section 5.13(b), the Administering Body
may in its discretion designate shorter or longer periods to claim or otherwise exercise
Awards following a Recipient’s termination of employment; provided, however, that any
shorter periods determined by the Administering Body shall be effective only if provided for
in the instrument that evidences the grant to the Recipient of such Award or if such shorter
period is agreed to in writing by the Recipient. Notwithstanding anything to the contrary
herein, Awards shall be claimed or exercisable by a Recipient following such Recipient’s
termination of employment only to the extent that installments thereof had become
exercisable on or prior to the date of such termination; and provided, further, that the
Administering Body may, in its discretion, elect to accelerate the vesting of all or any
portion of any Awards that had not vested on or prior to the date of such termination.

     5.14 Effect of Termination of Engagement on Awards—Non-Employees Only.

     (a) Termination of Engagement. Subject to Section 5.14(b), and except
as otherwise provided in a written agreement between the Company and/or an Affiliated Entity
and the Recipient, which may be entered into at any time before or after termination of
engagement of the Recipient, in the event of the termination of any non-Employee Recipient’s
engagement (including certain Directors and Consultants), all of the Recipient’s unvested
Awards shall be terminated and become void, and all of the Recipient’s unexercised Awards
(whether or not vested) shall be forfeited, expire and become void as of the earlier of (i)
the date such Awards would expire in accordance with their terms had the Recipient remained
in such engagement and (ii)(A) three (3) months after Recipient’s engagement is terminated
as a result of death or Permanent Disability and (B) thirty (30) days after Recipient’s
engagement is terminated for any other reason.

     (b) Alteration of Vesting and Exercise Periods. Notwithstanding anything to the
contrary in Section 5.14(a), the Administering Body may, in its discretion,
designate shorter or longer periods to claim or otherwise exercise Awards following a
non-Employee Recipient’s termination of engagement; provided, however, that any shorter
periods determined by the Administering Body shall be effective only if provided for in the
instrument that evidences the grant to the Recipient of such Award or if such shorter period
is agreed to in writing by the Recipient. Notwithstanding anything to the contrary herein,
Awards shall be claimed or exercisable by a Recipient following such Recipient’s termination
of engagement only to the extent that the installments thereof had become exercisable on or
prior to the date of such termination; and provided further, that the Administering Body
may, in its discretion, elect to accelerate the vesting of all or any portion of any Awards
that had not vested on or prior to the date of such termination.

     5.15 Transfer; Leave of Absence. For purposes of this Plan, the transfer by a
Recipient to the employment by or engagement with (i) the Company from an Affiliated Entity, (ii)
from the Company to an Affiliated Entity or (iii) from one Affiliated Entity to another Affiliated
Entity (including, with respect to Consultants, the assignment between the Company

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and an
Affiliated Entity or between two Affiliated Entities, as applicable, of an agreement pursuant to
which such services are rendered) or, with respect solely to Employees, an approved leave of
absence for military service, sickness or for any other purpose approved by the Company, shall not
be deemed a termination. In the case of any Employee on an approved leave of absence, the
Administering Body may make such provision respecting continuance of Awards as the Administering
Body in its discretion deems appropriate, except that in no event shall an Award be exercisable
after the date such Award would expire in accordance with its terms had the Recipient remained
continuously employed.

     5.16 Limits on Awards to Certain Eligible Persons.

     (a) Limitations Applicable to IRC Section 162(m) Participants. Notwithstanding any
other provision of this Plan, in order for the compensation attributable to Awards hereunder to
qualify as Performance-Based Compensation, no one Eligible Person shall be granted any one or more
Awards with respect to more than thirty thousand (30,000) shares of Common Stock in any one
calendar year. The limitation set forth in this Section 5.16 shall be subject to
adjustment as provided in Section 3.4 or Section 4.5(b), but only to the extent
such adjustment would not affect the status of compensation attributable to Awards hereunder as
Performance-Based Compensation.

     (b) Limitations Applicable to Section 16 Persons. Notwithstanding any other provision
of this Plan, the Plan, and any Award granted or awarded to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule
16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the
extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such applicable exemptive rule.

6. STOCK OPTIONS

     6.1 Nature of Stock Options. Subject to the limitations provided otherwise herein,
Stock Options may be Incentive Stock Options or Non-qualified Stock Options.

     6.2 Option Exercise Price. The exercise price for each Stock Option shall be
determined by the Administering Body as of the date such Stock Option is granted. The exercise
price shall be no less than or equal to fifty percent (50%) but not more than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to any Option designated as a
Non-qualified Stock Option. The exercise price shall be equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to any Option designated as an Incentive Stock
Option. The Administering Body may, with the
consent of the Recipient and subject to compliance with statutory or administrative
requirements applicable to Incentive Stock Options, (i) amend the terms of any Incentive Stock
Option to provide that the exercise price of the shares remaining subject to such Stock Option
shall be reestablished as a price equal to one hundred percent (100%) of the Fair Market Value of
the Common Stock on the effective date of the amendment, or (ii) amend the terms of any
Non-qualified Stock Option to provide that the exercise price of the shares remaining subject to
such Stock Option shall be re-established at a

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price no less than or equal to fifty percent (50%)
but not more than one hundred percent (100%) of the Fair Market Value of the Common Stock on the
effective date of the amendment. No modification of any other term or provision of any Stock
Option that is amended in accordance with the foregoing shall be required, although the
Administering Body may, in its discretion, make such further modifications of any such Stock Option
as are not inconsistent with this Plan.

     6.3 Option Period and Vesting. Stock Options granted hereunder shall vest and may be
exercised as determined by the Administering Body, except that exercise of such Stock Options after
termination of the Recipient’s employment or engagement shall be subject to Section 5.13 or
Section 5.14, as the case may be. Each Stock Option granted hereunder and all rights or
obligations thereunder shall expire on such date as shall be determined by the Administering Body,
but not later than ten (10) years after the date the Stock Option is granted and shall be subject
to earlier termination as provided herein or in the Award Agreement. The Administering Body may,
in its discretion at any time and from time to time after the grant of a Stock Option, accelerate
vesting of such Stock Option as a whole or in part by increasing the number of shares then
purchasable, provided that the total number of shares subject to such Stock Option may not be
increased. Except as otherwise provided herein, a Stock Option shall become exercisable, as a
whole or in part, on the date or dates specified by the Administering Body and thereafter shall
remain exercisable until the expiration or earlier termination of the Stock Option.

     6.4 Special Provisions Regarding Incentive Stock Options.

     (a) Notwithstanding anything in this Article 6 to the contrary, the exercise price and
vesting period of any Stock Option intended to qualify as an Incentive Stock Option shall
comply with the provisions of Section 422 of the IRC and the regulations thereunder. As of
the Effective Date, such provisions require, among other matters, that (i) the exercise
price must not be less than the Fair Market Value of the underlying stock as of the date the
Incentive Stock Option is granted, and not less than 110% of the Fair Market Value as of
such date in the case of a grant to a Significant Stockholder; and (ii) that the Incentive
Stock Option not be exercisable after the expiration of five (5) years from the date of
grant in the case of an Incentive Stock Option granted to a Significant Stockholder.

     (b) The aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Common Stock for which one or more Incentive Stock Options granted to any
Recipient under this Plan (or any other option plan of the Company or an
Affiliated Entity) may for the first time become exercisable as Incentive Stock Options
under the federal tax laws during any one calendar year shall not exceed $100,000.

     (c) Any Stock Options granted as Incentive Stock Options pursuant to this Plan that for
any reason fail or cease to qualify as such shall be treated as Non-qualified Stock Options.

     6.5 Reload Options. At the discretion of the Administering Body, Stock Options
granted pursuant to this Plan may include a “reload” feature pursuant to which a Recipient
exercising a Stock Option by the delivery of a number of shares of matured capital stock in
accordance with Section 5.4(c) hereof and the Award Agreement would automatically be
granted

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an additional Stock Option (with an exercise price equal to the Fair Market Value of the
Common Stock on the date the additional Stock Option is granted and with the same expiration date
as the original Stock Option being exercised, and with such other terms as the Administering Body
may provide) to purchase that number of shares of Common Stock equal to the number delivered to
exercise the original Stock Option.

     6.6 Restrictions. The Administering Body, in its sole and absolute discretion, may
impose such restrictions on the ownership and transferability of the shares purchasable upon the
exercise of a Stock Option as it deems appropriate. Any such restriction shall be set forth in the
respective Award Agreement and may be referred to on the certificates evidencing such shares. The
Recipient shall give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two years from the date of granting
(including the date the Stock Option is modified, extended or renewed for purposes of Section
424(h) of the IRC) such Stock Option to such Recipient or (ii) one year after the transfer of such
shares to such Recipient.

7. RESTRICTED STOCK AWARDS

     7.1 Nature of Restricted Stock Awards. The Administering Body may grant Restricted
Stock Awards to any Eligible Person. A Restricted Stock Award is an Award entitling the Recipient
to acquire Restricted Stock at par value or such other purchase price determined by the
Administering Body at the time of grant of the Restricted Stock Award (but not less than the par
value thereof unless permitted by applicable state law).

     7.2 Rights as a Stockholder. Subject to Section 7.3, upon delivery of the
shares of the Restricted Stock to the escrow holder pursuant to Section 7.5, the Recipient
shall have, unless otherwise provided by the Administering Body, all the rights of a stockholder
with respect to said shares of Restricted Stock, subject to the restrictions in his or her Award
Agreement, including the right to receive all dividends and other distributions paid or made with
respect to the shares; provided, however, that in the discretion of the Administering Body, any
extraordinary distributions with respect to the Common Stock shall be subject to the restrictions
set forth in Section 7.3.

     7.3 Restrictions. All shares of Restricted Stock issued under this Plan (including
any shares received by holders thereof with respect to shares of Restricted Stock as a result of
stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each
individual Award Agreement, be subject to such restrictions as the Administering Body shall
provide, which restrictions may include restrictions concerning voting rights and transferability
and restrictions based on duration of employment or engagement with the Company or its Affiliated
Entities, Company performance and individual performance; provided, however, that, unless the
Administering Body otherwise provides in the terms of the Award Agreement or otherwise, no share of
Restricted Stock granted to a person subject to Section 16 of the Exchange Act shall be sold,
assigned or otherwise transferred until at least six (6) months and one (1) day have elapsed from
the date on which the Restricted Stock was issued, and provided, further, that, except with respect
to shares of Restricted Stock granted to IRC Section 162(m) participants, by action taken after the
Restricted Stock is issued, the Administering Body may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by the terms

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of the
Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are
terminated or have expired.

     7.4 Repurchase of Restricted Stock. The Administering Body shall provide in the terms
of each individual Award Agreement that the Company shall have a right to repurchase from the
Recipient the Restricted Stock then subject to restrictions under the Award Agreement immediately
upon a termination of employment (with or without cause and for any reason whatsoever) or, if
applicable, upon a termination of engagement (with or without cause and for any reason whatsoever)
between the Recipient and the Company and/or an Affiliated Entity, at a cash price per share
determined by the Administering Body; provided, however, that, except with respect to shares of
Restricted Stock granted to IRC Section 162(m) participants, the Administering Body in its sole and
absolute discretion may provide that no such right of repurchase shall exist in the event of a
termination of employment or engagement following a Change in Control of the Company or because of
the Recipient’s death or Permanent Disability.

     7.5 Escrows. The Secretary of the Company or such other escrow holder as the
Administering Body may appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Award Agreement with respect to
the shares evidenced by such certificate expire or shall have been removed.

     7.6 Vesting of Restricted Stock. The Administering Body at the time of grant shall
specify the date or dates and/or attainment of pre-established Performance Criteria and/or other
conditions on which Restricted Stock shall become vested, subject to such further rights of the
Company or its assigns as may be specified in the instrument evidencing the Restricted Stock Award.

     7.7 Waiver, Deferral and Reinvestment of Dividends. The written instrument evidencing
the Award of Restricted Stock may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.

8. REORGANIZATIONS

     8.1 Reorganizations Not Involving a Change in Control. If the Company shall
consummate any Reorganization not involving a Change in Control in which holders of shares of
Common Stock are entitled to receive in respect of such shares any securities, cash or other
consideration (including a different number of shares of Common Stock), each Award outstanding
under this Plan shall thereafter be claimed or exercisable, in accordance with this Plan, only for
the kind and amount of securities, cash and/or other consideration receivable upon such
Reorganization by a holder of the same number of shares of Common Stock as are subject to that
Award immediately prior to such Reorganization, and any adjustments will be made to the terms of
the Award, and the underlying Award Agreement, in the sole discretion of the Administering Body as
it may deem appropriate to give effect to the Reorganization.

     8.2 Reorganizations Involving a Change in Control. As of the effective time and date
of any Change in Control, this Plan and any then outstanding Awards (whether or not vested) shall
automatically terminate unless (a) provision is made in writing in connection with such transaction
for the continuance of this Plan and for the assumption of such Awards, or for

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the substitution for
such Awards of new grants covering the securities of a successor entity or an affiliate thereof,
with appropriate adjustments as to the number and kind of securities and exercise prices, in which
event this Plan and such outstanding Awards shall continue or be replaced, as the case may be, in
the manner and under the terms so provided; or (b) the Board otherwise has provided or shall
provide in writing for such adjustments as it deems appropriate in the terms and conditions of the
then-outstanding Awards (whether or not vested), including (i) accelerating the vesting of
outstanding Awards, (ii) terminating the restrictions on outstanding Awards of Restricted Stock
and/or (iii) providing for the cancellation of Awards and their automatic conversion into the right
to receive the securities, cash and/or other consideration that a holder of the shares underlying
such Awards would have been entitled to receive upon consummation of such Change in Control had
such shares been issued and outstanding immediately prior to the effective date and time of the
Change in Control (net of the appropriate option exercise prices). If, pursuant to the foregoing
provisions of this Section 8.2, this Plan and the Awards granted hereunder shall terminate
by reason of the occurrence of a Change in Control without provision for any of the actions
described in clause (a) or (b) hereof, then any Recipient holding outstanding Awards shall have the
right, at such time immediately prior to the consummation of the Change in Control as the Board
shall designate, to convert, claim or exercise, as applicable, the Recipient’s Awards to the extent
vested or if the restrictions have lapsed to the full extent not theretofore converted, claimed or
exercised, but expressly excluding any installments of options which have not vested or Restricted
Stock subject to restrictions which have not terminated.

9. DEFINITIONS

     Capitalized terms used in this Plan and not otherwise defined shall have the meanings set
forth below:

     “Administering Body” means the Board as long as no Stock Plan Committee has been appointed and
is in effect and shall mean the Stock Plan Committee as long as the Stock Plan Committee is
appointed and in effect.

     “Affiliated Entity” means any Parent Corporation or Subsidiary Corporation.

     “Award” or “Awards,” except where referring to a particular category or grant under the Plan,
shall include Incentive Stock Options, Non-qualified Stock Options and Restricted Stock Awards.

     “Award Agreement” means the agreement or confirming memorandum setting forth the terms and
conditions of the Award.

     “Board” means the Board of Directors of the Company.

     “Change in Control” means the following and shall be deemed to occur if any of the following
events occur:

     (a) Any Person becomes, after the Effective Date, the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly,

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     of thirty
percent (30%) or more of the combined voting power of the Company’s then outstanding
securities; or

     (b) Individuals who, as of the effective date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board,
provided that any individual who becomes a director after the effective date hereof whose
election, or nomination for election by the Company’s shareholders, is approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall be considered
to be a member of the Incumbent Board unless that individual was nominated or elected by any
Person having the power to exercise, through beneficial ownership, voting agreement and/or
proxy, 20% or more of either the outstanding shares of Common Stock or the combined voting
power of the Company’s then outstanding voting securities entitled to vote generally in the
election of directors, in which case that individual shall not be considered to be a member
of the Incumbent Board unless such individual’s election or nomination for election by the
Company’s shareholders is approved by a vote of at least two-thirds of the directors then
comprising the Incumbent Board; or

     (c) a merger or consolidation of the Company with any other corporation, other than a
merger or consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than thirty percent (30%)
of the combined voting power of the Company’s then outstanding securities shall not
constitute a Change in Control of the Company; and
provided, further, a merger or consolidation in which the Company is the surviving
entity (other than as a wholly owned subsidiary or another entity) and in which the Board of
the Company after giving effect to the merger or consolidation is comprised of a majority of
members who are either (x) directors of the Company immediately preceding the merger or
consolidation, or (y) appointed to the Board of the Company by the Company (or its Board) as
an integral part of such merger or consolidation, shall not constitute a Change in Control
of the Company; or

     (d) Approval by the stockholders of the Company or any order by a court of
competent jurisdiction of a plan of liquidation of the Company, or the sale or
disposition by the Company of all or substantially all of the Company’s assets other
than (i) the sale or disposition of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or indirectly, at
least fifty percent (50%) or more of the combined voting power of the outstanding
voting securities of the Company at the time of the sale; or (ii) pursuant to a
dividend in kind or spin-off type transactions, directly or indirectly, of such
assets to the stockholders of the Company;

     (e) Notwithstanding the foregoing, a Change in Control of the type described in
paragraph (b), (c) or (d) shall be deemed to be completed on the date it occurs, and a

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Change in Control of the type described in paragraph (a) shall be deemed to be completed as
of the date the entity or group attaining 30% or greater ownership has elected its
representatives to the Company’s Board of Directors and/or caused its nominees to become
officers of the Company with the authority to terminate or alter the terms of employee’s
employment.

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means the non-voting Common Stock of the Company, without par value, as
constituted on the Effective Date of this Plan, and as thereafter adjusted as a result of any one
or more events requiring adjustment of outstanding Awards under Section 3.4 or Section
4.5(b) above or any other provision of the Plan.

     “Company” means Efficient Channel Coding, Inc., an Ohio corporation.

     “Consultant” means any consultant or advisor if:

     (a) the consultant or advisor renders bona fide services to the Company or any
Affiliated Entity;

     (b) the services rendered by the consultant or advisor are not in connection with the
offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities; and

     (c) the consultant or advisor is a natural person who has contracted directly with the
Company or an Affiliated Entity to render such services.

     “Director” means any person serving on the Board of the Company or of an Affiliated Entity
irrespective of whether such person is also an Employee of the Company or an Affiliated Entity.

     “DRO” shall mean a domestic relations order as defined by the IRC or Title I of ERISA or the
rules thereunder.

     “Effective Date” means ___, 2000, which is the date this Plan was adopted by the
Board.

     “Eligible Person” shall include key Employees, Directors and Consultants of the Company or of
any Affiliated Entity.

     “Employee” means any officer or other employee (as defined in accordance with Section 3401(c)
of the IRC) of the Company or any Affiliated Entity.

     “Employment Agreement” means an employment agreement between the Recipient and either the
Company and/or an Affiliated Entity.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

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

     “Exchange Act Registered Company” means that the Company has any class of any equity security
registered pursuant to Section 12 of the Exchange Act.

     “Expiration Date” means the tenth anniversary of the Effective Date.

     “Fair Market Value” of a share of the Company’s capital stock as of a particular date shall
be: (a) if the stock is listed on an established stock exchange or exchanges (including for this
purpose, the NASDAQ National Market), the closing sale prices of the stock quoted for such date as
reported in the transactions index of each such exchange, as published in The Wall Street Journal
and determined by the Administering Body, or, if no sale price was quoted in any such index for
such date, then as of the next preceding date on which such a sale price was quoted; or (b) if the
stock is not then listed on an exchange or the NASDAQ National Market, the average of the closing
bid and asked prices per share for the stock in the over-the-counter market as quoted on the NASDAQ
Small Cap Market on such date (in the case of (a) or (b), subject to adjustment as and if necessary
and appropriate to set an exercise price of Stock Options not less than 100% of the Fair Market
Value of the stock on the date an option is granted); or (c) if the stock is not then listed on an
exchange or quoted in the over-the-counter market, an amount determined in good faith by the
Administering Body; provided, however, that (i) when appropriate, the Administering Body, in
determining Fair Market Value of capital stock of the Company, may take into account such other
factors as it may deem appropriate under the circumstances and (ii) if the stock is traded on the
NASDAQ Small Cap Market and both sales prices and bid and asked prices are quoted or available, the
Administering Body may elect to determine Fair Market Value under either clause (a) or (b) above.
Notwithstanding the foregoing, the Fair Market Value of capital
stock for purposes of grants of Incentive Stock Options shall be determined in compliance with
applicable provisions of the IRC.

     “Incentive Stock Option” means a Stock Option that qualifies as an incentive stock option
under Section 422 of the IRC, or any successor statute thereto.

     “Including” means including without limitation.

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

     “Just Cause Dismissal” shall mean (i) if a Recipient is an Employee, a termination of a
Recipient’s employment for any of the following reasons: (a) the Recipient violates any reasonable
rule or regulation of the Board, the Company’s Chief Executive Officer or the Recipient’s superiors
that results in material damage to the Company or an Affiliated Entity or which, after written
notice to do so, the Recipient fails to correct within a reasonable time; (b) any willful
misconduct or gross negligence by the Recipient in the material responsibilities assigned to the
Recipient; (c) any willful failure to perform the Recipient’s job as required to meet the
objectives of the Company and/or an Affiliated Entity; (d) any wrongful conduct of a Recipient that
has material adverse impact on the Company or an Affiliated Entity or which constitutes a
misappropriation of assets of the Company or an Affiliated Entity; (e) the Recipient’s performing
services for any other person or entity that competes with the Company and/or an Affiliated Entity
while the Recipient is employed by the Company or an Affiliated Entity, without the express written
approval of the Chief Executive Officer of the Company or an Affiliated Entity; or (f) any other
conduct that the Administering Body determines constitutes Just Cause for Dismissal; provided,
however, that if a Recipient is party to an employment agreement with the Company and/or an
Affiliated Entity providing for just cause dismissal (or some comparable notion) of Recipient from
Recipient’s employment with the Company or an Affiliated

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

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Entity, “Just Cause Dismissal” for
purposes of this Plan shall have the same meaning as ascribed thereto or to such comparable notion
in such employment agreement and (ii) if a Recipient is a Consultant or Director (but not an
Employee), a termination of such Recipient’s engagement with the Company and/or an Affiliated
Entity for a material breach by Recipient of the agreement pursuant to which his services are
rendered to the Company and/or an Affiliated Entity or a material breach of his duties to the
Company and/or an Affiliated Entity; provided, however, that if a Recipient is party to an
agreement pursuant to which his services are rendered to the Company and/or an Affiliated Entity
providing for just cause dismissal (or some comparable notion) of Recipient from his engagement
with the Company and/or an Affiliated Entity, “Just Cause Dismissal” for purposes of this Plan
shall have the same meaning as ascribed thereto or such comparable notion in such agreement.

     “Non-Employee Director” means any director of the Company who qualifies as a “non-employee
director” within the meaning of Rule 16b-3.

     “Non-qualified Stock Option” means a Stock Option that is not an Incentive Stock Option.

     “Outside Director” means an “outside director” as defined in the regulations adopted under
Section 162(m) of the IRC.

     “Parent Corporation” means any Parent Corporation as defined in Section 424(e) of the IRC.

     “Performance-Based Compensation” means performance-based compensation as described in Section
162(m) of the IRC. If the amount of compensation an Eligible Person will receive under any Award
is not based solely on an increase in the value of Common Stock after the date of grant, the
Administering Body, in order to qualify Awards as performance-based compensation under Section
162(m) of the IRC, can condition the granting, vesting, exercisability, purchase price or
termination of restrictions of such Awards on the attainment of a preestablished, objective
performance goal. For this purpose, a preestablished, objective performance goal may include one or
more of the following performance criteria: (a) book value; (b) earnings per share (including
earnings before interest, taxes and amortization); (c) return on equity; (d) total stockholder
return; (e) return on capital; (f) return on assets or net assets; (g) income or net income; (h)
operating income or net operating income; (i) operating margin; (j) attainment of stated goals
related to the Company’s capitalization, costs, financial condition or results of operations; and
(k) any other similar performance criteria.

     “Performance Criteria” shall mean the following business criteria with respect to the Company,
any Affiliated Entity or any division or operating unit of the Company or an Affiliated Entity:
(a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share,
(f) return on equity, (g) return on invested capital or assets, (h) cost reductions or savings,

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

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(i) funds from operations, (j) appreciation in the fair market value of Common Stock, (k) earnings
before any one or more of the following items: interest, taxes, depreciation or amortization and
(l) such other criteria deemed appropriate by the Administering Body.

     “Permanent Disability” means that the Recipient becomes physically or mentally incapacitated
or disabled so that the Recipient is unable to perform substantially the same services as the
Recipient performed prior to incurring such incapacity or disability (the Company, at its option
and expense, being entitled to retain a physician to confirm the existence of such incapacity or
disability, and the determination of such physician to be binding upon the Company and the
Recipient), and such incapacity or disability continues for a period of three consecutive months or
six months in any 12-month period or such other period(s) as may be determined by the Administering
Body with respect to any Award, provided that for purposes of determining the period during which
an Incentive Stock Option may be exercised pursuant to Section 5.13(b)(ii) hereof,
Permanent Disability shall mean “permanent and total disability” as defined in Section 22(e) of the
IRC.

     “Person” means any person, entity or group, within the meaning of Section 13(d) or 14(d) of
the Exchange Act, but excluding (a) the Company and its Affiliated Entities, (b) any employee stock
ownership or other employee benefit plan maintained by the Company that is qualified under ERISA,
(c) any trustee or other fiduciary holding securities under any employee benefit plan of the
Company or an Affiliated Entity, (d) any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of Common Stock of the
Company, or (e) any entity holding non-participating shares of an entity which is a
stockholder of the Company or which owns or controls, directly or indirectly, a stockholder of
the Company becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or more of the combined
voting power of the Company’s then outstanding securities.

     “Plan” means this 2000 Long Term Incentive Plan of the Company.

     “Plan Term” means the period during which this Plan remains in effect (commencing on the
Effective Date and ending on the Expiration Date).

     “Recipient” means a person who has received Awards under this Plan or any person who is the
successor in interest to a Recipient.

     “Reorganization” means any merger, consolidation, business combination, other reorganization
or other similar transaction.

     “Restricted Stock” means the shares of Common Stock subject to such restrictions and
conditions as the Administering Body may determine at the time of grant.

     “Restricted Stock Awards” means any Award granted pursuant to Article 7 of this Plan.

     “Rule 16b-3” means Rule 16b-3 under the Exchange Act.

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

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

     “Significant Stockholder” is an individual who, at the time an Award is granted to such
individual under this Plan, owns more than ten percent (10%) of the combined voting power of all
classes of stock of the Company or of any Parent Corporation or Subsidiary Corporation (after
application of the attribution rules set forth in Section 424(d) of the IRC).

     “Stock Option” or “Option” means a right to purchase stock of the Company granted under
Article 6 of this Plan to an Eligible Person.

     “Stock Plan Committee” means the committee appointed by the Board to administer this Plan
pursuant to Section 4.1(b).

     “Subsidiary Corporation” means any Subsidiary Corporation as defined in Section 424(f) of the
IRC.

2000 Long Term Incentive Plan (Efficient Channel Coding, Inc.)

-24-exv10w1

 

Exhibit 10.1

EXECUTION COPY

HIGHLY CONFIDENTIAL

FOR SETTLEMENT PURPOSES ONLY;

Not admissible in any litigation or

other proceeding between the parties.

SETTLEMENT TERM SHEET

	A.	 	Preliminary Statement.

	 	1.	 	On June 25, 2001 (the “Petition Date”), USG Corporation (“USG”) and its debtor
subsidiaries (collectively, including USG, the “Debtors”; the term “Debtors” as used
herein includes the reorganized Debtors when applicable) commenced voluntary
reorganization cases (the “Reorganization Cases”) under title 11 of the United States
Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy Court”).
	 
	 	2.	 	This Settlement Term Sheet (this “Term Sheet”) is being executed by and among
(a) the Debtors; (b) the Official Committee of Asbestos Personal Injury Claimaints
appointed in the Reorganization Cases (the “ACC”) and counsel for each member of the
ACC in its individual capacity and on behalf of such member (each an “ACC Member’s
Counsel” and, collectively, the “ACC Members’ Counsel”); and (c) Dean M. Trafelet, in
his capacity as the Legal Representative for Future Claimants in the Reorganization
Cases (the “FCR” and, collectively with the Debtors, the ACC and the ACC Members’
Counsel, the “Parties”).
	 
	 	3.	 	This Term Sheet sets forth the basic terms on which the Parties have agreed to
settle certain disputes relating to the Debtors’ alleged liability for asbestos-related
personal injury claims and demands, the treatment of such claims and demands in the
Reorganization Cases and certain related matters.
	 
	 	4.	 	Upon its execution (the “Execution Date”), this Term Sheet shall be binding
upon the Parties and each of their respective successors and assigns to the fullest
extent permitted by applicable law. The implementation of the settlement set forth in
this Term Sheet is subject to definitive documentation of the settlement terms, which
may be accomplished through the Debtors’ plan of reorganization incorporating the terms
of this Term Sheet (the “Plan”).

	B.	 	Funding of the Asbestos Personal Injury Trust.

	 	1.	 	On the effective date of the Plan (the “Effective Date”), the Debtors (a) will
pay $890 million in cash to the qualified settlement trust established by the Debtors
under the Plan, which trust shall satisfy the requirements of section 524(g) of the
Bankruptcy Code (the “Asbestos Personal Injury Trust”); and (b) issue a promissory note
in the principal amount of $10 million to the Asbestos Personal Injury Trust (the “Note”), the terms and provisions of which shall be reasonably
acceptable to the Debtors, the ACC, the ACC Members’ Counsel and the FCR.

 

	 	 	 	Each of
the Debtors shall be a co-obligor under the Note and each Debtor shall be jointly
and severally liable for the obligations thereunder.
	 
	 	2.	 	On the Effective Date, the Debtors will provide a contingent payment note in
the amount of $3.05 billion to the Asbestos Personal Injury Trust (the “Contingent
Payment Note”), the terms and provisions of which shall be reasonably acceptable to the
Debtors, the ACC, the ACC Members’ Counsel and the FCR and the payment of which shall
only be subject to the condition precedent (the “Condition Precedent”) that The
Fairness in Asbestos Injury Resolution Act of 2005 or any substantially similar
legislation creating a national trust or similar fund (collectively referred to herein
as the “Fair Act”) has not been enacted and made law on or before the date that is 10
days (excluding Sundays) after final adjournment sine die of the 109th
Congress of the United States (the “Trigger Date”); provided, however, that:

	 	a.	 	If the Fair Act is not enacted and made law on or before the
Trigger Date, the obligations under the Contingent Payment Note shall vest and
the Debtors shall satisfy the Contingent Payment Note as set forth in Section
B.5 below.
	 
	 	b.	 	If the Fair Act is enacted and made law on or before the
Trigger Date, and is not subject to a constitutional challenge to its validity
(a “Challenge Proceeding”) on or before 60 days after the Trigger Date, the
obligations under the Contingent Payment Note shall not vest and the Contingent
Payment Note shall be fully cancelled.
	 
	 	c.	 	If the Fair Act is enacted and made law on or before the
Trigger Date, but is subject to a Challenge Proceeding as of 60 days after the
Trigger Date, the obligations under the Contingent Payment Note shall not vest,
subject to the resolution of the Challenge Proceeding by a final,
non-appealable order (a “Final Order”) as follows:

	 	(i)	 	If the Challenge Proceeding is resolved by a
Final Order such that the Fair Act is unconstitutional in its entirety
or as applied to debtors in chapter 11 cases whose plans of
reorganization have not yet been confirmed and become substantially
consummated (i.e., debtors that are then similarly situated to the
Debtors as of February 1, 2006 (in a chapter 11 case with a plan of
reorganization that has not yet been confirmed)), so that such debtors
will not be subject to the Fair Act, then the obligations under the
Contingent Payment Note shall vest and the Debtors shall satisfy the
Contingent Payment Note, with the first payment of $1.9 billion being
due within 30 days after such Final Order and the second payment of
$1.15 billion being due within 180 days after such Final Order.

2

 

	 	(ii)	 	If the Challenge Proceeding is resolved by a
Final Order in a manner other than as contemplated by the immediately
preceding clause (i), then the obligations under the Contingent Payment
Note shall not vest and the Contingent Payment Note shall be fully
cancelled.

	 	 	 	Each of the Debtors shall be a co-obligor under the Contingent Payment Note and each
Debtor shall be jointly and severally liable for the obligations thereunder.
	 
	 	3.	 	On the Effective Date, the Debtors will assign any of their respective rights
in and to insurance policies to the extent related to Asbestos Personal Injury Claims
to the Asbestos Personal Injury Trust on terms that are reasonably acceptable to the
Debtors, the ACC, the ACC Members’ Counsel and the FCR, which terms will, among other
things, enjoin entities other than the Asbestos Personal Injury Trust (and, to the
extent necessary, the Debtors) from pursuing or collecting under such insurance
policies to the extent related to Asbestos Personal Injury Claims.
	 
	 	4.	 	The Note will be issued by the Debtors and will be secured by 51 percent of the
voting stock of United States Gypsum Company. The Note shall be payable on December
31, 2006. The Note will bear annual interest at a fixed rate equivalent to the rate of
90-day LIBOR plus 40 basis points as at the Effective Date, which interest shall accrue
from the Effective Date until maturity.
	 
	 	5.	 	If the Condition Precedent is met, subject to Section B.2.c above, then $1.9
billion of the Contingent Payment Note will be payable within 30 days after the Trigger
Date, with the remaining $1.15 billion of the Contingent Payment Note payable within
180 days after the Trigger Date. The Contingent Payment Note will bear annual interest
at a fixed rate equivalent to the rate of 90-day LIBOR plus 40 basis points as at the
Trigger Date, which interest shall accrue from 30 days after the Trigger Date until the
Contingent Payment Note is paid in full. In addition, the Debtors will grant to the
Asbestos Personal Injury Trust a right to 51 percent of the voting stock of one of the
reorganized Debtors, exercisable upon the occurrence of certain specified
contingencies, to secure the payment of the first $1.9 billion of the Contingent
Payment Note, consistent with the Debtors’ need to obtain necessary financing.
	 
	 	6.	 	Until such time as the Contingent Payment Note is either paid in full or
cancelled, reorganized USG will not declare any dividend to the holders of its stock or
repurchase its stock in an amount that exceeds $150 million.
	 
	 	7.	 	Until such time as the Contingent Payment Note is either paid in full or
cancelled, the amount of the reorganized Debtors’ indebtedness that is senior to the
Contingent Payment Note (through any combination of the granting of security and/or
subordination) will be limited to:

	 	a.	 	an exit financing facility in an amount not to exceed $750
million;

3

 

	 	b.	 	amounts necessary to fund any Plan distributions, after taking
into account available cash, including, without limitation, payments to the
Asbestos Personal Injury Trust (including payments on the Note and the
Contingent Payment Note), payments to unsecured creditors and payments to
asbestos property damage claimants;
	 
	 	c.	 	amounts necessary to fund the operations, capital expenditures
and working capital of the reorganized Debtors;
	 
	 	d.	 	other customary items such as leases, hedging, interest rate
protection, taxes and similar items;
	 
	 	e.	 	$125 million general basket; and
	 
	 	f.	 	any refinancing of the above.

	C.	 	Permanent Channeling Injunction and Release.

	 	1.	 	The Bankruptcy Court or the United States District Court for the District of
Delaware (the “District Court”) shall enter and, if applicable, affirm, in conjunction
with the entry of an order confirming the Plan (a “Confirmation Order”), an order,
pursuant to section 524(g) of the Bankruptcy Code (the “Permanent Channeling
Injunction”), permanently and forever staying, restraining and enjoining any entity
from taking any actions against any Protected Party (as such term is defined below) for
the purpose of, directly or indirectly, collecting, recovering or receiving payment of,
on or with respect to any Asbestos Personal Injury Claim (as such term is defined
below), all of which shall be channeled to the Asbestos Personal Injury Trust for
resolution as set forth in the Trust Agreement for the Asbestos Personal Injury Trust
(the “Trust Agreement”) and the related Asbestos Personal Injury Trust Distribution
Procedures (the “TDPs”), including, without limitation:

	 	a.	 	commencing, conducting or continuing in any manner, directly or
indirectly, any suit, action or other proceeding (including, without
limitation, a judicial, arbitral, administrative or other proceeding) in any
forum against any Protected Party or any property or interests in property of
any Protected Party;
	 
	 	b.	 	enforcing, levying, attaching (including, without limitation,
any prejudgment attachment), collecting or otherwise recovering by any means or
in any manner, whether directly or indirectly, any judgment, award, decree or
other order against any Protected Party or any property or interests in
property of any Protected Party;
	 
	 	c.	 	creating, perfecting or otherwise enforcing in any manner,
directly or indirectly, any Encumbrance against any Protected Party or any
property or interests in property of any Protected Party;

4

 

	 	d.	 	setting off, seeking reimbursement of, contribution from or
subrogation against, or otherwise recouping in any manner, directly or
indirectly, any amount against any liability owed to any Protected Party or any
property or interests in property of any Protected Party; and
	 
	 	e.	 	proceeding in any manner in any place with regard to any matter
that is subject to resolution pursuant to the Asbestos Personal Injury Trust,
except in conformity and compliance therewith.

	 	2.	 	The Plan and the Permanent Channeling Injunction shall provide that the
Asbestos Personal Injury Trust shall protect, defend, indemnify and hold harmless, to
the fullest extent permitted by applicable law, each Protected Party from and against
any Asbestos Personal Injury Claim and any related damages.
	 
	 	3.	 	“Asbestos Personal Injury Claim” means any claim, remedy, liability or demand
now existing or hereafter arising against any Debtor, whether or not such claim,
remedy, liability or demand is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, whether or not the facts of or legal bases therefor are known or unknown,
under any theory of law, equity, admiralty or otherwise, for death, bodily injury,
sickness, disease, medical monitoring or other personal injuries (whether physical,
emotional or otherwise) to the extent allegedly arising out of or based on, directly or
indirectly, in whole or in part, the presence of or exposure to asbestos or
asbestos-containing products or things that were installed, engineered, designed,
manufactured, fabricated, constructed, sold, supplied, produced, specified, selected,
distributed, released, marketed, serviced, maintained, repaired, purchased, owned,
occupied, used, removed, replaced or disposed by any Debtor or an entity for whose
products or operations the Debtors allegedly have liability or for which any Debtor is
otherwise allegedly liable, including, without limitation, any claim, remedy, liability
or demand for compensatory damages (such as loss of consortium, wrongful death, medical
monitoring, survivorship, proximate, consequential, general and special damages) or
punitive damages, and any claim, remedy, liability or demand for reimbursement,
indemnification, subrogation or contribution (including, without limitation, any
indirect claim or demand), and any claim under any settlement entered into by or on
behalf of any Debtor prior to the petition date relating to an Asbestos Personal Injury
Claim. Neither any asbestos property damage claim nor a workers’ compensation claim
brought directly by a past or present employee of any Debtor under an applicable
workers’ compensation statute shall constitute an Asbestos Personal Injury Claim.
	 
	 	4.	 	"Protected Party” means any of the following parties:

	 	a.	 	any Debtor, reorganized Debtor or any affiliate of the
foregoing;

5

 

	 	b.	 	any former or present director, officer or employee of any
Debtor, reorganized Debtor or any affiliate of the foregoing but only in their
capacity as such;
	 
	 	c.	 	any stockholder of any Debtor but only in their capacity as
such;
	 
	 	d.	 	any entity that, pursuant to the Plan or on or after the
Effective Date, becomes a direct or indirect transferee of, or successor to,
any assets of any Debtor, any reorganized Debtor or the Asbestos Personal
Injury Trust (but only to the extent that liability is asserted to exist by
reason of it becoming such a transferee or successor);
	 
	 	e.	 	any entity that, pursuant to the Plan or on or after the
Effective Date, makes a loan to any Debtor or reorganized Debtor or the
Asbestos Personal Injury Trust or to a successor to, or transferee of, any
assets of any Debtor, reorganized Debtor or the Asbestos Personal Injury Trust
(but only to the extent that liability is asserted to exist by reason of such
entity becoming such a lender or to the extent any pledge of assets made in
connection with such a loan is sought to be upset or impaired); or
	 
	 	f.	 	any entity to the extent he, she or it is alleged to be
directly or indirectly liable for the conduct of, claims against or demands on
any Debtor, reorganized Debtor or the Asbestos Personal Injury Trust to the
extent that such alleged liability arises by reason of one or more of the
following:

	 	(i)	 	such entity’s ownership of a financial interest
in any Debtor, reorganized Debtor, a past affiliate of any Debtor to
the extent such past affiliate is listed in the schedule to be annexed
to the Plan, which schedule shall be reasonably acceptable to the
Debtors, the ACC, the ACC Members’ Counsel and the FCR (the “Plan
Schedule”) (such past affiliate being referred to herein as a “Past
Affiliate”), a present affiliate of any Debtor or reorganized Debtor or
a predecessor in interest of any Debtor or reorganized Debtor to the
extent such predecessor in interest is listed in the Plan Schedule
(such predecessor in interest being referred to herein as a
“Predecessor in Interest”);
	 
	 	(ii)	 	such entity’s involvement in the management of
any Debtor, any reorganized Debtor or any Predecessor in Interest;
	 
	 	(iii)	 	such entity’s service as an officer, director
or employee of any Debtor, any reorganized Debtor, any Past Affiliate,
any present affiliate of any Debtor or reorganized Debtor, any
Predecessor in Interest or any entity that owns or at any time has
owned a financial interest in any Debtor, any reorganized Debtor, any
Past Affiliate, any present affiliate of any Debtor or any reorganized
Debtor or any Predecessor in Interest; or

6

 

	 	(iv)	 	such entity’s involvement in a transaction
changing the corporate structure, or in a loan or other financial
transaction affecting the financial condition, of any Debtor, any
reorganized Debtor or any Past Affiliate, any present affiliate of any
Debtor or any reorganized Debtor, any Predecessor in Interest or any
entity that owns or at any time has owned a financial interest in any
Debtor, any reorganized Debtor, any Past Affiliate, any present
affiliate of any Debtor or any reorganized Debtor or any Predecessor in
Interest.

	 	5.	 	The settlement set forth in this Term Sheet represents a full and complete
settlement of any and all alleged liabilities of the Debtors and any of the Debtors’
affiliates relating to or involving A.P. Green Industries, Inc., A.P. Green
Refractories Co. or any of their affiliates or predecessors to the extent such
predecessors are listed in the Plan Schedule (collectively, “A.P. Green”).

	D.	 	Certain Matters Relating to the Plan.

	 	1.	 	The Plan will propose to pay allowed general unsecured claims in full, with
postpetition interest, or to reinstate such claims.
	 
	 	2.	 	With respect to the claims represented by the Official Committee of Asbestos
Property Damage Claimants (the “Property Damage Committee”), the Debtors will attempt
to resolve such claims on separate terms prior to the Effective Date and, to the extent
not resolved, will pass such claims through the Reorganization Cases or otherwise
resolve such claims post-Effective Date.
	 
	 	3.	 	The Plan will contain, among other things, conditions to the Confirmation Order
and the Effective Date that the Debtors, in their sole discretion, determine are
appropriate or necessary and that are reasonably acceptable to the ACC, the ACC
Members’ Counsel and the FCR.
	 
	 	4.	 	The Plan will contain such other provisions as the Debtors, in their sole
discretion, determine are appropriate or necessary, which provisions shall be
reasonably acceptable to the ACC, the ACC Members’ Counsel and the FCR. As set forth
in more detail below, the ACC, the ACC Members’ Counsel and the FCR shall cooperate
fully with the Debtors and shall take all reasonable actions requested by the Debtors
in connection with the Plan process in the Reorganization Cases. Notwithstanding the
foregoing, the ACC, the ACC Members’ Counsel and the FCR shall draft the Trust
Agreement and the related TDPs and select the trustee(s) for the Asbestos Personal
Injury Trust, all of which shall be (a) delivered to the Debtors for review in time for
filing with a disclosure statement on February 15, 2006; (b) reasonably acceptable to
the Debtors and to each of the ACC, the ACC Members’ Counsel and the FCR in all
respects; (c) consistent with all provisions of the Bankruptcy Code, including, without
limitation, section 1129 of the Bankruptcy Code; and (d) incorporated into, or attached
as exhibits to, the Plan. The TDPs shall provide for the execution of a

7

 

release of the Asbestos Personal Injury Trust, the Debtors and the Debtors’ estates,
reasonably acceptable in form and substance to the Debtors, by any claimant
receiving a distribution from the Asbestos Personal Injury Trust. In connection
with the Trust Agreement, to the extent that the ACC and the FCR agree on trustees
and require the service of such trustees in advance of confirmation of the Plan, the
Debtors agree to pay the reasonable compensation of such trustees prior to
confirmation, with such amounts to be reimbursed to the Debtors through a deduction
from the first payment due to the Asbestos Personal Injury Trust.

	E.	 	Representations, Agreements and Covenants of the ACC, the ACC Members’ Counsel and the
FCR.

	 	1.	 	From and after the Execution Date, to the fullest extent permitted by
applicable law, the ACC, the ACC Members’ Counsel and the FCR, each on behalf of itself
and on behalf of those claimants that it represents, agrees to: (a) support the Plan
(and the ACC shall provide the Debtors with a letter, endorsed by all members of the
ACC, recommending the Plan, which may be included in the Plan solicitation materials);
(b) not file any objection to the disclosure statement relating to the Plan or to
confirmation of the Plan; and (c) recommend that its respective constituencies or
clients vote in favor of the Plan and use its best efforts to cause such constituencies
or clients to so vote. In addition, the ACC, the ACC Members’ Counsel and the FCR
shall cooperate fully with the Debtors and shall take all reasonable actions requested
by the Debtors in connection with the Plan process in the Reorganization Cases,
including, without limitation, with respect to (a) the filing and confirmation of the
Plan; (b) the filing and approval of any request by the Debtors for financing or
related relief in connection with the Plan; (c) the filing and approval of any
pleadings, which may be the Plan, to approve the settlement set forth in this Term
Sheet; and (d) information needed for, and the timing of, the solicitation of votes to
accept or reject the Plan. Without limiting the foregoing, the ACC, the ACC Members’
Counsel and the FCR shall provide the Debtors with (a) the information necessary for
the solicitation process for the Plan described in Section E.2 below on a timely basis
as set forth herein and (b) the Trust Agreement, the TDPs and the related documents
that are to be attached as exhibits to the Plan on a timely basis as set forth herein.
	 
	 	2.	 	The ACC Members’ Counsel shall cooperate fully with the Debtors and use their
best efforts to provide the Debtors, on a timely basis, with all information relating
to Asbestos Personal Injury Claims (including, without limitation, all Asbestos
Personal Injury Claims asserted against the Debtors by, through or on account of A.P.
Green) that is necessary for, or appropriate in connection with, the solicitation
process for the Plan.
	 
	 	3.	 	The ACC, the ACC Members’ Counsel and the FCR each hereby represents that,
subject to the approval of the Bankruptcy Court or District Court, as applicable, it
has the requisite authority to enter into and perform under this Term Sheet.

8

 

	F.	 	Representations, Agreements and Covenants of the Debtors.

	 	1.	 	USG represents that, subject to the approval of its Board of Directors and the
Bankruptcy Court or District Court, as applicable, it has the requisite authority to
enter into and perform under this Term Sheet.
	 
	 	2.	 	USG will use its best efforts to obtain the approval of its Board of Directors
of this Term Sheet on or before January 29, 2006.
	 
	 	3.	 	The Official Committee of Equity Holders appointed in the Reorganization Cases
(the “Equity Committee”) supports the settlement set forth in this Term Sheet. The
Equity Committee, the ACC, the ACC Members’ Counsel and the FCR each reserves all of
its respective rights with respect to all matters not specifically delineated in this
Term Sheet.
	 
	 	4.	 	USG will use its reasonable best efforts to have the Effective Date occur on or
before July 1, 2006.

	G.	 	Termination of the Term Sheet.

	 	1.	 	Unless otherwise agreed in writing by the Parties, this Term Sheet shall
terminate automatically upon the occurrence of any of the following:

	 	a.	 	USG’s Board of Directors does not approve the Term Sheet on or
before January 29, 2006.
	 
	 	b.	 	Any of the ACC, the ACC Members’ Counsel or the FCR has not
executed this Term Sheet on or before January 27, 2006.
	 
	 	c.	 	The Effective Date has not occurred on or before August 1,
2006.

	 	2.	 	This Term Sheet may be terminated at any time by the written agreement of the
Parties.
	 
	 	3.	 	No Party shall bear any liability for the termination of this Term Sheet in
accordance with Sections G.1 and G.2 above.

	H.	 	Miscellaneous.

	 	1.	 	Notwithstanding anything to the contrary herein, this Term Sheet shall not
affect or impair the Debtors’, the ACC’s or the FCR’s ability to perform their
respective fiduciary duties.
	 
	 	2.	 	Notwithstanding anything to the contrary herein, this Term Sheet shall not
affect or impair any matter concerning the corporate governance of the Debtors or the
reorganized Debtors.

9

 

	 	3.	 	From and after the Execution Date, the Debtors, the ACC and the FCR will
jointly seek to obtain a stay of the estimation litigation currently pending before the
District Court with respect to asbestos personal injury claims asserted against the
Debtors until the termination of this Term Sheet; provided, however, that within 30
days after the termination of this Term Sheet, the claimants’ questionnaires in such
litigation shall be completed and delivered to the Debtors.
	 
	 	4.	 	The Parties shall treat all negotiations regarding this Term Sheet as
confidential. Without the prior written consent of USG, counsel to the ACC and counsel
to the FCR, neither the contents nor the existence of this Term Sheet shall be
disclosed by any Party, either orally or in writing, except to its directors, officers,
employees, legal counsel, financial advisors, accountants and clients on a confidential
basis, or when necessary to comply with court orders, or in an action to enforce the
terms and conditions of this Term Sheet itself. Notwithstanding the foregoing, the
Parties agree that this Term Sheet or the terms of this Term Sheet may be disclosed to
the Official Committee of Unsecured Creditors appointed in the Reorganization Cases,
the Property Damage Committee and the Equity Committee, subject to appropriate
confidentiality restrictions. In addition, USG may, in its sole discretion, disclose
this Term Sheet or the terms of this Term Sheet (a) to potential financing sources; (b)
as it determines is necessary to comply with its SEC disclosure obligations, including,
without limitation, the issuance of a press release and a Form 8-K filing upon full
execution of this Term Sheet; and (c) as it determines is necessary to obtain
Bankruptcy Court or District Court, as applicable, approval of the Term Sheet and the
Plan, as set forth herein, or to otherwise comply with its fiduciary duties. USG will
provide counsel to the ACC and counsel to the FCR an opportunity to review any press
release relating to this Term Sheet prior to its issuance.
	 
	 	5.	 	Neither this Term Sheet nor the settlement set forth herein constitutes, and
shall not be construed, interpreted or otherwise read to constitute any admission by
(a) any of the Debtors with respect to any alleged asbestos-related liabilities arising
out of, resulting from or attributable to the business or operations of the Debtors or
their respective predecessors or (b) the ACC, the ACC Members’ Counsel or the FCR
regarding the amount of any such alleged asbestos-related liabilities.
	 
	 	6.	 	This Term Sheet and the settlement set forth herein shall be governed by the
laws of Delaware.
	 
	 	7.	 	This Term Sheet may be executed by facsimile and in any number of counterparts,
each of which shall be deemed to be an original as against any Party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.

10

 

AGREED TO AND ACCEPTED BY:

Dated: January 24, 2006

	 	 	 	 	 
	 	THE DEBTORS:

USG CORPORATION

 	 
	 	By:  	                                /s/ Stanley Ferguson
 	 
	 	 	Name:  	Stanley Ferguson 	 
	 	 	Title:  	Executive Vice
President and General
Counsel 	 
	 
	 	The ACC:

CAPLIN & DRYSDALE, CHTD., ON BEHALF OF AND	 
	 	IN
ITS CAPACITY AS COUNSEL TO THE ACC	 
	 	By:  	/s/ Elihu Inselbuch
 	 
	 	 	Name:  	Elihu Inselbuch 	 
	 	 	Title:  	 	 
	 
	 	KAZAN, MCCAIN, EDISES, SIMON & ABRAMS, IN ITS

INDIVIDUAL CAPACITY AND ON BEHALF OF MICHAEL
ABBOTT	 
	 	By:  	/s/ Steven Kazan
 	 
	 	 	Name:  	Steven Kazan 	 
	 	 	Title:  	Managing Partner 	 
	 
	 	GOLDBERG, PERSKY, JENNINGS & WHITE, P.C., IN

ITS INDIVIDUAL CAPACITY AND ON BEHALF OF BETTY
BISE	 
	 	By:  	/s/ Theodore Goldberg
 	 
	 	 	Name:  	Theodore Goldberg 	 
	 	 	Title:  	President 	 
	 
	 	EARLY, LUDWICK & SWEENEY, LLC, IN ITS

INDIVIDUAL CAPACITY AND ON BEHALF OF DONALD R.
BOYER	 
	 	By:  	/s/ James E. Early
 	 
	 	 	Name:  	James E. Early 	 
	 	 	Title:  	President 	 

11

 

	 	 	 	 	 

	 	 	 	 	 
	 	LEVY PHILLIPS & KONIGSBERG, LLP, IN ITS

INDIVIDUAL CAPACITY AND ON BEHALF OF CHARLES

BRINCAT

 	 
	 	By:  	/s/ Robert I. Komitor
 	 
	 	 	Name:  	Robert I. Komitor 	 
	 	 	Title:  	Partner 	 
	 
	 	JAQUES ADMIRALTY LAW FIRM, IN ITS INDIVIDUAL

CAPACITY AND ON BEHALF OF JOSE LOUIS DELROSARIO

 	 
	 	By:  	/s/ Alan Kellman
 	 
	 	 	Name:  	Alan Kellman 	 
	 	 	Title:  	Partner 	 
	 
	 	WEITZ & LUXENBERG, P.C., IN ITS INDIVIDUAL

CAPACITY AND ON BEHALF OF NICHOLAS FERRANTE

 	 
	 	By:  	/s/ Perry Weitz
 	 
	 	 	Name:  	Perry Weitz 	 
	 	 	Title:  	 	 
	 
	 	LAW OFFICES OF SHEPARD A. HOFFMAN, IN ITS

INDIVIDUAL CAPACITY AND ON BEHALF OF ERICH

SPANGENBERG

 	 
	 	By:  	/s/ Shepard A. Hoffman
 	 
	 	 	Name:  	Shepard A. Hoffman 	 
	 	 	Title:  	Principal/Attorney 	 
	 
	 	SILBER PEARLMAN, LLP IN ITS INDIVIDUAL CAPACITY

AND ON BEHALF OF VIRGIE LEE TOLIVER

 	 
	 	By:  	Steven T. Baron
 	 
	 	 	Name:  	Steven T. Baron 	 
	 	 	Title:  	Partner 	 
	 
	 	BARON & BUDD, P.C., IN ITS INDIVIDUAL CAPACITY

AND ON BEHALF OF GERALD FREDERICK VOGT

 	 
	 	By:  	/s/ Russell Budd
 	 
	 	 	Name:  	Russell Budd 	 
	 	 	Title:  	 	 

12

 

	 	 	 	 	 

	 	 	 	 	 
	 	JACOBS & CRUMPLAR, P.A., IN ITS INDIVIDUAL

CAPACITY AND ON BEHALF OF EDWARD WALLEY	 
	 	By:  	/s/ Robert Jacobs & Thomas Crumplar
 	 
	 	 	Name:  	Robert Jacobs, Esq. & Thomas Crumplar, Esq. 	 
	 	 	Title:  	Attorneys 	 
	 
	 	COONEY & CONWAY, IN ITS
INDIVIDUAL

 CAPACITY AND
ON BEHALF OF JUDITH WILLIAMS
	 
	 	By:  	/s/ John Cooney
 	 
	 	 	Name:  	John Cooney 	 
	 	 	Title:  	Partner 	 
	 
	 	THE FCR:

DEAN M. TRAFELET, IN HIS CAPACITY AS
 THE LEGAL
REPRESENTATIVE FOR FUTURE CLAIMANTS IN
 THE
REORGANIZATION CASES	 
	 	By:  	/s/ Dean M. Trafelet
 	 
	 	 	Name:  	 	 
	 	 	 	 
	 

13

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