Document:

exv10w1

Exhibit 10.1

Abaxis, Inc.

2005 Equity Incentive Plan

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. Establishment, Purpose and Term of Plan
	 	 	1	 
	 
	 	 	 	 
	1.1 Establishment
	 	 	1	 
	1.2 Purpose
	 	 	1	 
	1.3 Term of Plan
	 	 	1	 
	 
	 	 	 	 
	2. Definitions and Construction
	 	 	1	 
	 
	 	 	 	 
	2.1 Definitions
	 	 	1	 
	2.2 Construction
	 	 	7	 
	 
	 	 	 	 
	3. Administration
	 	 	7	 
	 
	 	 	 	 
	3.1 Administration by the Committee
	 	 	7	 
	3.2 Authority of Officers
	 	 	7	 
	3.3 Administration with Respect to Insiders
	 	 	7	 
	3.4 Committee Complying with Section 162(m)
	 	 	7	 
	3.5 Powers of the Committee
	 	 	8	 
	3.6 Option or SAR Repricing
	 	 	9	 
	3.7 Indemnification
	 	 	9	 
	 
	 	 	 	 
	4. Shares Subject to Plan
	 	 	9	 
	 
	 	 	 	 
	4.1 Maximum Number of Shares Issuable
	 	 	9	 
	4.2 Adjustments for Changes in Capital Structure
	 	 	10	 
	 
	 	 	 	 
	5. Eligibility and Award Limitations
	 	 	10	 
	 
	 	 	 	 
	5.1 Persons Eligible for Awards
	 	 	10	 
	5.2 Participation
	 	 	11	 
	5.3 Incentive Stock Option Limitations
	 	 	11	 
	5.4 Award Limits
	 	 	11	 
	 
	 	 	 	 
	6. Terms and Conditions of Options
	 	 	12	 
	 
	 	 	 	 
	6.1 Exercise Price
	 	 	12	 
	6.2 Exercisability and Term of Options
	 	 	13	 
	6.3 Payment of Exercise Price
	 	 	13	 
	6.4 Effect of Termination of Service
	 	 	14	 
	6.5 Transferability of Options
	 	 	14	 
	 
	 	 	 	 
	7. Terms and Conditions of Stock Appreciation Rights
	 	 	14	 
	 
	 	 	 	 
	7.1 Types of SARs Authorized
	 	 	14	 
	7.2 Exercise Price
	 	 	15	 
	7.3 Exercisability and Term of SARs
	 	 	15	 
	7.4 Deemed Exercise of SARs
	 	 	15	 
	7.5 Effect of Termination of Service
	 	 	15	 

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TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page
	7.6 Nontransferability of SARs
	 	 	15	 
	 
	 	 	 	 
	8. Terms and Conditions of Restricted Stock Awards
	 	 	15	 
	 
	 	 	 	 
	8.1 Types of Restricted Stock Awards Authorized
	 	 	16	 
	8.2 Purchase Price
	 	 	16	 
	8.3 Purchase Period
	 	 	16	 
	8.4 Vesting and Restrictions on Transfer
	 	 	16	 
	8.5 Voting Rights; Dividends and Distributions
	 	 	16	 
	8.6 Effect of Termination of Service
	 	 	17	 
	8.7 Nontransferability of Restricted Stock Award Rights
	 	 	17	 
	 
	 	 	 	 
	9. Terms and Conditions of Performance Awards
	 	 	17	 
	 
	 	 	 	 
	9.1 Types of Performance Awards Authorized
	 	 	17	 
	9.2 Initial Value of Performance Shares and Performance Units
	 	 	17	 
	9.3 Establishment of Performance Period, Performance Goals and Performance
Award Formula
	 	 	17	 
	9.4 Measurement of Performance Goals
	 	 	18	 
	9.5 Settlement of Performance Awards
	 	 	19	 
	9.6 Voting Rights; Dividend Equivalent Rights and Distributions
	 	 	19	 
	9.7 Effect of Termination of Service
	 	 	20	 
	9.8 Nontransferability of Performance Awards
	 	 	20	 
	 
	 	 	 	 
	10. Terms and Conditions of Restricted Stock Unit Awards
	 	 	20	 
	 
	 	 	 	 
	10.1 Grant of Restricted Stock Unit Awards
	 	 	21	 
	10.2 Vesting
	 	 	21	 
	10.3 Voting Rights, Dividend Equivalent Rights and Distributions
	 	 	21	 
	10.4 Effect of Termination of Service
	 	 	21	 
	10.5 Settlement of Restricted Stock Unit Awards
	 	 	22	 
	10.6 Nontransferability of Restricted Stock Unit Awards
	 	 	22	 
	 
	 	 	 	 
	11. Deferred Compensation Awards
	 	 	22	 
	 
	 	 	 	 
	11.1 Establishment of Deferred Compensation Award Programs
	 	 	22	 
	11.2 Terms and Conditions of Deferred Compensation Awards
	 	 	23	 
	 
	 	 	 	 
	12. Other Stock-Based Awards
	 	 	24	 
	 
	 	 	 	 
	13. Change in Control
	 	 	24	 
	 
	 	 	 	 
	13.1 Effect of Change in Control on Options and SARs
	 	 	24	 
	13.2 Effect of Change in Control on Restricted Stock Awards
	 	 	25	 
	13.3 Effect of Change in Control on Performance Awards
	 	 	25	 
	13.4 Effect of Change in Control on Restricted Stock Unit Awards
	 	 	25	 
	13.5 Effect of Change in Control on Deferred Compensation Awards
	 	 	25	 

ii

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page
	14. Compliance with Securities Law
	 	 	26	 
	 
	 	 	 	 
	15. Tax Withholding
	 	 	26	 
	 
	 	 	 	 
	15.1 Tax Withholding in General
	 	 	26	 
	15.2 Withholding in Shares
	 	 	26	 
	 
	 	 	 	 
	16. Amendment or Termination of Plan
	 	 	26	 
	 
	 	 	 	 
	17. Miscellaneous Provisions
	 	 	27	 
	 
	 	 	 	 
	17.1 Repurchase Rights
	 	 	27	 
	17.2 Provision of Information
	 	 	27	 
	17.3 Rights as Employee, Consultant or Director
	 	 	27	 
	17.4 Rights as a Shareholder
	 	 	27	 
	17.5 Fractional Shares
	 	 	27	 
	17.6 Severability
	 	 	27	 
	17.7 Beneficiary Designation
	 	 	28	 
	17.8 Unfunded Obligation
	 	 	28	 
	17.9 Choice of Law
	 	 	28	 

iii

 

Abaxis, Inc.

2005 Equity Incentive Plan

     1. Establishment, Purpose and Term of Plan.

          1.1 Establishment. The Abaxis, Inc. 2005 Equity Incentive Plan (the “Plan”) is hereby
established effective as of its approval by the shareholders of the Company (the “Effective Date”).
The Plan is the successor to the Company’s 1998 Stock Option Plan and its share reserve.

          1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract and retain the best qualified
personnel to perform services for the Participating Company Group, by motivating such persons to
contribute to the growth and profitability of the Participating Company Group, by aligning their
interests with interests of the Company’s shareholders, and by rewarding such persons for their
services by tying a significant portion of their total compensation package to the success of the
Company. The Plan seeks to achieve this purpose by providing for Awards in the form of Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Shares, Performance Units,
Restricted Stock Units, Deferred Compensation Awards and other Stock-Based Awards as described
below.

          1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.

     2. Definitions and Construction.

          2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

               (a) “Affiliate” means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term “control” (including the term
“controlled by”) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.

               (b) “Award” means any Option, SAR, Restricted Stock Award, Performance Share, Performance
Unit, Restricted Stock Unit or Deferred Compensation Award or other Stock-Based Award granted under
the Plan.

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               (c) “Award Agreement” means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant.

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

               (e) “Change in Control” means, unless otherwise defined by the Participant’s Award Agreement
or contract of employment or service, an Ownership Change Event or a series of related Ownership
Change Events (collectively, the “Transaction”) wherein the shareholders of the Company immediately
before the Transaction do not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company’s voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the corporation or
corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”),
as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.
The Board shall have the right to determine whether multiple sales or exchanges of the voting
stock of the Company or multiple Ownership Change Events are related, and its determination shall
be final, binding and conclusive.

               (f) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

               (g) “Committee” means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. If no
committee of the Board has been appointed to administer the Plan, the Board shall exercise all of
the powers of the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.

               (h) “Company” means Abaxis, Inc., a California corporation, or any successor corporation
thereto.

               (i) “Consultant” means a person engaged to provide consulting or advisory services (other than
as an Employee or a member of the Board) to a Participating Company, provided that the identity of
such person, the nature of such services or the entity to which such services are provided would
not preclude the Company from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the Securities Act.

               (j) “Deferred Compensation Award” means an award of Stock Units granted to a Participant
pursuant to Section 11 of the Plan.

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

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               (l) “Disability” means the permanent and total disability of the Participant, within the
meaning of Section 22(e)(3) of the Code.

               (m) “Dividend Equivalent” means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Stock for each share of Stock represented by an Award held by such
Participant.

               (n) “Employee” means any person treated as an employee (including an Officer or a member of
the Board who is also treated as an employee) in the records of a Participating Company and, with
respect to any Incentive Stock Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a member of the Board nor
payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.
The Company shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of such individual’s
employment or termination of employment, as the case may be. For purposes of an individual’s
rights, if any, under the Plan as of the time of the Company’s determination, all such
determinations by the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary determination.

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

               (p) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:

                    (i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market Value of a share of
Stock shall be the closing price of a share of Stock as quoted on the New York Stock Exchange or
such other national or regional securities exchange or market system constituting the primary
market for the Stock, as reported in The Wall Street Journal or such other source as the Company
deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant date, or such other
appropriate day as shall be determined by the Committee, in its discretion.

                    (ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair
Market Value on the basis of the opening, closing, high, low or average sale price of a share of
Stock or the actual sale price of a share of Stock received by a Participant, on such date, the
preceding trading day, the next succeeding trading day or an average determined over a period of
trading days. The Committee may vary its method of determination of the Fair Market Value as
provided in this Section for different purposes under the Plan.

3

 

                    (iii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee
in good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.

               (q) “Incentive Stock Option” means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.

               (r) “Insider” means an Officer, a Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.

               (s) “Net-Exercise” means a procedure by which the Participant will be issued a number of
shares of Stock determined in accordance with the following formula:

                    X = Y(A-B)/A, where

                    X = the number of shares of Stock to be issued to the Participant upon exercise of the Option;

                    Y = the total number of shares with respect to which the Participant has elected to exercise
the Option;

                    A = the Fair Market Value of one (1) share of Stock;

                    B = the exercise price per share (as defined in the Participant’s Award Agreement).

               (t) “Nonemployee Director” means a Director who is not an Employee.

               (u) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award
Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.

               (v) “Officer” means any person designated by the Board as an officer of the Company.

               (w) “Option” means the right to purchase Stock at a stated price for a specified period of
time granted to a Participant pursuant to Section 6 of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.

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

               (y) “Ownership Change Event” shall be deemed to have occurred if any of the following occurs
with respect to the Company:

                    (i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

                    (ii) a merger or consolidation in which the Company is a party;

4

 

                    (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

                    (iv) a liquidation or dissolution of the Company.

               (z) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

               (aa) “Participant” means any eligible person who has been granted one or more Awards.

               (bb) “Participating Company” means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.

               (cc) “Participating Company Group” means, at any point in time, all entities collectively
which are then Participating Companies.

               (dd) “Performance Award” means an Award of Performance Shares or Performance Units.

               (ee) “Performance Award Formula” means, for any Performance Award, a formula or table
established by the Committee pursuant to Section 9.3 of the Plan which provides the basis for
computing the value of a Performance Award at one or more threshold levels of attainment of the
applicable Performance Goal(s) measured as of the end of the applicable Performance Period.

               (ff) “Performance Goal” means a performance goal established by the Committee pursuant to
Section 9.3 of the Plan.

               (gg) “Performance Period” means a period established by the Committee pursuant to Section 9.3
of the Plan at the end of which one or more Performance Goals are to be measured.

               (hh) “Performance Share” means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Share, as determined by the Committee, based on performance.

               (ii) “Performance Unit” means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Unit, as determined by the Committee, based upon performance.

               (jj) “Restricted Stock Award” means an Award of Restricted Stock.

               (kk) “Restricted Stock Unit” or “Stock Unit” means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 10 or Section 11 of the Plan, respectively, to receive
a share of Stock on a date determined in accordance with the provisions of Section 10 or
Section 11, as applicable, and the Participant’s Award Agreement.

5

 

               (ll) “Restriction Period” means the period established in accordance with Section 8.4 of the
Plan during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.

               (mm) “Retirement” means termination as an Employee of a Participating Company at age 55 or
older, provided that the Participant was an Employee for at least five consecutive years prior to
the date of such termination.

               (nn) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.

               (oo) “SAR” or “Stock Appreciation Right” means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the
Plan to receive payment in any combination of shares of Stock or cash of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.

               (pp) “Section 162(m)” means Section 162(m) of the Code.

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

               (rr) “Service” means a Participant’s employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service
shall not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders such Service or a change in the Participating Company for which the Participant
renders such Service, provided that there is no interruption or termination of the Participant’s
Service. Furthermore, a Participant’s Service shall not be deemed to have terminated if the
Participant takes any military leave, sick leave, or other bona fide leave of absence approved by
the Company. However, if any such leave taken by a Participant exceeds ninety (90) days, then on
the one hundred eighty-first (181st) day following the commencement of such leave any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and
instead shall be treated thereafter as a Nonstatutory Stock Option, unless the Participant’s right
to return to Service with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as Service for purposes of determining vesting under the
Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either
upon an actual termination of Service or upon the entity for which the Participant performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participant’s Service has terminated and the effective date of such
termination.

               (ss) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2 of the Plan.

               (tt) “Stock-Based Awards” means any award that is valued in whole or in part by reference to,
or is otherwise based on, the Stock, including dividends on the Stock, but not limited to those
Awards described in Sections 6 through 11 of the Plan.

6

 

               (uu) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

               (vv) “Ten Percent Owner” means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.

               (ww) “Vesting Conditions” mean those conditions established in accordance with Section 8.4 or
Section 10.2 of the Plan prior to the satisfaction of which shares subject to a Restricted Stock
Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture or a repurchase
option in favor of the Company upon the Participant’s termination of Service.

          2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

     3. Administration.

          3.1 Administration by the Committee. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final and binding upon all persons having an interest in the Plan or
such Award.

          3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election. In addition,
to the extent specified in a resolution adopted by the Board, the Chief Executive Officer of the
Company shall have the authority to grant Awards to an Employee who is not an Insider and who is
receiving a salary below the level which requires approval by the Committee; provided that the
terms of such Awards conform to guidelines established by the Committee and provided further that
at the time of making such Awards the Chief Executive Officer also is a Director.

          3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.

          3.4 Committee Complying with Section 162(m). While the Company is a “publicly held
corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside
directors” within the meaning of Section 162(m) to approve the grant of any Award which might
reasonably be anticipated to result in the payment of employee

7

 

remuneration that would otherwise exceed the limit on employee remuneration deductible for
income tax purposes pursuant to Section 162(m).

          3.5 Powers of the Committee. In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:

               (a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock or units to be subject to each Award;

               (b) to determine the type of Award granted and to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;

               (c) to determine the Fair Market Value of shares of Stock or other property;

               (d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares purchased pursuant to any Award, (ii) the method of payment
for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the withholding or delivery
of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any
Award or any shares acquired pursuant thereto, (v) the Performance Award Formula and Performance
Goals applicable to any Award and the extent to which such Performance Goals have been attained,
(vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of
Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable
to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

               (e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;

               (f) to approve one or more forms of Award Agreement;

               (g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;

               (h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any
shares acquired pursuant thereto, including with respect to the period following a Participant’s
termination of Service;

               (i) without the consent of the affected Participant and notwithstanding the provisions of any
Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding Option, provided
that such Stock Appreciation Right covers the same number of shares of Stock and provides for the
same exercise price (subject in each case to adjustment in accordance with Section 4.2) as the
replaced Option and otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Committee;

8

 

               (j) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards;

               (k) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law; and

               (l) to delegate to the Chief Executive Officer or the Senior Vice President of Human Resources
the authority with respect to ministerial matters regarding the Plan and Awards made under the
Plan.

          3.6 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the
shares of Stock cast in person or by proxy at a meeting of the shareholders of the Company at which
a quorum representing a majority of all outstanding shares of Stock is present or represented by
proxy, the Board shall not approve a program providing for either (a) the cancellation of
outstanding Options or SARs and the grant in substitution therefore of new Options or SARs having a
lower exercise price or (b) the amendment of outstanding Options or SARs to reduce the exercise
price thereof. This paragraph shall not be construed to apply to “issuing or assuming a stock
option in a transaction to which section 424(a) applies,” within the meaning of Section 424 of the
Code.

          3.7 Indemnification. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad
faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.

     4. Shares Subject to Plan.

          4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be five million
three hundred eighty-six thousand (5,386,000) and shall

9

 

consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
If an outstanding Award for any reason expires or is terminated or canceled without having been
exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to
forfeiture or repurchase are forfeited or repurchased by the Company, the shares of Stock allocable
to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall
again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been
issued pursuant to the Plan (a) with respect to any portion of an Award that is settled in cash or
(b) to the extent such shares are withheld or reacquired by the Company in satisfaction of tax
withholding obligations pursuant to Section 15.2. Upon payment in shares of Stock pursuant to the
exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced
only by the number of shares actually issued in such payment. If the exercise price of an Option
is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the
Participant, or by means of a Net-Exercise, the number of shares available for issuance under the
Plan shall be reduced only by the net number of shares for which the Option is exercised.

          4.2 Adjustments for Changes in Capital Structure. Subject to any required action by the
shareholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the shareholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards,
in the Award limits set forth in Section 5.4, and in the exercise or purchase price per share under
any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the
Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall
not be treated as “effected without receipt of consideration by the Company.” Any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number. The Committee in its sole discretion, may also make such adjustments in the terms of
any Award to reflect, or related to, such changes in the capital structure of the Company or
distributions as it deems appropriate, including modification of Performance Goals, Performance
Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to
this Section 4.2 shall be final, binding and conclusive.

     5. Eligibility and Award Limitations.

          5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and
Directors. For purposes of the foregoing sentence, “Employees,” “Consultants”and “Directors” shall
include prospective Employees, prospective Consultants and prospective Directors to whom Awards are
granted in connection with written offers of an employment or other service relationship with the
Participating Company Group; provided, however, that no Stock subject to any such Award shall vest,
become exercisable or be issued prior to the date on which such person commences Service. A
Nonemployee Director Award may be granted only to a person who, at the time of grant, is a
Nonemployee Director.

10

 

          5.2 Participation. Awards other than Nonemployee Director Awards are granted solely at the
discretion of the Committee. Eligible persons may be granted more than one Award. However,
excepting Nonemployee Director Awards, eligibility in accordance with this Section shall not
entitle any person to be granted an Award, or, having been granted an Award, to be granted an
additional Award.

          5.3 Incentive Stock Option Limitations.

               (a) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary
Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation
shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying
Corporation, with an exercise price determined as of such date in accordance with Section 6.1.

               (b) Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by a Participant for the first time during any calendar year for stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of
such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section, options designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of stock shall be determined as
of the time the option with respect to such stock is granted. If the Code is amended to provide
for a limitation different from that set forth in this Section, such different limitation shall be
deemed incorporated herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the Participant is exercising.
In the absence of such designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such
portion shall be separately identified.

          5.4 Award Limits.

               (a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise of Incentive Stock
Options shall not exceed five million three hundred eighty-six thousand (5,386,000) shares. The maximum aggregate number of
shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock
Options shall be the number of shares determined in accordance with Section 4.1, subject to
adjustment as provided in Section 4.2 and further subject to the limitation set forth in
Section 5.4(b) below.

11

 

               (b) Aggregate Limit on Full Value Awards. Subject to adjustment as provided in Section 4.2,
in no event shall more than five hundred thousand (500,000) shares in the aggregate be issued under
the Plan pursuant to the exercise or settlement of Restricted Stock Awards, Restricted Stock Unit
Awards and Performance Awards (“Full Value Awards”). Except with respect to a maximum of five
percent (5%) of the shares of Stock authorized in this Section 5.4(b), any Full Value Awards which
vest on the basis of the Participant’s continued Service shall not provide for vesting which is
any more rapid than annual pro rata vesting over a three (3) year period and any Full Value Awards
which vest upon the attainment of Performance Goals shall provide for a Performance Period of at
least twelve (12) months.

               (c) Section 162(m) Award Limits. The following limits shall apply to the grant of any Award
if, at the time of grant, the Company is a “publicly held corporation” within the meaning of
Section 162(m).

                    (i) Options and SARs. Subject to adjustment as provided in Section 4.2, no Employee shall be
granted within any fiscal year of the Company one or more Options or Freestanding SARs which in the
aggregate are for more than 100,000 shares.

                    (ii) Restricted Stock and Restricted Stock Unit Awards. Subject to adjustment as provided in
Section 4.2, no Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting Conditions based on the
attainment of Performance Goals, for more than 500,000 shares.

                    (iii) Performance Awards. Subject to adjustment as provided in Section 4.2, no Employee shall
be granted (1) Performance Shares which could result in such Employee receiving more than 500,000
shares for each full fiscal year of the Company contained in the Performance Period for such Award,
or (2) Performance Units which could result in such Employee receiving value equal to more than
500,000 shares for each full fiscal year of the Company contained in the Performance Period for
such Award. No Participant may be granted more than one Performance Award for the same Performance
Period.

                    (iv) Stock-Based Awards. Subject to adjustment as provided in Section 4.2, no Employee may be
granted Stock-Based Awards which could result in the Employee receiving more than 50,000 shares (or
equivalent value) in any fiscal year of the Company.

     6. Terms and Conditions of Options.

          Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions:

          6.1 Exercise Price. The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be

12

 

not less than the Fair Market Value of a share of Stock on the effective date of grant of the
Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise
price lower than the minimum exercise price set forth above if such Option is granted pursuant to
an assumption or substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.

          6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, and (c) no Option granted to a prospective
Employee, prospective Consultant or prospective Director may become exercisable prior to the date
on which such person commences Service. Subject to the foregoing, unless otherwise specified by
the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10)
years after the effective date of grant of the Option, unless earlier terminated in accordance with
its provisions.

          6.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than
the exercise price, (iii) by delivery of a properly executed notice of exercise together with
irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of
a sale or loan with respect to some or all of the shares being acquired upon the exercise of the
Option (including, without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a “Cashless Exercise”), (iv) by delivery of a properly executed notice of exercise
electing a Net-Exercise, (v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock.

13

 

                    (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Company’s sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise, including with respect
to one or more Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.

          6.4 Effect of Termination of Service.

               (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee, an Option shall be exercisable after a
Participant’s termination of Service only during the applicable time periods provided in the Award
Agreement.

               (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, unless the
Committee provides otherwise in the Award Agreement, if the exercise of an Option within the
applicable time periods is prevented by the provisions of Section 14 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined by the Committee,
in its discretion) after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

               (c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing, if a
sale within the applicable time periods of shares acquired upon the exercise of the Option would
subject the Participant to suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a
sale of such shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant’s termination of Service, or (iii) the
Option Expiration Date.

          6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. Prior
to the issuance of shares of Stock upon the exercise of an Option, the Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.

     7. Terms and Conditions of Stock Appreciation Rights.

          Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No SAR or purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs may incorporate
all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

          7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a
related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding
SAR”). A Tandem SAR may be granted either concurrently with the

14

 

grant of the related Option or at any time thereafter prior to the complete exercise, termination,
expiration or cancellation of such related Option.

          7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of
the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR
shall be the exercise price per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on
the effective date of grant of the SAR.

          7.3 Exercisability and Term of SARs.

               (a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and
only to the extent, that the related Option is exercisable, subject to such provisions as the
Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option.

               (b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR;
provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.

          7.4 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.

          7.5 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise
provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth
in the Award Agreement, an SAR shall be exercisable after a Participant’s termination of Service
only as provided in the Award Agreement.

          7.6 Nontransferability of SARs. During the lifetime of the Participant, an SAR shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. Prior
to the exercise of an SAR, the SAR shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution.

     8. Terms and Conditions of Restricted Stock Awards.

          Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to time establish. No
Restricted Stock Award or purported Restricted Stock Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award Agreements evidencing
Restricted Stock Awards may incorporate all or any

15

 

of the terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:

          8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may or may not
require the payment of cash compensation for the stock. Restricted Stock Awards may be granted
upon such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Award or the lapsing of the Restriction Period is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 9.3 through 9.5(a).

          8.2 Purchase Price. The purchase price, if any, for shares of Stock issuable under each
Restricted Stock Award and the means of payment shall be established by the Committee in its
discretion.

          8.3 Purchase Period. A Restricted Stock Award requiring the payment of cash consideration
shall be exercisable within a period established by the Committee; provided, however, that no
Restricted Stock Award granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences Service.

          8.4 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock
Award may or may not be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria, including, without
limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee
and set forth in the Award Agreement evidencing such Award. During any Restriction Period in which
shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such
shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other
than as provided in the Award Agreement or as provided in Section 8.7. Upon request by the Company,
each Participant shall execute any agreement evidencing such transfer restrictions prior to the
receipt of shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement on such certificates
of appropriate legends evidencing any such transfer restrictions.

          8.5 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.4
and any Award Agreement, during the Restriction Period applicable to shares subject to a Restricted
Stock Award, the Participant shall have all of the rights of a shareholder of the Company holding
shares of Stock, including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares. However, in the event of a dividend or
distribution paid in shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, any and all
new, substituted or additional securities or other property (other than normal cash dividends) to
which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be
immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock
Award with respect to which such dividends or distributions were paid or adjustments were made.

16

 

          8.6 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Restricted Stock Award and set forth in the Award Agreement, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the Participant’s death or
disability), then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting Conditions as of
the date of the Participant’s termination of Service in exchange for the payment of the purchase
price, if any, paid by the Participant. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.

          8.7 Nontransferability of Restricted Stock Award Rights. Prior to the issuance of shares of
Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance
or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by
will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participant’s guardian or legal representative.

     9. Terms and Conditions of Performance Awards.

          Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall
from time to time establish. No Performance Award or purported Performance Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:

          9.1 Types of Performance Awards Authorized. Performance Awards may be in the form of either
Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall
specify the number of Performance Shares or Performance Units subject thereto, the Performance
Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.

          9.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial value
equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.2, on the effective date of grant of the Performance
Share. Each Performance Unit shall have an initial value determined by the Committee. The final
value payable to the Participant in settlement of a Performance Award determined on the basis of
the applicable Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance Period established by
the Committee.

          9.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In
granting each Performance Award, the Committee shall

17

 

establish in writing the applicable Performance Period, Performance Award Formula and one or
more Performance Goals which, when measured at the end of the Performance Period, shall determine
on the basis of the Performance Award Formula the final value of the Performance Award to be paid
to the Participant. To the extent compliance with the requirements under Section 162(m) with
respect to “performance-based compensation” is desired, the Committee shall establish the
Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later
than the earlier of (a) the date ninety (90) days after the commencement of the applicable
Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any
event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula shall not be changed during the
Performance Period. The Company shall notify each Participant granted a Performance Award of the
terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award
Formula.

          9.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee
on the basis of targets to be attained (“Performance Targets”) with respect to one or more measures
of business or financial performance (each, a “Performance Measure”), subject to the following:

               (a) Performance Measures. Performance Measures shall have the same meanings as used in the
Company’s financial statements, or, if such terms are not used in the Company’s financial
statements, they shall have the meaning applied pursuant to generally accepted accounting
principles, or as used generally in the Company’s industry. Performance Measures shall be
calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for
financial reporting purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award
shall be calculated in accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and excluding the
effect (whether positive or negative) of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of
the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be
made solely for the purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participant’s rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Committee: revenue; sales; expenses; operating income;
gross margin; operating margin; earnings before any one or more of: stock-based compensation
expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net
income; economic value added; free cash flow; operating cash flow; stock price; earnings per share;
return on shareholder equity; return on capital; return on assets; return on investment; employee
satisfaction; employee retention; balance of cash, cash equivalents and marketable securities;
market share; daily average revenue trades; asset gathering metrics; number of customers; customer
satisfaction; product development; completion of a joint venture or other corporate transaction;
completion of identified special project; and overall effectiveness of management; or such other
measures as determined by the Committee consistent with this Section 9.4(a).

18

 

               (b) Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to a standard selected by the Committee.

          9.5 Settlement of Performance Awards.

               (a) Determination of Final Value. As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall certify in writing the
extent to which the applicable Performance Goals have been attained and the resulting final value
of the Award earned by the Participant and to be paid upon its settlement in accordance with the
applicable Performance Award Formula.

               (b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for the positive or
negative adjustment of the Performance Award Formula applicable to a Performance Award that is not
intended to constitute “qualified performance based compensation” to a “covered employee” within
the meaning of Section 162(m) (a “Covered Employee”) to reflect such Participant’s individual
performance in his or her position with the Company or such other factors as the Committee may
determine. With respect to a Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion to reduce some or all
of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the resulting value of the
Performance Award determined in accordance with the Performance Award Formula.

               (c) Payment in Settlement of Performance Awards. As soon as practicable following the
Committee’s determination and certification in accordance with Sections 9.5(a) and (b), payment shall be
made to each eligible Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s death) of the final value
of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of
Stock, or a combination thereof as determined by the Committee.

          9.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which the Performance Shares are
settled or forfeited. Such Dividend Equivalents, if any, shall be credited to the Participant in
the form of additional whole Performance Shares as of the date of payment of such cash dividends on
Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the

19

 

number of shares of Stock represented by the Performance Shares previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalents
may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and
may be paid on the same basis as settlement of the related Performance Share as provided in
Section 9.5. Dividend Equivalents shall not be paid with respect to Performance Units. In the event
of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in
the capital structure of the Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Performance Share Award so that it
represents the right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award,
and all such new, substituted or additional securities or other property shall be immediately
subject to the same Performance Goals as are applicable to the Award.

          9.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the grant
of a Performance Award and set forth in the Award Agreement, the effect of a Participant’s
termination of Service on the Performance Award shall be as follows:

               (a) Death or Disability. If the Participant’s Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period applicable to the
Performance Award, the final value of the Participant’s Performance Award shall be determined by
the extent to which the applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the Participant’s Service
during the Performance Period. Payment shall be made following the end of the Performance Period
in any manner permitted by Section 9.5.

               (b) Other Termination of Service. If the Participant’s Service terminates for any reason
except death or Disability before the completion of the Performance Period applicable to the
Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the
event of an involuntary termination of the Participant’s Service, the Committee, in its sole
discretion, may waive the automatic forfeiture of all or any portion of any such Award.

          9.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

     10. Terms and Conditions of Restricted Stock Unit Awards.

          Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the

20

 

Committee shall from time to time establish. No Restricted Stock Unit Award or purported
Restricted Stock Unit Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Restricted Stock Units may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:

          10.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).

          10.2 Vesting. Restricted Stock Units may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award.

          10.3 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on
Stock having a record date prior to the date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid by crediting the
Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the Restricted Stock Units
previously credited to the Participant by (b) the Fair Market Value per share of Stock on such
date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter as practicable) as
the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of
a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in
the capital structure of the Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it
represents the right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately subject to the same
Vesting Conditions as are applicable to the Award.

          10.4 Effect of Termination of Service. Unless otherwise provided by the Committee in the
grant of a Restricted Stock Unit Award and set forth in the Award Agreement,

21

 

if a Participant’s Service terminates for any reason, whether voluntary or involuntary
(including the Participant’s death or disability), then the Participant shall forfeit to the
Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions
as of the date of the Participant’s termination of Service.

          10.5 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 10.3) for each Restricted Stock Unit
then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes. Notwithstanding the foregoing, if permitted by the Committee and set forth in
the Award Agreement, the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or other property otherwise
issuable to the Participant pursuant to this Section.

          10.6 Nontransferability of Restricted Stock Unit Awards. Prior to the issuance of shares of
Stock in settlement of a Restricted Stock Unit Award, the Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by
will or by the laws of descent and distribution. All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.

     11. Deferred Compensation Awards.

          11.1 Establishment of Deferred Compensation Award Programs. This Section 11 shall not be
effective unless and until the Committee determines to establish a program pursuant to this
Section. The Committee, in its discretion and upon such terms and conditions as it may determine,
may establish one or more programs pursuant to the Plan under which:

               (a) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to reduce such Participant’s compensation otherwise payable in cash (subject to any
minimum or maximum reductions imposed by the Committee) and to be granted automatically at such
time or times as specified by the Committee one or more Awards of Stock Units with respect to such
numbers of shares of Stock as determined in accordance with the rules of the program established by
the Committee and having such other terms and conditions as established by the Committee.

               (b) Participants designated by the Committee who are Insiders or otherwise among a select
group of highly compensated Employees may irrevocably elect, prior to a date specified by the
Committee, to be granted automatically an Award of Stock Units with respect to such number of
shares of Stock and upon such other terms and conditions as established by the Committee in lieu
of:

22

 

                    (i) shares of Stock otherwise issuable to such Participant upon the exercise of an Option;

                    (ii) cash or shares of Stock otherwise issuable to such Participant upon the exercise of an
SAR; or

                    (iii) cash or shares of Stock otherwise issuable to such Participant upon the settlement of a
Performance Award or Performance Unit.

          11.2 Terms and Conditions of Deferred Compensation Awards. Deferred Compensation Awards
granted pursuant to this Section 11 shall be evidenced by Award Agreements in such form as the
Committee shall from time to time establish. No such Deferred Compensation Award or purported
Deferred Compensation Award shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Award Agreement. Award Agreements evidencing Deferred Compensation Awards may
incorporate all or any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:

               (a) Vesting Conditions. Deferred Compensation Awards shall not be subject to any vesting
conditions.

               (b) Terms and Conditions of Stock Units.

                    (i) Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no
voting rights with respect to shares of Stock represented by Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company). However, a Participant shall be entitled to
receive Dividend Equivalents with respect to the payment of cash dividends on Stock having a record
date prior to date on which Stock Units held by such Participant are settled. Such Dividend
Equivalents shall be paid by crediting the Participant with additional whole and/or fractional
Stock Units as of the date of payment of such cash dividends on Stock. The method of determining
the number of additional Stock Units to be so credited shall be specified by the Committee and set
forth in the Award Agreement. Such additional Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time (or as soon thereafter as
practicable) as the Stock Units originally subject to the Stock Unit Award. In the event of a
dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Stock Unit Award so that it represent
the right to receive upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would be entitled by reason of
the shares of Stock issuable upon settlement of the Award.

                    (ii) Settlement of Stock Unit Awards. A Participant electing to receive an Award of Stock
Units pursuant to this Section 11, shall specify at the time of such election a settlement date
with respect to such Award. The Company shall issue to the Participant as soon as practicable
following the earlier of the settlement date elected by the

23

 

Participant or the date of termination of the Participant’s Service, a number of whole shares
of Stock equal to the number of whole Stock Units subject to the Stock Unit Award. Such shares of
Stock shall be fully vested, and the Participant shall not be required to pay any additional
consideration (other than applicable tax withholding) to acquire such shares. Any fractional Stock
Unit subject to the Stock Unit Award shall be settled by the Company by payment in cash of an
amount equal to the Fair Market Value as of the payment date of such fractional share.

                    (iii) Nontransferability of Stock Unit Awards. Prior to their settlement in accordance with
the provision of the Plan, no Stock Unit Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Stock Unit Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

     12. Other Stock-Based Awards.

     In addition to the Awards set forth in Sections 6 through 11 above, the Committee, in its sole
discretion, may carry out the purpose of this Plan by awarding Stock-Based Awards as it determines
to be in the best interests of the Company and subject to such other terms and conditions as it
deems necessary and appropriate.

     13. Change in Control.

     Notwithstanding any other provision of the Plan, any unexercisable or unvested portion of each
outstanding Award held by a Nonemployee Director or an officer and any shares acquired upon the
exercise thereof shall be immediately exercisable and vested in full as of the date ten (10) days
prior to the date of a Change in Control but conditioned upon the consummation of the Change in
Control.

          13.1 Effect of Change in Control on Options and SARs.

               (a) Accelerated Vesting. Notwithstanding any other provision of the Plan to the contrary
except as provided in this Section 13, the Committee, in its sole discretion, may provide in any
Award Agreement or, in the event of a Change in Control, may take such actions as it deems
appropriate to provide for the acceleration of the exercisability and vesting in connection with
such Change in Control of any or all outstanding Options and SARs and shares acquired upon the
exercise of such Options and SARs upon such conditions and to such extent as the Committee shall
determine.

               (b) Assumption or Substitution. In the event of a Change in Control, the surviving,
continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”),
may, without the consent of any Participant, either assume the Company’s rights and obligations
under outstanding Options and SARs or substitute for outstanding Options and SARs substantially
equivalent options and SARs (as the case may be) for the Acquiror’s stock. Any Options or SARs
which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of
the time of consummation of the Change in Control shall

24

 

terminate and cease to be outstanding effective as of the time of consummation of the Change
in Control.

               (c) Cash-Out of Options. The Committee may, in its sole discretion and without the consent of
any Participant, determine that, upon the occurrence of a Change in Control, each or any Option or
SAR outstanding immediately prior to the Change in Control shall be canceled in exchange for a
payment with respect to each vested share of Stock subject to such canceled Option or SAR in (i)
cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change
in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair
Market Value equal to the excess of the Fair Market Value of the consideration to be paid per share
of Stock in the Change in Control over the exercise price per share under such Option or SAR (the
“Spread”). In the event such determination is made by the Committee, the Spread (reduced by
applicable withholding taxes, if any) shall be paid to Participants in respect of their canceled
Options and SARs as soon as practicable following the date of the Change in Control.

          13.2 Effect of Change in Control on Restricted Stock Awards. The Committee may, in its
discretion, provide in any Award Agreement evidencing a Restricted Stock Award that, in the event
of a Change in Control, the lapsing of the Restriction Period applicable to the shares subject to
the Restricted Stock Award held by a Participant whose Service has not terminated prior to the
Change in Control shall be accelerated effective immediately prior to the consummation of the
Change in Control to such extent as specified in such Award Agreement. Any acceleration of the
lapsing of the Restriction Period that was permissible solely by reason of this Section 13.2 and
the provisions of such Award Agreement shall be conditioned upon the consummation of the Change in
Control.

          13.3 Effect of Change in Control on Performance Awards. The Committee may, in its discretion,
provide in any Award Agreement evidencing a Performance Award that, in the event of a Change in
Control, the Performance Award held by a Participant whose Service has not terminated prior to the
Change in Control or whose Service terminated by reason of the Participant’s death or Disability
shall become payable effective as of the date of the Change in Control to such extent as specified
in such Award Agreement.

          13.4 Effect of Change in Control on Restricted Stock Unit Awards. The Committee may, in its
discretion, provide in any Award Agreement evidencing a Restricted Stock Unit Award that, in the
event of a Change in Control, the Restricted Stock Unit Award held by a Participant whose Service
has not terminated prior to such date shall be settled effective as of the date of the Change in
Control to such extent as specified in such Award Agreement.

          13.5 Effect of Change in Control on Deferred Compensation and Other Stock-Based Awards. The
Committee may, in its discretion, provide in any Award Agreement evidencing a Deferred Compensation
Award or other Stock-Based Award that, in the event of a Change in Control, the amounts payable
pursuant to such Award shall be settled effective as of the date of the Change in Control to such
extent as specified in such Award Agreement.

25

 

     14. Compliance with Securities Law.

          The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

     15. Tax Withholding.

          15.1 Tax Withholding in General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise or Net Exercise of an Option, to
make adequate provision for, the federal, state, local and foreign taxes, if any, required by law
to be withheld by the Participating Company Group with respect to an Award or the shares acquired
pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release
shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment
in cash under the Plan until the Participating Company Group’s tax withholding obligations have
been satisfied by the Participant.

          15.2 Withholding in Shares. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.

     16. Amendment or Termination of Plan.

          The Board or the Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive
Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s
shareholders under any applicable law, regulation or rule. No

26

 

amendment, suspension or termination of the Plan shall affect any then outstanding Award
unless expressly provided by the Board or the Committee. In any event, no amendment, suspension or
termination of the Plan may adversely affect any then outstanding Award without the consent of the
Participant unless necessary to comply with any applicable law, regulation or rule, including
Section 409A of the Code.

     17. Miscellaneous Provisions.

          17.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.

          17.2 Provision of Information. Each Participant shall be given access to information
concerning the Company equivalent to that information generally made available to the Company’s
common shareholders.

          17.3 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or,
having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award
granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or
Director or interfere with or limit in any way any right of a Participating Company to terminate
the Participant’s Service at any time. To the extent that an Employee of a Participating Company
other than the Company receives an Award under the Plan, that Award shall in no event be understood
or interpreted to mean that the Company is the Employee’s employer or that the Employee has an
employment relationship with the Company.

          17.4 Rights as a Shareholder. A Participant shall have no rights as a shareholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.2 or another provision of the Plan.

          17.5 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.

          17.6 Severability. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.

27

 

          17.7 Beneficiary Designation. Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participant’s death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participant’s lifetime. If a
married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness
of such designation may be subject to the consent of the Participant’s spouse. If a Participant
dies without an effective designation of a beneficiary who is living at the time of the
Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal
representative.

          17.8 Unfunded Obligation. Participants shall have the status of general unsecured creditors
of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and
unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan. Each Participating Company shall be responsible for making benefit payments
pursuant to the Plan on behalf of its Participants or for reimbursing the Company for the cost of
such payments, as determined by the Company in its sole discretion. In the event the respective
Participating Company fails to make such payment or reimbursement, a Participant’s (or other
individual’s) sole recourse shall be against the respective Participating Company, and not against
the Company. A Participant’s acceptance of an Award pursuant to the Plan shall constitute
agreement with this provision.

          17.9 Choice of Law. Except to the extent governed by applicable federal law, the validity,
interpretation, construction and performance of the Plan and each Award Agreement shall be governed
by the laws of the State of California, without regard to its conflict of law rules.

28exv10w2x8yxgy

Exhibit 10.2(8)(g)

FOURTH AMENDMENT TO

BELO

2004 EXECUTIVE COMPENSATION PLAN

     Belo Corp., pursuant to authorization of the Compensation Committee of the Board of Directors,
adopts the following amendment to the Belo 2004 Executive Compensation Plan (the “Plan”).

	 	1.	 	Section 12 of the Plan is amended in its entirety to read as follows:

	 	12.	 	Awards for Directors.

                    (a) On the date of each annual meeting of Belo shareholders, each Director will be
granted an Award that has a fair market value (as hereinafter determined) on the Date of
Grant equal to 50% of the Director’s annual compensation from Belo. The form of the Award
and the vesting conditions and payment provisions applicable thereto will be determined by
the Committee in its discretion; provided, however, that unless the Committee determines
otherwise, Awards made to Directors will be in the form of Deferred Shares. To the extent
permitted by Section 409A of the Code, the Committee may permit a Director to elect the date
or dates on which such Award will be paid. Any such election will be irrevocable when made
and, to the extent that the Director’s election will result in a deferral of compensation
subject to Section 409A of the Code, must be made by the Director in writing no later than
the last day of the calendar year immediately preceding the calendar year in which the date
of the annual shareholders meeting occurs.

        (b) For purposes of this Section 12, the date of an annual meeting of shareholders of
Belo is the date on which the meeting is convened. Any portion of a Director’s compensation
from Belo that is not paid to the Director in the form of an Award will be paid in cash on
the date of the annual meeting of shareholders or the date of the Director’s election to the
Board, as applicable.

        (c) An Award granted to a Director pursuant to this Section 12 will constitute payment
of a portion of the Director’s annual compensation for services to be performed by the
Director for the 12-month period beginning on the date of the annual meeting of shareholders
on which the Award is granted. If, however, a Director is elected to the Board as of a date
other than the date of an annual meeting of Belo shareholders, (i) the Director’s annual
compensation will be prorated based on the number of days remaining in the year in which the
Director is elected to the Board (for this purpose the year will begin on the date of the
annual meeting of shareholders immediately preceding the date of the Director’s election to
the Board), (ii) 50% of the Director’s prorated annual compensation will be paid in the form
of an Award valued on the date of the Director’s election to the Board and (iii) any
election by the Director of the payment date or dates of an Award will be irrevocable when
made and, to the extent that the Director’s election will result in a deferral of
compensation subject to Section 409A of the Code, must be made no later than 30 days after
the date of the Director’s election to the Board and will

 

 

apply only to compensation paid for services to be performed by the Director after the
date of his written election.

     (d) For purposes of this Section 12:

         (i) the fair market value of a Stock Option or an Appreciation Right awarded to
a Director will be determined by the Committee using (A) the Black-Scholes Option
Pricing Model; (B) a generally accepted binomial pricing model that takes into
account as of the Date of Grant (1) the Option Price or Grant Price, as applicable,
(2) the expected term of the Stock Option or Appreciation Right, (3) the Market
Value per Share of the Common Stock on the Date of Grant, (4) the volatility of the
Common Stock, (5) the expected dividends on the Common Stock and (6) the risk-free
interest rate for the expected term of the Stock Option or Appreciation Right; (C)
any other pricing model used by Belo to value Stock Options for financial reporting
purposes; or (D) any other pricing model approved by the Committee, if used such
model would not result in the granting of a greater number of Stock Options or
Appreciation Rights than would be granted under the Black-Scholes Stock Option
Pricing Model;

         (ii) the fair market value of a Deferred Share, a Restricted Share or a
Performance Share awarded to a Director will be equal to the Market Value per Share
of the Common Stock on the Date of Grant without regard to any restrictions,
limitations or conditions with respect to such Award; and

         (iii) the fair market value of a Performance Unit awarded to a Director will be
its stated value.

	 	2.	 	Section 18 of the Plan is amended by adding a new Section 18(g) thereto to read as follows:

     (g) Except as otherwise provided in an Evidence of Award, “disability” means that a
Participant or Director is considered disabled within the meaning of Section 409A of the
Code and applicable guidance thereunder.

	 	3.	 	The foregoing amendments will be effective as of January 1, 2009.

     Executed at Dallas, Texas, this 26 day of September, 2008.

	 	 	 	 	 
	                          BELO CORP.
 	 
	By      	  /s/ Marian Spitzberg
 	 
	 	Marian Spitzberg 	 
	 	Senior Vice President/Human Resources 	 
	 

2

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