Document:

Exhibit
4.2

 

EXECUTION VERSION

 

US$500,000,000
ADDITIONAL FACILITY T ACCESSION AGREEMENT

 

To:          Toronto Dominion (Texas) LLC as Facility
Agent and TD Bank Europe Limited as Security Agent

 

From:      The persons listed in Schedule 1 to this
Agreement (the Additional Facility T Lenders)

 

Date:     
 6 May 2009

 

UPC Broadband Holding B.V.
(formerly known as UPC Distribution Holding B.V) -

€1,072,000,000 Term Credit Agreement dated 16 January 2004 as amended from
time to

time (the Credit Agreement)

 

1.             In this Agreement:

 

Additional Facility N
Lender
means each of the lenders under Facility N.

 

Facility N means the US$1,900,000,000
term loan facility made available under the Additional Facility Accession
Agreements dated 11 May 2007 and 18 May 2007 respectively (each an Additional Facility N Accession Agreement).

 

Facility N Interest Period means the Interest Period
which is current, at the Effective Date, in respect of the outstanding Advance
(the Facility N Advance) under Facility N.

 

Facility T means the US$500,000,000 term
loan facility made available under this Agreement.

 

Facility T Advance means a US dollar denominated
advance made to UPC Financing by the Additional Facility T Lenders under
Facility T.

 

Facility T Commitment means, in relation to an
Additional Facility T Lender, the amount in US dollars set opposite its name
under the heading “Facility T Commitment” in Schedule 1 to the counterpart of
this Agreement executed by that Additional Facility T Lender, to the extent not
cancelled, transferred, or reduced under the Credit Agreement.

 

Majority Facility T Lenders means Additional Facility T
Lenders the aggregate of whose Facility T Commitments exceeds 662/3 per
cent. of the aggregate of Facility T Commitments of all Additional Facility T
Lenders.

 

2.             Unless otherwise defined in this Agreement,
terms defined in the Credit Agreement shall have the same meaning in this
Agreement and a reference to a Clause is a reference to a Clause of the Credit
Agreement.  The principles of
construction set out in Clause 1.2 (Construction) of the Credit Agreement apply
to this Agreement as though they were set out in full in this Agreement.

 

3.             We refer to Clause 2.2 (Additional
Facilities) of the Credit Agreement.

 

4.             This Agreement will take effect on the date
on which the Facility Agent notifies UPC Broadband and the Additional Facility
T Lenders that it has received the documents and evidence set out in Schedule 2
to this Agreement, in each case in form and substance

 

 

satisfactory
to it or, as the case may be, the requirement to provide any of such documents
or evidence has been waived by the Majority Facility T Lenders (the Effective Date).

 

5.             We, the Additional Facility T Lenders,
agree:

 

(a)           to become party to and to be bound by the
terms of the Credit Agreement as Lenders in accordance with Clause 2.2
(Additional Facilities) of the Credit Agreement; and

 

(b)           to become party to the Security Deed as
Lenders and to observe, perform and be bound by the terms and provisions of the
Security Deed in the capacity of Lenders in accordance with Clause 9.3
(Transfers by Lenders) of the Security Deed.

 

6.             The Additional Facility Commitment in
relation to an Additional Facility T Lender (for the purpose of the definition
of Additional Facility Commitment in Clause 1.1 (Definitions) of the Credit
Agreement) is its Facility T Commitment.

 

7.             Any interest due in relation to Facility T
will be payable on the last day of each Interest Period in accordance with
Clause 8 (Interest) of the Credit Agreement.

 

8.             The Availability Period for Facility T
shall be the Effective Date.

 

9.             Facility T may be drawn by one Advance and
no more than one Request may be made in respect of Facility T under the Credit
Agreement.

 

10.           (a)           The first Interest Period to
apply to the Facility T Advance will be a period equal to the period running
from the Effective Date up to and including the last day of the Facility N
Interest Period.

 

(b)           In respect of the first Interest Period
only, LIBOR shall mean the LIBOR rate as determined in
respect of the Facility N Interest Period.

 

11.           The Facility T Advances will be used for
general corporate purposes and working capital purposes, including the
repayment or prepayment of existing indebtedness.

 

12.           The Final Maturity Date in respect of this
Facility T will be the earlier of:

 

(a)           31 December 2016; and

 

(b)           17 October 2013 (the Relevant Date) being the date falling 90 days prior to the
date on which the UPC Holding B.V. issued bonds due 2014 (the Bonds) are currently scheduled to fall due, if on the
Relevant Date, Bonds are outstanding in an aggregate amount equal to or greater
than €250,000,000.

 

13.           The outstanding Facility T Advances will be
repaid in full on the Final Maturity Date.

 

14.           The Margin in relation to Facility T is
3.50 per cent. per annum.

 

15.           The Borrower in relation to Facility T is
UPC Financing.

 

16.           (a)           Provided that any upsizing of Facility T
permitted under this paragraph will not breach any term of the Credit
Agreement, Facility T may be upsized by any amount, by the signing of one or
more further Additional Facility T Accession Agreements, that specify (along
with the other terms specified therein) UPC Financing as the sole Borrower and
which specify Additional Facility T Commitments denominated in US 

 

 

dollars, to be
drawn in US dollars, with the same Final Maturity Date and Margin as specified
in this Additional Facility T Accession Agreement.

 

(b)           For the purposes of this paragraph 16,
references to Additional Facility T Lenders and Facility T Advances shall
include Lenders and Advances made under any such further Additional Facility T
Accession Agreement.

 

(c)                                  If the Borrower so requests, an Interest
Period for a Facility T Advance will end on the same day as the current
Interest Period for any other Facility T Advance denominated in the same
currency as that Facility T Advance.  On
the last day of those Interest Periods, those Facility T Advances will be
consolidated and treated as one Facility T Advance.

 

17.           Each of UPC Broadband and UPC Financing
confirms, on behalf of themselves and each other Obligor that the
representations and warranties set out in Clause 15 (Representations and
Warranties) of the Credit Agreement (with the exception of Clauses 15.6(a) (Consents),
15.10 (Financial condition), 15.12 (Security Interests), 15.13(b) (Litigation
and insolvency proceedings), 15.14 (Business Plan), 15.15 (Tax liabilities),
15.16 (Ownership of assets), 15.18 (Works Council), 15.19 (Borrower Group
Structure), 15.20 (ERISA), 15.24 (UPC Financing) and 15.25 (Dutch Banking Act))
are true and correct as if made at the Effective Date with reference to the
facts and circumstances then existing, and as if each reference to the Finance
Documents includes a reference to this Agreement.

 

18.           UPC Broadband further represents and
warrants on the Effective Date that the execution and delivery by it of this
Agreement and the performance of the transactions contemplated by this
Agreement will not violate any agreement or instrument to which UPC Holding is
a party or binding upon UPC Holding or any member of the Borrower Group or any
assets of UPC Holding or any member of the Borrower Group’s assets, where such
violation would or is reasonably likely to have a Material Adverse Effect.

 

19.           Each Additional Facility T Lender confirms
to each Finance Party that:

 

(a)           it has made its own independent
investigation and assessment of the financial condition and affairs of each
Obligor and its related entities in connection with its participation in the
Credit Agreement and has not relied on any information provided to it by a
Finance Party in connection with any Finance Document; and

 

(b)           it will continue to make its own
independent appraisal of the creditworthiness of each Obligor and its related
entities while any amount is or may be outstanding under the Credit Agreement
or any Additional Facility Commitment is in force.

 

20.           Each of the Additional Facility T Lenders
agrees that without prejudice to Clause 26.3 of the Credit Agreement, each New
Lender (as defined in the Novation Certificate referred to below) shall become,
by the execution by the Facility Agent of a Novation Certificate substantially
in the form of part 1 or part 2 of Schedule 3 to this Agreement, bound by the
terms of this Agreement as if it were an original party hereto as an Additional
Facility T Lender and shall acquire the same rights and assume the same obligations
towards the other parties to this Agreement as would have been acquired and
assumed had the New Lender been an original party to this Agreement as an
Additional Facility T Lender.

 

21.           Each Additional Facility T Lender agrees to
waive the notice period in respect of drawdown requests under Clause 5.1
(Delivery of Request) of the Credit Agreement in respect of this Facility T.

 

 

22.           The Facility Office and address for notices
of each Additional Facility T Lender for the purposes of Clause 32.2
(Addresses for notices) of the Credit Agreement will be that notified by each
Additional Facility T Lender to the Facility Agent.

 

23.           This Agreement and any non-contractual
obligations arising out of or in connection with it are governed by English
law.

 

24.           This
Agreement may be executed in any number of counterparts, and by each party on
separate counterparts.  Each counterpart
is an original, but all counterparts shall together constitute one and the same
instrument.  Delivery of an executed
counterpart signature page of this Agreement by e-mail (PDF) or telecopy
shall be as effective as delivery of a manually executed counterpart of this
Agreement.

 

 

SCHEDULE 1

 

ADDITIONAL FACILITY T
LENDERS AND COMMITMENTS

 

	
  Additional Facility T Lender

  	
   

  	
  Facility T Commitment

   (US$ )

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Liberty Global Europe B.V.

  	
   

  	
  500,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  500,000,000

  	
   

  

 

 

SCHEDULE 2

 

CONDITIONS PRECEDENT
DOCUMENTS

 

1.             Constitutional Documents

 

(a)           A copy of the constitutional documents of
each Obligor (other than UPC Financing) and the partnership agreement of UPC
Financing or, if the Facility Agent already has a copy, a certificate of an
authorised signatory of the relevant Obligor confirming that the copy in the
Facility Agent’s possession is still correct, complete and in full force and
effect as at a date no earlier than the date of this Agreement.

 

(b)           An extract of the registration of each
Obligor established in the Netherlands in the trade register of the Dutch
Chamber of Commerce.

 

2.             Authorisations

 

(a)           A copy of a resolution of the board of
managing and, to the extent applicable, board of supervisory directors (or
equivalent) and, to the extent that a shareholders’ resolution is required, a
copy of the shareholders’ resolution of each Obligor:

 

(i)            approving the terms of and the transactions
contemplated by this Agreement and (in the case of UPC Broadband) resolving
that it execute the same (and, in the case of the Guarantors and the Charging
Entities (as defined in the Security Deed) resolving that it execute the
confirmation described at paragraph 4(a) below; and

 

(ii)           (in the case of UPC Broadband and UPC
Financing) authorising the issuance of a power of attorney to a specified
person or persons to execute this Agreement on its behalf and (in the case of
the Guarantors and the Charging Entities (as defined in the Security Deed))
authorising the issuance of a power of attorney to a specified person or
persons to execute the confirmation described in paragraph 4(a) below.

 

(b)           A specimen of the signature of each person
authorised pursuant to its constitutional documents or to the power of attorney
referred to in paragraph (a) above to sign this Agreement or the
confirmation described in paragraph 4(a) below (as appropriate).

 

(c)           A certificate of an authorised signatory of
UPC Broadband, each Guarantor and each Charging Entity certifying that each
copy document specified in this Schedule and supplied by UPC Broadband, each
Guarantor and each Charging Entity is correct, complete and in full force and
effect as at a date no earlier than the date of this Agreement.

 

(d)           A copy of any other authorisation or other
document, opinion or assurance which the Facility Agent has notified UPC
Broadband is necessary in connection with the entry into and performance of,
and the transactions contemplated by, this Agreement or for the validity and
enforceability of this Agreement.

 

3.             Legal opinions

 

(a)           A legal opinion of Allen & Overy
LLP, English legal advisers to the Facility Agent, addressed to the Finance
Parties.

 

(b)           A legal opinion of Allen & Overy
LLP, Dutch legal advisers to the Facility Agent, addressed to the Finance
Parties.

 

 

(c)           A legal opinion of Allen & Overy
LLP, New York legal advisers to the Facility Agent, addressed to the Finance
Parties.

 

4.             Other documents

 

Confirmation (in writing) from (i) each
of the Guarantors that its obligations under Clause 14 (Guarantee) of the
Credit Agreement and (ii) each of the Charging Entities (as defined in the
Security Deed) that the Security Interests granted to the Beneficiaries
pursuant to the Security Documents and its obligations under the Finance
Documents, shall continue unaffected and that such obligations extend to the
Total Commitments as increased by the addition of Facility T and that such
obligations shall be owed to each Finance Party including the Additional
Facility T Lenders.

 

 

SCHEDULE 3

 

NOVATION CERTIFICATES

 

PART 1

 

NOVATION CERTIFICATE
(CASH)

 

To:          [     ] as
Facility Agent and [BORROWER]

 

From:      [THE EXISTING LENDER] and [THE NEW LENDER]                  Date:
[          ]

 

UPC Broadband Holding B.V. - e1,072,000,000
Term Credit Agreement dated 16 January, 2004 (the Credit Agreement)

 

We refer to Clause 26.3 (Procedure for
novations) of the Credit Agreement and clause 9.3 (Transfers by the Lenders) of
the Security Deed.  Terms defined in the
Credit Agreement or, if not defined in the Credit Agreement, the Additional
Facility Accession Agreement between the Facility Agent, the Security Agent and
the Additional Facility T Lenders dated [         ] 2009, have the same meaning in this
Novation Certificate.

 

1.             We
[             ]
(the Existing Lender) and
[     ] (the New Lender)
agree to the Existing Lender and the New Lender novating all the Existing
Lender’s rights and obligations referred to in the Schedule in accordance with
Clause 26.3 (Procedure for novations) of the Credit Agreement and clause
9.3 (Transfers by the Lenders) of the Security Deed.

 

2.             The New Lender confirms that it is bound by the
terms of the Additional Facility Accession Agreement as if it were an original
party thereto as an Additional Facility T Lender and shall acquire the same
rights and assume the same obligations towards the other parties to this
Agreement as would have been acquired and assumed had the New Lender been an
original party to this Agreement as an Additional Facility T Lender.

 

3.             The Facility Office and address for notices
of the New Lender for the purposes of Clause 32.2 (Addresses for notices)
are set out in the Schedule.

 

4.             This
Novation
Certificate
may be executed in any number of counterparts, and by each party on separate
counterparts.  Each counterpart is an
original, but all counterparts shall together constitute one and the same
instrument.  Delivery of an executed counterpart
signature page of this Novation Certificate by e-mail (PDF) or telecopy
shall be as effective as delivery of a manually executed counterpart of this Novation
Certificate.

 

5.             This Novation Certificate and any
non-contractual obligations arising out of or in connection with it are
governed by English law.

 

 

THE SCHEDULE

 

Rights and obligations to be novated

 

[Details of the rights and
obligations of the Existing Lender to be novated.]

 

 

	
  [New Lender]

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Facility Office

  	
   

  	
  Address for notices for administrative
  purposes

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for notices for credit purposes]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Existing Lender]

  	
   

  	
  [New Lender]

  	
   

  	
  [                    ]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  Date:

  	
   

  	
  Date:

  

 

 

PART 2

 

NOVATION CERTIFICATE
(CASHLESS)

 

	
  To:

  	
  Toronto Dominion (Texas) LLC as Facility
  Agent and UPC Financing as Borrower

  
	
   

  	
   

  
	
  From:

  	
  Liberty Global Europe B.V. and [the
  EXISTING N LENDER / NEW T LENDER]

  

 

Date:       May 2009

 

UPC Broadband Holding B.V. - e1,072,000,000
Term Credit Agreement dated 16 January, 2004 (the Credit Agreement)

 

We refer to:

 

	
  (a)

  	
  Clause 26.3 (Procedure for
  novations) of the Credit Agreement;

  
	
   

  	
   

  
	
  (b)

  	
  Clause 9.3 (Transfers by the Lenders) of
  the Security Deed;

  
	
   

  	
   

  
	
  (c)

  	
  the Additional Facility N Accession
  Agreements; and

  
	
   

  	
   

  
	
  (d)

  	
  the US$500,000,000 Additional Facility T
  Accession Agreement.

  

 

Terms defined in the Credit Agreement or,
if not defined in the Credit Agreement, the Additional Facility N Accession
Agreements, have the same meaning in this Novation Certificate.

 

1.             [                 ]
(the Existing N Lender) agrees to novate and
Liberty Global Europe B.V. (the New N Lender)
agrees to accept novation on the Effective Date of all the Existing N Lender’s
rights and obligations referred to in the Schedule in accordance with
Clause 26.3 (Procedure for novations) of the Credit Agreement and clause
9.3 (Transfers by the Lenders) of the Security Deed.

 

2.             Liberty Global Europe B.V. (the Existing T Lender) agrees to novate and [                    ]
(the New T Lender) agrees to accept the
novation on the Effective Date of all the Existing T Lender’s rights and
obligations referred to in the Schedule in accordance with Clause 26.3
(Procedure for novations) of the Credit Agreement and clause 9.3 (Transfers by
the Lenders) of the Security Deed.

 

3.             The aggregate Existing N Commitment will be
equal to the aggregate Existing T Commitment (each term as referred to in the
schedule to this certificate). The Existing N Lender’s obligation to transfer
the Existing N Commitment to the New N Lender and the Existing T Lender’s
obligation to transfer the Existing T Commitment to the New T Lender, will each
be deemed to be satisfied by the other, in each case on the Effective Date.

 

4.             The New N Lender confirms that it is bound by the
terms of the Additional Facility N Accession Agreement as if it were an
original party thereto as an Additional Facility N Lender and
shall acquire the same rights and assume the same obligations towards the other
parties to the
Additional Facility N Accession Agreement as would have been
acquired and assumed had the New Lender been an original party to the Additional
Facility N Accession Agreement as an Additional Facility N
Lender.

 

 

5.             The New T Lender confirms that it is bound by the
terms of the Additional Facility T Accession Agreement as if it were an
original party thereto as an Additional Facility T Lender and
shall acquire the same rights and assume the same obligations towards the other
parties to the
Additional Facility T Accession Agreement as would have been
acquired and assumed had the New Lender been an original party to the Additional
Facility T Accession Agreement as an Additional Facility T
Lender.

 

6.             This certificate shall take effect on the
date of this certificate.

 

7.             For the purposes of this certificate, “Effective Date” means the date specified under the Facility
Agent’s name in the relevant signature page to this Novation Certificate.

 

8.             Each party to this document agrees, the
Facility Agent agrees on behalf of each Finance Party, and UPC Broadband
Holding B.V. agrees on behalf of each Obligor, that this document is a Novation
Certificate notwithstanding that its form is different to that required by the
Credit Agreement or any Additional Facility N Accession Agreement.

 

9.             The New T Lender confirms that (in its
capacity as Lender under the Credit Agreement) it approves the amendments to
the Credit Agreement as set out in paragraph 3 (Amendments) of the draft
Amendment Letter dated 27 April 2009 (with document number BK:11304423.1)
to be entered into between (among others) UPC Broadband, UPC Financing and the
Facility Agent (the Amendment Letter).

 

10.           This Novation Certificate is a Finance
Document.

 

11.           This
Novation Certificate may be executed in any number of counterparts, and by each
party on separate counterparts.  Each
counterpart is an original, but all counterparts shall together constitute one
and the same instrument.  Delivery of an
executed counterpart signature page of this Novation Certificate by e-mail
(PDF) or telecopy shall be as effective as delivery of a manually executed
counterpart of this Novation Certificate.

 

12.           This Novation Certificate and any
non-contractual obligations arising out of or in connection with it are
governed by English law.

 

 

THE SCHEDULE

 

Rights and obligations to be
novated:

 

	
  25.

  	
  Existing N Lender

  
	
   

  	
   

  
	
   

  	
  Existing N Commitment:
  US$[            ]

  
	
   

  	
   

  
	
   

  	
  Assignee: New N Lender

  
	
   

  	
   

  
	
  2.

  	
  Existing T Lender

  
	
   

  	
   

  
	
   

  	
  Existing T Commitment:
  US$[            ]

  
	
   

  	
   

  
	
   

  	
  Assignee: New T Lender

  

 

 

[THE EXISTING N LENDER], as the Existing N
Lender

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

LIBERTY GLOBAL EUROPE B.V., as the New N
Lender

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

LIBERTY GLOBAL EUROPE B.V., as the Existing
T Lender

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

 

[THE NEW T LENDER], as the New T Lender

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

UPC BROADBAND HOLDING B.V., as Obligors
agent

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

TORONTO DOMINION (TEXAS) LLC, as Facility
Agent

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  

 

The Facility Agent confirms that the
Effective Date is the date on which it countersigns this Novation Certificate.

 

 

SIGNATORIES

 

TORONTO DOMINION (TEXAS) LLC as Facility
Agent

 

By: Authorized Signatory

 

06 May, 2009

 

 

TD BANK EUROPE LIMITED as Security Agent

 

By: Authorized Signatory

 

06 May, 2009

 

 

UPC BROADBAND HOLDING B.V.

 

By: Authorized Signatory

 

06 May, 2009

 

 

UPC FINANCING PARTNERSHIP

 

By: Authorized Signatory

 

06 May, 2009

 

 

ADDITIONAL
FACILITY T LENDERS

 

 

LIBERTY GLOBAL EUROPE B.V.

 

By: Authorized Signatory

 

06 May. 2009Exhibit 10.2

 

LIQUIDITY SERVICES, INC.

 

2006 OMNIBUS LONG-TERM INCENTIVE PLAN

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  1.

  	
  PURPOSE

  	
   

  	
  1

  
	
  2.

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  3.

  	
  ADMINISTRATIONOFTHEPLAN

  	
   

  	
  4

  
	
   

  	
  3.1.

  	
   

  	
  Board

  	
   

  	
  4

  
	
   

  	
  3.2.

  	
   

  	
  Committee

  	
   

  	
  4

  
	
   

  	
  3.3.

  	
   

  	
  TermsofAwards

  	
   

  	
  4

  
	
   

  	
  3.4.

  	
   

  	
  DeferralArrangement

  	
   

  	
  5

  
	
   

  	
  3.5.

  	
   

  	
  NoLiability

  	
   

  	
  5

  
	
   

  	
  3.6.

  	
   

  	
  ShareIssuance

  	
   

  	
  5

  
	
  4.

  	
  STOCKSUBJECTTOTHEPLAN

  	
   

  	
  6

  
	
  5.

  	
  EFFECTIVEDATE,DURATIONANDAMENDMENTS

  	
   

  	
  6

  
	
   

  	
  5.1.

  	
   

  	
  EffectiveDate

  	
   

  	
  6

  
	
   

  	
  5.2.

  	
   

  	
  Term

  	
   

  	
  6

  
	
   

  	
  5.3.

  	
   

  	
  AmendmentandTerminationofthePlan

  	
   

  	
  6

  
	
  6.

  	
  AWARDELIGIBILITYANDLIMITATIONS

  	
   

  	
  7

  
	
   

  	
  6.1.

  	
   

  	
  ServiceProvidersandOtherPersons

  	
   

  	
  7

  
	
   

  	
  6.2.

  	
   

  	
  SuccessiveAwardsandSubstituteAwards

  	
   

  	
  7

  
	
   

  	
  6.3.

  	
   

  	
  LimitationonSharesofStockSubjecttoAwardsandCashAwards

  	
   

  	
  7

  
	
  7.

  	
  AWARDAGREEMENT

  	
   

  	
  7

  
	
  8.

  	
  TERMSANDCONDITIONSOFOPTIONS

  	
   

  	
  7

  
	
   

  	
  8.1.

  	
   

  	
  OptionPrice

  	
   

  	
  7

  
	
   

  	
  8.2.

  	
   

  	
  Vesting

  	
   

  	
  8

  
	
   

  	
  8.3.

  	
   

  	
  Term

  	
   

  	
  8

  
	
   

  	
  8.4.

  	
   

  	
  TerminationofService

  	
   

  	
  8

  
	
   

  	
  8.5.

  	
   

  	
  LimitationsonExerciseofOption

  	
   

  	
  8

  
	
   

  	
  8.6.

  	
   

  	
  MethodofExercise

  	
   

  	
  8

  
	
   

  	
  8.7.

  	
   

  	
  RightsofHoldersofOptions

  	
   

  	
  8

  
	
   

  	
  8.8.

  	
   

  	
  DeliveryofStockCertificates

  	
   

  	
  9

  
	
   

  	
  8.9.

  	
   

  	
  TransferabilityofOptions

  	
   

  	
  9

  
	
   

  	
  8.10.

  	
   

  	
  FamilyTransfers

  	
   

  	
  9

  
	
   

  	
  8.11.

  	
   

  	
  LimitationsonIncentiveStockOptions

  	
   

  	
  9

  
	
  9.

  	
  TERMSANDCONDITIONSOFSTOCKAPPRECIATIONRIGHTS

  	
   

  	
  9

  
	
   

  	
  9.1.

  	
   

  	
  RighttoPaymentandGrantPrice

  	
   

  	
  9

  
	
   

  	
  9.2.

  	
   

  	
  OtherTerms

  	
   

  	
  10

  
	
  10.

  	
  TERMSANDCONDITIONSOFRESTRICTEDSTOCKANDSTOCKUNITS

  	
   

  	
  10

  
	
   

  	
  10.1.

  	
   

  	
  GrantofRestrictedStockorStockUnits

  	
   

  	
  10

  
	
   

  	
  10.2.

  	
   

  	
  Restrictions

  	
   

  	
  10

  
	
   

  	
  10.3.

  	
   

  	
  RestrictedStockCertificates

  	
   

  	
  10

  
	
   

  	
  10.4.

  	
   

  	
  RightsofHoldersofRestrictedStock

  	
   

  	
  10

  
	
   

  	
  10.5.

  	
   

  	
  RightsofHoldersofStockUnits

  	
   

  	
  11

  
	
   

  	
  10.5.1

  	
   

  	
  VotingandDividendRights

  	
   

  	
  11

  
	
   

  	
  10.5.2

  	
   

  	
  Creditor’sRights

  	
   

  	
  11

  
	
   

  	
  10.6.

  	
   

  	
  TerminationofService

  	
   

  	
  11

  
	
   

  	
  10.7.

  	
   

  	
  PurchaseofRestrictedStock

  	
   

  	
  11

  
	
   

  	
  10.8.

  	
   

  	
  DeliveryofStock

  	
   

  	
  11

  

 

i

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  11.

  	
  TERMSANDCONDITIONSOFUNRESTRICTEDSTOCKAWARDS

  	
   

  	
  11

  
	
  12.

  	
  FORMOFPAYMENTFOROPTIONSANDRESTRICTEDSTOCK

  	
   

  	
  12

  
	
   

  	
  12.1.

  	
   

  	
  GeneralRule

  	
   

  	
  12

  
	
   

  	
  12.2.

  	
   

  	
  SurrenderofStock

  	
   

  	
  12

  
	
   

  	
  12.3.

  	
   

  	
  CashlessExercise

  	
   

  	
  12

  
	
   

  	
  12.4.

  	
   

  	
  OtherFormsofPayment

  	
   

  	
  12

  
	
  13.

  	
  TERMSANDCONDITIONSOFDIVIDENDEQUIVALENTRIGHTS

  	
   

  	
  12

  
	
   

  	
  13.1.

  	
   

  	
  DividendEquivalentRights

  	
   

  	
  12

  
	
   

  	
  13.2.

  	
   

  	
  TerminationofService

  	
   

  	
  13

  
	
  14.

  	
  TERMSANDCONDITIONSOFPERFORMANCEANDANNUALINCENTIVEAWARDS

  	
   

  	
  13

  
	
   

  	
  14.1.

  	
   

  	
  PerformanceConditions

  	
   

  	
  13

  
	
   

  	
  14.2.

  	
   

  	
  PerformanceorAnnualIncentiveAwardsGrantedtoDesignatedCoveredEmployees

  	
   

  	
  13

  
	
   

  	
  14.2.1

  	
   

  	
  PerformanceGoalsGenerally

  	
   

  	
  13

  
	
   

  	
  14.2.2

  	
   

  	
  BusinessCriteria

  	
   

  	
  13

  
	
   

  	
  14.2.3

  	
   

  	
  TimingForEstablishingPerformanceGoals

  	
   

  	
  14

  
	
   

  	
  14.2.4

  	
   

  	
  SettlementofPerformanceorAnnualIncentiveAwards;OtherTerms

  	
   

  	
  14

  
	
   

  	
  14.3.

  	
   

  	
  WrittenDeterminations

  	
   

  	
  14

  
	
   

  	
  14.4.

  	
   

  	
  StatusofSection14.2AwardsUnderCodeSection162(m)

  	
   

  	
  14

  
	
  15.

  	
  PARACHUTELIMITATIONS

  	
   

  	
  15

  
	
  16.

  	
  REQUIREMENTSOFLAW

  	
   

  	
  15

  
	
   

  	
  16.1.

  	
   

  	
  General

  	
   

  	
  15

  
	
   

  	
  16.2.

  	
   

  	
  Rule16b-3

  	
   

  	
  16

  
	
  17.

  	
  EFFECTOFCHANGESINCAPITALIZATION

  	
   

  	
  16

  
	
   

  	
  17.1.

  	
   

  	
  ChangesinStock

  	
   

  	
  16

  
	
   

  	
  17.2.

  	
   

  	
  ReorganizationinWhichtheCompanyIstheSurvivingEntityWhichdoesnotConstituteaCorporateTransaction

  	
   

  	
  16

  
	
   

  	
  17.3.

  	
   

  	
  CorporateTransaction

  	
   

  	
  17

  
	
   

  	
  17.4.

  	
   

  	
  Adjustments

  	
   

  	
  17

  
	
   

  	
  17.5.

  	
   

  	
  NoLimitationsonCompany

  	
   

  	
  18

  
	
  18.

  	
  GENERALPROVISIONS

  	
   

  	
  18

  
	
   

  	
  18.1.

  	
   

  	
  DisclaimerofRights

  	
   

  	
  18

  
	
   

  	
  18.2.

  	
   

  	
  NonexclusivityofthePlan

  	
   

  	
  18

  
	
   

  	
  18.3.

  	
   

  	
  WithholdingTaxes

  	
   

  	
  18

  
	
   

  	
  18.4.

  	
   

  	
  Captions

  	
   

  	
  19

  
	
   

  	
  18.5.

  	
   

  	
  OtherProvisions

  	
   

  	
  19

  
	
   

  	
  18.6.

  	
   

  	
  NumberandGender

  	
   

  	
  19

  
	
   

  	
  18.7.

  	
   

  	
  Severability

  	
   

  	
  19

  
	
   

  	
  18.8.

  	
   

  	
  GoverningLaw

  	
   

  	
  19

  
	
   

  	
  18.9.

  	
   

  	
  Section409AoftheCode

  	
   

  	
  19

  

 

ii

 

LIQUIDITY
SERVICES, INC.

2006 OMNIBUS LONG-TERM INCENTIVE PLAN

 

Liquidity
Services, Inc., a Delaware corporation (the “Company”), sets forth herein
the terms of its 2006 Omnibus Long-Term 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 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 14) over a performance period of up to one year
(the Company’s 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 15 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) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense (other than
minor traffic offenses); 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 the Compensation Committee of the Board.

 

2.10                           “Company” means Liquidity Services, Inc.

 

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

 

1

 

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 50% 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 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 13
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 the date of closing of the Company’s
initial public offering.

 

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

 

2.17                           “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.

 

2.18                           “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 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 of the voting interests.

 

2.19                           “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.

 

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

 

2

 

2.21                           “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.

 

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

 

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

 

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

 

2.25                           “Other Agreement” shall have the meaning set forth in Section 15 hereof.

 

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

 

2.27                           “Performance Award” means an Award made subject to the
attainment of performance goals (as described in Section 14) over a performance period of up to ten (10) years.

 

2.28                           “Plan” means this Liquidity Services, Inc. 2006
Omnibus Long-Term Incentive Plan.

 

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

 

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

 

2.31                           “Restricted Stock” means shares of Stock, awarded to a Grantee
pursuant to Section 10 hereof.

 

2.32                           “SAR Exercise Price” means the per share
exercise price of a SAR granted to a Grantee under Section 9 hereof.

 

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

 

2.34                           “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.

 

2.35                           “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.

 

2.36                           “Stock” means the common stock, par value $.001 per share,
of the Company.

 

2.37                           “Stock Appreciation Right” or “SAR” means a right granted to a Grantee
under Section 9 hereof.

 

2.38                           “Stock Unit” means a bookkeeping entry representing the
equivalent of one share of Stock awarded to a Grantee pursuant to Section 10 hereof.

 

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

 

2.40                           “Substitute Awards” means Awards granted upon assumption of, or
in substitution for, outstanding awards previously granted by a company or
other entity acquired by the Company or any Affiliate or with which the Company
or any Affiliate combines.

 

3

 

2.41                           “Termination Date” means the date upon which an Option shall
terminate or expire, as set forth in Section 8.3
hereof.

 

2.42                           “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.

 

2.43                           “Unrestricted Stock” means an Award pursuant to Section 11 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 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,

 

4

 

(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 and no amendment or modification to an Award that would treated as a
repricing under the rules of the stock exchange or market on which the
Stock is listed or quoted shall be made without approval of the Company’s
stockholders.

 

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 17.

 

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, restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans. Any such deferrals shall
be made in a manner that complies with Code Section 409A.

 

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.                            Share Issuance

 

Notwithstanding
any provision of this Plan to the contrary, the issuance of the Stock under the
Plan may be evidenced in such a manner as the Board, in its discretion, deems
appropriate, including, without limitation, book-entry registration or issuance
of one or more Stock certificates.

 

5

 

4.                                      STOCK SUBJECT TO THE PLAN

 

Subject
to adjustment as provided in Section 17
hereof, the number of shares of Stock available for issuance under the Plan
shall be ten million (10,000,000). Notwithstanding the preceding sentence and
also subject to adjustment as provided in Section 17
hereof, the aggregate number of shares of Stock which cumulatively may be available
for issuance pursuant to Awards other than Awards of Options or SARs shall not
exceed three million five hundred thousand (3,500,000) and the number of shares
that may be issued as Incentive Stock Options shall not exceed ten million (10,000,000).
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. 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 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 year of
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 or market 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

 

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 and Substitute Awards.

 

An eligible person may receive more than one
Award, subject to such restrictions as are provided herein. Notwithstanding Sections 8.1 and 9.1, the Option Price of an Option or the
grant price of a SAR that is a Substitute Award may be less than 100% of the
Fair Market Value of a share of Common Stock on the original date of grant
provided that the Option Price or grant price in determined in accordance with
the principles of Code Section 424 and the regulations thereunder.

 

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 one million (1,000,000) 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 seven hundred thousand (700,000) 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 $3,000,000 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 $5,000,000.

 

The preceding limitations in this Section 6.3 are subject to adjustment
as provided in Section 17
hereof.

 

7.             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.

 

8.             TERMS AND
CONDITIONS OF OPTIONS

 

8.1.         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

 

7

 

Stock Option shall be not less than 110 percent 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.

 

8.2.         Vesting.

 

Subject to Sections 8.3
and 17.3 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 8.2, 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.

 

8.3.         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 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
years from its Grant Date.

 

8.4.         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.

 

8.5.         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 17 hereof which results in
termination of the Option.

 

8.6.         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. 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. The minimum number of shares of Stock with respect to
which an Option may be exercised, in whole or in part, at any time shall be the
lesser of (i) 100 shares or such lesser number set forth in the applicable
Award Agreement and (ii) the maximum number of shares available for
purchase under the Option at the time of exercise.

 

8.7.         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

 

8

 

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 17
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.

 

8.8.         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.

 

8.9.         Transferability
of Options

 

Except as provided in Section 8.10, 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 8.10,
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.

 

8.10.       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 8.10, 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 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 8.10,
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 8.10
or by will or the laws of descent and distribution. The events of termination
of Service of Section 8.4
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 8.4.

 

8.11.       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.

 

9.             TERMS AND
CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1.         Right to
Payment and Grant Price.

 

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 at least 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; provided
that a SAR that is granted

 

9

 

subsequent to the Grant Date of a related Option must have a SAR Price
that is no less than the Fair Market Value of one share of Stock on the SAR
Grant Date.

 

9.2.         Other
Terms.

 

The Board shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under
which a 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 a SAR shall be in tandem or in combination with any other Award, and any
other terms and conditions of any SAR.

 

10.          TERMS AND
CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

 

10.1.       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).

 

10.2.       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 Section 14.1
and 14.2. 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.

 

10.3.       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.

 

10.4.       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.

 

10

 

10.5.       Rights of
Holders of Stock Units.

 

10.5.1.    Voting and Dividend
Rights.

 

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.

 

10.5.2.    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.

 

10.6.       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.

 

10.7.       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 12 or, in the discretion of
the Board, in consideration for past Services rendered to the Company or an
Affiliate.

 

10.8.       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. Neither the Grantee, nor the Grantee’s beneficiary or estate,
shall have any further rights with regard to a Stock Unit once the share of
Stock represented by the Stock Unit has been delivered.

 

11.          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 respect of

 

11

 

past Services and other valid consideration, or in lieu of, or in
addition to, any cash compensation due to such Grantee.

 

12.          FORM OF
PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

12.1.       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.

 

12.2.       Surrender
of Stock.

 

To the extent the Award Agreement so
provides, payment of the Option Price for shares purchased pursuant to the
exercise of an Option or the Purchase Price for Restricted Stock may be made
all or in part through the tender to the Company of shares of Stock, which
shares, if acquired from the Company and if so required by the Company, shall have
been held for at least six months at the time of tender and which shall be
valued, for purposes of determining the extent to which the Option Price or
Purchase Price has been paid thereby, at their Fair Market Value on the date of
exercise or surrender.

 

12.3.       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 18.3.

 

12.4.  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.

 

13.          TERMS AND
CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

 

13.1.       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. 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

 

12

 

granted as a component of another Award may also contain terms and
conditions different from such other award.

 

13.2.       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.

 

14.          TERMS AND
CONDITIONS OF PERFORMANCE AND ANNUAL INCENTIVE AWARDS

 

14.1.       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 Sections 14.2
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.

 

14.2.       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 14.2.

 

14.2.1.    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 14.2. 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 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.

 

14.2.2.    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) total stockholder return; (2) 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; (3) net income;

 

13

 

(4) pretax earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax operating earnings after
interest expense and before bonuses, service fees, and extraordinary or special
items; (7) operating margin; (8) earnings per share; (9) return
on equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital; (14) ratio of
debt to stockholders’ equity; (15) revenue; and (16) gross
merchandise value. 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.

 

14.2.3.    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).

 

14.2.4.    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.

 

14.3.       Written Determinations.

 

All determinations by the Committee as to the
establishment of performance goals, the amount of any potential Performance
Awards and as to the achievement of performance goals relating to Performance
Awards, and the amount of any 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 permitted by Section 162(m), the Committee may delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.

 

14.4.       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 14.2 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 14.2, 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

 

15.                               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.

 

16.                               REQUIREMENTS
OF LAW

 

16.1.       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 

 

15

 

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.

 

16.2.       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.

 

17.                               EFFECT OF
CHANGES IN CAPITALIZATION

 

17.1.       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 dividend but excluding a non-extraordinary dividend 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.

 

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

 

Subject to Section 17.3 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 

 

16

 

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 17.2, 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.

 

17.3.       Corporate
Transaction.

 

Subject to the exceptions
set forth in the last sentence of this Section 17.3
and the last sentence of Section 17.4,
upon the occurrence of a Corporate Transaction:

 

(i)  all outstanding
shares of Restricted Stock shall be deemed to have vested, and all Stock Units
shall be deemed to have vested and the shares of Stock subject thereto shall be
delivered, immediately prior to the occurrence of such Corporate Transaction,
and

 

(ii) either of the
following two actions shall be taken:

 

(A) fifteen 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 days, or

 

(B) the Board may
elect, in its sole discretion, to cancel any outstanding Awards of Options,
Restricted Stock, Stock Units, and/or SARs and pay or deliver, or cause to be
paid or delivered, to the holder thereof 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, (i) any exercise of an Option or SAR
during such fifteen-day period shall be conditioned upon the consummation of
the event and shall be effective only immediately before the consummation of
the event, and (ii) 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 17.3 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
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.

 

17.4.       Adjustments.

 

Adjustments under this Section 17 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 

 

17

 

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 17.1, 17.2 and 17.3.

 

17.5.       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.

 

18.                               GENERAL
PROVISIONS

 

18.1.       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.

 

18.2.       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 otherwise than under the
Plan.

 

18.3.       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 

 

18

 

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 18.3
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.

 

18.4.       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.

 

18.5.       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.

 

18.6.       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.

 

18.7.       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.

 

18.8.       Governing
Law

 

The validity and
construction of this Plan and the instruments evidencing the Awards 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.

 

Section 409A of the
Code (“Section 409A”), or an exemption to Section 409A, with regard
to Awards hereunder that constitute nonqualified deferred compensation within
the meaning of Section 409A. To the extent that the Board determines that
a Grantee would be subject to the additional 20% tax imposed on certain
nonqualified deferred compensation plans pursuant to Section 409A as a
result of any provision of any Award granted under this Plan, such provision
shall be deemed amended to the minimum extent necessary to avoid application of
such additional tax. The nature of any such amendment shall be determined by
the Board.

 

18.9.       Section 409A
of the Code

 

The Board intends to comply
with Section 409A of the Code (“Section 409A”), or an exemption to Section 409A,
with regard to Awards hereunder that constitute nonqualified deferred
compensation within the meaning of Section 409A. To the extent that the
Board determines that a Grantee would be subject to the additional 20% tax
imposed on certain nonqualified deferred compensation plans pursuant to Section 409A
as a result of any provision of any Award granted under this Plan, such
provision shall be deemed amended to the minimum extent necessary to avoid
application of such additional tax. The nature of any such amendment shall be
determined by the Board.

 

***

 

19

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