Exhibit 10.1

 

CV THERAPEUTICS, INC.

 

2004 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS DECEMBER 14, 2004

 

1. PURPOSES.

 

(a) Eligible Stock Award Recipients. Only Eligible Participants may receive
Stock Awards under this Plan.

 

(b) General Purpose. The purpose of the Plan is to provide a means by which
Eligible Participants may be given an opportunity to benefit from increases in
value of the Common Stock through the granting of Stock Awards, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.

 

2. DEFINITIONS.

 

(a) “Affiliate” means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

 

(b) “Board” means the Board of Directors of the Company.

 

(c) “Code” means the Internal Revenue Code of 1986, as amended.

 

(d) “Committee” means a committee of one or more members of the Board appointed
by the Board in accordance with subsection 3(c).

 

(e) “Common Stock” means the common stock of the Company.

 

(f) “Company” means CV Therapeutics, Inc., a Delaware corporation.

 

(g) “Consultant” means any person, including an advisor, (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term “Consultant” shall not include Directors.

 

(h) “Continuous Service” means that the Participant’s service with the Company
or an Affiliate, whether as an Employee or Consultant, is not interrupted or
terminated. The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee or Consultant or a
change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service to the
Company or an Affiliate. For example, a change in status without interruption
from an Employee of the Company to a Consultant of an Affiliate will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party’s

 

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sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.

 

(i) “Director” means a member of the Board of Directors of the Company.

 

(j) “Disability” means the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code.

 

(k) “Eligible Participant” means any Employee who has not previously been an
Employee or Director of the Company or an Affiliate, or following a bona fide
period of non-employment by the Company or an Affiliate, if he or she is granted
a Stock Award in connection with his or her commencement of employment with the
Company or an Affiliate and such grant is an inducement material to his or her
entering into employment with the Company or an Affiliate. The Board may in its
discretion adopt procedures from time to time to ensure that an Employee is
eligible to participate in the Plan prior to the granting of any Stock Awards to
such Employee under the Plan (including, without limitation, a requirement, if
any, that each such Employee certify to the Company prior to the receipt of a
Stock Award under the Plan that he or she has not been previously employed by
the Company or an Affiliates, or if previously employed, has had a bona fide
period of non-employment, and that the grant of Stock Awards under the Plan is
an inducement material to his or her agreement to enter into employment with the
Company or an Affiliates).

 

(l) “Employee” means any person employed by the Company or an Affiliate. Mere
service as a Director or payment of a director’s fee by the Company or an
Affiliate shall not be sufficient to constitute “employment” by the Company or
an Affiliate.

 

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

 

(n) “Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:

 

(i) If the Common Stock is listed on any established stock exchange or traded on
the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value
of a share of Common Stock shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable.

 

(ii) In the absence of such markets for the Common Stock, the Fair Market Value
shall be determined in good faith by the Board.

 

(o) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder. Incentive Stock Options may not be granted under the
Plan.

 

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(p) “Independent Director” means a Director who is not an Employee of the
Company and who qualifies as “independent” within the meaning of NASD Rule
4200(a)(14), if the Company’s securities are traded on the Nasdaq National
Market, or the requirements of any other established stock exchange on which the
Company’s securities are traded, as such rules or requirements may be amended
from time to time.

 

(q) “NASD” means the National Association of Securities Dealers, Inc.

 

(r) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

(s) “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.

 

(t) “Option Agreement” means a written or electronic agreement between the
Company and an Optionholder evidencing certain terms and conditions of an
individual Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.

 

(u) “Optionholder” means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.

 

(v) “Participant” means a person to whom a Stock Award is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Stock
Award.

 

(w) “Plan” means this CV Therapeutics, Inc. 2004 Employment Commencement
Incentive Plan.

 

(x) “Restricted Stock” means Common Stock awarded to a Participant pursuant to
Section VII that is subject to certain restrictions and to risk of forfeiture.

 

(y) “Restricted Stock Unit” means a right to receive a specified number of
shares of Common Stock during specified time periods pursuant to Section VII.

 

(z) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

 

(aa) “Securities Act” means the Securities Act of 1933, as amended.

 

(bb) “Stock Award” means any right granted under the Plan, including an Option,
Restricted Stock, and a Restricted Stock Unit.

 

(cc) “Stock Award Agreement” means a written agreement between the Company and a
Participant evidencing the terms and conditions of an individual Stock Award
grant. Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

 

3. ADMINISTRATION.

 

(a) Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any actions

 

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taken by the Board in connection with the administration of the Plan shall not
be deemed approved by the Board unless such actions are approved by a majority
of the Independent Directors.

 

(b) Powers of Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

 

(i) To determine from time to time which of the persons eligible under the Plan
shall be granted Stock Awards; when and how each Stock Award shall be granted;
the provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive Common
Stock pursuant to a Stock Award; and the number of shares of Common Stock with
respect to which a Stock Award shall be granted to each such person.

 

(ii) To adopt procedures from time to time in the Board’s discretion to ensure
that an Employee is eligible to participate in the Plan prior to the granting of
any Stock Awards to such Employee under the Plan (including, without limitation,
a requirement, if any, that each such Employee certify to the Company prior to
the receipt of a Stock Award under the Plan that he or she has not been
previously employed by the Company or an Affiliates, or if previously employed,
has had a bona fide period of non-employment, and that the grant of Stock Awards
under the Plan is an inducement material to his or her agreement to enter into
employment with the Company or an Affiliates).

 

(iii) To construe and interpret the Plan and Stock Awards granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.

 

(iv) To amend the Plan or a Stock Award as provided in Section 11.

 

(v) To terminate or suspend the Plan as provided in Section 12.

 

(vi) Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Company which
are not in conflict with the provisions of the Plan.

 

(c) Delegation to Committee. The Board may delegate administration of the Plan
to the Compensation Committee of the Board, which shall be comprised of a
majority of the Independent Directors, or is a committee comprised solely of the
Company’s Independent Directors. The term “Committee” shall apply to any persons
to whom such authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.

 

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(d) Effect of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

 

4. SHARES SUBJECT TO THE PLAN.

 

(a) Share Reserve. The number of shares of Common Stock that may be issued
pursuant to Stock Awards shall initially be zero (0). Prior to or concurrently
with the grant of any Stock Awards under the Plan, the Board shall reserve for
issuance hereunder such number of shares of Common Stock as may be necessary in
order to accommodate such Stock Awards, which reservation shall be noted on the
schedule attached hereto. Subject to subsection 4(b), the aggregate number of
shares of Common Stock that may be issued pursuant to Stock Awards at any given
time shall be equal to the total of such shares so reserved by the Board. Any
shares of Common Stock so reserved shall be subject to the provisions of Section
11 relating to adjustments upon changes in Common Stock.

 

(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.

 

(c) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.

 

5. ELIGIBILITY. Stock Awards may be granted only to Eligible Participants. All
Options granted under the Plan shall be Nonstatutory Stock Options.

 

6. OPTION PROVISIONS.

 

The Board may grant Options, the terms of which Stock Awards shall be set forth
in an appropriate Option Agreement. Each Option shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:

 

(a) Option Exercise Price. The exercise price of each Option shall be not less
than par value of the Common Stock subject to the Option on the date the Option
is granted.

 

(b) Consideration. The purchase price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board (1) by delivery to the Company of other Common
Stock, (2) according to a deferred payment or other similar arrangement with the
Optionholder or (3) in any other form of legal consideration that may be
acceptable to the Board. Unless otherwise specifically provided in the Option,
the purchase price of Common Stock acquired pursuant to an Option that is paid
by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial

 

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accounting purposes). At any time that the Company is incorporated in Delaware,
payment of the Common Stock’s “par value,” as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

 

(c) Deferred Payment. In the case of any deferred payment arrangement, interest
shall be compounded at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

 

(d) Transferability of Options. An Option shall be transferable to the extent
provided in the Option Agreement. If the Option does not provide for
transferability, then the Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.

 

(e) Vesting Generally. The total number of shares of Common Stock subject to an
Option may, but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(f) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

 

(f) Termination of Continuous Service. In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder’s Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

 

(g) Extension of Termination Date. An Optionholder’s Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder’s Continuous Service (other than upon the Optionholder’s death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder’s Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

 

(h) Disability of Optionholder. In the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the

 

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date of termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement) or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

 

(i) Death of Optionholder. In the event (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death or (ii) the Optionholder dies
within the period (if any) specified in the Option Agreement after the
termination of the Optionholder’s Continuous Service for a reason other than
death, then the Option may be exercised (to the extent the Optionholder was
entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the Option upon the
Optionholder’s death pursuant to subsection 6(e), but only within the period
ending on the earlier of (1) the date eighteen (18) months following the date of
death (or such longer or shorter period specified in the Option Agreement) or
(2) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.

 

(j) Early Exercise. The Option may, but need not, include a provision whereby
the Optionholder may elect at any time before the Optionholder’s Continuous
Service terminates to exercise the Option as to any part or all of the shares of
Common Stock subject to the Option prior to the full vesting of the Option. Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate. The Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.

 

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

The Board may grant Restricted Stock and/or Restricted Stock Units, the terms of
which Stock Awards shall be set forth in an appropriate Stock Award Agreement.
Each such Stock Award shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate Stock
Award agreements need not be identical, but each Stock Award Agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(a) Purchase Price. At its discretion, the Board may designate a purchase price
or no purchase price for the issuance of Common Stock under the Plan. The
purchase price, if any, under each Stock Award Agreement shall be such amount as
the Board shall determine and designate in such Stock Award Agreement. In no
event may Common Stock be issued under the Plan for less than adequate legal
consideration, as determined by the Board in its sole discretion.

 

(b) Consideration. The purchase price of Common Stock acquired pursuant to the
Stock Award Agreement shall be paid either: (i) in cash at the time of issuance
of the Common Stock; (ii) at the discretion of the Board, according to a
deferred payment or other similar arrangement with the Participant; or (iii) in
any other form of legal consideration that may be

 

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acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

 

(c) Restricted Stock Vesting. Restricted Stock Units and/or shares of Common
Stock acquired under a Stock Award Agreement shall be subject to vesting
schedule or a forfeiture or share repurchase option (in the case of Restricted
Stock issued with a purchase price) in favor of the Company pursuant to a
vesting schedule to be determined by the Board in accordance with the following
guidelines: (A) the vesting period for Restricted Stock Units or shares of
Common Stock acquired under Stock Award Agreements shall be no less than three
(3) years unless based upon performance, in which event the vesting period shall
be no less than one (1) year; and (B) notwithstanding the provisions of Section
10(a), the Board may not accelerate such vesting except under extraordinary
circumstances, including without limitation the death, disability or divorce of
the Participant, change in corporate structure of the Company, Change of Control
or termination of Continuous Service in connection with a Change of Control.

 

(d) Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Board may cancel an unvested
Restricted Stock Unit and/or repurchase or otherwise reacquire any or all of the
shares of Restricted Stock held by the Participant which have not vested as of
the date of termination under the terms of the Stock Award Agreement.

 

(e) Transferability. Restricted Stock or Restricted Stock Units shall be
transferable by the Participant only upon such terms and conditions as are set
forth in the Stock Award Agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the applicable Stock Award
Agreement remains subject to the terms of the Stock Award Agreement.

 

(f) Restricted Stock Units. Common Stock underlying a Restricted Stock Unit
award will not be issued until the Restricted Stock Unit award has vested.
Unless otherwise provided by the Board, a Participant awarded Restricted Stock
Units shall have no rights as a Company stockholder with respect to such
Restricted Stock Units until such time as the Restricted Stock Units have vested
and the Common Stock underlying the Restricted Stock Units has been issued.

 

8. COVENANTS OF THE COMPANY.

 

(a) Availability of Shares. During the terms of the Stock Awards, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Stock Awards.

 

(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise or vesting of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any Common Stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the

 

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Company deems necessary for the lawful issuance and sale of Common Stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise or vesting of such Stock Awards unless and
until such authority is obtained.

 

9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of Common Stock pursuant
to Options shall constitute general funds of the Company.

 

10. MISCELLANEOUS.

 

(a) Acceleration of Exercisability and Vesting. Subject to subsection 7(c) with
respect to Restricted Stock and Restricted Stock Units, the Board shall have the
power to accelerate the time at which a Stock Award may first vest and/or be
exercised in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

 

(b) Stockholder Rights. No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

 

(c) No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Stock Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause or (ii) the service of
a Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate.

 

(d) Investment Assurances. The Company may require a Participant, as a condition
of exercising or acquiring Common Stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant’s knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participant’s own account and not with
any present intention of selling or otherwise distributing the Common Stock. The
foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (1) the issuance of the shares of Common Stock upon the
exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act or (2) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

 

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(e) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under a Stock Award by any of the following means (in addition to the Company’s
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.

 

(f) UK Withholding Obligations. Each Optionholder agrees that he shall be liable
for any employer’s United Kingdom National Insurance Contribution and to the
extent provided by the terms of an Option Agreement, the Company may require
that any liability it has to account for United Kingdom income tax under the Pay
As You Earn system and National Insurance Contributions or any other federal,
state or local tax withholding obligation relating to the exercise or
acquisition of Common Stock under a Stock Award be satisfied by any of the
following means (in addition to the Company’s right to withhold from any
compensation paid to the Optionholder by the Company) or by a combination of
such means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold shares of Common Stock from the shares of Common Stock otherwise
issuable to the Optionholder as a result of the exercise or acquisition of
Common Stock under the Option, provided, however, that no shares of Common Stock
are withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.

 

11. ADJUSTMENTS UPON CHANGES IN STOCK.

 

(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards. The Board shall
make such adjustments, and its determination shall be final, binding and
conclusive. The conversion of any convertible securities of the Company shall
not be treated as a transaction “without receipt of consideration” by the
Company.

 

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of
the Company, then all outstanding Stock Awards shall terminate immediately prior
to such event.

 

(c) Change of Control.

 

(i) in the event of a Change of Control, each outstanding Stock Award under the
Plan shall, automatically and without further action by the Company, become
fully vested and/or exercisable with respect to all of the shares of Common
Stock subject thereto no later than

 

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five (5) business days before the closing of such Change in Control. In
addition, to the extent permitted by law, any surviving corporation or acquiring
corporation in a Change of Control may assume any such Stock Awards outstanding
under the Plan or substitute similar stock awards (including awards to acquire
the same consideration paid to the stockholders in the Change of Control) for
those outstanding under the Plan. In the event any surviving corporation or
acquiring corporation does not assume such Stock Awards or substitute similar
stock awards for those outstanding under the Plan, then the Stock Awards shall
terminate if not exercised at or prior to the closing of the Change of Control.

 

(ii) For purposes of this Plan, “Change of Control” means: (i) a sale of
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation in which shareholders immediately before the merger or
consolidation have, immediately after the merger or consolidation, equal or
greater stock voting power); (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (other than a reverse
merger in which stockholders immediately before the merger have, immediately
after the merger, greater stock voting power); or (iv) any transaction or series
of related transactions in which in excess of 50% of the Company’s voting power
is transferred.

 

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

 

(a) Amendment of Plan. The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 11 relating to adjustments upon
changes in Common Stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Rule 16b-3 or the requirements of the Nasdaq
National Market or an established stock exchange on which the Company’s
securities are traded.

 

(b) Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be provided under
the provisions of the Code.

 

(c) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

 

(d) Amendment of Stock Awards. The Board at any time, and from time to time, may
amend the terms of any one or more Stock Awards; provided, however, that the
rights under any Stock Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing. Notwithstanding the foregoing, the Board shall not, without
the approval of the stockholders of the Company, authorize the amendment of any
outstanding Option to reduce its exercise price. Furthermore, no Option shall be
canceled and replaced with grants having a lower exercise price without the
further approval of stockholders of the Company.

 

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13. TERMINATION OR SUSPENSION OF THE PLAN.

 

(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board. No Stock Award may be
granted under the Plan while the Plan is suspended or after it is terminated.

 

(b) No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan is in
effect except with the written consent of the Participant.

 

14. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon its adoption by
the Board.

 

15. CHOICE OF LAW/INTERPRETATION. The law of the State of Delaware shall govern
all questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.

 

16. STOCKHOLDER APPROVAL NOT REQUIRED. It is expressly intended that approval of
the Company’s stockholders not be required as a condition of the effectiveness
of the Plan, and the Plan’s provisions shall be interpreted in a manner
consistent with such intent for all purposes. Specifically, Rule 4350(i)
promulgated by the NASD generally requires stockholder approval for stock option
plans or other equity compensation arrangements adopted by companies whose
securities are listed on the Nasdaq National Market pursuant to which stock
awards or stock may be acquired by officers, directors, employees, or
consultants of such companies. NASD Rule 4350(i)(1)(A)(iv) provides an exception
to this requirement for issuances of securities to a person not previously an
employee or director of the issuer, or following a bona fide period of
non-employment, as an inducement material to the individual’s entering into
employment with the issuer, provided such issuances are approved by either the
issuer’s compensation committee comprised of a majority of independent directors
or a majority of the issuer’s independent directors. Stock Awards under this
Plan may only be made to Eligible Participants who have not previously been an
Employee or director of the Company or an Affiliate, or following a bona fide
period of non-employment by the Company or an Affiliate, as an inducement
material to the Eligible Participant’s entering into employment with the Company
or an Affiliate. Stock Awards under the Plan will be approved by (i) the
Company’s Compensation Committee comprised of a majority of the Company’s
Independent Directors or (ii) a majority of the Company’s Independent Directors.
Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of Stock
Awards and the shares of Common Stock issuable upon exercise or vesting of such
Stock Awards pursuant to this Plan are not subject to the approval of the
Company’s stockholders.

 

17. PARTICIPANTS IN FOREIGN COUNTRIES. The Board shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or any Affiliate may operate to assure the viability of Stock Awards
granted under the Plan in such countries and to meet the objectives of the Plan.

 

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SHARES RESERVED

 

Date Reserved

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Number of Shares

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13