Document:

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                                                                    Exhibit 10.2

                                                           AGREEMENT NO. [XXXXX]

                            SMITH INTERNATIONAL, INC.
                PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

     THIS PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT (this "AGREEMENT")
is made and entered into by and between Smith International, Inc., a Delaware
corporation (the "COMPANY") and [EMPLOYEE NAME], an individual and employee of
the Company ("Grantee"), on the [____] day of ___________, 2005 (the "GRANT
DATE"), subject to the terms and provisions of the Smith International, Inc.,
1989 Long-Term Incentive Compensation Plan, as amended and restated effective
January 1, 2005 (the "PLAN"). The Plan is hereby incorporated herein in its
entirety by this reference. Capitalized terms not otherwise defined in this
Agreement shall have the meaning given to such terms in the Plan.

     WHEREAS, Grantee is an employee of the Company, and in connection
therewith, the Company desires to grant to Grantee performance-based restricted
stock units, subject to the terms and conditions of this Agreement and the Plan,
with a view to increasing Grantee's interest in the Company's success and
growth; and

     WHEREAS, Grantee desires to be the holder of such units subject to the
terms and conditions of this Agreement;

     NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

     1. GRANT OF TARGET UNITS. Subject to the terms and conditions of this
Agreement and the Plan, the Company hereby grants to Grantee
[___________________ (_____)] Target Units ("TARGET UNITS"). Subject to Section
3 hereof, each Target Unit shall initially represent one share of the Company's
Common Stock ("SHARE"), $1.00 par value. Each Target Unit represents an
unsecured promise of the Company to deliver Shares to the Grantee pursuant to
the terms and conditions of the Plan and this Agreement. As a holder of Target
Units, the Grantee has only the rights of a general unsecured creditor of the
Company.

     2. TRANSFER RESTRICTIONS. Grantee shall not sell, assign, transfer,
exchange, pledge, encumber, gift, devise, hypothecate or otherwise dispose of
(collectively, "TRANSFER") any Target Units granted hereunder. Any purported
Transfer of Target Units in breach of this Agreement shall be void and
ineffective, and shall not operate to Transfer any interest or title in the
purported transferee.
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     3. PERFORMANCE CRITERIA AND STOCK AWARDS. Upon satisfaction of the
Performance Criteria as established by the Compensation and Benefits Committee
of the Company's Board of Directors (the "COMMITTEE"), the Company shall
determine the number of shares payable to Grantee as provided under this
Agreement, subject to certification by the Committee that the specified
Performance Criteria has been satisfied. The maximum number of Shares of the
Company's Common Stock that will be awarded under this Agreement is determined
as a percentage of Employee's Target Units, such percentage based on the
Company's fiscal year 2005 return on equity, as calculated by reference to the
Company's audited financial statements, in such manner as established by the
Committee.

     4. VESTING AND PAYMENT OF TARGET UNITS.

          (a) Subject to Section 5 hereof, the Target Units granted hereunder
shall vest and become payable to Grantee as of the applicable "VESTING DATE," as
set out below:

<TABLE>
<CAPTION>
   VESTING DATE     PERCENTAGE OF TARGET UNITS VESTED
   ------------     ---------------------------------
<S>                 <C>
December 31, 2005                33 1/3%
December 1, 2006                 33 1/3%
December 1, 2007                 33 1/3%
                                 ------
   TOTAL                           100%
</TABLE>

          (b) Settlement of Target Units. Within two and one-half (2 1/2) months
after the end of the calendar year in which Target Units become vested pursuant
to Section 4(a) above, the Company shall award to Grantee the number of Shares
determined in accordance with Section 3, if any, provided Grantee has not
terminated employment prior to the applicable Vesting Date (unless otherwise
provided under Section 5 hereof). All Shares delivered to or on behalf of
Grantee in exchange for vested Target Units shall be subject to any further
vesting, transfer or other restrictions as may be required by securities law or
other applicable law as determined by the Company.

          (c) Dividends, Splits and Voting Rights. If the Company (i) declares a
stock dividend or makes a distribution on Common Stock in Shares, (ii)
subdivides or reclassifies outstanding Shares into a greater number of Shares,
or (iii) combines or reclassifies outstanding Shares into a smaller number of
Shares, then the number of Target Units granted under this Agreement shall be
proportionately increased or reduced, as applicable, so as to prevent the
enlargement or dilution of Grantee's rights and duties hereunder. The
determination of the Committee regarding such adjustments shall be binding.

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     5. FORFEITURE.

          (a) Termination Due to Death or Disability. If Grantee's employment
with the Company is terminated due to death or Disability of the Grantee, then,
in either such event, Grantee shall not be considered to have incurred a
termination of employment for purposes of this Agreement, and the settlement of
vested Target Units shall be made in accordance with Section 4 hereof, but only
through the next Vesting Date.

          For purposes of this Section 5(a), "Disability" means, as determined
by the Committee in its discretion exercised in good faith, a physical or mental
condition of the Grantee that would entitle Grantee to payment of disability
income payments under the Company's long-term disability insurance policy or
plan for employees, as then effective, if any; or in the event that the Grantee
is not covered, for whatever reason, under the Company's long-term disability
insurance policy or plan, "Disability" means a permanent and total disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. A
determination of Disability may be made by a physician selected or approved by
the Committee and, in this respect, the Grantee must submit to any reasonable
examination(s) required by such physician upon request in order to render an
opinion regarding whether there is a Disability.

          (b) Termination Other than Death or Disability. If Grantee's
employment with the Company is voluntarily or involuntarily terminated by the
Company or Grantee for any reason other than due to death or Disability, then
Grantee shall immediately forfeit all Target Units which are not already vested
as of such date. Upon the forfeiture of any Target Units hereunder, the Grantee
shall cease to have any rights in connection with such Target Units as of the
date of such forfeiture. A transfer of employment by the Grantee, without an
interruption of employment service, between or among the Company and any parent
or subsidiary of the Company, shall not be considered a termination of
employment for purposes of this Agreement.

     6. GRANTEE'S REPRESENTATIONS. Notwithstanding any provision hereof to the
contrary, the Grantee hereby agrees and represents that Grantee will not acquire
any Shares, and that the Company will not be obligated to issue any Shares to
the Grantee hereunder, if the issuance of such Shares constitutes a violation by
the Grantee or the Company of any law or regulation of any governmental
authority. Any determination in this regard that is made by the Committee, in
good faith, shall be final and binding. The rights and obligations of the
Company and the Grantee are subject to all applicable laws and regulations.

     7. TAX WITHHOLDING. To the extent that the receipt of Shares hereunder
results in compensation income to Grantee for federal, state or local income tax
purposes, Grantee shall deliver to Company at such time the sum that the Company
requires to meet its tax withholding obligations under applicable law or
regulation, and, if Grantee fails to do so, Company is authorized to (a)
withhold from any cash or other remuneration (including any Shares), then or
thereafter payable to Grantee, any tax required to be withheld; or (b) sell such
number of Shares before their transfer to Grantee as is appropriate to satisfy
such tax withholding requirements, before transferring the resulting net number
of Shares to Grantee in satisfaction of its obligations under this Agreement.

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     8. PAR VALUE PAID CONSIDERATION FOR SHARES. As purchase consideration for
the issuance of any Shares after they become vested, Grantee shall pay to
Company an amount equal to the par value ($1.00) of each vested Share, unless
otherwise determined at the discretion of the Company. If the Grantee fails to
do so, then the Company may withhold such amount due in the same manner as for
tax withholding pursuant to Section 7 before the Shares are transferred to
Grantee.

     9. MISCELLANEOUS.

          (a) No Fractional Shares. All provisions of this Agreement concern
whole Shares. If the application of any provision hereunder would yield a
fractional Share, such fractional Share shall be rounded down to the next whole
Share if it is less than 0.5 and rounded up to the next whole Share if it is 0.5
or more.

          (b) Not an Employment Agreement. This Agreement is not an employment
agreement, and no provision of this Agreement shall be construed or interpreted
to create any employment relationship between Grantee and the Company for any
time period. The employment of Grantee with the Company shall be subject to
termination to the same extent as if this Agreement had not been executed.

          (c) Dispute Resolution. Any dispute or controversy arising out of or
relating to this Agreement, or any breach hereof, shall be resolved by binding
arbitration in accordance with (i) the Commercial Arbitration Rules of the
American Arbitration Association before a single arbitrator unless otherwise
mutually agreed by the parties and (ii) the Federal Arbitration Act. Judgment on
any award rendered by the arbitrator may be entered in any court of competent
jurisdiction. The venue for any arbitration proceeding shall be in Harris or
Montgomery County, Texas, except if otherwise mutually agreed by the parties.
All costs and expenses, including attorneys' fees, relating to the resolution of
any such dispute shall be borne by the party incurring such costs and expenses.

          (d) Notices. Any notice, instruction, authorization, request or demand
required hereunder shall be in writing, and shall be delivered either by
personal delivery, by telegram, telex, telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by courier or
delivery service, addressed to the Company at its then current main corporate
address, and to Grantee at his address indicated on the Company's records, or at
such other address and number as a party has previously designated by written
notice given to the other party in the manner hereinabove set forth. Notices
shall be deemed given when received, if sent by facsimile means (confirmation of
such receipt by confirmed facsimile transmission being deemed receipt of
communications sent by facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery service, or sent by
certified or registered mail, return receipt requested.

          (e) Amendment, Termination and Waiver. This Agreement may be amended,
modified, terminated or superseded only by written instrument executed by or on
behalf of the Company and by Grantee. Any waiver of the terms or conditions
hereof shall be made only by a written instrument executed and delivered by the
party waiving compliance. Any waiver granted

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by the Company shall be effective only if executed and delivered by a duly
authorized executive officer of the Company other than Grantee. The failure of
any party at any time or times to require performance of any provisions hereof
shall in no manner affect the right to enforce the same. No waiver by any party
of any term or condition herein, or the breach thereof, in one or more instances
shall be deemed to be, or construed as, a further or continuing waiver of any
such condition or breach or a waiver of any other condition or the breach of any
other term or condition.

          (f) Governing Law and Severability. This Agreement shall be governed
by the internal laws, and not the laws of conflict, of the State of Texas. The
invalidity of any provision of this Agreement shall not affect any other
provision of this Agreement, which shall remain in full force and effect.

          (g) Successors and Assigns. This Agreement shall bind, be enforceable
by, and inure to the benefit of, the Company and its successors and assigns, and
Grantee and Grantee's permitted assigns under the Plan in the event of death or
Disability.

                            [Signature page follows.]

                                        5
<PAGE>
     IN WITNESS WHEREOF, this Restricted Stock Unit Agreement is granted and
executed as of the date first written above.

                                        SMITH INTERNATIONAL, INC.

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        GRANTEE:

                                        [EMPLOYEE NAME]

                                        ----------------------------------------
                                        Signature

                                        ----------------------------------------
                                        Print Name

                                        6exv10w1

 

Exhibit 10.1

ORBITAL SCIENCES CORPORATION

2005 STOCK INCENTIVE PLAN

(as amended through April 28, 2005)

     Orbital Sciences Corporation, a Delaware corporation (the “Company”), sets forth herein the
terms of its 2005 Stock Incentive Plan (the “Plan”), as follows:

1. PURPOSE

     The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability
to attract and retain highly qualified officers, directors, key employees, and other persons, and
to motivate such officers, directors, key employees, and other persons to serve the Company and its
Affiliates and to expend maximum effort to improve the business results and earnings of the
Company, by providing to such persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the Plan provides for
the grant of stock options, stock appreciation rights, restricted stock, stock units, unrestricted
stock, dividend equivalent rights and cash awards. Any of these awards may, but need not, be made
as performance incentives to reward attainment of annual or long-term performance goals in
accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock
options or incentive stock options, as provided herein.

2. DEFINITIONS

     For purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:

     2.1 “Affiliate” means, with respect to the Company, any company or other trade or business
that controls, is controlled by or is under common control with the Company within the meaning of
Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

     2.2 “Annual Incentive Award” means an Award made subject to attainment of performance goals
(as described in Section 13) over a performance period of up to one (1) year (the fiscal year,
unless otherwise specified by the Committee).

     2.3 “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock,
Unrestricted Stock, Stock Unit, Dividend Equivalent Rights, or cash award under the Plan.

     2.4 “Award Agreement” means the written agreement between the Company and a Grantee that
evidences and sets out the terms and conditions of an Award.

     2.5 “Benefit Arrangement” shall have the meaning set forth in Section 14 hereof.

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

 

 

     2.7 “Cause” means, as determined by the Board and unless otherwise provided in an applicable
agreement with the Company or an Affiliate, (i) incompetence or willful misconduct in connection
with the performance of duties; (ii) conduct casting such discredit on the Company as in the
opinion of the Board justifies termination or forfeiture of any Award, or (iii) material breach of
any term of any employment, consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

     2.8 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

     2.9 “Committee” means a committee of, and designated from time to time by resolution of, the
Board, which shall be constituted as provided in Section 3.2. Commencing on the Effective Date and
until such time as the Board shall determine otherwise, the Committee shall be the Human Resources
and Compensation Committee of the Board (or any successor committee thereto with like
responsibilities).

     2.10 “Company” means Orbital Sciences Corporation.

     2.11 “Corporate Transaction” means (i) the dissolution or liquidation of the Company or a
merger, consolidation, or reorganization of the Company with one or more other entities in which
the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the
Company to another person or entity, or (iii) any transaction (including without limitation a
merger or reorganization in which the Company is the surviving entity) which results in any person
or entity (other than persons who are stockholders or Affiliates immediately prior to the
transaction) owning a majority or more of the combined voting power of all classes of stock of the
Company.

     2.12 “Covered Employee” means a Grantee who is a Covered Employee within the meaning of
Section 162(m)(3) of the Code.

     2.13 “Disability” means the Grantee is unable to perform each of the essential duties of such
Grantee’s position by reason of a medically determinable physical or mental impairment which is
potentially permanent in character or which can be expected to last for a continuous period of not
less than twelve (12) months; provided, however, that, with respect to rules regarding expiration
of an Incentive Stock Option following termination of the Grantee’s Service, Disability shall mean
the Grantee is unable to engage in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12 months.

     2.14 “Dividend Equivalent Right” means a right, granted to a Grantee under Section 12 hereof,
to receive cash, Stock, other Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Stock, or other periodic payments.

 

 

     2.15 “Effective Date” means March 9, 2005, the date the Plan is approved by the Board.

     2.16 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended.

     2.17 “Executive Officer” means individuals designated by the Board of Directors as “executive
officers” under Rule 3b-7 of the Exchange Act, and/or as Section 16 “officers” under such Act.

     2.18 “Fair Market Value” means the value of a share of Stock, determined as follows: if on
the Grant Date or other determination date the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on The Nasdaq Stock Market, Inc. or is publicly
traded on an established securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (if there is more than one such
exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date
or such other determination date (or if there is no such reported closing price, the Fair Market
Value shall be the mean between the highest bid and lowest asked prices or between the high and low
sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the
next preceding day on which any sale shall have been reported. If the Stock is not listed on such
an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value
of the Stock as determined by the Board in good faith.

     2.19 “Family Member” means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive
relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in which any one or more of these persons have more than fifty percent (50%) of
the beneficial interest, a foundation in which any one or more of these persons (or the Grantee)
control the management of assets, and any other entity in which one or more of these persons (or
the Grantee) own more than fifty percent (50%) of the voting interests.

     2.20 “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of
which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes
eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified
by the Board.

     2.21 “Grantee” means a person who receives or holds an Award under the Plan.

     2.22 “Incentive Stock Option” means an “incentive stock option” within the meaning of Section
422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended
from time to time.

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

     2.24 “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

     2.25 “Option Price” means the exercise price for each share of Stock subject to an Option.

     2.26 “Other Agreement” shall have the meaning set forth in Section 14 hereof.

 

 

     2.27 “Outside Director” means a member of the Board who is not an officer or employee of the
Company.

     2.28 “Performance Award” means an Award made subject to the attainment of performance goals
(as described in Section 13) over a performance period of up to ten (10) years.

     2.29 “Plan” means this Orbital Sciences Corporation 2005 Stock Incentive Plan.

     2.30 “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of
Restricted Stock or Unrestricted Stock.

     2.31 “Reporting Person” means a person who is required to file reports under Section 16(a) of
the Exchange Act.

     2.32 “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 9
hereof.

     2.33 “SAR” means a right granted to a Grantee under Section 8 hereof.

     2.34 “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee
under Section 8 hereof.

     2.35 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter
amended.

     2.36 “Service” means service as a Service Provider to the Company or an Affiliate. Unless
otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall
not result in interrupted or terminated Service, so long as such Grantee continues to be a Service
Provider to the Company or an Affiliate. Subject to the preceding sentence, whether a termination
of Service shall have occurred for purposes of the Plan shall be determined by the Board, which
determination shall be final, binding and conclusive.

     2.37 “Service Provider” means an employee, officer or director of the Company or an Affiliate,
or a consultant or adviser currently providing services to the Company or an Affiliate.

     2.38 “Stock” means the common stock, par value $.01 per share, of the Company.

     2.39 “Stock Appreciation Right” means a right granted to a Grantee under Section 8 hereof.

     2.40 “Stock Unit” means a bookkeeping entry representing the equivalent of shares of Stock,
awarded to a Grantee pursuant to Section 9 hereof.

     2.41 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code.

     2.42 “Termination Date” means the date upon which an Option shall terminate or expire, as set
forth in Section 7.3 hereof.

 

 

     2.43 “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the
total combined voting power of all classes of outstanding stock of the Company, its parent or any
of its Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.

     2.44 “Unrestricted Stock” means an Award pursuant to Section 10 hereof.

3. ADMINISTRATION OF THE PLAN

     3.1. Board

     The Board shall have such powers and authorities related to the administration of the Plan as
are consistent with the Company’s certificate of incorporation and by-laws and applicable law. The
Board shall have full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Award or any Award Agreement, and shall have full
power and authority to take all such other actions and make all such other determinations not
inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All
such actions and determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in writing in
accordance with the Company’s certificate of incorporation and by-laws and applicable law. The
interpretation and construction by the Board of any provision of the Plan, any Award or any Award
Agreement shall be final, binding and conclusive.

     3.2. Committee

     The Board from time to time may delegate to the Committee such powers and authorities related
to the administration and implementation of the Plan, as set forth in Section 3.1 above and other
applicable provisions, as the Board shall determine, consistent with the certificate of
incorporation and by-laws of the Company and applicable law.

     The Board may also appoint one or more separate committees of the Board, each composed of one
or more directors of the Company who need not be Outside Directors, who may administer the Plan
with respect to employees or other Service Providers who are not Executive Officers or directors of
the Company, may grant Awards under the Plan to such employees or other Service Providers, and may
determine all terms of such Awards.

     In the event that the Plan, any Award or any Award Agreement entered into hereunder provides
for any action to be taken by or determination to be made by the Board, such action may be taken or
such determination may be made by the Committee if the power and authority to do so has been
delegated to the Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the Committee shall be
final, binding and conclusive. To the extent permitted by law, the Committee may delegate its
authority under the Plan to a member of the Board.

     3.3. Terms of Awards

     Subject to the other terms and conditions of the Plan, the Board shall have full and final
authority to:

 

 

          (i) designate Grantees;

          (ii) determine the type or types of Awards to be made to a Grantee;

          (iii) determine the number of shares of Stock to be subject to an Award;

          (iv) establish the terms and conditions of each Award (including, but not limited to, the
exercise price of any Option, the nature and duration of any restriction or condition (or provision
for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the
shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options);

          (v) prescribe the form of each Award Agreement evidencing an Award; and

          (vi) amend, modify, or supplement the terms of any outstanding Award. Such authority
specifically includes the authority, in order to effectuate the purposes of the Plan but without
amending the Plan, to modify Awards to eligible individuals who are foreign nationals or are
individuals who are employed outside the United States to recognize differences in local law, tax
policy, or custom. Notwithstanding the foregoing, no amendment, modification or supplement of any
Award shall, without the consent of the Grantee, impair the Grantee’s rights under such Award.

     The Company may retain the right in an Award Agreement to cause a forfeiture of the gain
realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in
conflict with any employment agreement, non-competition agreement, any agreement prohibiting
solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality
obligation with respect to the Company or any Affiliate thereof or otherwise in competition with
the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to
the Grantee. Furthermore, the Company may annul an Award if the Grantee is an employee of the
Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award
Agreement or the Plan, as applicable. The grant of any Award shall be contingent upon the Grantee
executing the appropriate Award Agreement.

     Notwithstanding the foregoing, no amendment or modification may be made to an outstanding
Option or SAR which reduces the Option Price or SAR Exercise Price, either by lowering the Option
Price or SAR Exercise Price or by canceling the outstanding Option or SAR and granting a
replacement Option or SAR with a lower exercise price without the approval of the stockholders of
the Company, provided, that, appropriate adjustments may be made to outstanding Options and SARs
pursuant to Section 16.

     3.4. Deferral Arrangement

     The Board may permit or require the deferral of any award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish, which may include provisions
for the payment or crediting of interest or dividend equivalents, including converting such credits
into deferred Stock equivalents and restricting deferrals to comply with hardship distribution
rules affecting 401(k) plans.

 

 

     3.5. No Liability

     No member of the Board or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Award or Award Agreement.

     3.6. Book Entry

     Notwithstanding any other provision of this Plan to the contrary, the Company may elect to
satisfy any requirement under this Plan for the delivery of stock certificates through the use of
book-entry.

4. STOCK SUBJECT TO THE PLAN

     Subject to adjustment as provided in Section 16 hereof, the number of shares of Stock
available for issuance under the Plan shall be 2,500,000. Stock issued or to be issued under the
Plan shall be authorized but unissued shares; or, to the extent permitted by applicable law, issued
shares that have been reacquired by the Company. If any shares covered by an Award are not
purchased or are forfeited, or if an Award otherwise terminates without delivery of any Stock
subject thereto, then the number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Award shall, to the extent of any such forfeiture or
termination, again be available for making Awards under the Plan.

     The Board shall have the right to substitute or assume Awards in connection with mergers,
reorganizations, separations, or other transactions to which Section 424(a) of the Code applies,
provided such substitutions and assumptions are permitted by Section 424 of the Code and the
regulations promulgated thereunder. The number of shares of Stock reserved pursuant to Section 4
may be increased by the corresponding number of Awards assumed and, in the case of a substitution,
by the net increase in the number of shares of Stock subject to Awards before and after the
substitution.

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

     5.1. Effective Date

     The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the
Company’s stockholders within one (1) year of the Effective Date. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made under the Plan on or after the
Effective Date shall be fully effective as if the stockholders of the Company had approved the Plan
on the Effective Date. If the stockholders fail to approve the Plan within one (1) year after the
Effective Date, any Awards made hereunder shall be null and void and of no effect.

     5.2. Term

     The Plan shall terminate automatically ten (10) years after its adoption by the Board and may
be terminated on any earlier date as provided in Section 5.3.

 

 

     5.3. Amendment and Termination of the Plan

     The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any shares of Stock as to which Awards have not been made. An amendment shall be contingent on
approval of the Company’s stockholders to the extent stated by the Board, required by applicable
law or required by applicable stock exchange listing requirements. No Awards shall be made after
termination of the Plan. No amendment, suspension, or termination of the Plan shall, without the
consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the
Plan.

6. AWARD ELIGIBILITY AND LIMITATIONS

     6.1. Service Providers and Other Persons

     Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider to
the Company or of any Affiliate, including any Service Provider who is an officer or director of
the Company, or of any Affiliate, as the Board shall determine and designate from time to time,
(ii) any Outside Director, and (iii) any other individual whose participation in the Plan is
determined to be in the best interests of the Company by the Board.

     6.2. Successive Awards

     An eligible person may receive more than one Award, subject to such restrictions as are
provided herein.

     6.3. Limitation on Shares of Stock Subject to Awards and Cash Awards

     During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act:

          (i) the maximum number of shares of Stock subject to Options or SARs that can be awarded under
the Plan to any person eligible for an Award under Section 6 hereof is 350,000 per calendar year;

          (ii) the maximum number of shares that can be awarded under the Plan, other than pursuant to
an Option or SARs, to any person eligible for an Award under Section 6 hereof is 200,000 per
calendar year; and

          (iii) the maximum amount that may be earned as an Annual Incentive Award or other cash Award
in any calendar year by any one Grantee shall be $2,500,000 and the maximum amount that may be
earned as a Performance Award or other cash Award in respect of a performance period by any one
Grantee shall be $2,500,000.

     The preceding limitations in this Section 6.3 are subject to adjustment as provided in Section
16 hereof.

 

 

     6.4. Award Agreement

     Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form
or forms as the Board shall from time to time determine. Award Agreements granted from time to
time or at the same time need not contain similar provisions but shall be consistent with the terms
of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be
Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification
such options shall be deemed Non-qualified Stock Options.

7. TERMS AND CONDITIONS OF OPTIONS

     7.1. Option Price

     The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement
evidencing such Option. The Option Price of each Option shall be at least the Fair Market Value on
the Grant Date of a share of Stock; provided, however, that in the event that a
Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall be not less than one hundred and ten percent (110%)
of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the Option Price
of any Option be less than the par value of a share of Stock.

     7.2. Vesting

     Subject to Sections 7.3 and 16.3 hereof, each Option granted under the Plan shall become
exercisable at such times and under such conditions as shall be determined by the Board and stated
in the Award Agreement. For purposes of this Section 7.2, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest whole number. No Option shall be
exercisable in whole or in part prior to the date the Plan is approved by the Stockholders of the
Company as provided in Section 5.1 hereof.

     7.3. Term

     Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock
thereunder shall cease, upon the expiration of ten (10) years from the date such Option is granted,
or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be
fixed by the Board and stated in the Award Agreement relating to such Option (the “Termination
Date”); provided, however, that in the event that the Grantee is a Ten Percent
Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option
shall not be exercisable after the expiration of five (5) years from its Grant Date.

     7.4. Termination of Service

     Each Award Agreement shall set forth the extent to which the Grantee shall have the right to
exercise the Option following termination of the Grantee’s Service. Such provisions shall be
determined in the sole discretion of the Board, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

 

 

     7.5. Limitations on Exercise of Option

     Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, prior to the date the Plan is approved by the stockholders of the Company as
provided herein or after the occurrence of an event referred to in Section 16 hereof which results
in termination of the Option.

     7.6. Method of Exercise

     An Option that is exercisable may be exercised by the Grantee’s delivery to the Company of
written notice of exercise on any business day, at the Company’s principal office, on the form
specified by the Company and in accordance with Section 12 hereof. Such notice shall specify the
number of shares of Stock with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the shares for which the Option is being
exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its
judgment, be required to withhold with respect to an Award.

     7.7. Rights of Holders of Options

     Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising
an Option shall have none of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock or to direct the
voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid
and issued to him. Except as provided in Section 16 hereof, no adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to the date of such
issuance.

     7.8. Delivery of Stock Certificates

     Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.

     7.9. Transferability of Options

     Except as provided in Section 7.10, during the lifetime of a Grantee, only the Grantee (or, in
the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise an Option. Except as provided in Section 7.10, no Option shall be assignable or
transferable by the Grantee to whom it is granted, other than by will or the laws of descent and
distribution.

     7.10. Family Transfers

     If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of an Option which is not an Incentive Stock Option to any Family Member. For the purpose of
this Section 7.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) a transfer to
an entity in which more than fifty percent (50%) of the voting interests are owned by Family
Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under
this Section 7.10, any such Option shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer.

 

 

Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with this Section 7.10 or
by will or the laws of descent and distribution. The events of termination of Service of Section
7.4 hereof shall continue to be applied with respect to the original Grantee, following which the
Option shall be exercisable by the transferee only to the extent, and for the periods specified, in
Section 7.4.

     7.11. Limitations on Incentive Stock Options

     An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates)
does not exceed $100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.

8. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

     8.1. Right to Payment

     A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over
(B) the grant price of the SAR as determined by the Board. The Award Agreement for a SAR shall
specify the grant price of the SAR, which shall be no less than the Fair Market Value of a share of
Stock on the date of grant. SARs may be granted in conjunction with all or part of an Option
granted under the Plan or at any subsequent time during the term of such Option, in conjunction
with all or part of any other Award or without regard to any Option or other Award. All SARs
granted under the Plan shall have such terms and conditions as are necessary to avoid the
imposition of the twenty percent (20%) excise tax under Code Section 409A.

     8.2. Other Terms

     The Board shall determine at the date of grant or thereafter, the time or times at which and
the circumstances under which any SAR may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or times at which
SARs shall cease to be or become exercisable following termination of Service or upon other
conditions, the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be delivered to
Grantees, whether or not any SAR shall be in tandem or in combination with any other Award, and any
other terms and conditions of any SAR.

9. TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

     9.1. Grant of Restricted Stock or Stock Units

     Awards of Restricted Stock or Stock Units may be made for no consideration (other than par
value of the shares which is deemed paid by Services already rendered).

 

 

     9.2. Restrictions

     At the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole
discretion, establish a period of time (a “restricted period”) applicable to such Restricted Stock
or Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a different
restricted period. The Board may, in its sole discretion, at the time a grant of Restricted Stock
or Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the restricted period, including the satisfaction of
corporate or individual performance objectives, which may be applicable to all or any portion of
the Restricted Stock or Stock Units in accordance with Sections 13.1 and 13.2. Notwithstanding
the foregoing, Restricted Stock that vests solely by the passage of time shall not vest in full in
less than three (3) years from the Grant Date. Restricted Stock for which vesting may be
accelerated by achieving performance targets shall not vest in full in less than one (1) year from
the Grant Date. Neither Restricted Stock nor Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the restricted period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to such Restricted
Stock or Stock Units.

     9.3. Restricted Stock Certificates

     The Company shall issue, in the name of each Grantee to whom Restricted Stock has been
granted, stock certificates representing the total number of shares of Restricted Stock granted to
the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an
Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the
Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the
restrictions lapse, or (ii) such certificates shall be delivered to the Grantee, provided,
however, that such certificates shall bear a legend or legends that comply with the
applicable securities laws and regulations and makes appropriate reference to the restrictions
imposed under the Plan and the Award Agreement.

     9.4. Rights of Holders of Restricted Stock

     Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have the right to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee
with respect to Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions applicable to the
original Grant.

     9.5. Rights of Holders of Stock Units

          9.5.1. Voting and Dividend Rights

          Unless the Board otherwise provides in an Award Agreement, holders of Stock Units shall have
no rights as stockholders of the Company. The Board may provide in an Award Agreement evidencing a
grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the
Company’s payment of a cash dividend on its outstanding Stock, a cash payment for each Stock Unit
held equal to the per-share dividend paid on the Stock. Such Award Agreement may also provide that
such cash payment will be deemed reinvested in additional Stock Units at a price per unit equal to
the Fair Market Value of a share of Stock on the date that such dividend is paid.

 

 

          9.5.2. Creditor’s Rights

          A holder of Stock Units shall have no rights other than those of a general creditor of the
Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Award Agreement.

     9.6. Termination of Service

     Unless the Board otherwise provides in an Award Agreement or in writing after the Award
Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Stock or Stock
Units held by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Stock Units, the Grantee shall have no further rights with
respect to such Award, including but not limited to any right to vote Restricted Stock or any right
to receive dividends with respect to shares of Restricted Stock or Stock Units.

     9.7. Purchase of Restricted Stock

     The Grantee shall be required, to the extent required by applicable law, to purchase the
Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if
any, specified in the Award Agreement relating to such Restricted Stock. The Purchase Price shall
be payable in a form described in Section 11 or, in the discretion of the Board, in consideration
for past Services rendered to the Company or an Affiliate.

     9.8. Delivery of Stock

     Upon the expiration or termination of any restricted period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or
Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a
stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee
or the Grantee’s beneficiary or estate, as the case may be.

10. TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS

     The Board may, in its sole discretion, grant (or sell at par value or such other higher
purchase price determined by the Board) an Unrestricted Stock Award to any Grantee pursuant to
which such Grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”)
under the Plan. Unrestricted Stock Awards may be granted or sold as described in the preceding
sentence in lieu of any cash compensation due to such Grantee.

 

 

11. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

     11.1. General Rule

     Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to
the Company.

     11.2. Cashless Exercise

     With respect to an Option only (and not with respect to Restricted Stock), to the extent
permitted by law and to the extent the Award Agreement so provides, payment of the Option Price for
shares
purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a
form acceptable to the Board) of an irrevocable direction to a licensed securities broker
acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds
to the Company in payment of the Option Price and any withholding taxes described in Section 17.3.

     11.3. Other Forms of Payment

     To the extent the Award Agreement so provides, payment of the Option Price for shares
purchased pursuant to exercise of an Option or the Purchase Price for Restricted Stock may be made
in any other form that is consistent with applicable laws, regulations and rules.

12. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

     12.1. Dividend Equivalent Rights

     A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on
cash distributions that would have been paid on the shares of Stock specified in the Dividend
Equivalent Right (or other award to which it relates) if such shares had been issued to and held by
the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee as a component
of another Award or as a freestanding award. The terms and conditions of Dividend Equivalent
Rights shall be specified in the grant. Dividend equivalents credited to the holder of a Dividend
Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of
Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair
Market Value on the date of reinvestment. Dividend Equivalent Rights may be settled in cash or
Stock or a combination thereof, in a single installment or installments, all determined in the sole
discretion of the Board. A Dividend Equivalent Right granted as a component of another Award may
provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right shall
expire or be forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms and conditions
different from such other award.

 

 

     12.2. Termination of Service

     Except as may otherwise be provided by the Board either in the Award Agreement or in writing
after the Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights or
interest equivalents shall automatically terminate upon the Grantee’s termination of Service for
any reason.

13. TERMS AND CONDITIONS OF PERFORMANCE AND ANNUAL INCENTIVE AWARDS

     13.1. Performance Conditions

     The right of a Grantee to exercise or receive a grant or settlement of any Award, and the
timing thereof, may be subject to such performance conditions as may be specified by the Board.
The Board may use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its discretion to reduce
the amounts payable under any Award subject to performance conditions, except as limited under
Section 13.2 hereof in the
case of a Performance Award or Annual Incentive Award intended to qualify under Code Section
162(m). If and to the extent required under Code Section 162(m), any power or authority relating
to a Performance Award or Annual Incentive Award intended to qualify under Code Section 162(m),
shall be exercised by the Committee and not the Board.

     13.2. Performance or Annual Incentive Awards Granted to Designated Covered Employees

     If and to the extent that the Committee determines that a Performance or Annual Incentive
Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered
Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m),
the grant, exercise and/or settlement of such Performance or Annual Incentive Award shall be
contingent upon achievement of pre-established performance goals and other terms set forth in this
Section 13.2.

          13.2.1. Performance Goals Generally

          The performance goals for such Performance or Annual Incentive Awards shall consist of one or
more business criteria and a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section 13.2. Performance goals shall
be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being “substantially uncertain.” The
Committee may determine that such Performance or Annual Incentive Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal or that two (2) or more of
the performance goals must be achieved as a condition to grant, exercise and/or settlement of such
Performance or Annual Incentive Awards. Performance goals may differ for Performance or Annual
Incentive Awards granted to any one Grantee or to different Grantees.

          13.2.2. Business Criteria

          One or more of the following business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company (except with respect to the total

 

 

stockholder return and earnings per share criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance or Annual Incentive Awards: (1) cash flow; (2)
operating income; (3) revenues; (4) backlog; (5) total stockholder return; (6) such total
stockholder return as compared to total return (on a comparable basis) of a publicly available
index such as, but not limited to, the Standard & Poor’s 500 Stock Index; (7) net income; (8)
pretax earnings; (9) earnings before interest expense, taxes, depreciation and amortization; (10)
pretax operating earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (11) operating margin; (12) earnings per share; (13) return on
equity; (14) return on capital; (15) return on investment; (16) working capital and (17) ratio of
debt to stockholders’ equity. Business criteria may be measured on an absolute basis or on a
relative basis (i.e., performance relative to peer companies) and on a GAAP or non-GAAP basis.
Financial criteria may be measured at the operating group and/or on a consolidated basis.

          13.2.3. Timing For Establishing Performance Goals

          Performance goals shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance or Annual Incentive Awards, or at such other date
as may be required or permitted for “performance-based compensation” under Code Section 162(m).

          13.2.4. Settlement of Performance or Annual Incentive Awards; Other Terms

          Settlement of such Performance or Annual Incentive Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection with such
Performance or Annual Incentive Awards. The Committee shall specify the circumstances in which
such Performance or Annual Incentive Awards shall be paid or forfeited in the event of termination
of Service by the Grantee prior to the end of a performance period or settlement of Performance
Awards.

     13.3. Written Determinations

     All determinations by the Committee as to the establishment of performance goals, the amount
of any Performance Award pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards, and the amount of any Annual Incentive Award
pool or potential individual Annual Incentive Awards and the amount of final Annual Incentive
Awards, shall be made in writing in the case of any Award intended to qualify under Code Section
162(m). To the extent required to comply with Code Section 162(m), the Committee may delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards.

     13.4. Status of Section 14.2 Awards Under Code Section 162(m)

     It is the intent of the Company that Performance Awards and Annual Incentive Awards under
Section 13.2 hereof granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute “qualified performance-based compensation” within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Section 13.2,
including the definitions of Covered Employee and other terms used therein, shall be interpreted in
a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will
be a Covered Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the Committee, at the time
of grant of Performance

 

 

Awards or an Annual Incentive Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.

14. PARACHUTE LIMITATIONS

     Notwithstanding any other provision of this Plan or of any other agreement, contract, or
understanding heretofore or hereafter entered into by a Grantee with the Company or any Affiliate,
except an agreement, contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an “Other Agreement”), and notwithstanding any formal or
informal plan or other arrangement for the direct or indirect provision of compensation to the
Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a
member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified individual,” as
defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Stock Unit held by that Grantee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that such right to
exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits
to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would
cause any payment or benefit to the Grantee under this Plan to be considered a “parachute payment”
within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”)
and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts
received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be received by the Grantee
without causing any such payment or benefit to be considered a Parachute Payment. In the event
that the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in
conjunction with all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount
received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee
shall have the right, in the Grantee’s sole discretion, to designate those rights, payments, or
benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced
or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed
to be a Parachute Payment.

15. REQUIREMENTS OF LAW

     15.1. General

     The Company shall not be required to sell or issue any shares of Stock under any Award if the
sale or issuance of such shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing, registration or
qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or obtained free of any

 

 

conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the
date of termination of the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an Award, unless a
registration statement under such Act is in effect with respect to the shares of Stock covered by
such Award, the Company shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other individual exercising an Option
may acquire such shares pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Board shall be final, binding, and conclusive. The Company
may, but shall in no event be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Company shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares of Stock pursuant to the Plan to comply
with any law or regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable until the shares of Stock covered
by such Option are registered or are exempt from registration, the exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

     15.2. Rule 16b-3

     During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise
of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law
and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event
that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan
in any respect necessary to satisfy the requirements of, or to take advantage of any features of,
the revised exemption or its replacement.

16. EFFECT OF CHANGES IN CAPITALIZATION

     16.1. Changes in Stock

     If the number of outstanding shares of Stock is increased or decreased or the shares of Stock
are changed into or exchanged for a different number or kind of shares or other securities of the
Company on account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares for which grants of
Options and other Awards may be made under the Plan shall be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of shares for which Awards are
outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of
the Grantee immediately following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options or SARs shall not change
the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to
the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a
corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The
conversion of any convertible securities of the Company shall not be treated as an increase in
shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of
any distribution to the Company’s stockholders of securities of any other entity or other assets
(including an extraordinary cash dividend but

 

 

excluding a non-extraordinary dividend payable in
cash or in stock of the Company) without receipt of consideration by the Company, the Company may,
in such manner as the Company deems appropriate, adjust (i) the number and kind of shares subject
to outstanding Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation
Rights to reflect such distribution.

	 	16.2.  	Reorganization in Which the Company Is the Surviving Entity Which does not
Constitute a Corporate Transaction

     Subject to Section 16.3 hereof, if the Company shall be the surviving entity in any
reorganization, merger, or consolidation of the Company with one or more other entities which does
not constitute a Corporate Transaction, any Option or SAR theretofore granted pursuant to the Plan
shall pertain to and apply to the securities to which a holder of the number of shares of Stock
subject to such Option or SAR would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR
Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall
be the same as the aggregate Option Price or SAR Exercise Price of the shares remaining subject to
the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to
any contrary language in an Award Agreement
evidencing an Award, any restrictions applicable to such Award shall apply as well to any
replacement shares received by the Grantee as a result of the reorganization, merger or
consolidation. In the event of a transaction described in this Section 16.2, Stock Units shall be
adjusted so as to apply to the securities that a holder of the number of shares of Stock subject to
the Stock Units would have been entitled to receive immediately following such transaction.

     16.3. Corporate Transaction

     Subject to the exceptions set forth in the last sentence of this Section 16.3 and the last
sentence of Section 16.4, upon the occurrence of a Corporate Transaction, the Board shall provide
for any one or more of the following actions to be taken (with any such action to be contingent on
the occurrence of such Corporate Transaction):

          (i) the vesting of all outstanding shares of Restricted Stock and all Stock Units, and the
delivery of the shares of Stock subject to the Stock Units, immediately prior to the occurrence of
such Corporate Transaction,

          (ii) that fifteen (15) days prior to the scheduled consummation of a Corporate Transaction,
all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain
exercisable for a period of fifteen (15) days, or

          (iii) that all, or a portion of, the outstanding Awards of Options, Restricted Stock, Stock
Units, and/or SARs will be cancelled with the holders paid or delivered an amount in cash or
securities having a value (as determined by the Board acting in good faith), in the case of
Restricted Stock or Stock Units, equal to the formula or fixed price per share paid to holders of
shares of Stock and, in the case of Options or SARs, equal to the product of the number of shares
of Stock subject to the Option or SAR (the “Award Shares”) multiplied by the amount, if any, by
which (I) the formula or fixed price per share paid to holders of shares of Stock pursuant to such
transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Shares.

 

 

     With respect to the Company’s establishment of an exercise window, (a) any exercise of an
Option or SAR during such fifteen- (15-) day period shall be conditioned upon the consummation of
the event and shall be effective only immediately before the consummation of the event, and (b)
upon consummation of any Corporate Transaction the Plan, and all outstanding but unexercised
Options and SARs shall terminate. The Board shall send written notice of an event that will result
in such a termination to all individuals who hold Options and SARs not later than the time at which
the Company gives notice thereof to its stockholders.

     This Section 16.3 shall not apply to any Corporate Transaction to the extent that provision is
made in writing in connection with such Corporate Transaction for the assumption or continuation of
the Options, SARs, Stock Units and Restricted Stock theretofore granted, or for the substitution
for such Options, SARs, Stock Units and Restricted Stock for new common stock options and stock
appreciation rights and new common stock units and restricted stock relating to the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number
of shares (disregarding any consideration that is not common stock) and option and stock
appreciation right exercise prices, in which event the Plan, Options, SARs, Stock Units and
Restricted Stock theretofore granted shall continue in the manner and under the terms so provided.

     16.4. Adjustments

     Adjustments under this Section 16 related to shares of Stock or securities of the Company
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share. The Board shall determine the effect of a
Corporate Transaction upon Awards other than Options, SARs, Stock Units and Restricted Stock, and
such effect shall be set forth in the appropriate Award Agreement. The Board may provide in the
Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for
different provisions to apply to an Award in place of those described in Sections 16.1, 16.2 and
16.3.

     16.5. No Limitations on Company

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

17. GENERAL PROVISIONS

     17.1. Disclaimer of Rights

     No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company. In
addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated
in the applicable Award Agreement, no Award granted

 

 

under the Plan shall be affected by any change
of duties or position of the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company or an Affiliate. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall
in no way be interpreted to require the Company to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the
terms of the Plan.

     17.2. Nonexclusivity of the Plan

     Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options or restricted stock otherwise than
under the Plan.

     17.3. Withholding Taxes

     The Company or an Affiliate, as the case may be, shall have the right to deduct from payments
of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by
law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an
Award or upon the issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or
the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably
determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of
the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company or the Affiliate to withhold shares of Stock otherwise issuable to
the Grantee or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to
satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the
date that the amount of tax to be withheld is to be determined. A Grantee who has made an election
pursuant to this Section 17.3 may satisfy his or her withholding obligation only with shares of
Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.

     17.4. Captions

     The use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

     17.5. Other Provisions

     Each Award granted under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Board, in its sole discretion.

 

 

     17.6. Number and Gender

     With respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.

     17.7. Severability

     If any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

     17.8. Governing Law

     The validity and construction of this Plan and the instruments evidencing the Award hereunder
shall be governed by the laws of the State of Delaware, other than any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of this Plan and the
instruments evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction.

* * *

     To record adoption of the Plan by the Board as of March 9, 2005, and approval of the Plan by
the stockholders on April 28, 2005, the Company has caused its authorized officer to execute the
Plan.

	 	 	 	 	 
	 	 	ORBITAL SCIENCES CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	/s/ Leo Millstein
	

	 	 	 	 
	

	 	 	 	Leo Millstein
	

	 	 	 	Senior Vice President, General Counsel and
	

	 	 	 	Secretary of the Company

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