Document:

exv10w42

 

EXHIBIT 10.42

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of March 29, 2006,
among Syntax-Brillan Corporation, a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:

     “Action” shall have the meaning ascribed to such term in Section 3.1(j).

     “Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with, a Person as such
terms are used in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

     “Closing” means the closing of the purchase and sale of the Securities pursuant to
Section 2.1.

     “Closing Date” means the Trading Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions precedent to (a) the
Purchasers’ obligations to pay the Subscription Amount and (b) the Company’s obligations to deliver
the Securities have been satisfied or waived.

     “Closing Price” means on any particular date (a) the last reported closing bid price
per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15
PM (New York time)), or (b) if there is no such price on such date, then the closing bid price on
the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15
PM (New York time)), or (c) if the Common Stock is not then listed or quoted on the Trading Market
and if prices for the Common Stock are then reported in the “pink sheets”
published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d)
if

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the shares of Common Stock are not then publicly traded, the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Purchasers of a majority
in interest of the Shares then outstanding.

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means the common stock of the Company, par value $0.001 per share, and
any other class of securities into which such securities may hereafter have been reclassified or
changed into.

     “Common Stock Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.

     “Company Counsel” means Greenberg Traurig, LLP.

     “Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

     “Discussion Time” shall have the meaning ascribed to such term in Section 3.2(f).

     “Effective Date” means the date that the initial Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first declared effective by the
Commission.

     “Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(q).

     “Excess Shares” shall have the meaning ascribed to such term in Section 4.15.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted
by a majority of the non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities issued hereunder or securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended (except for
automatic adjustments pursuant to the terms of such securities) since the date of this Agreement to
increase the number of such securities or to decrease the exercise, exchange, or conversion price
of any such securities, and (c) securities issued pursuant to acquisitions or strategic
transactions, provided any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with
the business of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is issuing

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securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in
securities.

     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

     “Intellectual Property Rights” shall have the meaning ascribed to such term in Section
3.1(o).

     “Issuable Maximum” shall have the meaning ascribed to such term in Section 4.15.

     “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

     “Liens” means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right, or other restriction.

     “Material Adverse Effect” means any adverse effect on the business, results of
operations, properties, prospects, or financial condition of the Company and its Subsidiaries,
taken as a whole, and which is material to the Company and its Subsidiaries, or which is likely to
materially effect the Company’s obligations to perform under this Agreement and the other
Transaction Documents.

     “Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

     “Per Share Purchase Price” equals $5.00, subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations or other similar transactions of the Common Stock
that occur after the date of this Agreement.

     “Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof), or other entity of any kind.

     “Proceeding” means an action, claim, suit, investigation, or proceeding (including,
without limitation, an investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

     “Registration Rights Agreement” means the Registration Rights Agreement, dated the
date hereof, among the Company and the Purchasers, in the form of Exhibit A attached
hereto.

     “Registration Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares
and the Warrant Shares.

     “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

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     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

     “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

     “Securities” means the Shares, the Warrants and the Warrant Shares.

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

     “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.

     “Short Sales” shall include all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).

     “Stockholder Approval” shall have the meaning ascribed to such term in Section 4.15.

     “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for
Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription Amount,” in United States Dollars and
in immediately available funds.

     “Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a).

     “Trading Day” means a day on which the Common Stock is traded on a Trading Market.

     “Trading Market” means the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market, or the OTC Bulletin Board.

     “Transaction Documents” means this Agreement, the Warrants, and the Registration
Rights Agreement, and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

     “Warrants” means collectively the Common Stock purchase warrants, in the form of
Exhibit B delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable beginning on the 181st day following the
date of issuance of such Warrants and shall have a term of exercise equal to five years.

     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

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ARTICLE II.

PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth
herein, concurrent with the execution and delivery of this Agreement by the parties hereto, the
Company agrees to sell, and each Purchaser agrees to purchase in the aggregate, severally and not
jointly, up to $15,000,000 of Shares and Warrants. Each Purchaser shall deliver to the Company via
wire transfer or a certified check immediately available funds equal to their Subscription Amount
and the Company shall deliver to each Purchaser their respective Shares and Warrants as determined
pursuant to Section 2.2(a) and the other items set forth in Section 2.2 issuable at the Closing.
Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the offices of Company Counsel, or such other location as the parties shall mutually agree.

     2.2 Deliveries.

          (a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

               (i) this Agreement duly executed by the Company;

               (ii) a copy of the irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;

               (iii) a Warrant registered in the name of such Purchaser to purchase up to a number of shares
of Common Stock determined as follows:

                    (A) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is greater than or equal to $5.00 per share, then 15 shares of Common Stock for each
100 shares of Common Stock purchased by the Purchaser; or

                    (B) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is less than $5.00 but greater than or equal to $4.00 per share, then 20 shares of
Common Stock for each 100 shares of Common Stock purchased by the Purchaser; or

                    (C) if the Closing Price of the Common Stock on the Trading Day immediately preceding the
Closing Date is less than $4.00 per share, then 25 shares of Common Stock for each 100 shares of
Common Stock purchased by the Purchaser;

               in each such case with an exercise price equal to the Per Share Purchase Price, subject to
adjustment as provided therein; and

               (iv) the Registration Rights Agreement duly executed by the Company.

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               (b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to
the Company the following:

                    (i) this Agreement duly executed by such Purchaser;

                    (ii) such Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and

                    (iii) the Registration Rights Agreement duly executed by such Purchaser.

     2.3 Closing Conditions.

          (a) The obligations of the Company hereunder in connection with the Closing are subject to the
following conditions being met:

                    (i) the accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;

                    (ii) all obligations, covenants, and agreements of the Purchasers required to be performed at
or prior to the Closing Date shall have been performed; and

                    (iii) the delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.

          (b) The respective obligations of the Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:

                    (i) the accuracy in all material respects on the Closing Date of the representations and
warranties of the Company contained herein;

                    (ii) all obligations, covenants, and agreements of the Company required to be performed at or
prior to the Closing Date shall have been performed;

                    (iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
and

                    (iv) there shall have been no Material Adverse Effect with respect to the Company since the
date hereof.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. Except as set forth under the corresponding section of the disclosure schedules delivered
to the Purchasers concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules
shall be deemed a part hereof, the Company hereby makes the representations and warranties set
forth below to each Purchaser:

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          (a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set
forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

          (b) Organization and Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as the case may be,
could not reasonably be expected to result in a Material Adverse Effect.

          (c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive relief or other
equitable remedies.

          (d) No Conflicts. The execution, delivery, and performance of the Transaction
Documents by the Company, the issuance and sale of the Shares, and the consummation by the Company
of the other transactions contemplated hereby and thereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws, or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary, or give to others any rights of termination, amendment, acceleration, or
cancellation (with or without notice, lapse of time, or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction,
decree, or other restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and

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regulations), or by which
any property or asset of the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not reasonably be expected to result in a Material
Adverse Effect.

          (e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization, or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local, or other governmental authority or other Person in
connection with the execution, delivery, and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the
filing with the Commission of the Registration Statement, (iii) application(s) to each applicable
Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and
manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

          (f) Issuance of the Securities. The Securities are duly authorized and, when issued
and paid for in accordance with the applicable Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has
reserved from its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants.

          (g) Capitalization. The capitalization of the Company as of March 28, 2006 is as set
forth on Schedule 3.1(g). No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the Securities or as set
forth on Schedule 3.1(g), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale of the Securities. There
are no stockholders agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.

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          (h) SEC Reports; Financial Statements. The Company has filed all reports, schedules,
forms, statements, and other documents required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated by reference
therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

          (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since December
31, 2005, the Company has not experienced or suffered any Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has any liabilities, obligations, claims, or losses (contingent
or otherwise) other than (A) those incurred in the
ordinary course of business, (B) those set forth in the SEC Reports, and (C) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission. Except for the issuance of the Securities
contemplated by this Agreement or as set forth in the SEC Reports, since December 31, 2005, no
event or circumstance has occurred or exists with respect to the Company or its Subsidiaries or
their respective business, properties, prospects, operations or financial condition, that, under
applicable law, rule, or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly disclosed or announced.

          (j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)
could not, if there were an unfavorable decision, reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or
has been the subject of any Action involving a claim of violation of or liability under federal or
state securities

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laws or a claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such
employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local, and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

          (k) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect.

          (l) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in violation of, any
indenture, loan, or credit agreement, or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or violation has been
waived); (ii) is in violation of any order of any court, arbitrator, or governmental body; or (iii)
is or has been in violation of any statute, rule, or regulation of any governmental authority,
including without limitation all foreign, federal, state, and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not have a Material
Adverse Effect.

          (m) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations, and permits issued by the appropriate federal, state, local, or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or modification of any Material
Permit.

          (n) Title to Assets. The Company and the Subsidiaries have good and marketable title
in fee simple to all real property owned by them that is material to the business of the Company
and the Subsidiaries and good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case

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free and clear of all
Liens, except for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and
the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which
is neither delinquent nor subject to penalties. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid and enforceable leases of which
the Company and the Subsidiaries are in substantial compliance.

          (o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark applications, service marks, trade
names, trade secrets, inventions, copyrights, licenses, and other similar intellectual property
rights necessary or material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary
has received a notice (written or otherwise) that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of others. The Company
and its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.

          (p) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers, and directors), including any
contract, agreement, or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any officer, director, or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee, or partner, in each case in excess of $60,000, other than (i) for payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company, and (iii) for other employee benefits, including stock option agreements under any
stock option plan of the Company.

          (q) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,

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including its Subsidiaries,
is made known to the certifying officers by others within those entities, particularly during the
period in which the Company’s most recently filed periodic report under the Exchange Act, as the
case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness
of the Company’s controls and procedures as of the date prior to the filing date of the most
recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company’s internal controls (as such term is defined in
Item 307(b) of Regulation S-K under the Exchange Act) or, to the knowledge of the Company, in other
factors that could significantly affect the Company’s internal controls.

          (r) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank, or other Person with respect to the transactions contemplated by the Transaction
Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction Documents.

          (s) Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules and regulations of the
Trading Market.

          (t) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended. The
Company shall conduct its business in a manner so that it will not become subject to the Investment
Company Act.

          (u) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the Disclosure Schedules
to this Agreement, furnished by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct with respect to such representations and warranties and
do not contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

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          (v) Tax Status. Except for matters that could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has
filed all necessary federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.

          (w) No General Solicitation. Neither the Company nor any person acting on behalf of
the Company has offered or sold any of the Securities by any form of general solicitation or
general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and
for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to
the Company as follows:

          (a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its organization with full
right, corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery, and performance by such Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies, and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.

          (b) Own Account. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account and not with a view
to or for distributing or reselling such Securities or any part thereof in violation of the
Securities Act or any applicable state securities law, has no present intention of distributing any
of such Securities in violation of the Securities Act or any applicable state securities law and
has no arrangement or understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance with applicable
federal and state securities laws) in violation of the Securities Act or any applicable state
securities law. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.

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          (c) Purchaser Status. At the time such Purchaser was offered the Securities, it was,
and at the date hereof it is, and on each date on which it exercises any Warrants, it will be
either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.

          (d) Experience of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication, and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

          (e) General Solicitation. Such Purchaser is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.

          (f) Short Sales and Confidentiality Prior To The Date Hereof. Other than the
transaction contemplated hereunder, such Purchaser has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any
disposition, including Short Sales, in the securities of the Company during the period commencing
from the time that such Purchaser first received a term sheet from the Company or any other Person
setting forth the material terms of the transactions contemplated hereunder until the date hereof
(“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage separate portions of
such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

          (a) The Securities may only be disposed of in compliance with foreign, state, and federal
securities laws. In connection with any transfer of Securities, other than pursuant to an
effective registration statement or Rule 144, to the Company or to an affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require

14

 

registration of such
transferred Securities under the Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.

          (b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of
a legend on any of the Securities in the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT.

     The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to
a bona fide margin agreement with a registered broker-dealer or grant a security interest in some
or all of the Securities to a financial institution that is an “accredited investor” as defined in
Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the
Company will execute and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3)
under the Securities Act or other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.

     (c) Certificates evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a registration statement
(including the Registration Statement) covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Shares or Warrant Shares pursuant to Rule
144, or (iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the Securities Act (including judicial

15

 

interpretations and pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effective
Date if required by the Company’s transfer agent to effect the removal of the legend hereunder. If
all or any portion of a Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Warrant Shares, such Warrant Shares shall be issued free of
all legends. The Company agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company’s transfer agent of a
certificate representing Shares or Warrant Shares, as the case may be, issued with a restrictive
legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Certificates for Securities subject to legend removal hereunder shall be
transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company System.

          (d) Nothing herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific performance or
injunctive relief.

          (e) Each Purchaser, severally and not jointly with the other Purchasers, agrees that the
removal of the restrictive legend from certificates representing Securities as set forth in this
Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.

     4.2 Furnishing of Information. As long as any Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3 Integration. The Company shall not sell, offer for sale, or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any Trading Market
such that it would require stockholder approval prior to the closing of such

16

 

other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.

     4.4 Securities Laws Disclosure; Publicity. The Company shall, no later than by 5:30 p.m.
Eastern time on the fourth business day immediately following the date hereof, file a Current
Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and shall
attach the Transaction Documents thereto. The Company and each Purchaser shall consult with each
other in issuing any press releases with respect to the transactions contemplated hereby, and no
Purchaser shall issue any press release or otherwise make any such public statement without the
prior consent of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such Purchaser, except (i) as required by federal securities law in
connection with the registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure permitted under
subclause (i) or (ii).

     4.5 Stockholder Rights Plan. No claim will be made or enforced by the Company or, to the
knowledge of the Company, any other Person that any Purchaser is an “Acquiring Person” under any
stockholder rights plan or similar plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.

     4.6 Non-Public Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the confidentiality and
use of such information. The Company understands and confirms that each Purchaser shall be relying
on the foregoing representations in effecting transactions in securities of the Company.

     4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net
proceeds from the sale of the Securities hereunder for working capital purposes and not to redeem
any Common Stock or Common Stock Equivalents or to settle any outstanding litigation.

     4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8, the
Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members,
partners, employees, and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person
who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents, members, partners, or

17

 

employees (and any
other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs, and expenses, including all judgments, amounts paid in settlements, court costs,
and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer
or incur as a result of or relating to (a) any breach of any of the representations, warranties,
covenants, or agreements made by the Company in this Agreement or in the other Transaction
Documents, or (b) any action instituted against a Purchaser, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser’s representations, warranties, or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may have with any such
stockholder or any violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct, or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable
period of time to assume such defense and to employ counsel, or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party. The Company will not be
liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which shall not be unreasonably withheld or
delayed, or (ii) to the extent, but only to the extent, that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants,
or agreements made by the Purchasers in this Agreement or in the other Transaction Documents.

     4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of
Common Stock for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

     4.10 Listing of Common Stock. The Company hereby agrees to use its reasonable best efforts to
maintain the listing of the Common Stock on a Trading Market, and as soon as reasonably practicable
following the Closing (but not later than the earlier of the Effective Date and the first
anniversary of the Closing Date), to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its

18

 

Common Stock on a Trading Market
and will comply in all material respects with the Company’s reporting, filing, and other
obligations under the bylaws or rules of the Trading Market.

     4.11 Equal Treatment of Purchasers. No consideration shall be offered or paid to any person
to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the purchase,
disposition, or voting of Securities or otherwise.

     4.12 Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliates acting on its
behalf or pursuant to any understanding with it will execute any Short Sales during the period
after the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.4,
such Purchaser will maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each Purchaser
understands and acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short sales of shares of the Common Stock
“against the box” prior to the Effective Date of the Registration Statement with the Securities is
a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A,
of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no
Purchaser makes any representation, warranty, or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.

     4.13 Delivery of Securities After Closing. The Company shall deliver, or cause to be
delivered, the respective Securities purchased by each Purchaser to such Purchaser within five
Trading Days of the Closing Date.

     4.14 Beneficial Ownership Restrictions. Notwithstanding anything to the contrary set forth in
this Agreement or any other Transaction Document, at no time may a Purchaser convert or exercise
any securities of the Company if the number of shares of Common Stock to be issued pursuant to such
conversion or exercise, when aggregated with all other shares of Common Stock beneficially owned by
the Purchaser at such time, would result in the Purchaser

19

 

beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess
of 14.99% of the then issued and outstanding shares of Common Stock outstanding at such time.

     4.15 Trading Market Limitations. Notwithstanding anything herein to the contrary, the Company
shall not issue any Warrant Shares which, when aggregated with the Shares issued prior to such date
of issuance, would exceed 19.999% of the number of shares of Common Stock outstanding on the
business day immediately preceding the Closing Date (such number of shares, the “Issuable
Maximum”). If on the date of exercise of Warrants (a) the applicable Exercise Price in effect
is such that the shares issuable upon exercise of the Warrants together with the aggregate number
of shares of Common Stock that would then be issuable upon exercise in full of all then outstanding
Warrants would exceed the Issuable Maximum, and (b) the Company’s stockholders shall not have
previously approved the issuance of 20% or more of the Company’s capital stock in connection with
the transactions contemplated by the Transaction Documents (the “Stockholder Approval”),
then the Company shall issue to the Purchaser requesting exercise of Warrants a number of shares of
Common Stock equal to such Purchaser’s pro-rata portion of the Issuable Maximum and, with respect
to the remainder of the Warrants then held by such Purchaser for which exercise would result in an
issuance of shares of Common Stock in excess of such Purchaser’s pro-rata portion of the Issuable
Maximum (the “Excess Shares”), the Company shall be prohibited from issuing such Excess
Shares, and shall notify the Purchaser of the reason therefor. The Warrants would be unconvertible
and unexercisable to such extent until and unless Stockholder Approval is subsequently obtained,
but shall otherwise remain in full force and effect. If Stockholder Approval is required under
this Section 4.15, the Company shall use commercially reasonable efforts to obtain, as promptly as
practicable, Stockholder Approval that is necessary to issue shares of Common Stock in excess of
the Issuable Maximum.

ARTICLE V.

MISCELLANEOUS

     5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between the Company and the
other Purchasers, by written notice to the other parties, if the Closing has not been consummated
on or before April 15, 2006; provided, however, that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).

     5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants, and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery, and performance of this Agreement. The Company shall pay all
transfer agent fees, stamp taxes, and other taxes and duties levied in connection with the delivery
of any Securities.

     5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents, exhibits, and
schedules.

20

 

     5.4 Notices. Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and effective on the
earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.

     5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by the Company and each Purchaser or, in
the case of a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of any such right.

     5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement
and shall not be deemed to limit or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

     5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not assign this Agreement
or any rights or obligations hereunder without the prior written consent of each Purchaser. Any
Purchaser may assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that apply to the
“Purchasers.”

     5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person, except as otherwise set forth in Section
4.8.

     5.9 Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, stockholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of Phoenix, state of Arizona. Each

21

 

party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of
Phoenix, state of Arizona, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.

     5.10 Survival. The representations and warranties contained herein shall survive the Closing
and the delivery of the Shares and Warrant Shares.

     5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the Company, it being understood that
parties need not sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.

     5.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable
in any respect, the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen, or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement Securities.

     5.14 Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that

22

 

monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation the defense that a remedy at law would be adequate.

     5.15 Payment Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to
the Company, a trustee, a receiver, or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     5.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Documents.
Each Purchaser shall be entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and
it shall not be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by the Purchasers.

     5.17 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or
other amounts owing under the Transaction Documents is a continuing obligation of the Company and
shall not terminate until all unpaid partial liquidated damages and other amounts have been paid
notwithstanding the fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

     5.18 Construction. The parties agree that each of them or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule
of construction to the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

23

 

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 	 	 	 	 
	 	 	SYNTAX-BRILLIAN CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Wayne A. Pratt
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Wayne A. Pratt	 	 
	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	1600 N. Desert Drive	 	 
	 	 	Tempe, Arizona 85281	 	 
	 	 	Attn: Wayne A. Pratt	 	 
	 
	 	 	 	 	 	 
	 	 	Email: wayne.pratt@syntaxbrillian.com	 	 
	 	 	Telephone: (602) 389-8888	 	 
	 	 	Facsimile: (602) 389-8801	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	Greenberg Traurig, LLP	 	 
	 	 	2375 E. Camelback Road, Suite 700	 	 
	 	 	Phoenix, Arizona 85016	 	 
	 	 	Attn: Brian H. Blaney, Esq.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Email: blaneyb@gtlaw.com	 	 
	 	 	Telephone: (602) 445-8322	 	 
	 	 	Facsimile: (602) 445-8603	 	 

[SIGNATURE PAGE FOR PURCHASERS FOLLOWS]

24

 

PURCHASER SIGNATURE PAGE TO

SYNTAX-BRILLIAN SECURITIES PURCHASE AGREEMENT

     IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement to be duly
executed by its respective authorized signatory as of the date first indicated above.

	 	 	 	 	 	 	 
	 	 	Purchaser Name: Taiwan Kolin Company, Ltd.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By: /s/  Christopher C.L. Liu	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Christopher C.L. Liu	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	10F. #86 Sect. 1, Chung-King S. Rd	 	 
	 	 	Taipei, Taiwan	 	 
	 
	 	 	 	 	 	 
	 	 	Email:	 	 
	 

	 	 	 	 
	 	 
	 	 	Telephone: 886-2-2314-3151	 	 
	 	 	Facsimile: 886-2-2311-3855	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Email:	 	 
	 

	 	 	 	 
	 	 
	 	 	Telephone:	 	 
	 

	 	 	 	 
	 	 
	 	 	Facsimile:	 	 
	 

	 	 	 	 
	 	 
	 
	 	 	 	 	 	 
	 	 	Subscription Amount:
$15,000,000 USDexv10w34xay

 

Exhibit 10.34(a)

GameTech International, Inc.

 

1997 Incentive Stock Plan

Amended and Restated as of

January 6, 2006

 

 

GameTech International, Inc.

1997 Incentive Stock Plan

     1. Purpose. The purpose of this 1997 Incentive Stock Plan (the “Plan”) is to
assist GameTech International, Inc., a Delaware corporation (the “Company”) and its Related
Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, directors, consultants and other persons who provide
services to the Company or its Related Entities by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of interests between such
persons and the Company’s shareholders, and providing such persons with annual and long-term
performance incentives to expend their maximum efforts in the creation of shareholder value. The
Plan is intended to qualify certain compensation awarded under the Plan for tax deductibility under
Section 162(m) of the Code (as hereafter defined) to the extent deemed appropriate by the Plan
Administrator (as hereafter defined).

     2. Definitions. For purposes of the Plan, the following terms shall be defined as set
forth below, in addition to such terms defined in the Plan.

          (a) “2001 Plan” means the Company’s 2001 Restricted Stock Plan.

          (b) “Applicable Laws” means the requirements relating to the administration of equity
compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, the rules and regulations of any stock exchange upon which the Common Stock is listed and the
applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

          (c) “Award” means any award granted pursuant to the terms of this Plan including, an
Option, Stock Appreciation Right, Restricted Stock, Stock Unit, Stock granted as a bonus or in lieu
of another award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with
any other right or interest, granted to a Participant under the Plan.

          (d) “Award Agreement” means the written agreement evidencing an Award granted under
the Plan.

          (e) “Beneficiary” means the person, persons, trust or trusts which have been
designated by a Participant in his or her most recent written beneficiary designation filed with
the Plan Administrator to receive the benefits specified under the Plan upon such Participant’s
death or to which Awards or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant’s death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person, persons, trust or
trusts entitled by will or the laws of descent and distribution to receive such benefits.

          (f) “Beneficial Owner”, “Beneficially Owning” and “Beneficial
Ownership” shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange Act
and any successor to such Rule.

          (g) “Board” means the Company’s Board of Directors.

          (h) “Cause” shall, with respect to any Participant, have the meaning specified in the
Award Agreement. In the absence of any definition in the Award Agreement, “Cause” shall have the
equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment,
consulting, or other agreement for the performance of services between the Participant and the
Company or a Related Entity or, in the absence of any such definition in such agreement, such term
shall mean (i) the failure by the Participant to perform his or her duties as assigned by the
Company (or a Related Entity) in a reasonable manner, (ii) any material violation or material
breach by the Participant of his or her employment, consulting or other similar agreement with the
Company (or a Related Entity), if any, (iii) any violation or breach by the Participant of any
confidential information and invention assignment, non-competition, non-solicitation,
non-disclosure and/or other similar agreement with the Company or a Related Entity, if any, (iv)
any act by the Participant of dishonesty or bad faith with respect to the Company (or

1

 

a Related
Entity), (v) any material violation or breach by the Participant of the Company’s or a Related
Entity’s policy for employee conduct, if any, (vi) use of alcohol, drugs or other similar
substances in a manner that adversely affects the Participant’s work performance, or (vii) the
commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the
Participant or the Company or any Related Entity. The good faith determination of the Plan
Administrator of whether the Participant’s Continuous Service has been terminated for “Cause” shall
be final and binding on all parties and for all purposes hereunder.

          (i) “Change in Control” means and shall be deemed to have occurred on the earliest of
the following dates:

               (i) the date on which any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) obtains “beneficial ownership” (as defined in Rule 13d-3 of the Exchange Act) or a
pecuniary interest in fifty percent (50%) or more of the combined voting power of the Company’s
then outstanding securities (“Voting Stock”);

               (ii) the consummation of a merger, consolidation, reorganization or similar transaction other
than a transaction: (1) (a) in which substantially all of the holders of Company’s Voting Stock
hold or receive directly or indirectly fifty percent (50%) or more of the voting stock of the
resulting entity or a parent company thereof, in substantially the same proportions as their
ownership of the Company immediately prior to the transaction; or (2) in which the holders of
Company’s capital stock immediately before such transaction will, immediately after such
transaction, hold as a group on a fully diluted basis the ability to elect at least a majority of
the directors of the surviving corporation (or a parent company);

               (iii) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an entity, fifty percent (50%) or more of the combined voting
power of the voting securities of which are owned by shareholders of the Company in substantially
the same proportions as their ownership of the Company immediately prior to such sale, lease,
license or other disposition; or

               (iv) individuals who, on the date this Plan is adopted by the Board, are Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Directors;
provided, however, that if the appointment or election (or nomination for election) of any new
Director was approved or recommended by a majority vote of the members of the Incumbent Board then
still in office, such new member shall, for purposes of this Plan, be considered as a member of the
Incumbent Board.

     For purposes of determining whether a Change in Control has occurred, a transaction includes
all transactions in a series of related transactions, and terms used in this definition but not
defined are used as defined in the Plan. The term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of changing the domicile
of the Company.

     Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company and the
Participant shall supersede the foregoing definition with respect to Awards subject to such
agreement (it being understood, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall
apply).

          (j) “Code” means the Internal Revenue Code of 1986, as amended from time to time,
including regulations thereunder and successor provisions and regulations thereto.

          (k) “Committee” means a committee designated by the Board to administer the Plan with
respect to at least a group of Employees, Directors or Consultants.

2

 

          (l) “Consultant” means any person (other than an Employee or a Director, solely with
respect to rendering services in such person’s capacity as a director) who is engaged by the
Company or any Related Entity to render consulting or advisory services to the Company or such
Related Entity.

          (m) “Continuous Service” means uninterrupted provision of services to the Company or
any Related Entity in the capacity as either an officer, Employee, Director, Consultant or other
service provider. Continuous Service shall not be considered to be interrupted in the case of (i)
any approved leave of absence, (ii) transfers among the Company, any Related Entities, or any
successor entities, in the capacity as either an officer, Employee, Director, Consultant or other
service provider or (iii) any change in status as long as the individual remains in the service of
the Company or a Related Entity in the capacity as either an officer, Employee, Director,
Consultant or other service provider (except as otherwise provided in the Award Agreement). An
approved leave of absence shall include sick leave, military leave, or any other authorized
personal leave.

          (n) “Corporate Transaction” means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events:

               (i) a sale, lease, exclusive license or other disposition of a significant portion of the
consolidated assets of the Company and its Subsidiaries, as determined by the Board in its
discretion;

               (ii) a sale or other disposition of more than twenty percent (20%) of the outstanding
securities of the Company; or

               (iii) a merger, consolidation, reorganization or similar transaction, whether or not the
Company is the surviving corporation.

          (o) “Covered Employee” means an Eligible Person who is a Covered Employee as specified
in Section 7(d) of the Plan.

          (p) “Director” means a member of the Board or the board of directors of any Related
Entity.

          (q) “Disability” means a permanent and total disability (within the meaning of Section
22(e) of the Code), as determined by a medical doctor satisfactory to the Plan Administrator.

          (r) “Dividend Equivalent” means a right, granted to a Participant under Section 6(g)
hereof, to receive cash, Stock, other Awards or other property equal in value to dividends paid
with respect to a specified number of Shares, or other periodic payments.

          (s) “Effective Date” means the effective date of this Plan, which shall be the date
this Plan is adopted by the Board, subject to the approval of the shareholders of the Company.

          (t) “Eligible Person” means each officer, Director, Employee or Consultant who
provides services to the Company or any Related Entity. The foregoing notwithstanding, only common
law employees of the Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes
of receiving any Incentive Stock Options. An Employee on leave of absence may be considered as
still in the employ of the Company or a Related Entity for purposes of eligibility for
participation in the Plan.

          (u) “Employee” means any person, including an officer or Director, who is an employee
of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related
Entity shall not be sufficient to constitute “employment” by the Company.

          (v) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time, including rules thereunder and successor provisions and rules thereto.

          (w) “Fair Market Value” means the fair market value of Shares, Awards or other
property as determined by the Plan Administrator, or under procedures established by the Plan
Administrator. Unless otherwise

3

 

determined by the Plan Administrator, the Fair Market Value of a
Share as of any given date, after which the Stock is publicly traded on a stock exchange or market,
shall be the closing sale price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which the Stock is traded on the date as of which such value
is being determined or, if there is no sale on that date, then on the last previous day on which a
sale was reported.

          (x) “Good Reason” shall, with respect to any Participant, have the meaning specified
in the Award Agreement. In the absence of any definition in the Award Agreement, “Good Reason”
shall have the equivalent meaning (or the same meaning as “good reason” or “for good reason”) set
forth in any employment, consulting or other agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the absence of any such definition in such
agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in
any material respect with the Participant’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as assigned by the Company or a
Related Entity, or any other action by the Company (or a Related Entity) which results in a
material diminution in such duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company
(or a Related Entity) promptly after receipt of notice thereof given by the Participant; (ii) any
material failure by the Company (or a Related Entity) to comply with its material obligations to
the Participant as agreed upon, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company (or a Related Entity) promptly after
receipt of notice thereof given by the Participant; (iii) the Company’s (or Related Entity’s)
requiring the Participant to be based at any office or location more than fifty (50) miles from the
location of employment immediately prior to such relocation, except for travel reasonably required
in the performance of the Participant’s responsibilities; (iv) any purported termination by the
Company (or a Related Entity) of the Participant’s Continuous Service otherwise than for Cause (as
defined in Section 2(h)), death, or by reason of the Participant’s Disability (as defined in
Section 2(q)); or (v) any reduction in the Participant’s base salary.

          (y) “Incentive Stock Option” means any Option intended to be designated as an
incentive stock option within the meaning of Section 422 of the Code or any successor provision
thereto.

          (z) “Option” means a right granted to a Participant under Section 6(b) hereof, to
purchase Stock or other Awards at a specified price during specified time periods.

          (aa) “Option Expiration Date” means the date of expiration of the Option’s maximum
term as set forth in the Award Agreement evidencing such Option.

          (bb) “Other Stock-Based Awards” means Awards granted to a Participant pursuant to
Section 6(i) hereof.

          (cc) “Parent” means any corporation (other than the Company), whether now or hereafter
existing, in an unbroken chain of corporations ending with the Company, if each of the corporations
in the chain (other than the Company) owns stock possessing fifty percent (50%) or more of the
combined voting power of all classes of stock in one of the other corporations in the chain.

          (dd) “Participant” means a person who has been granted an Award under the Plan which
remains outstanding, including a person who is no longer an Eligible Person.

          (ee) “Performance Award” means a right, granted to an Eligible Person under Sections
6(h) and 7 hereof, to receive Awards based upon performance criteria specified by the Plan
Administrator.

          (ff) “Performance Period” means that period established by the Plan Administrator at
the time any Performance Award is granted or at any time thereafter during which any performance
goals specified by the Plan Administrator with respect to such Award are to be measured.

          (gg) “Person” has the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section
12(d) thereof.

4

 

          (hh) “Plan Administrator” means the Board or any Committee delegated by the Board to
administer the Plan. There may be different Plan Administrators with respect to different groups
of Eligible Persons.

          (ii) “Related Entity” means any Subsidiary and any business, corporation, partnership,
limited liability company or other entity designated by the Plan Administrator in which the
Company, a Parent or a Subsidiary, directly or indirectly, holds a substantial ownership interest.

          (jj) “Restricted Stock” means Stock granted to a Participant under Section 6(d)
hereof, that is subject to certain restrictions, including a risk of forfeiture.

          (kk) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and Participants,
promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

          (ll) “Share” means a share of the Company’s Common Stock, and the share of such other
securities as may be substituted (or resubstituted) for Stock pursuant to Section 10(c) hereof.

          (mm) “Stock” means the Company’s Common Stock, and such other securities as may be
substituted (or resubstituted) for the Company’s Common Stock pursuant to Section 10(c) hereof.

          (nn) “Stock Appreciation Right” means a right granted to a Participant pursuant to
Section 6(c) hereof.

          (oo) “Stock Unit” means a right, granted to a Participant pursuant to Section 6(e)
hereof, to receive Shares, cash or a combination thereof at the end of a specified period of time.

          (pp) “Subsidiary” means any corporation (other than the Company), whether now or
hereafter existing, in an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     3. Administration.

          (a) Administration by Board. The Board shall administer the Plan unless and until the
Board delegates administration to a Committee, as provided in Section 3(b).

          (b) Delegation to Committee.

               (i) General. The Board may delegate administration of the Plan to a Committee or
Committees, and the term “Committee” shall apply to any person or persons to whom such authority
has been delegated. If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the administration of the Plan.

               (ii) Section 162(m) and Rule 16b-3 Compliance. In the discretion of the Board, the
Committee may consist solely of two or more “Outside Directors”, in accordance with Section 162(m)
of the Code,
and/or solely of two or more “Non-Employee Directors”, in accordance with Rule 16b-3. In
addition, the Board or the Committee may delegate to a committee the authority to grant Awards to
eligible persons who are either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Award, (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code, or (c) not then
subject to Section 16 of the Exchange Act.

5

 

          (c) Powers of the Plan Administrator. The Plan Administrator shall have the power,
subject to, and within the limitations of, the express provisions of the Plan:

               (i) To determine from time to time which of the persons eligible under the Plan shall be
granted Awards; when and how each Award shall be granted; what type or combination of types of
Award shall be granted; the provisions of each Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive Shares or cash pursuant to
an Award; and the number of Shares or amount of cash with respect to which an Award shall be
granted to each such person.

               (ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Plan Administrator, in the exercise
of this power, may correct any defect, omission or inconsistency in the Plan or in any Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

               (iii) To amend the Plan or an Award as provided in Section 10(e).

               (iv) To terminate or suspend the Plan as provided in Section 10(e).

               (v) To adopt such modifications, procedures, and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or Related Entities
may operate to assure the viability of the benefits from Awards granted to Participants performing
services in such countries and to meet the objectives of the Plan.

               (vi) To make all determinations required under the Plan or any Award Agreements thereunder,
including, but not limited to, the determination if there has been a Change in Control, a Corporate
Transaction, whether a termination of Continuous Service was for Cause or for Good Reason and
whether a Participant was prevented from selling his or her Shares due to federal or state
securities laws or by agreement.

               (vii) Generally, to exercise such powers and to perform such acts as the Plan Administrator
deems necessary or appropriate to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan.

          (d) Effect of Plan Administrator’s Decision. All determinations, interpretations and
constructions made by the Plan Administrator in good faith shall not be subject to review by any
person and shall be final, binding and conclusive on all persons.

          (e) Arbitration. Any dispute or claim concerning any Award granted (or not granted)
pursuant to the Plan or any disputes or claims relating to or arising out of the Plan shall be
fully, finally and exclusively resolved by binding and confidential arbitration conducted pursuant
to the rules of Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in the nearest city in
which JAMS conducts business to the city in which the Participant is employed by the Company. The
Company shall pay all arbitration fees. In addition to any other relief, the arbitrator may award
to the prevailing party recovery of its attorneys’ fees and costs. By accepting an Award, the
Participant and the Company waive their respective rights to have any such disputes or claims tried
by a judge or jury.

          (f) Limitation of Liability. The Plan Administrator, and each member thereof, shall
be entitled to, in good faith, rely or act upon any report or other information furnished to him or
her by any officer or Employee, the Company’s independent auditors, Consultants or any other agents
assisting in the administration of the Plan. Members of the Plan Administrator, and any officer or
Employee acting at the direction or on behalf of the Plan Administrator, shall not be personally
liable for any action or determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action or determination.

6

 

     4. Shares Issuable Under the Plan.

          (a) Limitation on Overall Number of Shares Available for Issuance Under the Plan.
Subject to adjustment as provided in Section 10(c) hereof, the total number of Shares that may be
issued in connection with Awards under the Plan shall not exceed in the aggregate 4,000,000 plus
any Shares available for issuance under the 2001 Plan as of the date of the 2006 annual
shareholders meeting. Any Shares delivered under the Plan may consist, in whole or in part, of
authorized and unissued Shares or treasury shares.

          (b) Availability of Shares Not Issued Pursuant to Awards.

               (i) If any Shares subject to an Award or subject to an award granted under the 2001 Plan are
forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or any award
granted under the 2001 Plan is settled for cash or otherwise does not result in the issuance of all
or a portion of the Shares subject to such Award, the Shares shall, to the extent of such
forfeiture, expiration, termination, cash settlement or non-issuance, be available for Awards under
the Plan, subject to Section 4(b)(iv) below.

               (ii) If any Shares issued pursuant to an Award or an award granted under the 2001 Plan are
forfeited back to or repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required for the vesting of
such shares, then such forfeited or repurchased Shares shall revert to and become available for
issuance under the Plan, subject to Section 4(b)(iv) below.

               (iii) In the event that any Option or other Award is exercised by the withholding of Shares
from the Award by the Company, or withholding tax liabilities arising from such Option or other
Award are satisfied by the withholding of Shares from the Award by the Company, then only the net
number of Shares actually issued to the Participant, excluding the Shares withheld, shall be
counted as issued for purposes of determining the maximum number of Shares available for grant
under the Plan, subject to Section 4(b)(iv) below.

               (iv) Notwithstanding anything in this Section 4(b) to the contrary and solely for purposes of
determining whether Shares are available for the grant of Incentive Stock Options, the maximum
aggregate number of shares that may be granted under this Plan shall be determined without regard
to any Shares restored pursuant to this Section 4(b) that, if taken into account, would cause the
Plan to fail the requirement under Code Section 422 that the Plan designate a maximum aggregate
number of shares that may be issued.

          (c) Application of Limitations. The limitation contained in this Section 4 shall
apply not only to Awards that are settled by the delivery of Shares but also to Awards relating to
Shares but settled only in cash (such as cash-only Stock Appreciation Rights). The Plan
Administrator may adopt reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and may make adjustments if
the number of Shares actually delivered differs from the number of shares previously counted in
connection with an Award.

     5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. Subject to adjustment as
provided in Section 10(c), for each fiscal year in which awards granted under the Plan are subject
to the requirements of Section 162(m) of the Code, an Eligible Person may not be granted (i)
Options or Stock Appreciation Rights with respect to more than the total number of Shares reserved
under the Plan or (ii) Awards, other than Options or Stock Appreciation Rights, with respect to
more than the total number of Shares reserved under the Plan. In addition, the maximum dollar
value payable in any fiscal year to any one Participant with respect to Awards granted under the
Plan is $5,000,000.

     6. Terms of Awards.

          (a) General. Awards may be granted on the terms and conditions set forth in this
Section 6. In addition, the Plan Administrator may impose on any Award or the exercise thereof, at
the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Plan Administrator shall determine,
including terms requiring forfeiture of Awards in the event of

7

 

termination of the Participant’s
Continuous Service and terms permitting a Participant to make elections relating to his or her
Award. The Plan Administrator shall retain full power and discretion to accelerate, waive or
modify, at any time, any term or condition of an Award that is not mandatory under the Plan.

          (b) Options. The Plan Administrator is authorized to grant Options to any Eligible
Person on the following terms and conditions:

               (i) Stock Option Agreement. Each grant of an Option shall be evidenced by an Award
Agreement. Such Award Agreement shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan
and which the Plan Administrator deems appropriate for inclusion in the Award Agreement. The
provisions of the various Award Agreements entered into under the Plan need not be identical.
Notwithstanding any other provision of the Plan, any Non-Qualified Stock Option shall be structured
to comply with or be exempt from Section 409A of the Code, unless otherwise specifically determined
by the Plan Administrator.

               (ii) Number of Shares. Each Award Agreement shall specify the number of Shares that
are subject to the Option and shall provide for the adjustment of such number in accordance with
Section 10(c) hereof. The Award Agreement shall also specify whether the Stock Option is an
Incentive Stock Option or a Non-Qualified Stock Option.

               (iii) Exercise Price.

                    (A) In General. Each Award Agreement shall state the price at which Shares subject to
the Option may be purchased (the “Exercise Price”), which shall be, with respect to Incentive Stock
Options, not less than one hundred percent (100%) of the Fair Market Value of the Stock on the date
of grant. In the case of Non-Qualified Stock Options, the Exercise Price shall be determined in
the sole discretion of the Plan Administrator; provided, however, that if the Exercise Price is
less than one hundred percent (100%) of the Fair Market Value of the Stock on the date of grant,
the Non-Qualified Stock Option shall be structured to comply with or be exempt from Section 409A of
the Code.

                    (B) Ten Percent Shareholder. If a Participant owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of
the Company or any Parent or Subsidiary, any Incentive Stock Option granted to such Employee
must have an exercise price per Share of at least 110% of the Fair Market Value of a Share on the
date of grant.

               (iv) Time and Method of Exercise. The Plan Administrator shall determine the time or
times at which or the circumstances under which an Option may be exercised in whole or in part
(including based on achievement of performance goals and/or future service requirements), the time
or times at which Options shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by which the exercise price may be paid or
deemed to be paid (including, in the discretion of the Plan Administrator, a cashless exercise
procedure), the form of such payment, including, without limitation, cash, Stock, Shares subject to
the Option (a “net” exercise), other Awards or awards granted under other plans of the Company or a
Related Entity, other property (including notes or other contractual obligations of Participants to
make payment on a deferred basis) or any other form of consideration legally permissible, and the
methods by or forms in which Stock will be delivered or deemed to be delivered to Participants.

               (v) Termination of Service. Subject to earlier termination of the Option as otherwise
provided in the Plan and unless otherwise specifically provided by the Plan Administrator with
respect to an Option and set forth in the Award Agreement, an Option shall remain exercisable, to
the extent vested, after a Participant’s termination of Continuous Service only during the
applicable time period determined in accordance with this Section and thereafter shall terminate
and no longer be exercisable:

                    (A) Death or Disability. If the Participant’s Continuous Service terminates because
of the death or Disability of the Participant, the Option, to the extent unexercised and vested and
exercisable

8

 

on the date on which the Participant’s Continuous Service terminated, may be exercised
by the Participant (or the Participant’s legal representative or estate) at any time prior to the
expiration of twelve (12) months (or such other period of time as determined by the Plan
Administrator, in its discretion) after the date on which the Participant’s Continuous Service
terminated, but in any event only with respect to the vested portion of the Option and no later
than the Option Expiration Date.

                    (B) Termination for Cause. Notwithstanding any other provision of the Plan to the
contrary, if the Participant’s Continuous Service is terminated for Cause, the Option shall
terminate and cease to be exercisable immediately upon such termination of Continuous Service.

                    (C) Other Termination of Service. If the Participant’s Continuous Service terminates
for any reason, except Disability, death or Cause, the Option, to the extent unexercised, vested
and exercisable by the Participant on the date on which the Participant’s Continuous Service
terminated, may be exercised by the Participant at any time prior to the expiration of thirty (30)
days (or such longer period of time as determined by the Plan Administrator, in its discretion)
after the date on which the Participant’s Continuous Service terminated, but in any event only with
respect to the vested portion of the Option and no later than the Option Expiration Date.

                    (D) Extension for Securities Law Violations. Notwithstanding the other provisions of
this Section 6(b)(v) and contingent upon this provision not adversely affecting the exemption of
the Option from the provisions of Section 409A of the Code, if the Participant’s Continuous Service
terminates for any reason, except Cause, and the Participant is precluded by federal or state
securities laws from selling the Shares, so that the Participant has less than a thirty (30) day
period from the termination of Participant’s Continuous Service to the expiration date of the
Option in which the Participant would be permitted by federal or state securities laws to sell the
Shares, then the period for exercising the Option following the termination of Participant’s
Continuous Service shall automatically be extended by an additional period of up to thirty (30)
days measured from the date the Participant is first free to sell Shares; provided, however, that
in no event shall the Option be exercisable after the specified Option Expiration Date and the
maximum date permitted for exemption of the Option under Section 409A of the Code. The
determination of whether the Participant is precluded from selling the Shares subject to the Option
by federal or state securities laws shall be made by the Plan Administrator and such determination
shall be final, binding and conclusive.

               (vi) Incentive Stock Options. The terms of any Incentive Stock Option granted under
the Plan shall comply in all respects with the provisions of Section 422 of the Code. If and to
the extent
required to comply with Section 422 of the Code, Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions:

                    (1) The Option shall not be exercisable more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a Participant owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any Parent or Subsidiary and the
Incentive Stock Option is granted to such Participant, the Incentive Stock Option shall not be
exercisable (to the extent required by the Code at the time of the grant) for no more than five
years from the date of grant; and

                    (2) If the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under
the Plan and all other option plans of the Company, its Parent or any Subsidiary are exercisable
for the first time by a Participant during any calendar year in excess of $100,000, then such
Participant’s Incentive Stock Option(s) or portions thereof that exceed such $100,000 limit shall
be treated as Non-Qualified Stock Options (in the reverse order in which they were granted, so that
the last Incentive Stock Option will be the first treated as a Non-Qualified Stock Option). This
paragraph shall only apply to the extent such limitation is applicable under the Code at the time
of the grant.

          (c) Stock Appreciation Rights. The Plan Administrator is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:

9

 

               (i) Agreement. Each grant of a Stock Appreciation Right shall be evidenced by an
Award Agreement. Such Award Agreement shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not inconsistent with the
Plan and which the Plan Administrator deems appropriate for inclusion in the Award Agreement. The
provisions of the various Award Agreements entered into under the Plan need not be identical.

               (ii) Right to Payment. A Stock Appreciation Right shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market
Value of one share of stock on the date of exercise over (B) the grant price of the Stock
Appreciation Right as determined by the Plan Administrator.

               (iii) Other Terms. The Plan Administrator shall determine at the date of grant or
thereafter, the time or times at which and the circumstances under which a Stock Appreciation Right
may be exercised in whole or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which Stock Appreciation Rights shall cease to
be or become exercisable following termination of Continuous Service or upon other conditions, the
form of payment upon exercise of Shares, cash or other property, the method of exercise, method of
settlement, form of consideration payable in settlement (either cash, Shares or other property),
method by or forms in which Stock will be delivered or deemed to be delivered to Participants,
whether or not a Stock Appreciation Right shall be in tandem or in combination with any other
Award, and any other terms and conditions of any Stock Appreciation Right. Stock Appreciation
Rights may be either freestanding or in tandem with other Awards. Notwithstanding any other
provision of the Plan, unless otherwise specifically determined by the Plan Administrator, each
Stock Appreciation Right shall be structured to either comply with or be exempt from Section 409A
of the Code.

          (d) Restricted Stock. The Plan Administrator is authorized to grant Restricted Stock
to any Eligible Person on the following terms and conditions:

               (i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any, as the Plan Administrator may
impose, or as otherwise
provided in this Plan. The terms of any Restricted Stock granted under the Plan shall be set
forth in a written Award Agreement which shall contain provisions determined by the Plan
Administrator and not inconsistent with the Plan. The restrictions may lapse separately or in
combination at such times, under such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or otherwise, as the Plan
Administrator may determine at the date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award Agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote
the Restricted Stock and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Plan Administrator). During the restricted period
applicable to the Restricted Stock, subject to Section 10(b) below, the Restricted Stock may not
be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

               (ii) Forfeiture. Except as otherwise determined by the Plan Administrator, upon
termination of a Participant’s Continuous Service during the applicable restriction period, the
Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not
lapsed or otherwise been satisfied shall be forfeited to or reacquired by the Company; provided
that the Plan Administrator may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture conditions relating to Restricted
Stock shall be waived in whole or in part in the event of terminations resulting from specified
causes, and the Plan Administrator may in other cases waive in whole or in part the forfeiture of
Restricted Stock, as the Plan Administrator determines, in its discretion.

               (iii) Certificates for Shares. Restricted Stock granted under the Plan may be
evidenced in such manner as the Plan Administrator shall determine. If certificates representing
Restricted Stock are registered in the name of the Participant, the Plan Administrator may require
that such certificates bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the Company retain physical possession of
the certificates, that the certificates be kept with an escrow agent and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

10

 

               (iv) Dividends and Splits. As a condition to the grant of an Award of Restricted
Stock, the Plan Administrator may require or permit a Participant to elect that any cash dividends
paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted
Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined
by the Plan Administrator, Shares distributed in connection with a stock split or stock dividend,
and other property distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other
property have been distributed.

          (e) Stock Units. The Plan Administrator is authorized to grant Stock Units to
Participants, which are rights to receive Shares, cash or other property, or a combination thereof
at the end of a specified time period, subject to the following terms and conditions:

               (i) Award and Restrictions. Satisfaction of an Award of Stock Units shall occur upon
expiration of the time period specified for such Stock Units by the Plan Administrator (or, if
permitted by the Plan Administrator, as elected by the Participant). In addition, Stock Units
shall be subject to such restrictions (which may include a risk of forfeiture) as the Plan
Administrator may impose, if any, which restrictions may lapse at the expiration of the time period
or at earlier specified times (including based on achievement of performance goals and/or future
service requirements), separately or in combination, in installments or otherwise, as the Plan
Administrator may determine. The terms of an Award of Stock Units shall be set forth in a written
Award Agreement which shall contain provisions determined by the Plan Administrator and not
inconsistent with the Plan. Stock Units may be satisfied by delivery of Stock, cash equal to the
Fair Market Value of the specified number of Shares covered by the Stock Units, or a combination
thereof, as determined by the Plan Administrator at the date of grant or thereafter. Prior to
satisfaction of an Award of Stock Units, an Award of Stock Units carries no voting or dividend or
other rights associated with share ownership. Notwithstanding any other provision of the Plan,
unless specifically determined by the Plan Administrator, each Stock Unit shall be structured to
either comply with or be exempt from Section 409A of the Code.

               (ii) Forfeiture. Except as otherwise determined by the Plan Administrator, upon
termination of a Participant’s Continuous Service during the applicable time period or portion
thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the
Stock Units), the Participant’s Stock Units (other than those vested Stock Units subject to
deferral at the election of the Participant) shall be forfeited; provided that the Plan
Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to Stock Units shall be waived
in whole or in part in the event of terminations resulting from specified causes, and the Plan
Administrator may in other cases waive in whole or in part the forfeiture of Stock Units at its
discretion.

               (iii) Dividend Equivalents. Unless otherwise determined by the Plan Administrator at
date of grant, any Dividend Equivalents that are granted with respect to any Award of Stock Units
shall be either (A) paid with respect to such Stock Units at the dividend payment date in cash or
in Shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends,
or (B) deferred with respect to such Stock Units and the amount or value thereof automatically
deemed reinvested in additional Stock Units, other Awards or other investment vehicles, as the Plan
Administrator shall determine or permit the Participant to elect.

          (f) Bonus Stock and Awards in Lieu of Obligations. The Plan Administrator is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company
obligations to pay cash or deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the Plan Administrator to
the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to
such other terms as shall be determined by the Plan Administrator.

          (g) Dividend Equivalents. The Plan Administrator is authorized to grant Dividend
Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other
Awards, or other property equal in value to dividends paid with respect to a specified number of
Shares, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis
or in connection with another Award. The terms of an Award of Dividend Equivalents shall be set
forth in a written Award Agreement which shall contain provisions

11

 

determined by the Plan
Administrator and not inconsistent with the Plan. The Plan Administrator may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Plan Administrator may specify. Notwithstanding
any other provision of the Plan, unless specifically determined by the Plan Administrator, each
Dividend Equivalent shall be structured to either comply with or be exempt from Section 409A of the
Code.

          (h) Performance Awards. The Plan Administrator is authorized to grant Performance
Awards to any Eligible Person payable in cash, Shares, other property, or other Awards, on terms
and conditions established by the Plan Administrator, subject to the provisions of Section 7 if and
to the extent that the Plan Administrator shall, in its sole discretion, determine that an Award
shall be subject to those provisions. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined by the Plan
Administrator upon the grant of each Performance Award. Except as provided in this Plan or as may
be provided in an Award Agreement, Performance Awards will be distributed only after the end of the
relevant Performance Period. The performance goals to be achieved for each Performance Period
shall be conclusively determined by the Plan Administrator and may be based upon the criteria set
forth in Section 7(b), or in the case of an Award that the Plan Administrator determines shall not
be subject to Section 7 hereof, any other criteria that the Plan Administrator, in its sole
discretion, shall determine should be used for that purpose. The amount of the Award to be
distributed shall be conclusively determined by the Plan Administrator. Performance Awards may be
paid in a lump sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Plan Administrator, on a deferred basis.

          (i) Other Stock-Based Awards. The Plan Administrator is authorized, subject to
limitations under applicable law, to grant to any Eligible Person such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or
related to, Shares, as deemed by the Plan Administrator to be consistent with the purposes of the
Plan, including, without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment
contingent upon performance of the Company or any other factors designated by the Plan
Administrator, and Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified Related Entities or business units. These Awards may be granted
alone or in connection with other awards (whether or not such other awards are granted under the
Plan). The Plan Administrator shall determine the terms and conditions of such Awards. The terms
of any Award pursuant to this Section shall be set forth in a written Award Agreement which shall
contain provisions determined by the Plan Administrator and not inconsistent with the Plan. Stock
delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h)
shall be purchased for such consideration (including without limitation loans from the Company or a
Related Entity), paid for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards or other property, as the Plan Administrator shall determine.
Cash awards, as an element of or supplement to any other Award under the Plan, may also be
granted pursuant to this Section 6(i). Notwithstanding any other provision of the Plan, unless
specifically determined by the Plan Administrator, each Award shall be structured to either be
exempt or comply with Section 409A of the Code.

     7. Tax Qualified Performance Awards.

          (a) Covered Employees. A Committee, composed in compliance with the requirements of
Section 162(m) of the Code, in its discretion, may determine at the time an Award is granted to an
Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company
would claim a tax deduction in connection with such Award, a Covered Employee, that the provisions
of this Section 7 shall be applicable to such Award.

          (b) Performance Criteria. If an Award is subject to this Section 7, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as
applicable, shall be contingent upon achievement of one or more objective performance goals.
Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of
the Code and regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” One or more of the following business criteria for the Company, on a
consolidated basis, and/or for Related Entities, or for business or geographical units of the
Company and/or
a

12

 

Related Entity (except with respect to the total stockholder return and earnings
per share criteria), shall be used by the Committee in establishing performance goals for such
Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5)
return on net assets, investment, capital, or equity; (6) economic value added; (7) direct
contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings after interest expense and before
extraordinary or special items; operating income; income before interest income or expense, unusual
items and income taxes, local, state or federal and excluding budgeted and actual bonuses which
might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of
fixed costs or variable costs; (11) identification or consummation of investment opportunities or
completion of specified projects in accordance with corporate business plans, including strategic
mergers, acquisitions or divestitures; (12) total stockholder return; and (13) debt reduction. Any
of the above goals may be determined on an absolute or relative basis or as compared to the
performance of a published or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor’s 500 Stock Index or a group of companies that are comparable to
the Company. The Committee shall exclude the impact of an event or occurrence which the Committee
determines should appropriately be excluded, including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) an
event either not directly related to the operations of the Company or not within the reasonable
control of the Company’s management, or (iii) a change in accounting standards required by
generally accepted accounting principles.

          (c) Performance Period; Timing For Establishing Performance Goals. Achievement of
performance goals in respect of such Performance Awards shall be measured over a Performance
Period, as specified by the Committee. Performance goals shall be established not later than
ninety (90) days after the beginning of any Performance Period applicable to such Performance
Awards, or at such other date as may be required or permitted for “performance-based compensation”
under Section 162(m) of the Code.

          (d) Adjustments. The Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with Awards subject to this Section 7, but may not exercise
discretion to increase any such amount payable to a Covered Employee in respect of an Award subject
to this Section 7. The Committee shall specify the circumstances in which such Awards shall be
paid or forfeited in the event of termination of Continuous Service by the Participant prior to the
end of a Performance Period or settlement of Awards.

          (e) Committee Certification. No Participant shall receive any payment under the Plan
unless the Committee has certified, by resolution or other appropriate action in writing, that the
performance criteria and any other material terms previously established by the Committee or set
forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based
compensation” under Section 162(m) of the Code.

     8. Certain Provisions Applicable to Awards or Sales.

          (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Plan Administrator, be granted either alone or in addition to,
in tandem with, or in substitution or exchange for, any other Award or any award granted under
another plan of the Company, any Related Entity, or any business entity to be acquired by the
Company or a Related Entity, or any other right of a Participant to receive payment from the
Company or any Related Entity. Such additional, tandem, and substitute or exchange Awards may be
granted at any time. If an Award is granted in substitution or exchange for another Award or
award, the Plan Administrator shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the Company or any
Related Entity.

          (b) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company or a Related Entity
upon the exercise of an Option or other Award or settlement of an Award may be made in such forms
as the Plan Administrator shall determine, including, without limitation, cash, other Awards or
other property, and may be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Plan Administrator or upon occurrence of
one or more specified events (in addition to a Change in Control). Installment or deferred
payments may be

13

 

required by the Plan Administrator (subject to Section 10(g) of the Plan) or
permitted at the election of the Participant on terms and conditions established by the Plan
Administrator. Payments may include, without limitation, provisions for the payment or crediting
of a reasonable interest rate on installment or deferred payments or the grant or crediting of
Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in
Stock.

          (c) Exemptions from Section 16(b) Liability. It is the intent of the Company that
this Plan comply in all respects with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to
the extent necessary to ensure that neither the grant of any Awards to nor other transaction by a
Participant who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the extent necessary to conform
to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b).

          (d) Code Section 409A. If and to the extent that the Plan Administrator believes that
any Awards may constitute a “nonqualified deferred compensation plan” under Section 409A of the
Code, the terms and conditions set forth in the Award Agreement for that Award shall be drafted in
a manner that is intended to comply with, and shall be interpreted in a manner consistent with, the
applicable requirements of Section 409A of the Code, unless otherwise agreed to in writing by the
Participant and the Company.

     9. Change in Control; Corporate Transaction.

          (a) Change in Control.

               (i) The Plan Administrator may, in its discretion, accelerate the vesting, exercisability,
lapsing of restrictions, or expiration of deferral of any Award, including upon the occurrence of a
Change in Control. In addition, the Plan Administrator may provide in an Award Agreement that the
performance goals relating to any Award will be deemed to have been met upon the occurrence of any
Change in Control.

               (ii) In addition to the terms of Sections 9(a)(i) above, the effect of a “change in control,”
may be provided (1) in an employment, compensation, or severance agreement, if any, between the
Company or any Related Entity and the Participant, relating to the Participant’s employment,
compensation, or severance with or from the Company or such Related Entity, or (2) in the Award
Agreement.

          (b) Corporate Transactions. In the event of a Corporate Transaction, any surviving
entity or acquiring entity or its parent (together, the “Surviving Entity”) may either (i)
assume any or all Awards outstanding under the Plan; (ii) continue any or all Awards outstanding
under the Plan; or (iii) substitute similar stock awards for outstanding Awards (it being
understood that similar awards include, but are not limited to, awards to acquire the same
consideration paid to the shareholders or the Company, as the case may be, pursuant to the
Corporate Transaction). In the event that any Surviving Entity does not assume or continue any or
all such outstanding Awards or substitute similar stock awards for such outstanding Awards, then
with respect to Awards that have been not assumed, continued or substituted, then such Awards shall
terminate if not exercised (if applicable) at or prior to such effective time (contingent upon the
effectiveness of the Corporate Transaction); provided that the Plan Administrator provides the
Participants reasonable notice of the termination of their Awards and a period of at least three
(3) business days to exercise the Awards (to the extent the Awards are exercisable).

          The Plan Administrator, in its discretion and without the consent of any Participant, may (but
is not obligated to) either (i) accelerate the vesting of any Awards (and, if applicable, the time
at which such Awards may be exercised) in full or as to some percentage of the Award to a date
prior to the effective time of such Corporate Transaction as the Plan Administrator shall determine
(contingent upon the effectiveness of each Corporate Transaction) or (ii) provide for a cash
payment in exchange for the termination of an Award or any portion thereof where such cash payment
is equal to the Fair Market Value of the Shares that the Participant would receive if the Award
were fully vested and exercised (if applicable) as of such date (less any applicable exercise
price). In the event that the Plan Administrator accelerates the vesting of any Award, the Plan
Administrator shall

14

 

provide the Participant whose Award has been accelerated notice of the vesting acceleration
and a period of fifteen (15) days from the date of the notice in which to exercise the Award.

          (c) Notwithstanding the foregoing, with respect to Restricted Stock and any other Award
granted under the Plan where the Company has any forfeiture, reacquisition or repurchase rights,
the forfeiture, reacquisition or repurchase rights for such Awards may be assigned by the Company
to the Successor Entity in connection with such Corporate Transaction. In the event any such
rights are not continued or assigned to the Successor Entity, then such rights shall lapse and the
Award shall be fully vested as of the effective time of the Corporate Transaction. In addition,
the Plan Administrator, in its discretion, may (but is not obligated to) provide that any
forfeiture, reacquisition or repurchase rights held by the Company with respect to any such Awards
shall lapse in whole or in part (contingent upon the effectiveness of the Corporate Transaction).

          (d) Dissolution or Liquidation. In the event of a dissolution or liquidation of the
Company, then all outstanding Awards shall terminate immediately prior to the completion of such
dissolution or liquidation, and Shares subject to the Company’s repurchase option may be
repurchased by the Company notwithstanding the fact that the holder of such stock is still in
Continuous Service.

     10. General Provisions.

          (a) Compliance With Legal and Other Requirements. The Company may, to the extent
deemed necessary or advisable by the Plan Administrator, postpone the issuance or delivery of Stock
or payment of other benefits under any Award until completion of such registration or qualification
of such Stock or other required action under any federal or state law, rule or regulation, listing
or other required action with respect to any stock exchange or automated quotation system upon
which the Stock or other Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Plan Administrator, may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the issuance or delivery of
Stock or payment of other benefits in compliance with applicable laws, rules, and regulations,
listing requirements, or other obligations. The foregoing notwithstanding, in connection with a
Change in Control, the Company shall take or cause to be taken no action, and shall undertake or
permit to arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a Participant than existed on
the ninetieth (90th) day preceding the Change in Control.

          (b) Limits on Transferability; Beneficiaries. Except as determine by the Plan
Administrator, a Participant may not assign, sell, transfer, or otherwise encumber or subject to
any lien any Award or other right or interest granted under this Plan, in whole or in part, other
than by will or by operation of the laws of descent and distribution, and such Awards or rights
that may be exercisable shall be exercised during the lifetime of the Participant only by the
Participant or his or her guardian or legal representative.

          (c) Adjustments.

               (i) Adjustments to Awards. In the event that any extraordinary dividend or other
distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or event affects the
Stock and/or such other securities of the Company or any other issuer such that a substitution,
exchange, or adjustment is determined by the Plan Administrator to be appropriate, then the Plan
Administrator shall, in such manner as the Plan Administrator may deem equitable, substitute,
exchange, or adjust any or all of (A) the number and kind of Shares which reserved for issuance in
connection with Awards granted thereafter, (B) the number and kind of Shares by which annual
per-person Award limitations are measured under Section 5 hereof, (C) the number and kind of Shares
subject to or deliverable in
respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating
to any Award and/or make provision for payment of cash or other property in respect of any
outstanding Award, and (E) any other aspect of any Award that the Plan Administrator determines to
be appropriate.

15

 

               (ii) Other Adjustments. The Plan Administrator (which shall be a Committee to the
extent such authority is required to be exercised by a Committee to comply with Code Section
162(m)) is authorized to make adjustments in the terms and conditions of, and the criteria included
in, Awards (including Awards subject to performance goals) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and
assets) affecting the Company, any Related Entity or any business unit, or the financial statements
of the Company or any Related Entity, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in view of the Plan
Administrator’s assessment of the business strategy of the Company, any Related Entity or business
unit thereof, performance of comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, Stock Appreciation Rights or Performance Awards granted to
Participants designated by the Plan Administrator as Covered Employees and intended to qualify as
“performance-based compensation” under Code Section 162(m) and the regulations thereunder to
otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and
regulations thereunder.

          (d) Taxes. The Company and any Related Entity are authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a distribution of
Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due
or potentially payable in connection with any transaction involving an Award, and to take such
other action as the Plan Administrator may deem advisable to enable the Company, any Related Entity
and the Participants to satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include authority to withhold or receive
Stock or other property and to make cash payments in respect thereof in satisfaction of a
Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the
Plan Administrator.

          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue
or terminate the Plan, or any Committee’s authority to grant Awards under the Plan, without the
consent of shareholders or Participants. Any amendment or alteration to the Plan shall be subject
to the approval of the Company’s shareholders if such shareholder approval is deemed necessary and
advisable by the Board. However, without the consent of an affected Participant, no such amendment,
alteration, suspension, discontinuance or termination of the Plan may materially and adversely
affect the rights of such Participant under any previously granted and outstanding Award. The Plan
Administrator may waive any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award Agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an affected Participant, no
such action may materially and adversely affect the rights of such Participant under such Award.

          (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ of the Company or a Related Entity; (ii)
interfering in any way with the right of the Company or a Related Entity to terminate any Eligible
Person’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated uniformly with other
Participants and Employees, or (iv) conferring on a Participant any of the rights of a shareholder
of the Company unless and until the Participant is duly issued or transferred Shares in accordance
with the terms of an Award.

          (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or obligations to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general creditor of the Company; provided
that the Plan Administrator may authorize the creation of trusts and deposit therein cash, Stock,
other Awards or other property, or make other arrangements to meet the Company’s obligations under
the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the
Plan unless the Plan Administrator otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest
the proceeds in alternative investments, subject to such terms and conditions as the Plan
Administrator may specify and in accordance with applicable law.

16

 

          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the shareholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or the Committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).

          (i) Fractional Shares. No fractional Shares shall be issued or delivered pursuant to
the Plan or any Award. The Plan Administrator shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

          (j) Governing Law. The validity, construction and effect of the Plan, any rules and
regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws
of the State of Nevada without giving effect to principles of conflicts of laws, and applicable
federal law.

          (k) Plan Effective Date and Shareholder Approval; Termination of Plan. The Plan shall
become effective on the Effective Date, subject to subsequent approval within twelve (12) months of
its adoption by the Board by shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Applicable Laws. Awards may be granted
prior and subject to shareholder approval, but may not be exercised or otherwise settled in the
event shareholder approval is not obtained. The Plan shall terminate no later than ten (10) years
from the date of the later of (x) the Effective Date and (y) the date an increase in the number of
shares reserved for issuance under the Plan is approved by the Board (so long as such increase is
also approved by the shareholders).

17

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