Document:

exv10w2

Exhibit 10.2

OPTION AGREEMENT 

(Incentive Stock Option)

     This Option Agreement is made as of the       day of                          ,           , between SPS Commerce,
Inc. (formerly known as St. Paul Software, Inc.), a Minnesota corporation (hereinafter called the
“Company”), and                                    , an employee of the Company or one or more of its Subsidiaries
(hereinafter called the “Employee”).

     WHEREAS, the Company has heretofore adopted the St. Paul Software, Inc. 1999 Equity Incentive
Plan (the “Plan”); and

     WHEREAS, it is a requirement of the Plan that an Option Agreement be executed to
evidence the Incentive Stock Option granted to the Employee.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
and for other good and valuable consideration, the parties hereto have agreed, and do hereby
agree, as follows:

     1. Grant of Option. The Company hereby grants to the Employee the right and option
(hereinafter called the “Option”) to purchase all or any part of an aggregate of            shares of the
common stock, without par value, of the Company (“Shares”) (such number being subject to adjustment
as set forth herein and in the Plan) on the terms and conditions set forth herein and in the Plan;
provided, however, that this grant is conditioned on the Employee’s delivery to the Company, prior
to, or simultaneous with, the execution of this Option Agreement, of a properly executed
counterpart signature page to the Amended and Restated Voting and Co-Sale Agreement among the
Company and certain of its shareholders dated as of May 13, 1999 agreeing to be bound by the terms
and conditions therein.

 

 

     2. Type of Option. The Option granted under this Option Agreement is
intended to be an Incentive Stock Option.

     3. Option Price. The option price of the Shares covered by the Option is
$           per Share.

     4. Term
of Option. The term of the Option shall be for a period of ten (10) years from
the date hereof, subject to earlier termination as hereinafter provided.

     5. Exercise of Option.

     (a) Prior to its expiration or termination, and except as hereinafter provided,
the Option (to the extent vested) may be exercised in whole or in part as to the portion
vested and not previously exercised at any time after the date of this Agreement:

     (b) The Employee’s right to exercise the Option shall vest (i) on the twelve (12) month
anniversary of the date of this Agreement (the “Initial Vesting Date”) as to one-fourth (1/4)
of the Shares originally subject to the Option, and (ii) on each of the first twelve (12)
quarterly anniversaries of the Initial Vesting Date as to an additional one-sixteenth (1/16)
of the Shares originally subject to the Option.

     (c) In order to exercise the Option, the person or persons entitled to exercise it shall
deliver to the Company written notice of the number of full Shares with respect to which the
Option is to be exercised. Such notice shall be delivered to the attention of the President
of the Company, or such other person as the Board, or the Committee if one has been
appointed, shall designate. Unless (i) the Company, in its discretion, establishes
“cashless exercise” procedures pursuant to Section 10.2 of the Plan, and (ii) the Board, or
the Committee if one has been appointed, in its discretion, permits the person or persons
entitled to exercise the Option to utilize such “cashless exercise” procedures, the notice
shall be accompanied by payment in full for any Shares being purchased, which payment shall
be in

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cash or, upon the approval of the Board, or the Committee if one has been appointed, by
delivery of certificates of Shares that have been held for at least six (6) months, duly
endorsed in blank, equal in value to the purchase price of the Shares to be purchased based
on the Fair Market Value of the Shares on the date of exercise or, upon the approval of the
Board, or the Committee if one has been appointed, by a combination
of cash and Shares.

     (d) No Shares shall be issued until full payment therefor has been made, and the Employee
shall have none of the rights of a shareholder in respect of such Shares until full payment
therefor has been made.

     6. Nontransferability. The Option shall not be transferable, other than: (a) by
will or the laws of descent and distribution, and the Option may be exercised, during the lifetime
of the holder of the Option, only by him, or in the event of death, his Successor, or in the event
of disability, his personal representative, or (b) pursuant to a qualified domestic relations
order, as defined in the Code or ERISA or the rules thereunder, but only to the extent such
transfer is permitted under the Code or the Treasury Regulations thereunder without affecting the
Option’s qualification under Section 422 of the Code as an Incentive Stock Option.

     7. Termination of Employment. In the event of the complete termination of the
Employee’s employment with the Company and its Subsidiaries for any reason other than death or
disability, then (a) the Option may be exercised by the Employee (to the extent that he shall have
been entitled to do so at the termination of his employment) at any time within three (3) months
after the date of such termination, but not beyond the original term thereof, (b) the portion of
the Option that has not vested (i.e., that is not then exercisable) as of the date of the
Employee’s complete termination of employment with the Company and its Subsidiaries shall
automatically terminate as of the date of the Employee’s complete termination of employment with
the Company and its

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Subsidiaries, and (c) the vested portion of the Option shall automatically terminate upon the
expiration of the three month period described above to the extent not theretofore exercised. So
long as the Employee shall continue to be an employee of the Company or one or more of its
Subsidiaries, the Option shall not be affected by any change of duties or position. Nothing in this
Option Agreement shall confer upon the Employee any right to continue in the employ of the Company
or any of its Subsidiaries or interfere in any way with the right of the Company or any such
Subsidiary to terminate his employment at any time.

     8. Death of Employee. If the Employee shall die while he shall be employed by the
Company or one or more of its Subsidiaries, or within three (3) months after the complete
termination of his employment with the Company and its Subsidiaries, then (a) the Option may be
exercised by the Employee’s Successor (to the extent the Employee shall have been entitled to do so
at the time of his death) at any time within one (1) year after the date of the Employee’s death,
but not beyond the term of the Option, (b) the portion of the Option that has not vested as of the
date of the Employee’s death shall automatically terminate as of the date of the Employee’s death,
and (c) the vested portion of the Option shall automatically terminate upon the expiration of the
one (1) year period described above to the extent not theretofore exercised.

     9. Disability of Employee. If the employment of the Employee shall terminate on
account of his having become “disabled”, as defined in Section 22(e)(3) of the Code, then (a) the
Option may be exercised (to the extent the Employee shall have been entitled to do so at the time
of the termination of his employment by reason of his having become disabled) by the Employee or
the Employee’s personal representative, as the case may be, at any time within one (1) year after
the date on which the Employee’s employment terminated by reason of his having become disabled, but
not beyond the original term of the Option, (b) the portion of the Option that has not vested as of
the

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termination of the Employee’s employment by reason of his disability shall automatically terminate
as of such date, and (c) the Option shall automatically terminate upon the expiration of such one
(1) year period to the extent not theretofore exercised.

     10. Taxes. The Company shall have the right to require a person entitled to
receive Shares pursuant to the exercise of this Option under the Plan to pay the Company the amount
of any taxes which the Company is or will be required to withhold with respect to such Shares
before the certificate for such Shares is delivered pursuant to the Option. If the Employee
disposes of Shares acquired pursuant to this Option in a transaction considered to be a
disqualifying disposition under Sections 421 and 422 of the Code, the Employee shall promptly
notify the Company of such disposition and the Company shall have the right to deduct any taxes
required to be withheld as a result thereof from any amounts payable then or at any time thereafter
to the Employee. Furthermore, the Company may elect to deduct such taxes from any other amounts
then payable in cash or in shares or from any other amounts payable any time thereafter to the
Employee.

     11. Adjustments Upon Changes in Capitalization. In the event of changes in all of the
outstanding Shares by reason of stock dividends, stock splits, reclassifications,
recapitalizations, mergers, consolidations, combinations, or exchanges of shares, separations,
reorganizations, liquidations, or similar events, or in the event of extraordinary cash or non-cash
dividends being declared with respect to the Shares, or similar transactions or events, the number
and class of Shares subject to the Option hereby granted, the option price and all of the other
applicable provisions thereof shall, subject to the provisions of the Plan, be correspondingly
equitably adjusted by the Board, or the Committee if one has been appointed (which adjustment may,
but need not, include payment to the holder of the Option, in cash or in shares, in an amount equal
to the difference between the option price and the then current Fair Market Value of the Shares
subject to the Option

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as equitably determined by the Board or the Committee, as the case may be), as it shall decide in
its sole discretion. Any such adjustment may provide for the elimination of any fractional share
which might otherwise be subject to the Option.

     12. Delivery of Shares on Exercise. Delivery of certificates for Shares pursuant
to the exercise of the Option may be postponed by the Company for such period as may be required
for it with reasonable diligence to comply with any applicable requirements of any federal, state
or local law or regulation or any administrative or quasi-administrative requirement applicable to
the sale, issuance, distribution or delivery of such Shares. The Board, or the Committee if one
has been appointed, may, in its sole discretion, require the holder of the Option to furnish the
Company with appropriate representations and a written investment letter prior to the exercise of
the Option or the delivery of any Shares pursuant to the Option.

     13. Incorporation of Provisions of the Plan. All of the provisions of the Plan,
pursuant to which this Option is granted, are hereby incorporated by reference and made a part
hereof as if specifically set forth herein, and to the extent of any conflict between this Option
Agreement and the terms contained in the Plan, the Plan shall control. To the extent any
capitalized terms are not otherwise defined herein, they shall have the meanings set forth in the
Plan.

     14. Invalidity of Provisions. The invalidity or unenforceability of any provision of
this Option Agreement as a result of a violation of any state or federal law, or of the rules or
regulations of any governmental regulatory body, or any securities exchange shall not affect the
validity or enforceability of the remainder of this Option Agreement.

     15. Waiver and Modification. The provisions of this Option Agreement may not be waived
or modified unless such waiver or modification is in writing and signed by the parties hereto.

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     16. 
    Interpretation. All decisions or interpretations made by the Board, or the
Committee
if one has been appointed, with regard to any question arising under the Plan or this Option
Agreement as provided by Section 4 of the Plan, shall be binding and conclusive on the Company and
the Employee.

     17. Multiple Counterparts. This Option Agreement may be signed in multiple
counterparts, all of which when taken together shall constitute an original agreement. The
execution by one party of any counterpart shall be sufficient execution by that party, whether or
not the same counterpart has been executed by any other party.

     18. Governing Law. This Option Agreement shall be governed by the laws of the State of
Minnesota.

     IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its
duly authorized officer, and the Employee has hereunto set his hand, all as of the day and year
first above written.

	 	 	 	 	 
	 	SPS COMMERCE, INC.

 	 
	 	By:  	                    	 
	 	 	 	 
	 	 	 	 
	 

7exv10w3

Exhibit 10.3

SPS COMMERCE, INC.

2001 STOCK OPTION PLAN

[Amended and Restated As of July 24, 2008]

     1. Purpose. The purpose of this 2001 Stock Option Plan (the “Plan”) is to promote the
interests of SPS Commerce, Inc., a Delaware corporation (the “Company”), and its stockholders by
providing personnel of the Company and any parent or subsidiaries thereof, and any other
individuals and entities who provide services to the Company or any parent or subsidiaries in the
capacity of non-employee directors or advisors or consultants, with an opportunity to acquire a
proprietary interest in the Company and thereby develop a stronger incentive to put forth maximum
effort for the continued success and growth of the Company. In addition, the opportunity to
acquire a proprietary interest in the Company will aid in attracting and retaining personnel of
outstanding ability.

     2. Administration.

          (a) General. This Plan shall be administered by a committee of two or more directors
of the Company (the “Committee”) appointed by the Company’s Board of Directors (the “Board”). If
the Board has not appointed a committee to administer this Plan, then the Board shall constitute
the Committee. The Committee shall have the power, subject to the limitations contained in this
Plan, to fix any terms and conditions for the grant or exercise of any award under this Plan. No
director shall serve as a member of the Committee unless such director shall be a “non-employee
director” as that term is defined in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or any successor statute or regulation comprehending the
same subject matter. A majority of the members of the Committee shall constitute a quorum for any
meeting of the Committee, and the acts of a majority of the members present at any meeting at which
a quorum is present or the acts unanimously approved in writing by all members of the Committee
shall be the acts of the Committee. Subject to the provisions of this Plan, the Committee may from
time to time adopt such rules for the administration of this Plan as it deems appropriate. The
decision of the Committee on any matter affecting this Plan, or the rights and obligations arising
under this Plan or any award granted hereunder, shall be final, conclusive and binding upon all
persons, including without limitation the Company, stockholders and optionees.

          (b) Indemnification. To the full extent permitted by law, (i) no member of the
Committee or person to whom authority under this Plan is delegated shall be liable for any action,
omission or determination taken or made in good faith with respect to this Plan or any award
granted hereunder and (ii) the members of the Committee and each person to whom authority under
this Plan is delegated shall be entitled to indemnification by the Company against and from any
loss incurred by such member or person by reason of any such actions and determinations.

          (c) Delegation of Authority. The Committee may delegate all or any part of its
authority under this Plan to the Chief Executive Officer of the Company for purposes of granting
and administering awards granted to persons other than persons who are then subject to the
reporting requirements of Section 16 of the Exchange Act (“Section 16 Individuals”). The Chief
Executive Officer of the Company may, in turn, delegate all or a portion of the delegated authority
to such other officer or officers of the Company as the Chief Executive Officer may determine.

          (d) Action by Board. Notwithstanding subparagraph 2(a) above, any grant of awards
hereunder to any director of the Company who is not an employee of the Company at the time of grant
(“Non-Employee Director Award”), and any action taken by the Company with respect to any
Non-Employee Director Award, including any amendment thereto, and any acceleration of the vesting
of

 

 

any option constituting a Non-Employee Director Award, any extension of the time within which
any option constituting a Non-Employee Director Award may be exercised, any determination pursuant
to paragraph 8 relating to the payment of the purchase price of Shares (as defined in paragraph 3
below) subject to an option constituting a Non-Employee Director Award, or any action pursuant to
paragraph 9 relating to the payment of withholding taxes, if any, through the use of Shares with
respect to a Non-Employee Director Award shall be subject to prior approval by the Board.

     3. Shares. The shares that may be made subject to awards granted under this Plan shall be
authorized and unissued shares of Common Stock of the Company (“Shares,” and each individually a
“Share”), and they shall not exceed 6,050,000 Shares in the aggregate, subject to adjustment as
provided in paragraph 13, below, except that, if any option lapses or terminates for any reason
before such option has been completely exercised, the Shares covered by the unexercised portion of
such option may again be made subject to options granted under this Plan. An option may not be
exercisable for a fraction of a Share.

     4. Eligible Participants. Options may be granted under this Plan to any employee of the
Company, or any parent or subsidiary thereof, including any such person who is also an officer or
director of the Company or any parent or subsidiary thereof. Non-statutory stock options (as
defined in subparagraph 5(a) below) also may be granted to (i) any employee of the Company, or any
parent or subsidiary thereof, (ii) any director of the Company who is not an employee of the
Company or any parent or subsidiary thereof, (iii) other individuals or entities who are not
employees but who provide services to the Company or a parent or subsidiary thereof in the capacity
of an advisor or consultant, and (iv) any individual or entity that the Company desires to induce
to become an employee, advisor or consultant, but any such grant shall be contingent upon such
individual or entity becoming employed by (or becoming an advisor or consultant to) the Company or
a parent or subsidiary thereof. References herein to “employment” and similar terms (except
“employee”) shall include the providing of services in the capacity of an advisor or consultant or
as a director. The employees and other individuals and entities to whom options may be granted
pursuant to this paragraph 4 are referred to herein as “Eligible Participants.”

     5. Terms and Conditions of Options.

          (a) General. Subject to the terms and conditions of this Plan, the Committee may,
from time to time during the term of this Plan, grant to such Eligible Participants as the
Committee may determine options to purchase such number of Shares of the Company on such terms and
conditions as the Committee may determine. In determining the Eligible Participants to whom
options shall be granted and the number of Shares to be covered by each option, the Committee may
take into account the nature of the services rendered by the respective Eligible Participants,
their present and potential contributions to the success of the Company, and such other factors as
the Committee in its sole discretion may deem relevant. The date and time of approval by the
Committee of the granting of an option shall be considered the date and the time of the grant of
such option. The Committee in its sole discretion may designate whether an option granted to an
employee is to be considered an “incentive stock option” (as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”), or any amendment thereto) or a
non-statutory stock option (an option granted under this Plan that is not intended to be an
“incentive stock option”). The Committee may grant both incentive stock options and non-statutory
stock options to the same employee. However, if an incentive stock option and a non-statutory
stock option are awarded simultaneously, such options shall be deemed to have been awarded in
separate grants, shall be clearly identified, and in no event shall the exercise of one such
option affect the right to exercise the other. To the extent that the aggregate Fair Market Value
(as defined in paragraph 7 below) of Shares with respect to which incentive stock options are
exercisable for

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the first time by any employee during any calendar year (under all incentive stock
option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such
options shall be treated as non-statutory stock options. Notwithstanding the foregoing, no
incentive stock option may be granted under this Plan unless this Plan is approved by the
stockholders of the Company within twelve months after the effective date of this Plan.

          (b) Purchase Price. The purchase price of each Share subject to an option granted
pursuant to this paragraph 5 shall be fixed by the Committee, subject, however, to the remainder of
this subparagraph 5(b). For non-statutory stock options, such purchase price may be set at any
price the Committee may determine; provided, however, that such purchase price shall be not less
than 85% of the Fair Market Value of a Share on the date of grant. For incentive stock options,
such purchase price shall be no less than 100% of the Fair Market Value of a Share on the date of
grant, provided that if such incentive stock option is granted to an employee who owns, or is
deemed under Section 424(d) of the Code to own, at the time such option is granted, stock of the
Company (or of any parent or subsidiary of the Company) possessing more than 10% of the total
combined voting power of all classes of stock therein (a “10% Stockholder”), such purchase price
shall be not less than 110% of the Fair Market Value of a Share on the date of grant.

          (c) Vesting. Each option agreement provided for in paragraph 6 shall specify when
each option granted under this Plan shall become exercisable with respect to the Shares covered by
the option. Notwithstanding the provisions of any option agreement provided for in paragraph 6,
the Committee may, in its sole discretion, declare at any time that any option granted under this
Plan shall be immediately exercisable.

          (d) Termination. Each option granted pursuant to this paragraph 5 shall expire, and
all rights to purchase Shares thereunder shall terminate, on the earliest of:

	 	(i)	 	ten years after the date such option is
granted (or in the case of an incentive stock option granted to
a 10% Stockholder, five years after the date such option is
granted) or on such date prior thereto as may be fixed by the
Committee on or before the date such option is granted;
	 
	 	(ii)	 	the expiration of the period after the
termination of the optionee’s employment within which the
option is exercisable as specified in paragraph 10(b) or 10(c),
whichever is applicable (provided that the Committee may, in
any option agreement provided for in paragraph 6 or by
Committee action with respect to any outstanding option, extend
the periods specified in paragraph 10(b) and 10(c));
	 
	 	(iii)	 	termination of an optionee’s
employment by the Company for Cause (as hereinafter defined);
or
	 
	 	(iv)	 	the date, if any, fixed for
cancellation pursuant to paragraph 11(c) or 12 below.

     6. Option Agreements. All options granted under this Plan shall be evidenced by a written
agreement in such form or forms as the Committee may from time to time determine, which agreement

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shall, among other things, designate whether the options being granted thereunder are non-statutory
stock options or incentive stock options.

     7. Fair Market Value. For purposes of this Plan, the “Fair Market Value” of a Share at a
specified date shall, unless otherwise expressly provided in this Plan, mean the closing or last
sale price of a Share on the date immediately preceding such date or, if no sale of Shares shall
have occurred on that date, on the next preceding day on which a sale of Shares occurred, on the
Composite Tape for New York Stock Exchange listed shares or, if Shares are not quoted on the
Composite Tape for New York Stock Exchange listed shares, on the Nasdaq National Market or any
similar system then in use or, if Shares are not included in the Nasdaq National Market or any
similar system then in use, on the Nasdaq SmallCap Market or any similar system then in use,
provided that if the Shares in question are not quoted on any such system, Fair Market Value shall
be what the Committee determines in good faith to be 100% of the fair market value of a Share as of
the date in question. Notwithstanding anything stated in this paragraph 7, if the applicable
securities exchange or system has closed for the day by the time the determination is being made,
all references in this paragraph to the date immediately preceding the date in question shall be
deemed to be references to the date in question.

     8. Manner of Exercise of Options.

          (a) General. A person entitled to exercise an option granted under this Plan may,
subject to its terms and conditions and the terms and conditions of this Plan, exercise it in whole
at any time, or in part from time to time, by delivery to the Company at its principal executive
office, to the attention of its Secretary, of written notice of exercise, specifying the number of
Shares with respect to which the option is being exercised and payment of the purchase price of the
Shares. The granting of an option to a person shall give such person no rights as a stockholder
except as to Shares issued to such person.

          (b) Payment. The consideration to be paid for the Shares, including the method(s) of
payment, shall be determined by the Committee (and, in the case of an incentive stock option, shall
be determined at the time of grant) in its sole discretion and may consist entirely of (i) cash
(including check, bank draft or money order); (ii) delivery of optionee’s promissory note with such
recourse, interest, security and redemption provisions as the Committee determines to be
appropriate; (iii) cancellation of indebtedness; (iv) delivery to the Company of unencumbered
Shares having an aggregate Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the option is exercised; (v) authorization of the
Company to retain from the total number of Shares as to which the option is exercised that number
of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the
total number of shares as to which the option is exercised; (vi) any combination of the methods of
payments described above; or (vii) such other consideration and method of payment for the issuance
of Shares to the extent permitted under applicable law. Notwithstanding the foregoing, no person
shall be permitted to pay any portion of the purchase price with Shares, or by authorizing the
Company to retain Shares upon exercise of the option, if the Committee, in its sole discretion,
determines that payment in such manner is undesirable. Except for delivery of a promissory note by
an optionee as provided above, the purchase price of the Shares with respect to which an option is
being exercised shall be payable in full at the time of exercise, provided that, to the extent
permitted by law, the holder of an option may simultaneously exercise an option and sell all or a
portion of the Shares thereby acquired pursuant to a brokerage or similar relationship and use the
proceeds from such sale to pay the purchase price of such Shares.

     9. Tax Withholding. Delivery of Shares upon exercise of any non-statutory stock option
granted under this Plan shall be subject to any required withholding taxes. A person exercising a

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non-statutory stock option may, as a condition precedent to receiving the Shares, be required to
pay the Company a cash amount equal to the amount of any required withholdings. In lieu of all or
any part of such a cash payment, the Committee may, but shall not be required to, provide in any
option agreement provided for in paragraph 6 (or provide by Committee action with respect to any
outstanding option) that a person exercising an option may cover all or any part of the required
withholdings, and any additional withholdings up to the amount needed to cover the individual’s
full FICA and federal, state and local income tax liability with respect to income arising from the
exercise of the option, through the delivery to the Company of unencumbered Shares, through a
reduction in the number of Shares delivered to the person exercising the option or through a
subsequent return to the Company of Shares delivered to the person exercising the option (in each
case, such Shares having an aggregate Fair Market Value on the date of exercise equal to the amount
of the withholding taxes being paid through such delivery, reduction or subsequent return of
Shares).

     10. Transferability and Termination of Employment.

          (a) Transferability. During the lifetime of an optionee, only such optionee or his or
her guardian or legal representative may exercise options granted under this Plan, and no option
granted under this Plan shall be assignable or transferable by the optionee otherwise than by will
or the laws of descent and distribution or, with respect only to non-statutory stock options,
pursuant to a domestic relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder; provided, however, that any optionee may transfer a
non-statutory stock option granted under this Plan to a member or members of his or her immediate
family (i.e., his or her children, grandchildren and spouse) or to one or more trusts for the
benefit of such family members or partnerships in which such family members are the only partners,
if (i) the option agreement with respect to such options expressly so provides either at the time
of initial grant or by amendment to an outstanding option agreement and (ii) the optionee does not
receive any consideration for the transfer. Any options held by any such transferee shall continue
to be subject to the same terms and conditions that were applicable to such options immediately
prior to their transfer and may be exercised by such transferee as and to the extent that such
option has become exercisable and has not terminated in accordance with the provisions of the Plan
and the applicable option agreement. For purposes of any provision of this Plan relating to notice
to an optionee or to vesting or termination of an option upon the death, disability or termination
of employment of an optionee, the references to “optionee” shall mean the original grantee of an
option and not any transferee.

          (b) Termination of Employment During Lifetime. During the lifetime of an optionee who
is an employee of the Company or any parent or subsidiary thereof at the time of grant of an
option, an option granted to such optionee may be exercised only while the optionee is employed by
the Company or by a parent or subsidiary thereof, and only if such optionee has been continuously
so employed since the date the option was granted, except that:

	 	(i)	 	an option shall continue to be
exercisable for 30 days after termination of the optionee’s
employment but only to the extent that the option was
exercisable immediately prior to such optionee’s termination of
employment; provided, however, that if termination of the
optionee’s employment shall have been for Cause (as hereinafter
defined), any option held by such optionee
shall expire, and all rights to purchase Shares thereunder
shall terminate, immediately upon such termination; for
purposes of this paragraph 10(b)(i), “Cause” shall be deemed
to exist upon (A) the failure to cure a material breach by
the optionee of the

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	 	 	 	terms of any
non-competition/non-solicitation agreement between the
Company and the optionee within 30 days of receipt of written
notice of such breach from the Company, (B) gross negligence
or willful misconduct by the optionee, (C) conviction of the
optionee of, or the entry of a pleading of guilty or nolo
contendere by the optionee to, any crime involving moral
turpitude or any felony, (D) willful violation of specific
and lawful instructions from the Board or the Company’s Chief
Executive Officer that are reasonably related to the
optionee’s employment by the Company, and (E) fraud,
embezzlement, theft or proven dishonesty against the Company;
	 
	 	(ii)	 	in the case of an optionee who is
disabled (as hereinafter defined) while employed, an option
shall continue to be exercisable for one year after termination
of such optionee’s employment; and
	 
	 	(iii)	 	as to any optionee whose termination
occurs following a declaration pursuant to paragraph 12 below,
an option may be exercised at any time permitted by such
declaration.

          (c) Termination Upon Death. With respect to an optionee whose employment terminates
by reason of death, any option granted to such optionee may be exercised within one year after the
death of such optionee.

          (d) Vesting Upon Disability or Death. In the event of the disability (as hereinafter
defined) or death of an optionee, any option granted to such optionee that was not previously
exercisable shall become immediately exercisable in full if (i) the disabled or deceased optionee
shall have been continuously employed by the Company or a parent or subsidiary thereof between the
date such option was granted and the date of such disability or death and (ii) the option agreement
with respect to such option expressly so provides either at the time of initial grant or by
amendment to an outstanding option agreement. “Disability” of an optionee shall mean any physical
or mental incapacitation whereby such optionee is therefore unable for a period of twelve
consecutive months or for an aggregate of twelve months in any twenty-four consecutive month period
to perform his or her duties for the Company or any parent or subsidiary thereof. “Disabled,” with
respect to any optionee, shall mean that such optionee has incurred a Disability.

          (e) Transfers and Leaves of Absence. Neither the transfer of employment of a person
to whom an option is granted between any combination of the Company, a parent corporation or a
subsidiary thereof, nor a leave of absence granted to such person and approved by the Committee,
shall be deemed a termination of employment for purposes of this Plan. The terms “parent” or
“parent corporation” and “subsidiary” as used in this Plan shall have the meaning ascribed to
“parent corporation” and “subsidiary corporation”, respectively, in Sections 424(e) and (f) of the
Code.

          (f) Right to Terminate Employment. Nothing contained in this Plan, or in any option
granted pursuant to this Plan, shall confer upon any optionee any right to continued employment
by the Company or any parent or subsidiary of the Company or limit in any way the right of the
Company or any such parent or subsidiary to terminate such optionee’s employment at any time.

Page 6

 

          (g) Expiration Date. In no event shall any option be exercisable at any time after
the time it shall have expired in accordance with paragraph 5(d) of this Plan. When an option is
no longer exercisable, it shall be deemed to have lapsed or terminated and will no longer be
outstanding.

     11. Change in Control.

          (a) Definition. For purposes of this Plan, a “Change in Control” of the Company shall
be deemed to occur if any of the following occur:

     (1) Any “person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) acquires or becomes a “beneficial owner” (as defined in
Rule 13d-3 or any successor rule under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities entitled
to vote generally in the election of directors (“Voting Securities”),
provided, however, that the following shall not constitute a Change in
Control pursuant to this paragraph (a)(1):

	 	(A)	 	any acquisition of Shares
or Voting Securities of the Company directly from the
Company;
	 
	 	(B)	 	any acquisition or
beneficial ownership by the Company or a subsidiary;
	 
	 	(C)	 	any acquisition or
beneficial ownership by any employee benefit plan (or
related trust) sponsored or maintained by the Company or
one or more of its subsidiaries;
	 
	 	(D)	 	any acquisition or
beneficial ownership by any corporation with respect to
which, immediately following such acquisition, more than
50% of both the combined voting power of the Company’s
then outstanding Voting Securities and the Shares of the
Company is then beneficially owned, directly or
indirectly, by all or substantially all of the persons
who beneficially owned Voting Securities and Shares of
the Company immediately prior to such acquisition in
substantially the same proportions as their ownership of
such Voting Securities and Shares, as the case may be,
immediately prior to such acquisition;

     (2) A majority of the members of the Board of Directors of the Company
shall not be Continuing Directors. “Continuing Directors” shall mean: (A)
individuals who, on the date hereof, are directors of the Company, (B)
individuals elected as directors of the Company subsequent to the date
hereof for whose election proxies shall have been solicited by the Board of Directors
of the Company or (C) any individual elected or appointed by the Board of
Directors of the Company to fill vacancies on the Board of Directors of the
Company caused by death or resignation (but not by removal) or to fill
newly-created directorships;

Page 7

 

     (3) Approval by the stockholders of the Company of a reorganization,
merger or consolidation of the Company or a statutory exchange of
outstanding Voting Securities of the Company, unless, immediately following
such reorganization, merger, consolidation or exchange, all or substantially
all of the persons who were the beneficial owners, respectively, of Voting
Securities and Shares of the Company immediately prior to such
reorganization, merger, consolidation or exchange beneficially own, directly
or indirectly, more than 50% of, respectively, the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors and the then outstanding shares of common stock, as
the case may be, of the corporation resulting from such reorganization,
merger, consolidation or exchange in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger,
consolidation or exchange, of the Voting Securities and Shares of the
Company, as the case may be; or

     (4) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other
disposition of all or substantially all of the assets of the Company (in one
or a series of transactions), other than to a corporation with respect to
which, immediately following such sale or other disposition, more than 50%
of, respectively, the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and the then outstanding shares of common stock of such
corporation is then beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Shares of the Company immediately
prior to such sale or other disposition in substantially the same
proportions as their ownership, immediately prior to such sale or other
disposition, of the Voting Securities and Shares of the Company, as the case
may be.

          (b) Acceleration of Vesting. If, but only if, so provided in an option agreement
provided for in paragraph 6 or by Committee action with respect to any outstanding option, and
notwithstanding anything in subparagraph 5(c) above to the contrary, if a Change in Control of the
Company shall occur, then such option, if not already exercised in full or otherwise terminated,
expired or cancelled, shall become immediately exercisable in full and shall remain exercisable
during the remaining term thereof.

          (c) Cash Payment. If a Change in Control of the Company shall occur, then, so long as
a majority of the members of the Board are Continuing Directors, the Committee, in its sole
discretion, and without the consent of the holder of any option affected thereby, may determine
that some or all outstanding options shall be cancelled as of the effective date of any such Change
in Control and that the holder or holders of such cancelled options shall receive, with respect to
some or all of the Common Shares subject to such options, as of the date of such cancellation, cash
in an amount, for each Share subject to an option, equal to the excess of the per Share Fair Market Value of such Shares
immediately prior to such Change in Control of the Company over the exercise price per Share of
such options.

          (d) Limitation on Change in Control Payments. Notwithstanding anything in
subparagraph 11(b) or 11(c) above or paragraph 12 below to the contrary, if, with respect to an
optionee, the acceleration of the exercisability of an option or the payment of cash in exchange
for all or part of an

Page 8

 

option as provided in subparagraph 11(b) or 11(c) above or paragraph 12 below
(which acceleration or payment could be deemed a “payment” within the meaning of Section 280G(b)(2)
of the Code), together with any other payments which such optionee has the right to receive from
the Company or any corporation which is a member of an “affiliated group” (as defined in Section
1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a
member, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then
such acceleration of exercisability and payments pursuant to subparagraph 11(b) or 11(c) above or
paragraph 12 below shall be reduced to the largest amount as, in the sole judgment of the
Committee, will result in no portion of such payments being subject to the excise tax imposed by
Section 4999 of the Code.

     12. Dissolution, Liquidation, Merger. In the event of (a) the proposed dissolution or
liquidation of the Company, (b) a proposed sale of substantially all of the assets of the Company
or (c) a proposed merger, consolidation of the Company with or into any other entity, regardless of
whether the Company is the surviving corporation, or a proposed statutory share exchange with any
other entity (the actual effective date of the dissolution, liquidation, sale, merger,
consolidation or exchange being herein called an “Event”), the Committee may, but shall not be
obligated to, either (i) if the Event is a merger, consolidation or statutory share exchange, make
appropriate provision for the protection of outstanding options granted under this Plan by the
substitution, in lieu of such options, of options to purchase appropriate voting common stock (the
“Survivor’s Stock”) of the corporation surviving any such merger or consolidation or, if
appropriate, the parent corporation of the Company or such surviving corporation, or,
alternatively, by the delivery of a number of shares of the Survivor’s Stock which has a Fair
Market Value as of the effective date of such merger, consolidation or statutory share exchange
equal to the product of (x) the excess of (A) the Event Proceeds per Share (as hereinafter defined)
covered by the option as of such effective date over (B) the exercise price per Share of the Shares
subject to such option, times (y) the number of Shares covered by such option, or (ii) declare, at
least twenty days prior to the Event, and provide written notice to each optionee of the
declaration, that each outstanding option, whether or not then exercisable, shall be cancelled at
the time of, or immediately prior to the occurrence of, the Event (unless it shall have been
exercised prior to the occurrence of the Event). In connection with any declaration pursuant to
clause (ii) of the preceding sentence, the Committee may, but shall not be obligated to, cause
payment to be made, within twenty days after the Event, in exchange for each cancelled option to
each holder of an option that is cancelled, of cash equal to the amount (if any), for each Share
covered by the cancelled option, by which the Event Proceeds per Share (as hereinafter defined)
exceeds the exercise price per Share covered by such option. At the time of any declaration
pursuant to clause (ii) of the first sentence of this paragraph 12, each option that has not
previously expired pursuant to subparagraph 5(d)(i), 5(d)(ii) or 5(d)(iii) of this Plan or been
cancelled pursuant to paragraph 11(c) of this Plan shall immediately become exercisable in full and
each holder of an option shall have the right, during the period preceding the time of cancellation
of the option, to exercise his or her option as to all or any part of the Shares covered thereby.
In the event of a declaration pursuant to clause (ii) of the first sentence of this paragraph 12,
each outstanding option granted pursuant to this Plan that shall not have been exercised prior to
the Event shall be cancelled at the time of, or immediately prior to, the Event, as provided in the
declaration, and this Plan shall terminate at the time of such cancellation, subject to the payment
obligations of the Company provided in this paragraph 12. Notwithstanding the foregoing, no person
holding an option shall be entitled to the payment provided in this paragraph 12 if such option
shall have expired pursuant to subparagraph 5(d)(i), 5(d)(ii) or 5(d)(iii) of this
Plan or been cancelled pursuant to paragraph 11(c) of this Plan. For purposes of this paragraph
12, “Event Proceeds per Share” shall mean the cash plus the fair market value, as determined in
good faith by the Committee, of the non-cash consideration to be received per Share by the
stockholders of the Company upon the occurrence of the Event.

     13. Adjustments. In the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering,
or extraordinary dividend or divestiture (including a spin-off), or any other change in the
corporate structure

Page 9

 

or Shares of the Company, the Committee (or if the Company does not survive any
such transaction, a comparable committee of the Board of Directors of the surviving corporation)
may (but shall not be obligated to), without the consent of any holder of an option, make such
adjustment as it determines in its discretion to be appropriate as to the number and kind of
securities subject to and reserved under this Plan and, in order to prevent dilution or enlargement
of rights of participants in this Plan, the number and kind of securities issuable upon exercise of
outstanding options and the exercise price thereof.

     14. Substitute Options. Options may be granted under this Plan from time to time in
substitution for stock options held by employees of other corporations who are about to become
employees of the Company, or any parent or subsidiary thereof, or whose employer is about to become
a subsidiary of the Company, as the result of a merger or consolidation of the Company or a
subsidiary of the Company with another corporation, the acquisition by the Company or a subsidiary
of the Company of all or substantially all the assets of another corporation or the acquisition by
the Company or a subsidiary of the Company of at least 50% of the issued and outstanding stock of
another corporation. The terms and conditions of the substitute options so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at the time of the
grant may deem appropriate to conform, in whole or in part, to the provisions of the stock options
in substitution for which they are granted, but with respect to stock options which are incentive
stock options, no such variation shall be permitted which affects the status of any such substitute
option as an incentive stock option.

     15. Compliance With Legal Requirements.

          (a) General. No certificate for Shares distributable under this Plan shall be issued
and delivered unless the issuance of such certificate complies with all applicable legal
requirements including, without limitation, compliance with the provisions of applicable state
securities laws, the Securities Act of 1933, as amended, and the Exchange Act, and any delivery
requirements set forth in the option agreement provided for in paragraph 6.

          (b) Rule 16b-3. With respect to Section 16 Individuals, transactions under this Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of this Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.

     16. Governing Law. To the extent that federal laws do not otherwise control, this Plan and
all determinations made and actions taken under this Plan shall be governed by the laws of the
State of Delaware, without regard to the conflicts of law provisions thereof, and construed
accordingly.

     17. Amendment and Discontinuance of Plan. The Board may at any time amend, suspend or
discontinue this Plan; provided, however, that no amendment to this Plan shall, without the consent
of the holder of the option, alter or impair any option previously granted under this Plan. To the
extent considered necessary to comply with applicable provisions of the Code, any such amendments to this
Plan may be made subject to approval by the stockholders of the Company.

     18. Term.

          (a) Effective Date. This Plan shall be effective as of August 22, 2001.

          (b) Termination. This Plan shall remain in effect until all Shares subject to it are
distributed or this Plan is terminated under paragraph 17 above. No award of an incentive stock
option shall be made under this Plan more than ten years after the effective date of this Plan (or
such other limit as may be required by the Code) if such limitation is necessary to qualify the
option as an incentive stock option.

Page 10

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