Lionbridge Technologies (LIOX)

Stock Options and Restricted Stock

The Nominating and Compensation Committee has historically relied on incentive compensation in the form of stock options and restricted stock (“Equity Awards”) to retain and motivate executive officers and employees. Incentive compensation in the form of stock options and restricted stock is designed to provide long-term incentives to executive officers and other employees, to encourage the executive officers and other employees to remain with Lionbridge and to enable them to develop and maintain a stock ownership position in Lionbridge’s Common Stock.

Lionbridge’s Equity Plans permit the Nominating and Compensation Committee to administer the granting of Equity Awards to eligible employees, including executive officers. Equity Awards generally become exercisable based upon a vesting schedule tied to years of future service to Lionbridge. The value realizable from exercisable options or upon the lapsing of restrictions on restricted stock is dependent upon the extent to which Lionbridge’s performance is reflected in the market price of Lionbridge’s Common Stock at any particular point in time. Equity compensation in the form of stock options and restricted stock is designed to provide long-term incentives to executive officers and other employees. The Nominating and Compensation Committee approves the granting of Equity Awards in order to motivate these employees to maximize shareholder value. Generally, options are granted to officers and employees at fair market value on the date of grant and vest over a four-year period and restricted stock grants have restrictions on disposition lapsing from two to four years from the date of grant.

Equity Awards to employees are based on such factors as initiative, achievement and performance, as well as to provide an incentive for attainment of the Company’s goals and objectives for financial and operating performance. In administering grants to executive officers, the Nominating and Compensation Committee evaluates each officer’s total equity compensation package and reviews the analysis prepared by its independent compensation consultant relative to compensation levels at the Comparison Group companies. Based upon its review of the equity holdings of each of the executive officers, including their vesting and exercise prices and the then current value of any unvested options and restricted stock, as well as an analysis of compensation practices of companies in the Comparison Group, the Committee determined that given the anticipated acquisition of BGS and the strategic objectives and demands on each executive officer related to this acquisition, as well as the need to ensure stability and continuity in the Company’s leadership and operations throughout the negotiation of the acquisition, special Equity Awards were appropriate for the executive officers in addition to the annual grant of

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restricted stock and options. Accordingly, the Committee determined, in February 2005, that each executive officer receive special retention grants in the form of restricted stock vesting over two and three years, in additional to an annual grant of stock options and restricted stock vesting over four years.