Document:

Exhibit 99.3

                       Review and Recommendations

                     Copper Queen Group, # 530690
                     Omineca Region, NTS: 93L/11W
                           Telkwa River Area
                       British Columbia, Canada

                Prepared by:  James W.  McLeod,   P. Geo.

                 For:     After Glow Explorations, Inc.

                      Dated: April 26, 2006

<PAGE>

                       Table of Contents

										Page

0.0     Summary								   4

1.0     Introduction and Terms of Reference			   	   4

2.0     Disclaimer								   5

3.0     Property Description and Location				   5

4.0    Accessibility, Climate, Local Resources,
         Infrastructure and Physiography					   6

5.0    History								   7

6.0    Geological Setting
6.1    Regional Geology						   	   7
6.2    Local Geology						   	   7
6.3    Property Geology						   	   8
6.4    Deposit Type							   	   8
6.5    Mineralization						   	   8

7.0    Exploration
7.1    Geophysics of the Copper Queen Property			           9
7.2    Geochemistry of the Copper Queen Property		   	   9

8.0    Drilling							   	   9

9.0   Sampling Method and Approach					  10
9.1   Results 								  10

10.0  Sample Preparation, Analyses and Security		   	          10

11.0  Data Verification						  	  10

12.0  Adjacent Properties						  	  11

13.0  Mineral Processing and Metallurgical Testing		          11

14.0  Mineral Resource and Mineral Reserve Estimates	  	          11

15.0  Other Relevant Data and Information			  	  11

16.0  Interpretation and Conclusions				  	  11

17.0  Recommendations and Cost  Estimate			          11

17.1  Recommended Drilling				   		  12

18.0  References							  	  12

19.0  Author?s Qualifications and Certification			          13

0.0  Summary

The Copper Queen property consists of two mineral claims, CQ #1 and Copper
Queen Group comprising a total of 20 contiguous cells and covering an area of
877 acres. The property is situated near the headwaters of Winfield Creek, a
south flowing tributary of the Telkwa River approximately 20 airmiles southwest
the Town of Smithers, British Columbia, Canada. After Glow Explorations, Inc.,
a Nevada, USA corporation is the beneficial owner of the mineral claim.

The property is underlain by Hazelton Group volcanic rock that are observed to
trend north to northeasterly and dip toward the southeast. These units have
been intruded by younger igneous rocks and are found contacting with felsic
flow units. Mineralization observed on the property is as the suite of copper
minerals, chalcocite, chalcopyrite and bornite, found containing some silver
and gold values.

The underlying rock units within the claim area exhibit a northwest-southeast
trending aeromagnetic pattern that could indicate a response to underlying
deformation due to geological contacts and/or faulting.  The author considers
that the potential exists for movement of mineralizing fluids to have
impregnated this zone.  These fluids could be emanating from the underlying
intrusions or these conduits could occur along several strong northwest
trending faults that are observed to traverse the local area. The claim is
favorably situated and may require geophysical surveys to determine in more
detail its potential following the initial prospecting, rock trenching and
sampling program. An exploratory drilling program would follow the previous
surveys and be contingent upon positive results being obtained from the
previous exploration work.

The object of our initial exploration undertaking is to assess areas that may
require more detailed investigations to assist in determining their economic
significance.

1.0   Introduction and Terms of Reference

This report, entitled Review and Recommendations, Copper Queen Group, #530690,
Omineca Region, NTS: 93L/11W, Telkwa River Area, British Columbia, Canada,
includes a description of the property, geology, history, past exploration and
mineral potential. This report is being prepared at the request of the Board of
Directors of After Glow Explorations, Inc.

The author of this report is a Qualified Person. He is a registered
Professional Geoscientist, #18,712 and a member in good standing with The
Association of Professional Engineers and Geoscientists of British Columbia.
The author has worked in the general area a number of times during the past
35 years.

The Copper Queen Mineral Claim Group was purchased by the Company from an arms-
length party.

2.0      Disclaimer

The author reviewed the historical data and has personally worked in the
general area.  This report is entirely the responsibility of the author who
based his recommendations and conclusions on his personal experience in the
mineral exploration business and upon sources of information that are
identified.

3.0      Property Description and Location

The Copper Queen Group consists of 20 mineral cells in one contiguous, 4N-5E
group, note the single cell is contained within the larger claim and are listed
as follows:
<TABLE><CAPTION>
	Name     Tenure No.             Cells          Expiration Date
	--------------------------------------------------------------
                  <c>                 <c>                  <c>
	CQ #1	   513879		   1		June 3, 2007

	Copper
	Queen
	Group	   530690		  19		March 28, 2007

</TABLE>

The beneficial owner of the above listed mineral claim is After Glow
Explorations, Inc., 6318 Quebec Street, Vancouver, British Columbia, V5W 2P7,
Canada.

The Copper Queen Group is comprised of 20 contiguous cells, note area covered
is for 20 cells as the single cell is contained within the larger claim
(see Figure 2) totaling 877 acres. The mineral claim comprised of a single
cell and called the CG#1 (formerly the Stock mineral showing) is contained
within the surrounding mineral claim called the Copper Queen Group and also
contains the former Table mineral showing. The mineral claim area may be
located on the NTS map sheet, 93L/11W. At the center of the property the
latitude is 54' 41' 27" N and the longitude is 127' 27' 4" W. The claim is
located at the headwaters of Winfield Creek in the Telkwa River area and is
situated 36 miles by gravel road west of the Village of Telkwa, British
Columbia, Canada.

4.0      Accessibility, Climate, Local Resources,
     	 Infrastructure and Physiography

The property is accessible by traveling west of Telkwa, British Columbia,
along the Telkwa River road for 36 miles to the property (see Figure 2).

The Copper Queen Group property lies within the Sub-Alpine Forest biotic zone
and experiences greater than 50" of precipitation annually of which about 35%
may occur as a snow equivalent. The summer weather is generally warm while the
winters are cold.

Much of the general area hosts conifer cover of Engelmann and white spruce,
lodgepole and white pine and Douglas fir mingled with alpine larch, dwarf
juniper, aspen and alder. The general area supports an active logging industry.
Mining holds an historical and contemporary place in the development and
economic well being of the area.

The Town of Smithers, British Columbia lies 48 miles by road east and then
north of the property and offers much of the necessary infrastructure required
to base and carry-out an exploration program (accommodations, communications,
much equipment and supplies). Prince George B.C. is highway accessible from
Smithers, B.C. by traveling approximately 160 miles by highway to the east and
offers major infrastructure. Both centers are on a major railroad line and have
effective airport service.

The property is located in the Intermontane belt and more specifically within
the Hazelton Range. The claim lies at about 4,900 to 5,300 feet mean sea level.
The physiographic setting of the property can be described as somewhat rugged
to rounded plateau terrain that has been surficially altered both by the
erosional and depositional (drift cover) effects of glaciation. Drift cover on
the property appears to be thin.

5.0	History

The recorded mining history of the general area dates from the pre-World War I
era. Lode gold, silver and base metal discoveries are abundant in a broad sense
with many of the prospects rendering some production. The claim area was first
recorded in the government records in 1917. During the period 1917-19 the Stock
property produced 12 tons of material that returned 6,465 lbs. of copper, 91
oz. of silver and 1 oz. gold (see References). Further exploration work was
carried-out on the property during 1961, 1967, 1968 and 1970.

6.0	Geological Setting

6.1	Regional Geology

The Copper Queen Group mineral claim is situated in the Intermontane Belt of
central British Columbia. The oldest rocks observed in the general area are
those of the Lower to Upper Jurassic aged Hazelton Group that trends
northwesterly as an elongate basin. The Hazelton Group occurs mainly as
compositionally wide ranging volcanic rocks as flows, tuffs and breccias that
may be interbedded with sediments and pyroclastic rocks. The older volcano-
sedimentary assemblage are at times intruded by undifferentiated igneous rocks
that are thought to range in age from Late Cretaceous to Eocene. These
intrusive rocks are likely the source of the solutions bearing the base and
precious metals.

6.2	Local Geology

The local geology of the mineral claim area may be described as being
underlain by the oldest rock units of the area, the Hazelton Group volcanic
and sedimentary rocks. These units are seen contacting with younger intrusive
rocks. A particular striking feature in the area is the block faulting
patterns in the underlying rocks and the occurrences of the igneous intrusions.
Most of the igneous intrusive occurrences appear related to the longer NW-SE
faults than to the NE-SW faults.

6.3	Property Geology

The geology of the Copper Queen Group mineral claim may be described as being
underlain by units of the older, interlayered volcano-sediment Hazelton Group.
These units in the vicinity of the claim have been intruded by a younger
rhyolite rock unit, possibly associated with the contact between two redbed
units. i.e. Basalt Flow - Red Tuff  Facies and a Red Tuff Member.

Some or all of these units may be found to host anomalous mineralization. The
property setting offers good underlying possibilities and all overburden areas
should be checked when a field program is undertaken.

6.4	Deposit Type

The deposit types that historically predominate in the general area are as the
larger porphyry-type base metal (copper or molybdenite with accessory gold-
silver) occurrence. These systems often reflect peripheral base and precious
metal occurrences as vein mineralization. At Winfield Creek the Copper Queen
Group occurrences, i.e. the vein system suggests a N130 degrees strike /
75 degrees S dip.

It may be that what has been historically looked at as small discontinuous
veinlets may in fact be larger zones of replacement as redbed  copper
occurrences. These types of copper occurrence may be epithermal or mesothermal
in origin. The volcanogenic massive sulphide (VMS) deposits are also found in
the general area.  All such occurrences should be sought especially carefully
in the drift covered areas of the claim and in some of the broken, iron-rich
volcanic rocks, i.e. volcanic redbed copper.

6.5	Mineralization

The property area is characterized by mineralization of a vein-type of
occurrences peripheral to possible underlying porphyry-type occurrence in the
intrusive rock units or replacement zones in the amygdaloidal crystal-lithic
flows and ash fall tuffs, i.e. volcanic redbed copper. The VMS style of
mineralization is generally as copper, lead, zinc with some silver and gold
values that may also show this association in the other types mentioned above.

7.0	Exploration

7.1	Geophysics of the Copper Queen Group Property

The aeromagnetic results shown in Figure 4 are from a survey conducted by
Lockwood Survey Corporation Ltd. of Toronto, Ontario for Amax Exploration Inc.
The survey was performed during the period July 1967-68. The data is presented
n the map sheet of the area by the Department of Energy, Mines and Resources,
 Ottawa, Ontario. The survey was published on behalf of the federal Department
of Energy, Mines and Resources and the provincial British Columbia Department
of Mines and Petroleum Resources.

There is a moderate magnetic inflection across the central portion of the
claim in a northwest-southeast direction, the general direction of the observed
contact and/or fault. The pattern of the inflection and a rapid change in
gradient between the southwest and northeast sectors suggests a rock-type
change, i.e. a contact or possibly a fault-contact. This type of structure is
known at times to enhance the receptiveness of the host rocks by fracture
preparation.

Geophysical techniques may be most effective in the covered areas as a follow-
up to prospecting, trenching and sampling of the first phase work program.

7.2	Geochemistry of the Copper Queen Group property

The author is not aware of any geochemical data that is available for the
Copper Queen Group mineral claim.

8.0	Drilling

Some shallow drilling appears to have taken place on the area presently covered
by the Copper Queen Group mineral claim, i.e. in 1960 on the Stock mineral
claim and 1970 on the Table mineral claim.

9.0	Sample Method and Approach

Standard sampling methods are utilized, for example a rock sample would be
acquired from the rock exposure with a hammer. The sample will be roughly
2'x2'x2 of freshly broken material. The sample grid location confirmed  with
the global positioning system (GPS) and will be marked in the logbook after a
sample number has been assigned. The sample number would be impressed on an
aluminum tag and on a flagging that will be affixed at the sample site for
future location.

9.1 Results

As exploration work could be conducted and assessed, a decision would be made
as to its importance and priority. The next phase of work will be determined
by the results obtained from the preceding one. At this point, it is premature
to determine a detailed exploration plan for the property.

10.0	Sample Preparation, Analyses and Security

Our rock exposure samples would be taken with known grid relationships that
have been tied-in with a hand held global positioning system (GPS).

The samples would be in the possession of the field supervisor of the
exploration project. The samples would undergo multi-element analyses by the
induction coupled plasma (ICP) method and the atomic absorption (AA) method
for the detection of precious metals with back-up analyses and/or assaying for
 more detail. All analyses and assaying will be carried-out in a certified
laboratory.

11.0	Data Verification

The data presented in the historical record is descriptive, but may have
accuracy constraints.

The writer is confident any information included in this report as accurate
can be utilized in planning further exploration work.

12.0	Adjacent Properties

There are presently no properties adjacent to or in the immediate proximity of
the Copper Queen Group mineral claim.

13.0	Mineral Processing and Metallurgical Testing

No mineral processing or metallurgical testing analyses have been carried-
out on the Copper Queen Group property.

14.0	Mineral Resource and Mineral Reserve Estimates

No mineralization has been encountered to date by the writer and no calculation
of any reliable mineral resource or mineral reserve  calculations, that in
any way conforms to currently accepted standards could be undertaken at this
time.

15.0	Other Relevant Data and Information

All relevant data and information concerning the Copper Queen Group property
has been presented in this report.

16.0	Interpretation and Conclusions

The object of the recommendations made in this report are to facilitate in the
possible discovery of a large, low grade mineral deposit of base and/or
precious metals or other minerals of economic consideration that have open pit
and/or underground mining potential. If such a deposit exists, it may occur
under the drift or overburden covered areas of the Copper Queen Group mineral
claim.

17.0	Recommendations and Cost Estimates

The writer believes that the mineralization encountered to date on the property
or in neighboring areas is possibly indicative of a larger system in the
general area of the Copper Queen Group mineral claim.  The glacial drift
covered portions of the property offer good exploration areas because of their
proximity to some known mineralization. These features encourage a
recommendation for a three phase exploration proposal that is outlined as
follows:

<TABLE><CAPTION>
Phase 1
<S>                                                                 <C>
Detailed prospecting, hand trenching and sampling by a
prospector with a blasting ticket and an assistant, at $400/day
for 7 days                                                         $2,800

Camp and board for 20 mandays at $50/day                            1,000

Transportation and accommodation                                    1,200

Sample analyses, 20 samples at $25/sample                             500

Equipment and supplies, drill, powder, caps and fuse                  550

Report and maps	                                                      450
                                                                   ------
                                                         Sub-total $6,500
</TABLE>
<TABLE><CAPTION>
Phase 2
<S>                                                                  <C>
Grid installation, 7.5 km. of baseline and 10 km. of gridline,
marked at 25 m. intervals with frequent global positioning
system (GPS) marks. Two field techs and assistant for 10 days at
$650/day                                                           $6,500

Selective grid controlled rock and/or soil geochemistry, two
Field techs and assistant, 10 days at $650/day                      6,500

Magnetometer and VLF-EM surveys over the selective grid(s),
Field-techs and assistant, 12 days at $500/day                      6,000

Transportation and accommodation, including 4X4 rental and
operating costs	                                                    5,520

Camp and board, 64 mandays at $70/day                               4,480

Equipment rentals and supplies, i.e. instruments, generator,
tools, fuel, oil, radio, etc.                                       2,500

Permits, insurance, etc.                                            2,500

Analyses                                                            2,500

Maps, reports and filing fees                                       3,500
                                                                ---------
                                                        Sub-Total $40,000
</TABLE>

Phase 3

Induced polarization (IP) and diamond core drilling, all inclusive
contracts of 8 miles of IP at $ 20,000 and 1,375 feet of BQ core
drilling at $55,000, respectively

                                                        Sub-Total $75,000
                                                                  -------

                                                        Total    $121,500
                                                                 ========

Each subsequent phase of exploration work would be contingent upon positive
results having been obtained from the preceding phase.

17.1	Recommended Drilling

No recommendations for drilling on the Copper Queen Group mineral claim can be
made at the present time.

18.0	References

British Columbia Department of Mines, Annual Report 1917, p. 119; 1919, p.
365; 1961, p. 18; 1967, p. 100; 1968, p.128 and 1970, p.160.

Geological Survey of Canada, Bulletin 270.

Geological Survey of Canada, Open File 351.

Kindle, E.D. (1954): Mineral Resources, Hazelton and Smithers Areas, Cassiar
and Coast Districts, British Columbia, Geological Survey of Canada, Memoir 223
(Revised Edition).

British Columbia, Energy, Mines and Petroleum Resources. Geological Fieldwork
1988, p. 195-208.

19.0   Author's Qualifications and Certification

I, James W. McLeod, P. Geo do hereby certify as follows:

    1.0   I am currently self-employed as a Consulting Geologist with an
          office located at 5382 Aspen Way, Delta, British Columbia, V4K
          3S3, Canada.

    2.0   I am a graduate of the University of British Columbia (1969), B.Sc
          (Major Geology).

I am a member in good standing of the Association of Professional Engineers
and Geoscientists of British Columbia, #18712 and a Fellow of the Geological
Association of Canada.

I have worked as a geologist for a total of 35 years since graduation.

I have read the definition of ?qualified person? set out in National
Instrument 43-101 (?NI 43-101?) in Canada and certify that by reason of my
education, affiliation with a professional association (as defined in NI
43-101) and past relevant work experience, I fulfill the requirements to be
a "qualified person" for the purposes of NI 43-101.

I am responsible for the preparation of sections 1 to 19 of the technical
report titled "Review and Recommendations, Copper Queen Group, #530690,
Omineca Region, 93L/11W, Telkwa River Area, British Columbia, Canada."
And dated April 26, 2006 (the Technical Report?) relating to the Copper
Queen Group property.

I have had prior work experience in the general area since 1967.

I am not aware of any material facts or material change with respect
 to the subject matter of the Technical Report that is not reflected in
the Technical Report, the omission to disclose which makes the Technical
Report misleading.

9.0 I am independent of the issuer and have no interest in the Copper
Queen Group mineral claim.

10.0 I have read National Instrument 43-101 and Form 43-101F1, and
        the Technical Report has been prepared in compliance with that
        instrument.

11.0 I consent to the filing of the Technical Report with any stock
    exchange and other regulatory authority and any publication by them,
    including electronic publication in the public company files on their
    websites accessible by the public, of the Technical report.

Dated at Delta, British Columbia this 26th Day of April, 2006.

                                    /s/ James W. McLeod
                                        James W. McLeod, P. Geo.
                                        Qualified PersonExhibit 10.1

SRS
LABS, INC.

2006
Stock Incentive Plan

1.   Establishment, Purpose, and Types of Awards

SRS Labs, Inc.(the “Company”) hereby establishes
this equity-based incentive compensation plan to be known as the “SRS Labs, Inc.
2006 Stock Incentive Plan” (hereinafter referred to as the “Plan”), in order to
provide incentives and awards to select employees, directors, consultants, and
advisors of the Company and its Affiliates.

The Plan permits the granting of the following types
of awards (“Awards”), according to the Sections of the Plan listed here:

	
  Section 6

  	
   

  	
  Options

  
	
  Section 7

  	
   

  	
  Share Appreciation Rights

  
	
  Section 8

  	
   

  	
  Restricted Shares, Restricted Share Units, and
  Unrestricted 

  Shares

  
	
  Section 9

  	
   

  	
  Deferred Share Units

  
	
  Section 10

  	
   

  	
  Performance Awards

  

 

The Plan is not intended to affect and shall not
affect any stock options, equity-based compensation, or other benefits that the
Company or its Affiliates may have provided, or may separately provide in the future
pursuant to any agreement, plan, or program that is independent of this Plan.

2.   Defined Terms

Terms in the Plan that begin with an initial capital
letter have the defined meaning set forth in Appendix A, unless defined elsewhere in
this Plan or the context of their use clearly indicates a different meaning.

3.   Shares Subject to the Plan

Subject to the provisions of Section 13 of the
Plan, the maximum number of Shares that the Company may issue for all Awards is
1,500,000 Shares, provided that the Company shall not make additional awards
under the SRS Labs, Inc. Amended and Restated 1996 Long-Term Incentive
Plan, As Amended. For all Awards, the Shares issued pursuant to the Plan may be
authorized but unissued Shares, or Shares that the Company has reacquired or
otherwise holds in treasury or in a trust.

Shares that are subject to an Award that for any
reason expires, is forfeited, is cancelled, or becomes unexercisable, and
Shares that are for any other reason not paid or delivered under the Plan shall
again, except to the extent prohibited by Applicable Law, be available for
subsequent Awards under the Plan. In addition, the Committee may make future
Awards with respect to Shares that the Company retains from otherwise
delivering pursuant to an Award either (i) as payment of the exercise
price of an Award, or (ii) in order to satisfy the withholding or
employment taxes due upon the grant, exercise, vesting or distribution of an
Award. Notwithstanding the foregoing, but subject to adjustments pursuant to Section 13
below, the number of Shares that are available for ISO Awards shall be determined,
to the extent required under applicable tax laws, by reducing the number of
Shares designated in the preceding paragraph by the number of Shares granted
pursuant to Awards (whether or not Shares are issued pursuant to such Awards),
provided that any Shares that are either issued or purchased under the Plan and
forfeited back to the Plan, or surrendered in payment of the Exercise Price for
an Award shall be available for issuance pursuant to future ISO Awards.

4.   Administration

(a)    General.   The
Committee shall administer the Plan in accordance with its terms, provided that
the Board may act in lieu of the Committee on any matter. The Committee shall
hold meetings at such times and places as it may determine and shall make such rules and
regulations for the conduct of its business as it deems advisable. In the
absence of a duly appointed Committee or if the Board otherwise chooses to act
in lieu of the Committee, the Board shall function as the Committee for all
purposes of the Plan.

(b)    Committee Composition.   The Board shall appoint the
members of the Committee. If and to the extent permitted by Applicable Law, the
Committee may authorize one or more Reporting Persons (or other officers) to
make Awards to Eligible Persons who are not Reporting Persons (or other
officers whom the Committee has specifically authorized to make Awards). The
Board may at any time appoint additional members to the Committee, remove and
replace members of the Committee with or without Cause, and fill vacancies on
the Committee however caused.

 

 

(c)    Powers of the Committee.   Subject to the provisions of
the Plan, the Committee shall have the authority, in its sole discretion:

(i)     to
determine Eligible Persons to whom Awards shall be granted from time to time
and the number of Shares, units, or dollars to be covered by each Award;

(ii)    to
determine, from time to time, the Fair Market Value of Shares;

(iii)   to
determine, and to set forth in Award Agreements, the terms and conditions of
all Awards, including any applicable exercise or purchase price, the
installments and conditions under which an Award shall become vested (which may
be based on performance), terminated, expired, cancelled, or replaced, and the
circumstances for vesting acceleration or waiver of forfeiture restrictions,
and other restrictions and limitations;

(iv)   to approve
the forms of Award Agreements and all other documents, notices and certificates
in connection therewith which need not be identical either as to type of Award
or among Participants;

(v)    to
construe and interpret the terms of the Plan and any Award Agreement, to
determine the meaning of their terms, and to prescribe, amend, and rescind rules and
procedures relating to the Plan and its administration; and

(vi)   in order
to fulfill the purposes of the Plan and without amending the Plan, to modify,
to cancel, or to waive the Company’s rights with respect to any Awards, to
adjust or to modify Award Agreements for changes in Applicable Law, and to
recognize differences in foreign law, tax policies, or customs; and

(vii)  to make
all other interpretations and to take all other actions that the Committee may
consider necessary or advisable to administer the Plan or to effectuate its
purposes.

Subject to
Applicable Law and the restrictions set forth in the Plan, the Committee may
delegate administrative functions to individuals who are Reporting Persons,
officers, or Employees of the Company or its Affiliates.

(d)    Deference to Committee Determinations.   The
Committee shall have the discretion to interpret or construe ambiguous,
unclear, or implied (but omitted) terms in any fashion it deems to be
appropriate in its sole discretion, and to make any findings of fact needed in
the administration of the Plan or Award Agreements. The Committee’s prior
exercise of its discretionary authority shall not obligate it to exercise its
authority in a like fashion thereafter. The Committee’s interpretation and
construction of any provision of the Plan, or of any Award or Award Agreement,
shall be final, binding, and conclusive. The validity of any such
interpretation, construction, decision or finding of fact shall not be given de
novo review if challenged in court, by arbitration, or in any other forum, and
shall be upheld unless clearly made in bad faith or materially affected by
fraud.

(e)    No Liability; Indemnification.   Neither the Board nor
any Committee member, nor any Person acting at the direction of the Board or
the Committee, shall be liable for any act, omission, interpretation,
construction or determination made in good faith with respect to the Plan, any
Award or any Award Agreement. The Company and its Affiliates shall pay or
reimburse any member of the Committee, as well as any Director, Employee, or
Consultant who takes action on behalf of the Plan, for all expenses incurred
with respect to the Plan, and to the full extent allowable under Applicable Law
shall indemnify each and every one of them for any claims, liabilities, and
costs (including reasonable attorney’s fees) arising out of their good faith
performance of duties on behalf of the Plan. The Company and its Affiliates
may, but shall not be required to, obtain liability insurance for this purpose.

5.   Eligibility

(a)    General Rule.   The Committee may grant ISOs only to
Employees (including officers who are Employees) of the Company or any
Affiliate that is a “parent corporation” or “subsidiary corporation” within the
meaning of Section 424 of the Code, and may grant all other Awards to any
Eligible Person. A Participant who has been granted an Award may be granted an
additional Award or Awards if the Committee shall so determine, if such person
is otherwise an Eligible Person and if otherwise in accordance with the terms
of the Plan.

(b)    Grant of Awards.   Subject to the
express provisions of the Plan, the Committee shall determine from the class of
Eligible Persons those individuals to whom Awards under the Plan may be
granted, the number of Shares subject to each Award, the price (if any) to be
paid for the Shares or the Award and, in the case of Performance Awards, in
addition to the matters addressed in Section 10 below, the specific
objectives, goals and performance criteria that further define the Performance
Award. Each Award shall be evidenced by an Award Agreement signed 

 

 

by the Company and, if required by the Committee, by
the Participant. The Award Agreement shall set forth the material terms and
conditions of the Award established by the Committee, and each Award shall be
subject to the terms and conditions set forth in Sections 23, 24, and 25 unless
otherwise specifically provided in an Award Agreement.

(c)    Limits on Awards.   During
any calendar year, no Participant may receive Options and SARs that relate to
more than 750,000 Shares. The Committee will adjust this limitation pursuant to
Section 13 below.

(d)    Replacement Awards.   Subject to
Applicable Laws (including any associated Shareholder approval requirements),
the Committee may, in its sole discretion and upon such terms as it deems
appropriate, require as a condition of the grant of an Award to a Participant
that the Participant surrender for cancellation some or all of the Awards that
have previously been granted to the Participant under this Plan or otherwise.
An Award that is conditioned upon such surrender may or may not be the same
type of Award, may cover the same (or a lesser or greater) number of Shares as
such surrendered Award, may have other terms that are determined without regard
to the terms or conditions of such surrendered Award, and may contain any other
terms that the Committee deems appropriate. In the case of Options, these other
terms may not involve an Exercise Price that is lower than the exercise price
of the surrendered Option unless the Company’s shareholders approve the grant
itself or the program under which the grant is made pursuant to the Plan.

6.   Option Awards

(a)    Types;  Documentation.   The
Committee may in its discretion grant ISOs to any Employee and Non-ISOs to any
Eligible Person, and shall evidence any such grants in an Award Agreement that
is delivered to the Participant. Each Option shall be designated in the Award
Agreement as an ISO or a Non-ISO, and the same Award Agreement may grant both
types of Options. At the sole discretion of the Committee, any Option may be
exercisable, in whole or in part, immediately upon the grant thereof, or only
after the occurrence of a specified event, or only in installments, which
installments may vary. Options granted under the Plan may contain such terms
and provisions not inconsistent with the Plan that the Committee shall deem
advisable in its sole and absolute discretion.

(b)    ISO $100,000 Limitation.   To the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as ISOs first become exercisable by a Participant in any calendar year (under
this Plan and any other plan of the Company or any Affiliate) exceeds $100,000,
such excess Options shall be treated as Non-ISOs. For purposes of determining
whether the $100,000 limit is exceeded, the Fair Market Value of the Shares
subject to an ISO shall be determined as of the Grant Date. In reducing the
number of Options treated as ISOs to meet the $100,000 limit, the most recently
granted Options shall be reduced first. In the event that Section 422 of
the Code is amended to alter the limitation set forth therein, the limitation
of this Section 6(b) shall be automatically adjusted accordingly.

(c)    Term of Options.   Each Award Agreement shall specify a
term at the end of which the Option automatically expires, subject to earlier
termination provisions contained in Section 6(h) hereof; provided,
that, the term of any Option may not exceed ten years from the Grant Date. In
the case of an ISO granted to an Employee who is a Ten Percent Holder on the
Grant Date, the term of the ISO shall not exceed five years from the Grant
Date.

(d)    Exercise Price.   The exercise price of an Option shall
be determined by the Committee in its sole discretion and shall be set forth in
the Award Agreement, provided that (i) if an ISO is granted to an Employee
who on the Grant Date is a Ten Percent Holder, the per Share exercise price
shall not be less than 110% of the Fair Market Value per Share on the Grant
Date, and (ii) for all other Options, such per Share exercise price shall
not be less than 100% of the Fair Market Value per Share on the Grant Date.

(e)    Exercise of Option.   The times,
circumstances and conditions under which an Option shall be exercisable shall
be determined by the Committee in its sole discretion and set forth in the
Award Agreement. The Committee shall have the discretion to determine whether
and to what extent the vesting of Options shall be tolled during any unpaid
leave of absence; provided, however, that in the absence of such determination,
vesting of Options shall be tolled during any such leave approved by the
Company.

(f)     Minimum Exercise Requirements.   An
Option may not be exercised for a fraction of a Share. The Committee may
require in an Award Agreement that an Option be exercised as to a minimum
number of Shares, provided that such requirement shall not prevent a
Participant from purchasing the full number of Shares as to which the Option is
then exercisable.

 

 

(g)    Methods of Exercise.   Prior to its expiration pursuant
to the terms of the applicable Award Agreement, and subject to the times,
circumstances and conditions for exercise contained in the applicable Award
Agreement, each Option may be exercised, in whole or in part (provided that the
Company shall not be required to issue fractional shares), by delivery of
written notice of exercise to the secretary of the Company accompanied by the
full exercise price of the Shares being purchased. In the case of an ISO, the
Committee shall determine the acceptable methods of payment on the Grant Date
and it shall be included in the applicable Award Agreement. The methods of
payment that the Committee may in its discretion accept or commit to accept in
an Award Agreement include:

(i)     cash or
check payable to the Company (in U.S. dollars);

(ii)    other
Shares that (A) are owned by the Participant who is purchasing Shares
pursuant to an Option, (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option is being exercised, (C) were not acquired by such Participant
pursuant to the exercise of an Option, unless such Shares have been owned by
such Participant for at least six months or such other period as the Committee
may determine, (D) are all, at the time of such surrender, free and clear
of any and all claims, pledges, liens and encumbrances, or any restrictions
which would in any manner restrict the transfer of such shares to or by the
Company (other than such restrictions as may have existed prior to an issuance
of such Shares by the Company to such Participant), and (E) are duly
endorsed for transfer to the Company;

(iii)   a
cashless exercise program that the Committee may approve, from time to time in
its discretion, pursuant to which a Participant may concurrently provide
irrevocable instructions (A) to such Participant’s broker or dealer to
effect the immediate sale of the purchased Shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the exercise price of the Option plus all applicable taxes required to be
withheld by the Company by reason of such exercise, and (B) to the Company
to deliver the certificates for the purchased Shares directly to such broker or
dealer in order to complete the sale; or

(iv)   any
combination of the foregoing methods of payment.

The Company shall
not be required to deliver Shares pursuant to the exercise of an Option until
payment of the full exercise price therefore is received by the Company.

(h)    Termination of Continuous Service.   The Committee may
establish and set forth in the applicable Award Agreement the terms and
conditions on which an Option shall remain exercisable, if at all, following
termination of a Participant’s Continuous Service. The Committee may waive or
modify these provisions at any time. To the extent that a Participant is not
entitled to exercise an Option at the date of his or her termination of
Continuous Service, or if the Participant (or other person entitled to exercise
the Option) does not exercise the Option to the extent so entitled within the
time specified in the Award Agreement or below (as applicable), the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan and become available for future Awards. In no event
may any Option be exercised after the expiration of the Option term as set
forth in the Award Agreement.

The following
provisions shall apply to the extent an Award Agreement does not specify the
terms and conditions upon which an Option shall terminate when there is a
termination of a Participant’s Continuous Service:

(i)     Termination other than Upon Disability or Death or
for Cause.   In the event of termination of a Participant’s
Continuous Service (other than as a result of Participant’s death, disability,
retirement or termination for Cause), the Participant shall have the right to
exercise an Option at any time within 90 days following such termination to the
extent the Participant was entitled to exercise such Option at the date of such
termination.

(ii)    Disability.   In the event of
termination of a Participant’s Continuous Service as a result of his or her
being Disabled, the Participant shall have the right to exercise an Option at
any time within one year following such termination to the extent the
Participant was entitled to exercise such Option at the date of such
termination.

(iii)   Retirement.   In the event of termination of a Participant’s
Continuous Service as a result of Participant’s retirement, the Participant
shall have the right to exercise the Option at any time within six months
following such termination to the extent the Participant was entitled to
exercise such Option at the date of such termination.

(iv)   Death.   In the event of the death of a Participant
during the period of Continuous Service since the Grant Date of an Option, or
within thirty days following termination of the Participant’s Continuous
Service, the Option may be exercised, at any time within one year following the
date of the Participant’s death, by the Participant’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only
to the extent the right to exercise the Option had vested at the date of death or,
if earlier, the date the Participant’s Continuous Service terminated.

 

 

(v)    Cause.   If the Committee determines
that a Participant’s Continuous Service terminated due to Cause, the
Participant shall immediately forfeit the right to exercise any Option, and it
shall be considered immediately null and void.

(i)     Reverse Vesting.   The Committee in
its sole discretion may allow a Participant to exercise unvested Non-ISOs, in
which case the Shares then issued shall be Restricted Shares having analogous
vesting restrictions to the unvested Non-ISOs.

7.   Share Appreciate Rights (SARs)

(a)    Grants.   The Committee may in its discretion grant
Share Appreciation Rights to any Eligible Person, in any of the following
forms:

(i)     SARs related to Options.   The Committee may grant SARs
either concurrently with the grant of an Option or with respect to an
outstanding Option, in which case the SAR shall extend to all or a portion of
the Shares covered by the related Option. An SAR shall entitle the Participant
who holds the related Option, upon exercise of the SAR and surrender of the
related Option, or portion thereof, to the extent the SAR and related Option
each were previously unexercised, to receive payment of an amount determined
pursuant to Section 7(e) below. Any SAR granted in connection with an
ISO will contain such terms as may be required to comply with the provisions of
Section 422 of the Code and the regulations promulgated thereunder.

(ii)    SARs Independent of Options.   The Committee may grant
SARs which are independent of any Option subject to such conditions as the
Committee may in its discretion determine, which conditions will be set forth
in the applicable Award Agreement.

(iii)   Limited SARs.   The Committee may grant SARs exercisable only upon or in
respect of a Change in Control or any other specified event, and such limited
SARs may relate to or operate in tandem or combination with or substitution for
Options or other SARs, or on a stand-alone basis, and may be payable in cash or
Shares based on the spread between the exercise price of the SAR, and (A) a
price based upon or equal to the Fair Market Value of the Shares during a
specified period, at a specified time within a specified period before, after
or including the date of such event, or (B) a price related to
consideration payable to Company’s shareholders generally in connection with
the event.

(b)    Exercise Price.   The per Share exercise price of an SAR
shall be determined in the sole discretion of the Committee, shall be set forth
in the applicable Award Agreement, and shall be no less than 100% of the Fair
Market Value of one Share. The exercise price of an SAR related to an Option
shall be the same as the exercise price of the related Option.

(c)    Exercise of SARs.   Unless the Award Agreement otherwise
provides, an SAR related to an Option will be exercisable at such time or
times, and to the extent, that the related Option will be exercisable; provided
that the Award Agreement shall not, without the approval of the shareholders of
the Company, provide for a vesting period for the exercise of the SAR that is
more favorable to the Participant than the exercise period for the related
Option. An SAR may not have a term exceeding ten years from its Grant Date. An
SAR granted independently of any other Award will be exercisable pursuant to
the terms of the Award Agreement, but shall not, without the approval of the
shareholders of the Company, provide for a vesting period for the exercise of
the SAR that is more favorable to the Participant than the exercise period for
the related Option. Whether an SAR is related to an Option or is granted independently,
the SAR may only be exercised when the Fair Market Value of the Shares
underlying the SAR exceeds the exercise price of the SAR.

(d)    Effect on Available Shares.   All SARs that may be settled
in Shares shall be counted in full against the number of Shares available for
award under the Plan, regardless of the number of Shares actually issued upon
settlement of the SARs.

(e)    Payment.   Upon exercise of an SAR related to an Option
and the attendant surrender of an exercisable portion of any related Award, the
Participant will be entitled to receive payment of an amount determined by
multiplying—

(i)     the
excess of the Fair Market Value of a Share on the date of exercise of the SAR
over the exercise price per Share of the SAR, by

(ii)    the
number of Shares with respect to which the SAR has been exercised.

 

 

Notwithstanding
the foregoing, an SAR granted independently of an Option (i) may limit the
amount payable to the Participant to a percentage, specified in the Award
Agreement but not exceeding one-hundred percent (100%), of the amount
determined pursuant to the preceding sentence, and (ii) shall be subject
to any payment or other restrictions that the Committee may at any time impose
in its discretion, including restrictions intended to conform the SARs with Section 409A
of the Code.

(f)     Form and Terms of Payment.   Subject to Applicable
Law, the Committee may, in its sole discretion, settle the amount determined
under Section 7(e) above solely in cash, solely in Shares (valued at
their Fair Market Value on the date of exercise of the SAR), or partly in cash
and partly in Shares, with cash paid in lieu of fractional shares. Unless
otherwise provided in an Award Agreement, all SARs shall be settled in Shares
as soon as practicable after exercise.

(g)    Termination of Employment or Consulting Relationship.   The
Committee shall establish and set forth in the applicable Award Agreement the
terms and conditions on which an SAR shall remain exercisable, if at all,
following termination of a Participant’s Continuous Service. The provisions of Section 6(h) above
shall apply to the extent an Award Agreement does not specify the terms and
conditions upon which an SAR shall terminate when there is a termination of a
Participant’s Continuous Service.

8.   Restricted Shares, Restricted Share Units, and Unrestricted Shares

(a)    Grants.   The Committee may in its sole discretion grant
restricted shares (“Restricted Shares”) to any Eligible Person and shall
evidence such grant in an Award Agreement that is delivered to the Participant
and that sets forth the number of Restricted Shares, the purchase price for
such Restricted Shares (if any), and the terms upon which the Restricted Shares
may become vested. In addition, the Company may in its discretion grant the right
to receive Shares after certain vesting requirements are met (“Restricted Share
Units”) to any Eligible Person and shall evidence such grant in an Award
Agreement that is delivered to the Participant which sets forth the number of
Shares (or formula, that may be based on future performance or conditions, for
determining the number of Shares) that the Participant shall be entitled to
receive upon vesting and the terms upon which the Shares subject to a
Restricted Share Unit may become vested. The Committee may condition any Award
of Restricted Shares or Restricted Share Units to a Participant on receiving
from the Participant such further assurances and documents as the Committee may
require to enforce the restrictions. In addition, the Committee may grant
Awards hereunder in the form of unrestricted shares (“Unrestricted Shares”),
which shall vest in full upon the date of grant or such other date as the
Committee may determine or which the Committee may issue pursuant to any
program under which one or more Eligible Persons (selected by the Committee in
its sole discretion) elect to receive Unrestricted Shares in lieu of cash
bonuses that would otherwise be paid.

(b)    Vesting and Forfeiture.   The Committee shall set forth
in an Award Agreement granting Restricted Shares or Restricted Share Units, the
terms and conditions under which the Participant’s interest in the Restricted
Shares or the Shares subject to Restricted Share Units will become vested and
non-forfeitable. Except as set forth in the applicable Award Agreement or the
Committee otherwise determines, upon termination of a Participant’s Continuous
Service for any other reason, the Participant shall forfeit his or her
Restricted Shares and Restricted Share Units; provided that if a Participant
purchases the Restricted Shares and forfeits them for any reason, the Company
shall return the purchase price to the Participant only if and to the extent
set forth in an Award Agreement.

(c)    Issuance of Restricted Shares Prior to Vesting.   The
Company shall issue stock certificates that evidence Restricted Shares pending
the lapse of applicable restrictions, and that bear a legend making appropriate
reference to such restrictions. Except as set forth in the applicable Award
Agreement or the Committee otherwise determines, the Company or a third party
that the Company designates shall hold such Restricted Shares and any dividends
that accrue with respect to Restricted Shares pursuant to Section 8(e) below.

(d)    Issuance of Shares upon Vesting.   As soon as practicable after vesting
of a Participant’s Restricted Shares (or right to receive Shares underlying
Restricted Share Units) and the Participant’s satisfaction of applicable tax
withholding requirements, the Company shall release to the Participant, free
from the vesting restrictions, one Share for each vested Restricted Share (or
issue one Share free of the vesting restriction for each vested Restricted
Share Unit), unless an Award Agreement provides otherwise. No fractional shares
shall be distributed, and cash shall be paid in lieu thereof.

(e)    Dividends Payable on Vesting.   Whenever Shares are
released to a Participant or duly-authorized transferee pursuant to Section 8(d) above
as a result of the vesting of Restricted Shares or the Shares underlying
Restricted Share Units are issued to a Participant pursuant to Section 8(d) above,
such Participant or duly-authorized transferee shall also be entitled to
receive (unless otherwise provided in the Award Agreement), with respect to
each 

 

 

Share released or issued, a number of Shares equal to
the sum of (i) any stock dividends, which were declared and paid to the
holders of Shares between the Grant Date and the date such Share is released
from the vesting restrictions in the case of Restricted Shares or issued in the
case of Restricted Share Units, and (ii) a number of Shares equal to the
Shares that the Participant could have purchased at Fair Market Value on the
payment date of any cash dividends for Shares if the Participant had received
such cash dividends with respect to each Restricted Share or Share subject to a
Restricted Share Unit Award between its Grant Date and its settlement date.

(f)     Section 83(b) Elections.   A
Participant may make an election under Section 83(b) of the Code (the
“Section 83(b) Election”) with respect to Restricted Shares. If a
Participant who has received Restricted Share Units provides the Committee with
written notice of his or her intention to make a Section 83(b) Election
with respect to the Shares subject to such Restricted Share Units, the
Committee may in its discretion convert the Participant’s Restricted Share
Units into Restricted Shares, on a one-for-one basis, in full satisfaction of
the Participant’s Restricted Share Unit Award. The Participant may then make a Section 83(b) Election
with respect to those Restricted Shares. Shares with respect to which a
Participant makes a Section 83(b) Election shall not be eligible for
deferral pursuant to Section 9 below.

(g)    Deferral Elections.   At any time within the thirty-day
period (or other shorter or longer period that the Committee selects in its
sole discretion) in which a Participant who is a member of a select group of
management or highly compensated employees (within the meaning of the Code)
receives an initial Award of either Restricted Shares or Restricted Share Units
(or before the calendar year in which a Participant receives a subsequent
Award, subject to adjustments by the Committee in accordance with Code Section 409A),
the Committee may permit the Participant to irrevocably elect, on a form
provided by and acceptable to the Committee, to defer the receipt of all or a
percentage of the Shares that would otherwise be transferred to the Participant
upon the vesting of such Award. If the Participant makes this election, the
Shares subject to the election, and any associated dividends and interest,
shall be credited to an account established pursuant to Section 9 hereof
on the date such Shares would otherwise have been released or issued to the
Participant pursuant to Section 8(d) above.

9.   Deferred Share Units

(a)    Elections to Defer.   The Committee may permit any
Eligible Person who is a Director, Consultant or member of a select group of
management or highly compensated employees (within the meaning of the Code) to
irrevocably elect, on a form provided by and acceptable to the Committee (the “Election
Form”), to forego the receipt of cash or other compensation (including the
Shares deliverable pursuant to any Award other than Restricted Shares for which
a Section 83(b) Election has been made), and in lieu thereof to have
the Company credit to an internal Plan account (the “Account”) a number of
deferred share units (“Deferred Share Units”) having a Fair Market Value equal
to the Shares and other compensation deferred. These credits will be made at
the end of each calendar month during which compensation is deferred. Each
Election Form shall take effect on the first day of the next calendar year
(or on the first day of the next calendar month in the case of an initial
election by a Participant who first receives an Award, subject to adjustments
by the Committee in accordance with Code Section 409A) after its delivery
to the Company, subject to Section 8(g) regarding deferral of
Restricted Shares and Restricted Share Units and to Section 10(e) regarding
deferral of Performance Awards, unless the Company sends the Participant a
written notice explaining why the Election Form is invalid within five
business days after the Company receives it. Notwithstanding the foregoing
sentence: (i) Election Forms shall be ineffective with respect to any
compensation that a Participant earns before the date on which the Company
receives the Election Form, and (ii) the Committee may unilaterally make
Awards in the form of Deferred Share Units, regardless of whether or not the
Participant foregoes other compensation.

(b)    Vesting.   Unless
an Award Agreement expressly provides otherwise, each Participant shall be 100%
vested at all times in any Shares subject to Deferred Share Units.

(c)    Issuances of Shares.   The Company shall provide a
Participant with one Share for each Deferred Share Unit in five substantially
equal annual installments that are issued before the last day of each of the
five calendar years that end after the date on which the Participant’s
Continuous Service terminates, unless—

(i)     the
Participant has properly elected a different form of distribution, on a form
approved by the Committee, that permits the Participant to select any
combination of a lump sum and annual installments that are completed within ten
years following termination of the Participant’s Continuous Service, and

(ii)    the
Company received the Participant’s distribution election form at the time the
Participant elects to defer the receipt of cash or other compensation pursuant
to Section 9(a), provided that such election may be changed through any
subsequent election that (i) is delivered to the Company at least one year
before the date on which distributions are otherwise scheduled to commence
pursuant to the Participant’s election, and (ii) defers the commencement
of distributions by at least five years from the originally scheduled
commencement date.

 

 

Fractional shares
shall not be issued, and instead shall be paid out in cash.

(d)    Crediting of Dividends.   Whenever
Shares are issued to a Participant pursuant to Section 9(c) above,
such Participant shall also be entitled to receive, with respect to each Share
issued, a number of Shares equal to the sum of (i) any stock dividends,
which were declared and paid to the holders of Shares between the Grant Date
and the date such Share is issued, and (ii) a number of Shares equal to
the Shares that the Participant could have purchased at Fair Market Value on
the payment date of any cash dividends for Shares if the Participant had
received such cash dividends between the Grant Date and the settlement date for
the Deferred Share Units.

(e)    Emergency Withdrawals.   In the event a Participant
suffers an unforeseeable emergency within the contemplation of this Section and
Section 409A of the Code, the Participant may apply to the Company for an
immediate distribution of all or a portion of the Participant’s Deferred Share
Units. The unforeseeable emergency must result from a sudden and unexpected
illness or accident of the Participant, the Participant’s spouse, or a
dependent (within the meaning of Section 152(a) of the Code) of the
Participant, casualty loss of the Participant’s property, or other similar
extraordinary and unforeseeable conditions beyond the control of the
Participant. Examples of purposes which are not considered unforeseeable
emergencies include post-secondary school expenses or the desire to purchase a
residence. In no event will a distribution be made to the extent the
unforeseeable emergency could be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the Participant’s nonessential
assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant’s unforeseeable emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution. The Committee shall determine whether a Participant has a
qualifying unforeseeable emergency and the amount which qualifies for
distribution, if any. The Committee may require evidence of the purpose and
amount of the need, and may establish such application or other procedures as
it deems appropriate.

(f)     Unsecured Rights to Deferred Compensation.   A
Participant’s right to Deferred Share Units shall at all times constitute an
unsecured promise of the Company to pay benefits as they come due. The right of
the Participant or the Participant’s duly-authorized transferee to receive
benefits hereunder shall be solely an unsecured claim against the general
assets of the Company. Neither the Participant nor the Participant’s
duly-authorized transferee shall have any claim against or rights in any
specific assets, shares, or other funds of the Company.

10.   Performance Awards

(a)    Performance Units.   Subject to the
limitations set forth in paragraph (c) hereof, the Committee may in its
discretion grant Performance Units to any Eligible Person and shall evidence
such grant in an Award Agreement that is delivered to the Participant which
sets forth the terms and conditions of the Award.

(b)    Performance Compensation Awards.   Subject
to the limitations set forth in paragraph (c) hereof, the Committee may,
at the time of grant of a Performance Unit, designate such Award as a “Performance
Compensation Award” (payable in cash or Shares) in order that such Award
constitutes “qualified performance-based compensation” under Code Section 162(m),
in which event the Committee shall have the power to grant such Performance
Compensation Award upon terms and conditions that qualify it as “qualified
performance-based compensation” within the meaning of Code Section 162(m).
With respect to each such Performance Compensation Award, the Committee shall
establish, in writing within the time required under Code Section 162(m),
a “Performance Period,” “Performance Measure(s)”, and “Performance Formula(e)”
(each such term being hereinafter defined). Once established for a Performance
Period, the Performance Measure(s) and Performance Formula(e) shall
not be amended or otherwise modified to the extent such amendment or
modification would cause the compensation payable pursuant to the Award to fail
to constitute qualified performance-based compensation under Code Section 162
(m).

A Participant shall be eligible to receive payment in
respect of a Performance Compensation Award only to the extent that the
Performance Measure(s) for such Award is achieved and the Performance
Formula(e) as applied against such Performance Measure(s) determines
that all or some portion of such Participant’s Award has been earned for the
Performance Period. As soon as practicable after the close of each Performance
Period, the Committee shall review and certify in writing whether, and to what
extent, the Performance Measure(s) for the Performance Period have been
achieved and, if so, determine and certify in writing the amount of the
Performance Compensation Award to be paid to the Participant and, in so doing,
may use negative discretion to decrease, but not increase, the amount of the
Award otherwise payable to the Participant based upon such performance.

 

 

(c)    Limitations on Awards.   The
maximum Performance Unit Award and the maximum Performance Compensation Award
that any one Participant may receive for any one Performance Period shall not
together exceed 1,000,000 Shares and $1,000,000 in cash. The Committee shall
have the discretion to provide in any Award Agreement that any amounts earned
in excess of these limitations will either be credited as Deferred Share Units,
or as deferred cash compensation under a separate plan of the Company (provided
in the latter case that such deferred compensation either bears a reasonable
rate of interest or has a value based on one or more predetermined actual
investments). Any amounts for which payment to the Participant is deferred
pursuant to the preceding sentence shall be paid to the Participant in a future
year or years not earlier than, and only to the extent that, the Participant is
either not receiving compensation in excess of these limits for a Performance
Period, or is not subject to the restrictions set forth under Section 162(b) of
the Code.

(d)    Definitions.

(i)     “Performance
Formula” means, for a Performance Period, one or more objective formulas or
standards established by the Committee for purposes of determining whether or
the extent to which an Award has been earned based on the level of performance
attained or to be attained with respect to one or more Performance Measure(s).
Performance Formulae may vary from Performance Period to Performance Period and
from Participant to Participant and may be established on a stand-alone basis,
in tandem or in the alternative.

(ii)    “Performance
Measure” means one or more of the following selected by the Committee to
measure Company, Affiliate, and/or business unit performance for a Performance
Period, whether in absolute or relative terms (including, without limitation,
terms relative to a peer group or index): basic, diluted, or adjusted earnings
per share; sales or revenue; earnings before interest, taxes, and other
adjustments (in total or on a per share basis); basic or adjusted net income; returns
on equity, assets, capital, revenue or similar measure; economic value added;
working capital; total shareholder return; and product development, product
market share, research, licensing, litigation, human resources, information
services, mergers, acquisitions, sales of assets of Affiliates or business
units. Each such measure shall be, to the extent applicable, determined in
accordance with generally accepted accounting principles as consistently
applied by the Company (or such other standard applied by the Committee) and,
if so determined by the Committee, and in the case of a Performance
Compensation Award, to the extent permitted under Code Section 162(m),
adjusted to omit the effects of extraordinary items, gain or loss on the
disposal of a business segment, unusual or infrequently occurring events and
transactions and cumulative effects of changes in accounting principles.
Performance Measures may vary from Performance Period to Performance Period and
from Participant to Participant, and may be established on a stand-alone basis,
in tandem or in the alternative.

(iii)   “Performance
Period” means one or more periods of time (of not less than one fiscal year of
the Company), as the Committee may designate, over which the attainment of one
or more Performance Measure(s) will be measured for the purpose of
determining a Participant’s rights in respect of an Award.

(e)    Deferral Elections.   At any time prior to the date that
is at least six months before the close of a Performance Period (or shorter or
longer period that the Committee selects) with respect to an Award of either
Performance Units or Performance Compensation, the Committee may permit a
Participant who is a member of a select group of management or highly
compensated employees (within the meaning of the Code) to irrevocably elect, on
a form provided by and acceptable to the Committee, to defer the receipt of all
or a percentage of the cash or Shares that would otherwise be transferred to
the Participant upon the vesting of such Award. If the Participant makes this
election, the cash or Shares subject to the election, and any associated
interest and dividends, shall be credited to an account established pursuant to
Section 9 hereof on the date such cash or Shares would otherwise have been
released or issued to the Participant pursuant to Section 10(a) or Section 10(b) above.

11.   Taxes

(a)    General.   As a condition to the issuance or
distribution of Shares pursuant to the Plan, the Participant (or in the case of
the Participant’s death, the person who succeeds to the Participant’s rights)
shall make such arrangements as the Company may require for the satisfaction of
any applicable federal, state, local or foreign withholding tax obligations
that may arise in connection with the Award and the issuance of Shares. The
Company shall not be required to issue any Shares until such obligations are
satisfied. If the Committee allows the withholding or surrender of Shares to
satisfy a Participant’s tax withholding obligations, the Committee shall not
allow Shares to be withheld in an amount that exceeds the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes.

 

 

(b)    Default Rule for Employees.   In the absence of any
other arrangement, an Employee shall be deemed to have directed the Company to
withhold or collect from his or her cash compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of the exercise of an Award.

(c)    Special Rules.   In the case of a Participant other than
an Employee (or in the case of an Employee where the next payroll payment is
not sufficient to satisfy such tax obligations, with respect to any remaining
tax obligations), in the absence of any other arrangement and to the extent
permitted under Applicable Law, the Participant shall be deemed to have elected
to have the Company withhold from the Shares or cash to be issued pursuant to
an Award that number of Shares having a Fair Market Value determined as of the
applicable Tax Date (as defined below) or cash equal to the amount required to
be withheld. For purposes of this Section 11, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined under the Applicable Law (the “Tax Date”).

(d)    Surrender of Shares.   If permitted by the Committee, in
its discretion, a Participant may satisfy the minimum applicable tax
withholding and employment tax obligations associated with an Award by
surrendering Shares to the Company (including Shares that would otherwise be
issued pursuant to the Award) that have a Fair Market Value determined as of
the applicable Tax Date equal to the amount required to be withheld. In the
case of Shares previously acquired from the Company that are surrendered under
this Section 11, such Shares must have been owned by the Participant for
more than six months on the date of surrender (or such longer period of time
the Company may in its discretion require).

(e)    Income Taxes and Deferred Compensation.   Participants
are solely responsible and liable for the satisfaction of all taxes and
penalties that may arise in connection with Awards (including any taxes arising
under Section 409A of the Code), and the Company shall not have any
obligation to indemnify or otherwise hold any Participant harmless from any or
all of such taxes. The Committee shall have the discretion to organize any
deferral program, to require deferral election forms, and to grant or to
unilaterally modify any Award in a manner that (i) conforms with the
requirements of Section 409A of the Code with respect to compensation that
is deferred and that vests after December 31, 2004, (ii) that voids
any Participant election to the extent it would violate Section 409A of
the Code, and (iii) for any distribution election that would violate Section 409A
of the Code, to make distributions pursuant to the Award at the earliest to
occur of a distribution event that is allowable under Section 409A of the
Code or any distribution event that is both allowable under Section 409A
of the Code and is elected by the Participant, subject to any valid second
election to defer, provided that the Committee permits second elections to
defer in accordance with Section 409A(a)(4)(C). The Committee shall have
the sole discretion to interpret the requirements of the Code, including Section 409A,
for purposes of the Plan and all Awards.

 

 

12.   Non-Transferability of
Awards

(a)    General.   Except as set forth in this Section 12,
or as otherwise approved by the Committee, Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a
beneficiary by a Participant will not constitute a transfer. An Award may be
exercised, during the lifetime of the holder of an Award, only by such holder,
the duly-authorized legal representative of a Participant who is Disabled, or a
transferee permitted by this Section 12.

(b)    Limited Transferability Rights.   Notwithstanding
anything else in this Section 12, the Committee may in its discretion
provide in an Award Agreement that an Award in the form of a Non-ISO,
Share-settled SAR, Restricted Shares, or Performance Shares may be transferred,
on such terms and conditions as the Committee deems appropriate, either (i) by
instrument to the Participant’s “Immediate Family” (as defined below), (ii) by
instrument to an inter vivos or testamentary trust (or other entity) in which
the Award is to be passed to the Participant’s designated beneficiaries, or (iii) by
gift to charitable institutions. Any transferee of the Participant’s rights
shall succeed and be subject to all of the terms of the applicable Award
Agreement and the Plan. “Immediate Family” means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive relationships.

13.   Adjustments Upon Changes
in Capitalization, Merger or Certain Other Transactions

(a)    Changes in Capitalization.   The Committee shall
equitably adjust the number of Shares covered by each outstanding Award, and
the number of Shares that have been authorized for issuance under the Plan but
as to which no Awards have yet been granted or that have been returned to the
Plan upon cancellation, forfeiture, or expiration of an Award, as well as the
price per Share covered by each such outstanding Award, to reflect any increase
or decrease in the number of issued Shares resulting from a stock-split,
reverse stock-split, stock dividend, combination, recapitalization or
reclassification of the Shares, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the Company. In
the event of any such transaction or event, the Committee may provide in
substitution for any or all outstanding Awards under the Plan such alternative
consideration (including securities of any surviving entity) as it may in good
faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all Awards so replaced. In any case, such
substitution of securities shall not require the consent of any person who is
granted Awards pursuant to the Plan. Except as expressly provided herein, or in
an Award Agreement, if the Company issues for consideration shares of stock of
any class or securities convertible into shares of stock of any class, the
issuance shall not affect, and no adjustment by reason thereof shall be
required to be made with respect to the number or price of Shares subject to
any Award.

(b)    Dissolution or Liquidation.   In the event of the
dissolution or liquidation of the Company other than as part of a Change of
Control, each Award will terminate immediately prior to the consummation of
such action, subject to the ability of the Committee to exercise any discretion
authorized in the case of a Change in Control.

(c)    Change in Control.   In the event of a Change in
Control, the Committee may in its sole and absolute discretion and authority,
without obtaining the approval or consent of the Company’s shareholders or any
Participant with respect to his or her outstanding Awards, take one or more of
the following actions:

(i)     arrange
for or otherwise provide that each outstanding Award shall be assumed or a
substantially similar award shall be substituted by a successor corporation or
a parent or subsidiary of such successor corporation (the “Successor
Corporation”);

(ii)    accelerate
the vesting of Awards so that Awards shall vest (and, to the extent applicable,
become exercisable) as to the Shares that otherwise would have been unvested
and provide that repurchase rights of the Company with respect to Shares issued
upon exercise of an Award shall lapse as to the Shares subject to such
repurchase right;

(iii)   arrange
or otherwise provide for the payment of cash or other consideration to
Participants in exchange for the satisfaction and cancellation of outstanding
Awards;

(iv)   terminate
upon the consummation of the transaction, provided that the Committee may in
its sole discretion provide for vesting of all or some outstanding Awards in
full as of a date immediately prior to consummation of the Change of Control.
To the extent that an Award is not exercised prior to consummation of a
transaction in which the Award is not being assumed or substituted, such Award
shall terminate upon such consummation; or

 A-1
 

 

 

(v)    make such
other modifications, adjustments or amendments to outstanding Awards or this
Plan as the Committee deems necessary or appropriate, subject however to the
terms of Section 15(a) below.

Notwithstanding
the above, in the event a Participant holding an Award assumed or substituted
by the Successor Corporation in a Change in Control is Involuntarily Terminated
by the Successor Corporation in connection with, or within 12 months (or other period either set forth in an Award Agreement, or
as increased thereafter by the Committee to a period longer than 12 months) following consummation of, the Change in Control, then any
assumed or substituted Award held by the terminated Participant at the time of
termination shall accelerate and become fully vested (and exercisable in full
in the case of Options and SARs), and any repurchase right applicable to any
Shares shall lapse in full, unless an Award Agreement provides for a more
restrictive acceleration or vesting schedule or more restrictive limitations on
the lapse of repurchase rights or otherwise places additional restrictions,
limitations and conditions on an Award. The acceleration of vesting and lapse
of repurchase rights provided for in the previous sentence shall occur immediately
prior to the effective date of the Participant’s termination, unless an Award
Agreement provides otherwise.

(d)    Certain Distributions.   In the event of any
distribution to the Company’s shareholders of securities of any other entity or
other assets (other than dividends payable in cash or stock of the Company)
without receipt of consideration by the Company, the Committee may, in its
discretion, appropriately adjust the price per Share covered by each
outstanding Award to reflect the effect of such distribution.

14.   Time of Granting Awards.

The date of grant (“Grant Date”) of an Award shall be
the date on which the Committee makes the determination granting such Award or
such other date as is determined by the Committee, provided that in the case of
an ISO, the Grant Date shall be the later of the date on which the Committee
makes the determination granting such ISO or the date of commencement of the
Participant’s employment relationship with the Company.

15.   Modification of Awards and
Substitution of Options.

(a)    Modification, Extension, and Renewal of Awards.   Within
the limitations of the Plan, the Committee may modify an Award to accelerate
the rate at which an Option or SAR may be exercised (including without
limitation permitting an Option or SAR to be exercised in full without regard
to the installment or vesting provisions of the applicable Award Agreement or
whether the Option or SAR is at the time exercisable, to the extent it has not
previously been exercised), to accelerate the vesting of any Award, to extend
or renew outstanding Awards or to accept the cancellation of outstanding Awards
to the extent not previously exercised. However, the Committee may not cancel
an outstanding Option whose exercise price is greater than Fair Market Value at
the time of cancellation for the purpose of reissuing the Option to the
Participant at a lower exercise price or granting a replacement award of a
different type. Notwithstanding the foregoing provision, no modification of an
outstanding Award shall materially and adversely affect such Participant’s
rights thereunder, unless either (i) the Participant provides written
consent, or (ii) before a Change in Control, the Committee determines in
good faith that the modification is not materially adverse to the Participant. Furthermore, neither the Company nor the
Committee shall, without shareholder approval, allow for a “repricing” within
the meaning of federal securities laws applicable to proxy statement
disclosures.

(b)    Merger-related Substitution of Options.   Notwithstanding
any inconsistent provisions or limits under the Plan, in the event the Company
or an Affiliate acquires (whether by purchase, merger or otherwise) all or
substantially all of outstanding capital stock or assets of another corporation
or in the event of any reorganization or other transaction qualifying under Section 424
of the Code, the Committee may, in accordance with the provisions of that
Section, substitute Options for options under the plan of the acquired company
provided (i) the excess of the aggregate fair market value of the shares
subject to an option immediately after the substitution over the aggregate
option price of such shares is not more than the similar excess immediately
before such substitution and (ii) the new option does not give persons
additional benefits, including any extension of the exercise period.

 A-2
 

 

 

16.   Term of Plan.

The Plan shall continue in effect for a term of
ten (10) years from its effective date as determined under Section 20
below, unless the Plan is sooner terminated under Section 17 below.

17.   Amendment and Termination
of the Plan.

(a)    Authority to Amend or Terminate.   Subject to Applicable
Laws, the Board may from time to time amend, alter, suspend, discontinue, or
terminate the Plan.

(b)    Effect of Amendment or Termination.   No amendment,
suspension, or termination of the Plan shall materially and adversely affect
Awards already granted unless either it relates to an adjustment pursuant to
Sections 13, a modification pursuant to Section 15(a) above, or it is
otherwise mutually agreed between the Participant and the Committee, which
agreement must be in writing and signed by the Participant and the Company.
Notwithstanding the foregoing, the Committee may amend the Plan to eliminate
provisions which are no longer necessary as a result of changes in tax or
securities laws or regulations, or in the interpretation thereof.

18.   Conditions Upon Issuance of Shares.

Notwithstanding any other provision of the Plan or any
agreement entered into by the Company pursuant to the Plan, the Company shall
not be obligated, and shall have no liability for failure, to issue or deliver
any Shares under the Plan unless such issuance or delivery would comply with
Applicable Law, with such compliance determined by the Company in consultation
with its legal counsel.

19.   Reservation of Shares.

The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient
to satisfy the requirements of the Plan.

20.   Effective Date.

This Plan shall become effective on the date which it
has received approval by a vote of a majority of the votes cast at a duly held
meeting of the Company’s shareholders (or by such other shareholder vote that
the Administrator determines to be sufficient for the issuance of Shares or
stock options according to the Company’s governing documents and applicable law
state law).

21.   Controlling Law.

All disputes relating to or arising from the Plan
shall be governed by the internal substantive laws (and not the laws of
conflicts of laws) of the State of Delaware, to the extent not preempted by
United States federal law. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions shall continue to be fully effective.

22.   Laws And Regulations.

(a)    U.S. Securities Laws.   This Plan, the grant of Awards,
and the exercise of Options and SARs under this Plan, and the obligation of the
Company to sell or deliver any of its securities (including, without
limitation, Options, Restricted Shares, Restricted Share Units, Unrestricted
Shares, Deferred Share Units, and Shares) under this Plan shall be subject to
all Applicable Law. In the event that the Shares are not registered under the
Securities Act of 1933, as amended (the “Act”), or any applicable state
securities laws prior to the delivery of such Shares, the Company may require,
as a condition to the issuance thereof, that the persons to whom Shares are to
be issued represent and warrant in writing to the Company that such Shares are
being acquired by him or her for investment for his or her own account and not
with a view to, for resale in connection with, or with an intent of
participating directly or indirectly in, any distribution of such Shares within
the meaning of the Act, and a legend to that effect may be placed on the
certificates representing the Shares.

(b)    Other Jurisdictions.   To facilitate the making of any
grant of an Award under this Plan, the Committee may provide for such special
terms for Awards to Participants who are foreign nationals or who are employed
by the Company or any Affiliate outside of the United States of America as the
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. The Company may adopt rules and
procedures relating to the operation and administration of this Plan to
accommodate the specific requirements of local laws and procedures of
particular countries. Without limiting the foregoing, the Company is
specifically authorized to adopt rules and procedures regarding the
conversion of local currency, taxes, withholding procedures and handling of
stock certificates which vary with the customs and requirements of particular
countries. The Company may adopt sub-plans and establish escrow accounts and
trusts as may be appropriate or applicable to particular locations and
countries.

 A-3
 

 

 

23.   No Shareholder Rights.   Neither a
Participant nor any transferee of a Participant shall have any rights as a
shareholder of the Company with respect to any Shares underlying any Award
until the date of issuance of a share certificate to a Participant or a transferee
of a Participant for such Shares in accordance with the Company’s governing
instruments and Applicable Law. Prior to the issuance of Shares pursuant to an
Award, a Participant shall not have the right to vote or to receive dividends
or any other rights as a shareholder with respect to the Shares underlying the
Award, notwithstanding its exercise in the case of Options and SARs. No
adjustment will be made for a dividend or other right that is determined based
on a record date prior to the date the stock certificate is issued, except as
otherwise specifically provided for in this Plan.

24.   No Employment Rights.   The
Plan shall not confer upon any Participant any right to continue an employment,
service or consulting relationship with the Company, nor shall it affect in any
way a Participant’s right or the Company’s right to terminate the Participant’s
employment, service, or consulting relationship at any time, with or without
Cause.

25.   Termination, Rescission
and Recapture.

(a)    Each Award
under the Plan is intended to align the Participant’s long-term interest with
those of the Company. If the Participant engages in certain activities
discussed below, either during employment or after employment with the Company
terminates for any reason, the Participant is acting contrary to the long-term
interests of the Company. Accordingly, except as otherwise expressly provided
in the Award Agreement, the Company may terminate any outstanding, unexercised,
unexpired, unpaid, or deferred Awards (“Termination”), rescind any exercise,
payment or delivery pursuant to the Award (“Rescission”), or recapture any
Common Stock (whether restricted or unrestricted) or proceeds from the
Participant’s sale of Shares issued pursuant to the Award (“Recapture”), if the
Participant does not comply with the conditions of subsections (b) and (c) hereof
(collectively, the “Conditions”).

(b)    A
Participant shall not, without the Company’s prior written authorization,
disclose to anyone outside the Company, or use in other than the Company’s
business, any proprietary or confidential information or material, as those or
other similar terms are used in any applicable patent, confidentiality,
inventions, secrecy, or other agreement between the Participant and the Company
with regard to any such proprietary or confidential information or material.

(c)    Pursuant to any agreement between the Participant and the
Company with regard to intellectual property (including but not limited to
patents, trademarks, copyrights, trade secrets, inventions, developments,
improvements, proprietary information, confidential business and personnel
information), a Participant shall promptly disclose and assign to the Company or its designee all right, title, and
interest in such intellectual property, and shall take all reasonable steps
necessary to enable the Company to secure all right, title and interest in such
intellectual property in the United States and in any foreign country.

(d)    Upon
exercise, payment, or delivery of cash or Common Stock pursuant to an Award,
the Participant shall certify on a form acceptable to the Company that he or
she is in compliance with the terms and conditions of the Plan and, if a
severance of Continuous Service has occurred for any reason, shall state the
name and address of the Participant’s then-current employer or any entity for
which the Participant performs business services and the Participant’s title,
and shall identify any organization or business in which the Participant owns a
greater-than-five-percent equity interest.

(e)    If the
Company determines, in its sole and absolute discretion, that (i) a
Participant has violated any of the Conditions or (ii) during his or her
Continuous Service, or within one year after its termination for any reason, a
Participant (a) has rendered services to or otherwise directly or
indirectly engaged in or assisted, any organization or business that, in the
judgment of the Company in its sole and absolute discretion, is or is working
to become competitive with the Company; (b) has solicited any
non-administrative employee of the Company to terminate employment with the
Company; or (c) has engaged in activities which are materially prejudicial
to or in conflict with the interests of the Company, including any breaches of
fiduciary duty or the duty of loyalty, then the Company may, in its sole and
absolute discretion, impose a Termination, Rescission, and/or Recapture with
respect to any or all of the Participant’s relevant Awards, Shares, and the
proceeds thereof.

 A-4
 

 

 

(f)     Within
ten days after receiving notice from the
Company of any such activity described in 25 (e) above, the
Participant shall deliver to the
Company the Shares acquired pursuant to the Award, or, if Participant
has sold the Shares, the gain realized, or payment received as a result of the
rescinded exercise, payment, or delivery; provided, that if the Participant
returns Shares that the Participant purchased pursuant to the exercise of an
Option (or the gains realized from the sale of such Common Stock), the Company shall promptly refund the
exercise price, without earnings, that the Participant paid for the Shares. Any
payment by the Participant to the
Company pursuant to this Section 21 shall be made either in cash or
by returning to the Company the
number of Shares that the Participant received in connection with the rescinded
exercise, payment, or delivery. It shall not be a basis for Termination,
Rescission or Recapture if after termination of a Participant’s Continuous
Service, the Participant purchases, as an investment or otherwise, stock or
other securities of such an organization or business, so long as (i) such
stock or other securities are listed upon a recognized securities exchange or
traded over-the-counter, and (ii) such investment does not represent
more than a five percent (5%) equity interest in the organization or business.

(g)    Notwithstanding
the foregoing provisions of this Section, the Company has sole and absolute
discretion not to require Termination, Rescission and/or Recapture, and its
determination not to require Termination, Rescission and/or Recapture with
respect to any particular act by a particular Participant or Award shall not in
any way reduce or eliminate the Company’s authority to require Termination,
Rescission and/or Recapture with respect to any other act or Participant or
Award. Nothing in this Section shall be construed to impose obligations on
the Participant to refrain from engaging in lawful competition with the Company
after the termination of employment that does not violate subsections (b) or
(c) of this Section, other than any obligations that are part of any
separate agreement between the Company and the Participant or that arise under
applicable law.

(h)    All
administrative and discretionary authority given to the Company under this Section shall
be exercised by the most senior human resources executive of the Company or
such other person or committee (including without limitation the Committee) as
the Committee may designate from time to time.

(i)     Notwithstanding
any provision of this Section, if any provision of this Section is
determined to be unenforceable or invalid under any applicable law, such
provision will be applied to the maximum extent permitted by applicable law,
and shall automatically be deemed amended in a manner consistent with its
objectives to the extent necessary to conform to any limitations required under
applicable law. Furthermore, if any provision of this Section is illegal
under any applicable law, such provision shall be null and void to the extent
necessary to comply with applicable law.

Notwithstanding the foregoing, but subject to any
contrary terms set forth in any Award Agreement, this Section shall not be
applicable: (i) to any Participant who is not, on the Award Date, an
Employee of the Company or its Affiliates; and (ii) to any Participant
from and after his or her termination of Continuous Service after a Change in
Control.

 A-5

 

SRS LABS, INC.

2006 STOCK
INCENTIVE PLAN

Appendix A:
Definitions

As used in the Plan, the following definitions shall
apply:

“Affiliate” means, with respect to any
Person (as defined below), any other Person that directly or indirectly
controls or is controlled by or under common control with such Person. For the
purposes of this definition, “control,” when used with respect to any Person,
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person or the power to elect
directors, whether through the ownership of voting securities, by contract or
otherwise; and the terms “affiliated,” “controlling” and “controlled” have
meanings correlative to the foregoing.

“Applicable Law” means the legal
requirements relating to the administration of options and share-based
plans under applicable U.S. federal and state laws, the Code, any applicable
stock exchange or automated quotation system rules or regulations (to the
extent that the Committee determines in its discretion that compliance with
such rules or regulations), and the applicable laws of any other country
or jurisdiction where Awards are granted, as such laws, rules, regulations and
requirements shall be in place from time to time.

“Award” means any award made pursuant to
the Plan, including awards made in the form of an Option, an SAR, a Restricted
Share, a Restricted Share Unit, an Unrestricted Share, a Deferred Share Unit,
and a Performance Award, or any combination thereof, whether alternative or
cumulative, authorized by and granted under this Plan.

“Award Agreement” means any written
document setting forth the terms of an Award that has been authorized by the
Committee. The Committee shall determine the form or forms of documents to be
used, and may change them from time to time for any reason.

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

“Cause” for termination of a Participant’s
Continuous Service will exist if the Participant is terminated from employment
or other service with the Company or an Affiliate for any of the following
reasons: (i) the Participant’s willful failure to substantially perform
his or her duties and responsibilities to the Company or deliberate violation
of a material Company policy; (ii) the Participant’s commission of any
material act or acts of fraud, embezzlement, dishonesty, or other willful
misconduct; (iii) the Participant’s material unauthorized use or
disclosure of any proprietary information or trade secrets of the Company or
any other party to whom the Participant owes an obligation of nondisclosure as
a result of his or her relationship with the Company; or (iv) Participant’s
willful and material breach of any of his or her obligations under any written
agreement or covenant with the Company.

The Committee shall in its discretion determine
whether or not a Participant is being terminated for Cause. The Committee’s
determination shall, unless arbitrary and capricious, be final and binding on
the Participant, the Company, and all other affected persons. The foregoing
definition does not in any way limit the Company’s ability to terminate a
Participant’s employment or consulting relationship at any time, and the term “Company”
will be interpreted herein to include any Affiliate or successor thereto, if appropriate.

 

 

“Change in Control”
shall mean the occurrence of any of the following events, subject to the Plan
Administrator’s absolute discretion to interpret this definition in a manner
that conforms with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and associated regulations (but
only to the extent such Section 409A rules apply to an Award):

(i)     The
Company is merged, consolidated or reorganized into or with another corporation
or other legal person and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting power of the then
outstanding securities of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock (as that
term is defined in subsection (iii) hereof) of the Company immediately
prior to such transaction;

(ii)    The
Company sells all or substantially all of its assets to any other corporation
or other legal person, less than a majority of the combined voting power of the
then outstanding voting securities of which are held directly or indirectly in
the aggregate by the holders of Voting Stock of the Corporation immediately
prior to such sale;

(iii)   Any
person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), has
become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d
3 or any successor rule or regulation promulgated under the Exchange Act)
of securities representing more than 50% of the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the
election of directors of the Company (“Voting Stock”); or

(iv)   The
Company files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in, or in response to, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
that a Change in Control of the Company has occurred.

Notwithstanding the foregoing provisions of (a) subsections
(iii) or (iv) hereof, a “Change in Control” shall not be deemed to
have occurred for purposes of this Agreement solely because the Company, an
entity in which the Company directly or indirectly beneficially owns 50% or
more of the voting securities of such entity (an “Affiliate”), any Company
sponsored employee stock ownership plan or any other employee benefit plan of
the Company either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D 1, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial ownership by it of shares of
voting securities of the Corporation, whether in excess of 50% or otherwise, or
because the Company reports that a Change in Control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership or (b) Subsection (iii) hereof, a “Change in Control” shall
not be deemed to have occurred for purposes of this Agreement solely because a
person who is a holder of five percent (5%) or more of the Voting Stock and who
also is an officer and director of the Company on the date of this Agreement
acquires more than 50% of the Voting Stock.

Notwithstanding the foregoing provisions of
subsections (i) and (ii) hereof, a “Change in Control” shall not be
deemed to have occurred for purposes of this Agreement solely because the
Company engages in an internal reorganization, which may include a transfer of
assets to one or more Affiliates, provided that such transaction has been
approved by at least two thirds of the Directors of the Company and as a result
of such transaction or transactions, at least 80% of the combined voting power
of the then outstanding securities of the Company or its successor are held in
the aggregate by the holders of Voting Stock immediately prior to such
transactions.

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

“Committee” means one or more committees or
subcommittees of the Board appointed by the Board to administer the Plan in
accordance with Section 4 above. With respect to any decision involving an
Award intended to satisfy the requirements of Section 162(m) of the
Code, the Committee shall consist of two or more Directors of the Company who
are “outside directors” within the meaning of Section 162(m) of the
Code. With respect to any decision relating to a Reporting Person, the
Committee shall consist of two or more Directors who are disinterested within
the meaning of Rule 16b-3.

“Company” means SRS Labs, Inc., a
Delaware corporation; provided, however, that in the event the Company
reincorporates to another jurisdiction, all references to the term “Company”
shall refer to the Company in such new jurisdiction.

 

 

“Consultant” means any person, including an
advisor, who is engaged by the Company or any Affiliate to render services and
is compensated for such services.

“Continuous Service” means the absence of
any interruption or termination of service as an Employee, Director, or
Consultant. Continuous Service shall not be considered interrupted in the case
of: (i) sick leave; (ii) military leave; (iii) any other leave
of absence approved by the Committee, provided that such leave is for a period
of not more than 90 days, unless reemployment upon the expiration of such leave
is guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; (iv) changes in status from
Director to advisory director or emeritus status; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Affiliates or their respective successors. Changes in status between service as
an Employee, Director, and a Consultant will not constitute an interruption of
Continuous Service.

“Deferred Share Units” mean Awards pursuant
to Section 9 of the Plan.

“Director” means a member of the Board, or
a member of the board of directors of an Affiliate.

“Disabled”
means a condition under which a Participant—

(a)    is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or

(b)    is, by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, received income replacement benefits for a period
of not less than 3 months under an accident or health plan covering employees
of the Company.

“Eligible Person” means any Consultant,
Director or Employee and includes non-Employees to whom an offer of employment
has been or is being extended.

“Employee” means any person whom the
Company or any Affiliate classifies as an employee (including an officer) for
employment tax purposes, whether or not that classification is correct. The
payment by the Company of a director’s fee to a Director shall not be
sufficient to constitute “employment” of such Director by the Company.

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

“Fair Market Value” means, as of any date
(the “Determination Date”) means: (i) the closing price of a Share on the
New York Stock Exchange or the American Stock Exchange (collectively, the “Exchange”),
on the Determination Date, or, if shares were not traded on the Determination
Date, then on the nearest preceding trading day during which a sale occurred;
or (ii) if such stock is not traded on the Exchange but is quoted on
NASDAQ or a successor quotation system, (A) the last sales price (if the
stock is then listed as a National Market Issue under The Nasdaq National
Market System) or (B) the mean between the closing representative bid and
asked prices (in all other cases) for the stock on the Determination Date as
reported by NASDAQ or such successor quotation system; or (iii) if such
stock is not traded on the Exchange or quoted on NASDAQ but is otherwise traded
in the over-the-counter, the mean between the representative bid and asked
prices on the Determination Date; or (iv) if subsections (i)-(iii) do
not apply, the fair market value established in good faith by the Board.

“Grant Date” has the meaning set forth in Section 14
of the Plan.

“Incentive Share Option or ISO” hereinafter
means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code, as designated in the applicable Award Agreement.

“Involuntary Termination” means termination
of a Participant’s Continuous Service under the following circumstances
occurring on or after a Change in Control: (i) termination without Cause
by the Company or an Affiliate or successor thereto, as appropriate; or (ii) voluntary
termination by the Participant within 60 days following (A) a material
reduction in the Participant’s job responsibilities, provided that neither a
mere change in title alone nor reassignment to a substantially similar position
shall constitute a material reduction in job responsibilities; (B) an
involuntary relocation of the Participant’s 

 

 

work site to a facility or location more than 50 miles
from the Participant’s principal work site at the time of the Change in
Control; or (C) a material reduction in Participant’s total compensation
other than as part of an reduction by the same percentage amount in the
compensation of all other similarly-situated Employees, Directors or
Consultants.

“Non-ISO” means an Option not intended to
qualify as an ISO, as designated in the applicable Award Agreement.

“Option” means any stock option granted
pursuant to Section 6 of the Plan.

“Participant” means any holder of one or
more Awards, or the Shares issuable or issued upon exercise of such Awards,
under the Plan.

“Performance Awards” mean Performance Units and
Performance Compensation Awards granted pursuant to Section 10.

“Performance Compensation
Awards” mean
Awards granted pursuant to Section 10(b) of the Plan.

“Performance Unit” means Awards granted
pursuant to Section 10(a) of the Plan which may be paid in cash, in
Shares, or such combination of cash and Shares as the Committee in its sole
discretion shall determine.

“Person” means any natural person,
association, trust, business trust, cooperative, corporation, general
partnership, joint venture, joint-stock company, limited partnership, limited
liability company, real estate investment trust, regulatory body, governmental
agency or instrumentality, unincorporated organization or organizational
entity.

“Plan” means this SRS Labs, Inc.2006
Stock Incentive Plan.

“Reporting Person” means an officer,
Director, or greater than ten percent shareholder of the Company within the
meaning of Rule 16a-2 under the Exchange Act, who is required to file
reports pursuant to Rule 16a-3 under the Exchange Act.

“Restricted Shares” mean Shares subject to
restrictions imposed pursuant to Section 8 of the Plan.

“Restricted Share Units” mean Awards
pursuant to Section 8 of the Plan.

“Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act, as amended from time to time, or any
successor provision.

“SAR” or “Share Appreciation Right” means
Awards granted pursuant to Section 7 of the Plan.

“Share” means a share of common stock of
the Company, par value $0.001, as adjusted in accordance with Section 13
of the Plan.

“Ten Percent Holder” means a person who
owns stock representing more than ten percent (10%) of the combined voting
power of all classes of stock of the Company or any Affiliate.

“Unrestricted Shares” mean Shares awarded
pursuant to Section 8 of the Plan.

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