Exhibit 10.4

 

COMBIMATRIX CORPORATION

 

2006 STOCK INCENTIVE PLAN

 

(as amended and restated June 17, 2015)(1)

 

ARTICLE ONE

 

GENERAL PROVISIONS

 

I.                                        PURPOSE OF THE PLAN

 

This CombiMatrix Corporation 2006 Stock Incentive Plan is intended to promote
the interests of CombiMatrix Corporation, a Delaware corporation, by providing
eligible persons in the Corporation’s Service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such Service.

 

Capitalized terms shall have the meanings assigned to such terms in the attached
Appendix.

 

II.                                   STRUCTURE OF THE PLAN

 

A.                                    The Plan shall be divided into three
separate equity incentive programs:

 

·                  the Discretionary Option/Stock Appreciation Right Grant
Program under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock, and

 

·                  the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary).

 

B.                                    The provisions of Articles One and Five
shall apply to all equity incentive programs under the Plan and shall govern the
interests of all persons under the Plan.

 

III.                              ADMINISTRATION OF THE PLAN

 

A.                                    The Committee shall have sole and
exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders. Administration of the
Discretionary Option Grant and Stock Issuance Programs with respect to

 

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(1)  All share numbers reflect the fifteen-for-one reverse stock split of the
Corporation’s Common Stock effected at the close of business on January 29,
2016.

 

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all other persons eligible to participate in those programs may, at the Board’s
discretion, be vested in the Committee, or the Board may retain the power to
administer those programs with respect to all such persons. Other than with
respect to Section 16 Insiders, the Board may also appoint an Executive Officer
Committee to administer the Discretionary Option Program and Stock Issuance
Program, subject to the applicable limitations and requirements of the Delaware
Corporate Law.  However, any discretionary option grants or stock issuances to
members of the Committee must be authorized and approved by a disinterested
majority of the Board.

 

B.                                    Members of the Committee or, if
applicable, the Executive Officer Committee, shall serve for such period of time
as the Board may determine and may be removed by the Board at any time.

 

C.                                    The Plan Administrator shall, within the
scope of its administrative functions under the Plan, have full power and
authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of those
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant and Stock
Issuance Programs under its jurisdiction or any stock option or stock issuance
thereunder.

 

D.                                    Service on the Committee shall constitute
Service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Committee or, if applicable, the
Executive Officer Committee, shall be liable for any act or omission made in
good faith with respect to the Plan or any option grants or stock issuances
under the Plan.

 

IV.                               ELIGIBILITY

 

A.                                    The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:

 

(i)        Employees,

 

(ii)        non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and

 

(iii)        consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).

 

B.                                    The Plan Administrator shall, within the
scope of its administrative jurisdiction under the Plan, have full authority to
determine, (i) with respect to the option grants under the Discretionary Option
Grant Program, which eligible persons are to receive such grants, the time or
times when those grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, if, and the extent to which, each option is to be
exercisable at a different time or times than those

 

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times set forth in Section I.B.1. of Article Two of the Plan, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
issuances, the time or times when the issuances are to be made, the number of
shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration for such shares.

 

C.                                    The Plan Administrator shall have the
absolute discretion either to grant options in accordance with the Discretionary
Option/Stock Appreciation Right Grant Program or to effect stock issuances in
accordance with the Stock Issuance Program.

 

V.                                    STOCK SUBJECT TO THE PLAN

 

A.                                    The stock issuable under the Plan shall be
shares of authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. Subject to adjustment by the
Plan Administrator pursuant to Section V.E below, effective June 17, 2015, the
number of shares of Common Stock reserved for issuance over the term of the Plan
shall not exceed 200,000 shares of Common Stock.  For purposes of clarification,
the shares of Common Stock subject to the Assumed Options are not included in
the 200,000 shares of Common Stock reserved hereunder for issuance pursuant to
this paragraph, though the shares of Common Stock subject to the Assumed Options
may become available for grant under this Plan to the extent provided in
Article One, Section V.D. below. (See Amendment to this Section V.A. below on
page 25).

 

B.                                    The maximum aggregate number of shares of
Common Stock that may be issued under the Plan through Incentive Options shall
be 200,000 shares of Common Stock.

 

C.                                    At such time as stock option or stock
appreciation rights granted under the Plan may qualify as performance-based
compensation under Code Section 162(m), no one person participating in the Plan
may receive stock options or separately exercisable stock appreciation rights
for more than 20,000 shares of Common Stock in the aggregate per calendar year. 
At such time as direct stock issuances, restricted stock unit or other
share-based awards granted under the Plan may qualify as performance-based
compensation under Code Section 162(m), no one person participating in the Plan
may receive direct stock issuances, restricted stock unit or other share-based
awards for more than 20,000 shares of Common Stock in the aggregate per calendar
year. In addition, the maximum dollar value payable to any one Participant with
respect to awards granted under Article Five, Section VIII.B. is $1,000,000 per
calendar year.

 

D.                                    Shares of Common Stock subject to
outstanding options, Assumed Options or stock appreciation rights shall be
available for subsequent issuance under the Plan to the extent such shares are
not issued pursuant to such options, Assumed Options or stock appreciation
rights prior to the expiration, termination or cancellation of such options,
Assumed Options or stock appreciation rights for any reason.  Shares of Common
Stock subject to outstanding restricted stock unit or other share-based awards
shall be available for subsequent issuance under the Plan to the extent those
restricted stock unit or other share-based awards expire, terminate or are
cancelled for any reason prior to the issuance of all shares of Common Stock
subject to such restricted stock unit or other share-based awards. Unvested
shares issued under the Plan and

 

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subsequently cancelled, forfeited or repurchased by the Corporation, at a price
per share not greater than the original issue price paid per share, pursuant to
the Corporation’s repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan. 
Notwithstanding anything to the contrary in this Section, the following shares
of Common Stock will not again become available for issuance under the Plan:
(i) any shares of Common Stock which would have been issued upon any exercise of
an option but for the fact that the exercise was paid by a cancellation of such
shares of Common Stock pursuant to Section I.A.2.ii of Article Two, (ii) any
shares of Common Stock withheld by the Corporation or shares of Common Stock
tendered to satisfy any tax withholding obligation with respect to an option or
stock appreciation right, (iii) shares of Common Stock covered by a stock
appreciation right issued under the Plan that are not issued in connection with
settlement in shares of Common Stock upon exercise, or (iv) shares of Common
Stock that are repurchased by the Corporation using option exercise proceeds.

 

E.                                     If any change is made to the Common Stock
by reason of any stock split, stock dividend, recapitalization, merger,
reorganization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made by the Plan
Administrator to (i) the maximum number, type and/or class of securities
issuable under the Plan, (ii) the maximum number, type and/or class of
securities for which any one person may be granted (x) stock options and
separately exercisable stock appreciation rights and (y) direct stock issuances,
restricted stock unit and other share-based awards under the Plan per calendar
year, (iii) the number, type and/or class of securities and the exercise price
per share in effect under each outstanding option and stock appreciation right
under the Plan, (iv) the number, kind and/or class of securities under each
restricted stock unit or other share-based award, and (v) the maximum number,
type and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the provisions of Section V.B. of
this Article One. Such adjustments to the outstanding awards are to be effected
in a manner which shall preclude the enlargement or dilution of rights and
benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.

 

ARTICLE TWO

 

DISCRETIONARY OPTION/STOCK APPRECIATION RIGHT GRANT PROGRAM

 

I.                                        OPTION TERMS

 

Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.

 

A.                                    EXERCISE PRICE.

 

1.                                      The exercise price per share shall be
fixed by the Plan Administrator but shall not be less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date, provided, however, that the Plan Administrator may

 

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designate a purchase price below Fair Market Value on the date of grant (A) to
the extent necessary or appropriate, as determined by the Plan Administrator, to
satisfy applicable legal or regulatory requirements of a foreign jurisdiction or
(B) if the Option is granted in substitution for a stock option previously
granted by an entity that is acquired by or merged into the Corporation (or an
affiliate).

 

2.                                      The exercise price shall become
immediately due upon exercise of the option and shall, subject to the provisions
of the documents evidencing the option, be payable in one or more of the forms
specified below:

 

(i)                                     cash or check made payable to the
Corporation, or

 

(ii)                                  shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date (including the cancellation of shares of Common Stock subject to the
option), or

 

(iii)                               to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale, or

 

(iv)                              to the extent permitted by the Plan
Administrator, by delivering to the Optionee a number of shares of Common Stock
having an aggregate Fair Market Value (determined as of the Exercise Date) equal
to the excess, if positive, of the Fair Market Value of the shares of Common
Stock underlying the Option being exercised on the Exercise Date, over the
exercise price of the Option for such shares of Common Stock, or

 

(v)                                 Any other form of legal consideration, as
determined by the Plan Administrator and specifically included in the stock
option agreement.

 

Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

 

B.                                    EXERCISE AND TERM OF OPTIONS.

 

1.                                      Each option shall vest and be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option.

 

2.                                      Notwithstanding any other provision of
the Plan, no option shall have a term in excess of ten (10) years measured from
the option grant date.

 

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C.                                    EFFECT OF TERMINATION OF SERVICE.

 

1.                                      The following provisions shall govern
the exercise of any options held by the Optionee at the time of cessation of
Service or death:

 

(i)                                     Termination of Service.  Subject to
earlier termination of the option as otherwise provided in the Plan and unless
otherwise specifically provided by the Plan Administrator with respect to an
option and set forth in the award agreement (either at grant or by amendment at
a later time), an option shall remain exercisable, to the extent vested, after a
Optionee’s termination of Service only during the applicable time period
determined in accordance with this Section and thereafter shall terminate and no
longer be exercisable:

 

(A)                               Death or Permanent Disability.  If the
Optionee’s Service terminates because of the death or Permanent Disability of
the Optionee, the option, to the extent unexercised, vested and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the
Optionee (or the Optionee’s legal representative or estate, as applicable) at
any time prior to the expiration of twelve (12) months (or such other period of
time as determined by the Plan Administrator, in its discretion) after the date
on which the Optionee’s Service terminated, but in any event only with respect
to the unexercised and vested portion of the option and not after the maximum
term of the option.

 

(B)                               Termination for Misconduct.  Notwithstanding
any other provision of the Plan to the contrary, if the Optionee’s Service is
terminated for Misconduct or should the Optionee otherwise engage in Misconduct
while holding one or more outstanding options, then all such options shall
terminate immediately and cease to be outstanding.

 

(C)                               Other Termination of Service.  If the
Optionee’s Service terminates for any reason, except Permanent Disability, death
or Misconduct, the option, to the extent unexercised, vested and exercisable by
the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee at any time prior to the expiration of three
(3) months (or such longer or shorter period of time as determined by the Plan
Administrator, in its discretion) after the date on which the Optionee’s Service
terminated, but in any event only with respect to the unexercised and vested
portion of the option and not the maximum term of the option.

 

(ii)                                  Any option held by the Optionee at the
time of death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee’s estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee’s will or the laws of descent and distribution or by the Optionee’s
designated beneficiary or beneficiaries of that option.

 

(iii)                               During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date of the
Optionee’s cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the option
has not been exercised. However, the option shall, immediately upon

 

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the Optionee’s cessation of Service, terminate and cease to be outstanding to
the extent the option is not otherwise at that time exercisable for vested
shares.

 

2.                                      The Plan Administrator shall have
complete discretion, exercisable either at the time an option is granted or at
any time while the option remains outstanding, to:

 

(i)                                     extend the period of time for which the
option is to remain exercisable following the Optionee’s cessation of Service
from the limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term and in no event to such extent
to make the option subject to Section 409A (unless given the prior consent of
the Optionee), and/or

 

(ii)                                  permit the option to be exercised, during
the applicable post-Service exercise period, not only with respect to the number
of vested shares of Common Stock for which such option is exercisable at the
time of the Optionee’s cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the Optionee
continued in Service.

 

D.                                    STOCKHOLDER RIGHTS. The holder of an
option shall have no stockholder rights with respect to the shares subject to
the option until such person shall have exercised the option, paid the exercise
price and become a holder of record of the purchased shares.

 

E.                                     REPURCHASE RIGHTS.  The Plan
Administrator shall have the discretion to grant options which are exercisable
for unvested shares of Common Stock.  Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the right, but not the
obligation, to repurchase any or all of those unvested shares at a price per
share equal to the lower of (i) the exercise price paid per share or (ii) the
Fair Market Value per share of Common Stock at the time of the Optionee’s
cessation of Service.  The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

 

F.                                      LIMITED TRANSFERABILITY OF OPTIONS.
During the lifetime of the Optionee, Incentive Options shall be exercisable only
by the Optionee and shall not be assignable or transferable other than by will
or the laws of descent and distribution following the Optionee’s death.
Non-Statutory Options shall be subject to the same limitation, except as
otherwise determined by the Plan Administrator, including an assignment to the
Optionee’s Immediate Family.  To the extent that a Non-Statutory Option is
assigned, the assigned portion may only be exercised by the person or persons
who acquire a proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate. Notwithstanding the foregoing, the Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such

 

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beneficiary or beneficiaries upon the Optionee’s death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee’s death.

 

II.                                   INCENTIVE OPTIONS

 

The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One and Two shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.

 

A.                                    ELIGIBILITY. Incentive Options may only be
granted to Employees.

 

B.                                    EXERCISE PRICE. The exercise price per
share shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the option grant date.

 

C.                                    DOLLAR LIMITATION. The aggregate Fair
Market Value of the shares of Common Stock (determined as of the respective date
or dates of grant) for which one or more options granted to any Employee under
the Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options
during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.  To the extent that the options exceed this limit, the excess amount
shall be considered Non-Statutory Options.

 

D.                                    FAILURE TO QUALIFY AS INCENTIVE OPTION. 
To the extent that any option governed by this Plan does not qualify as an
Incentive Option, by reason of the dollar limitation described in Section II.C
of this Article Two or for any other reason, such option shall be exercisable as
a Non-Statutory Option under the Federal tax laws.

 

E.                                     10% STOCKHOLDER. If any Employee to whom
an Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.

 

III.                              STOCK APPRECIATION RIGHT TERMS

 

The Plan Administrator may grant stock appreciation rights either in conjunction
with all or part of any option or without regard to any option, in each case
upon such terms and conditions as the Plan Administrator may establish in its
sole discretion, not inconsistent with the provisions of the Plan.  Each stock
appreciation right shall be evidenced by one or more

 

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documents in the form approved by the Plan Administrator; provided, however,
that each such document shall comply with the terms specified below.

 

A.                                    RIGHT TO PAYMENT.

 

1.                                      Each stock appreciation right shall
confer on the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one share of Common
Stock on the date of exercise over (B) the per share strike price of the stock
appreciation right.

 

2.                                      The Plan Administrator shall determine
the method of settlement, form of consideration payable in settlement and method
by or forms in which shares of Common Stock will be delivered or deemed to be
delivered to Participants.

 

3.                                      The strike price per share shall be
fixed by the Plan Administrator but shall not be less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the stock
appreciation right grant date.

 

B.                                    EXERCISE AND TERM OF STOCK APPRECIATION
RIGHTS.  Each stock appreciation right shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined
by the Plan Administrator and set forth in the documents evidencing the stock
appreciation right.  However, no stock appreciation right shall have a term in
excess of ten (10) years measured from the stock appreciation right grant date.

 

C.                                    EFFECT OF TERMINATION OF SERVICE.

 

1.                                      The following provisions shall govern
the exercise of any stock appreciation rights held by the Participant at the
time of cessation of Service or death:

 

(i)                                     Any stock appreciation right outstanding
at the time of the Participant’s cessation of Service for any reason shall
remain exercisable for such period of time thereafter as shall be determined by
the Plan Administrator and set forth in the documents evidencing the stock
appreciation right, but no such stock appreciation right shall be exercisable
after the expiration of the stock appreciation right term.

 

(ii)                                  Any stock appreciation right held by the
Participant at the time of death and exercisable in whole or in part at that
time may be subsequently exercised by the personal representative of the
Participant’s estate or by the person or persons to whom the stock appreciation
right is transferred pursuant to the Participant’s will or the laws of
inheritance or by the Participant’s designated beneficiary or beneficiaries of
that stock appreciation right.

 

(iii)                               Should the Participant’s Service be
terminated for Misconduct or should the Participant otherwise engage in
Misconduct while holding one or more outstanding stock appreciation rights under
this Article Two, then all those stock appreciation rights shall terminate
immediately and cease to be outstanding.

 

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(iv)                              During the applicable post-Service exercise
period, the stock appreciation right may not be exercised in the aggregate for
more than the number of vested shares for which the stock appreciation right is
exercisable on the date of the Participant’s cessation of Service.  Upon the
expiration of the applicable exercise period or (if earlier) upon the expiration
of the stock appreciation right term, the stock appreciation right shall
terminate and cease to be outstanding for any vested shares for which the stock
appreciation right has not been exercised.  However, the stock appreciation
right shall, immediately upon the Participant’s cessation of Service, terminate
and cease to be outstanding to the extent the stock appreciation right is not
otherwise at that time exercisable for vested shares.

 

2.                                      The Plan Administrator shall have
complete discretion, exercisable either at the time a stock appreciation right
is granted or at any time while the stock appreciation right remains
outstanding, to:

 

(i)                                     extend the period of time for which the
stock appreciation right is to remain exercisable following the Participant’s
cessation of Service from the limited exercise period otherwise in effect for
that stock appreciation right to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the stock appreciation right term, and/or

 

(ii)                                  permit the stock appreciation right to be
exercised, during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such stock
appreciation right is exercisable at the time of the Participant’s cessation of
Service but also with respect to one or more additional installments in which
the Participant would have vested had the Participant continued in Service.

 

D.                                    STOCKHOLDER RIGHTS.  The holder of a stock
appreciation right shall have no stockholder rights with respect to the shares
subject to the stock appreciation right until such person shall have exercised
the stock appreciation right, received shares of common stock in connection with
such exercise and become a holder of record of the purchased shares.

 

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E.                                     LIMITED TRANSFERABILITY OF STOCK
APPRECIATION RIGHTS.  During the lifetime of the Participant, stock appreciation
rights shall be exercisable only by the Participant and shall not be assignable
or transferable other than by will or the laws of inheritance following the
Participant’s death, except that the Plan Administrator may structure one or
more stock appreciation rights under the Discretionary Option/Stock Appreciation
Right Grant Program so that each such stock appreciation right may be assigned
in whole or in part during the Participant’s lifetime to one or more members of
the Participant’s family or to a trust established exclusively for one or more
such family members or to Participant’s former spouse, to the extent such
assignment is in connection with the Participant’s estate plan or pursuant to a
domestic relations order.  The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the stock appreciation
right pursuant to the assignment.  The terms applicable to the assigned portion
shall be the same as those in effect for the stock appreciation right
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate. 
Notwithstanding the foregoing, the Participant may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding stock
appreciation rights under this Article Two, and those stock appreciation rights
shall, in accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Participant’s death while holding those
stock appreciation rights.  Such beneficiary or beneficiaries shall take the
transferred stock appreciation rights subject to all the terms and conditions of
the applicable agreement evidencing each such transferred stock appreciation
right, including (without limitation) the limited time period during which the
stock appreciation right may be exercised following the Participant’s death.

 

IV.                               CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to effect, from time to time,
and with prior approval of the Corporation’s stockholders and the consent of the
affected option holders, the cancellation of any or all outstanding options
under the Discretionary Option/Stock Appreciation Right Grant Program (including
outstanding options incorporated from the Predecessor Plans) and to grant (i) in
substitution new options or stock appreciation rights covering the same or a
different number of shares of Common Stock but with an exercise price per share
calculated based upon the Fair Market Value per share of Common Stock on the new
grant date; (ii) stock issuances (including restricted stock unit awards);
(iii) cash; or (iv) other property.

 

ARTICLE THREE

 

STOCK ISSUANCE PROGRAM

 

I.                                        STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below.

 

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Shares of Common Stock may also be issued under the Stock Issuance Program
pursuant to (i) restricted stock unit awards which entitle the recipients to
receive those shares upon the attainment of designated performance goals or in
one or more installments over the Participant’s period of Service or (ii) other
share-based awards.

 

A.                                    PURCHASE PRICE.

 

1.                                            The purchase price per share shall
be fixed by the Plan Administrator, but shall not be less than any legal limit
required under state law.

 

2.                                            Shares of Common Stock may be
issued under the Stock Issuance Program for any of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:

 

(i)                                     cash or check made payable to the
Corporation for one hundred percent of the Fair Market Value of the shares of
Common Stock to be purchased,

 

(ii)                                  past services rendered to the Corporation
(or any Parent or Subsidiary),

 

(iii)                               services to be rendered to the Corporation
(or any Parent or Subsidiary) during the vesting period, or

 

(iv)                              any other form of legal consideration that may
be acceptable to the Plan Administrator.

 

B.                                    VESTING PROVISIONS.

 

1.                                      Shares of Common Stock issued under the
Stock Issuance Program may, in the discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant’s period of Service or upon attainment of
specified performance objectives. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program shall be determined by the Plan Administrator and incorporated
into the Stock Issuance Agreement. Shares of Common Stock may also be issued
under the Stock Issuance Program pursuant to restricted stock unit awards which
shall not deliver shares of Common Stock upon grant, but shall entitle the
recipients to receive those shares upon the attainment of designated performance
goals or in one or more installments over the Participant’s period of Service.
Upon the attainment of such performance goals or Service period, fully vested
shares of Common Stock shall be issued in satisfaction of those restricted stock
unit awards.  Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to other stock-based awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
shares of Common Stock (including, without limitation, securities convertible
into shares of Common Stock), as are deemed by the Plan Administrator to be
consistent with the purpose of the Plan.  The Plan Administrator shall determine
the terms and conditions of such other share-based awards, subject to the terms
of the Plan and any applicable Award Agreement.  No other share-based award
shall contain a purchase right or option-like exercise feature.

 

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2.                                      Any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant’s unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation’s receipt of consideration shall be issued subject to (i) the
same vesting requirements applicable to the Participant’s unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.

 

3.                                      Aside from shares of Common Stock
underlying unsettled restricted stock unit awards and other share-based awards,
the Participant shall have full stockholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether
or not the Participant’s interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares.

 

4.                                      Should the Participant cease to remain
in Service while holding one or more unvested shares of Common Stock issued
under the Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares.  To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant’s purchase-money indebtedness), the Corporation shall
repay to the Participant the lower of (i) the cash consideration paid for the
surrendered shares or (ii) the Fair Market Value of those shares at the time of
cancellation.

 

5.                                      The Plan Administrator may in its
discretion waive the surrender and cancellation of one or more unvested shares
of Common Stock which would otherwise occur upon the cessation of the
Participant’s Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant’s interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant’s cessation of Service or the attainment or non-attainment of the
applicable performance objectives.

 

6.                                      Outstanding restricted stock unit and
other share-based awards under the Stock Issuance Program shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service requirements
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under one
or more outstanding restricted stock unit awards as to which the designated
performance goals or Service requirements have not been attained.

 

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II.                                   SHARE ESCROW/LEGENDS

 

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow
by the Corporation until the Participant’s interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

 

ARTICLE FOUR

 

CORPORATE TRANSACTIONS

 

I.  PERMITTED ACTIONS

 

A.                                    In the event of any reorganization,
merger, consolidation, split-up, spin-off, combination, plan of arrangement,
take-over bid or tender offer, repurchase or exchange of shares of Common Stock
or other securities of the Corporation or any other similar corporate
transaction or event involving the Corporation (any such action a “Corporate
Transaction”), or the Corporation shall enter into a written agreement to
undergo a Corporate Transaction, the Plan Administrator may, in its sole
discretion, provide for any of the following to be effective upon the
consummation of the event (or effective immediately prior to the consummation of
the Corporate Transaction, provided that the consummation of the Corporate
Transaction subsequently occurs), and no action taken under this Article Four
shall be deemed to impair or otherwise adversely alter the rights of any holder
of an Award or beneficiary thereof:

 

(i)                                     either (A) termination of the Award,
whether or not vested, in exchange for an amount of cash and/or other property,
if any, equal to the amount that would have been attained upon the exercise of
the Award or realization of the Participant’s rights (and, for the avoidance of
doubt, if, as of the date of the occurrence of the Corporate Transaction, the
Plan Administrator determines in good faith that no amount would have been
attained upon the exercise of the Award or realization of the Participant’s
rights, then the Award may be terminated by the Company without any payment) or
(B) the replacement of the Award with other rights or property selected by the
Plan Administrator, in its sole discretion;

 

(ii)                                  that the Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;

 

(iii)                               that, subject to Article Four, Section I.B.
below, the Award shall be exercisable or payable or fully vested with respect to
all shares of Common Stock covered thereby, notwithstanding anything to the
contrary in the applicable Award Agreement; or

 

(iv)                              that the Award cannot vest, be exercised or
become payable after a date certain in the future, which may be the effective
date of the Corporate Transaction.

 

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B.                                    No Award Agreement shall accelerate the
exercisability of any Award or the lapse of restrictions relating to any Award
in connection with a change-in-control event unless such acceleration occurs
upon the consummation of (or effective immediately prior to the consummation of,
provided that the consummation subsequently occurs) such Corporate Transaction.

 

ARTICLE FIVE

 

MISCELLANEOUS

 

I.                                        NO FRACTIONAL SHARES

 

No fractional shares of Common Stock shall be issued or delivered pursuant to
the Plan, and the Plan Administrator shall determine whether cash shall be paid
in lieu of any fractional shares or whether such fractional shares or any rights
thereto shall be canceled, terminated or otherwise eliminated.

 

II.                                   TAX WITHHOLDING

 

A.                                    The Corporation’s obligation to deliver
shares of Common Stock upon a stock issuance, or the exercise of options or
stock appreciation rights or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable income and
employment tax withholding requirements.  The Corporation shall also make
appropriate arrangements to satisfy all applicable foreign tax withholding
requirements which may be imposed in connection with the grant or exercise of
options or stock appreciation rights under the Plan or the issuance or vesting
of shares of Common Stock under the Plan.

 

B.                                    The Plan Administrator may, in its
discretion, provide in the respective award agreement that (i) the Corporation,
in its discretion, may determine that shares of Common Stock from the award be
withheld by the Corporation in satisfaction of all or part of the Withholding
Taxes which may become payable in connection with the an award granted under the
Plan (pursuant to Article Five Section II.B.1.) and (ii) any or all Optionees or
Participants under the Plan (other than the non-employee Board members) with the
right to use shares of Common Stock in satisfaction of all or part of the
Withholding Taxes to which such individuals may become subject in connection
with the grant or exercise of their options or stock appreciation rights or the
issuance or vesting of their shares.  Such right to an individual may be
provided to any such holder in either or both of the following formats:

 

1.                                      Stock Withholding:  The election to have
the Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of options or stock appreciation rights or the issuance or the
vesting of such shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%) of the minimum Withholding Taxes required by law)
designated by the holder.

 

2.                                      Stock Delivery:  The election to deliver
to the Corporation, at the time the option or stock appreciation right is
granted or exercised or the shares are issued or vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with

 

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the option or stock appreciation right exercise or share vesting triggering the
Withholding Taxes) with an aggregate Fair Market Value equal to the percentage
of the Withholding Taxes (not to exceed one hundred percent (100%) of the
minimum Withholding Taxes required by law) designated by the holder.

 

III.                              EFFECTIVE DATE AND TERM OF THE PLAN

 

A.                                    The Plan shall become effective
immediately upon the Plan Effective Date.  Options may be granted under the
Discretionary Option/Stock Appreciation Right Grant Program at any time on or
after the Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation’s stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.

 

B.                                    The Plan shall terminate upon the earliest
of (i) the tenth anniversary of the Plan Effective Date, (ii) the tenth
anniversary of the approval of the Plan by the Corporation’s stockholders,
(iii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iv) the termination of all
outstanding awards in connection with a Change in Control.  Upon such Plan
termination, all option grants and unvested stock issuances outstanding at that
time shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.

 

IV.                               AMENDMENT OF THE PLAN

 

A.                                    The Board shall have complete and
exclusive power and authority to amend or modify the Plan or any outstanding
award granted under the Plan in any or all respects.  However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options, stock appreciation rights or unvested stock issuances at the
time outstanding, including restricted stock unit awards or other share-based
awards, under the Plan unless the Optionee or the Participant consents to such
amendment or modification.  Notwithstanding the foregoing, any amendment to
either increase the number of shares that may be issued under the Plan or the
Persons eligible to receive awards under the Plan shall require stockholder
approval.  In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

 

B.                                    Options to purchase shares of Common Stock
may be granted under the Discretionary Option/Stock Appreciation Right Grant
Program and shares of Common Stock may be issued under the Stock Issuance
Program that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase

 

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price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the short term applicable federal rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.

 

V.                                    USE OF PROCEEDS

 

Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.

 

VI.                               REGULATORY APPROVALS

 

A.                                    The implementation of the Plan, the
granting of any stock option under the Plan and the issuance of any shares of
Common Stock (i) upon the exercise of any granted option or (ii) under the Stock
Issuance Program shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the shares of Common Stock
issued pursuant to it.

 

B.                                    No shares of Common Stock or other assets
shall be issued or delivered under the Plan unless and until there shall have
been compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.

 

VII.                          NO EMPLOYMENT/SERVICE RIGHTS

 

Nothing in the Plan shall confer upon any Optionee or Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of any Optionee or
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.

 

VIII.                     SECTION 162(M)

 

A.                                    STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS.

 

It is the intent of the Corporation that any options or stock appreciation
rights granted under the Plan to a “covered employee” (as that term is defined
in Section 162(m) of the Code) with an exercise price of not less than the Fair
Market Value per share of Common Stock on the date of grant shall qualify as
“qualified performance-based compensation” (within the meaning of Treas. Reg.
§ 1.162-27(e)) to the extent that options or stock appreciation rights granted
under the Plan may qualify as “qualified performance-based compensation” and the
Plan shall be interpreted consistently with such intent.  In furtherance of the
foregoing, if and to the extent that the Corporation intends that an option or a
stock appreciation right granted under the Plan to any covered employee shall
qualify as qualified performance-based compensation, all decisions regarding the
grant of such option or stock appreciation right shall be made only by members
of the Committee who qualify as “outside directors” within the meaning of Treas.
Reg. § 1.162-27(e)(3).

 

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B.                                    PERFORMANCE AWARDS.

 

The Plan Administrator shall also have the discretionary authority, consistent
with Code Section 162(m), to structure (i) cash bonuses, (ii) stock options,
(iii) stock appreciation rights and (iv) stock issuances, including restricted
stock unit awards and other share-based awards, so that (x) the cash bonuses are
only payable, (y) the shares of Common Stock received upon exercise of the stock
option or stock appreciation right and (z) the shares of Common Stock subject to
such stock issuances shall only vest or be issuable upon the achievement of
certain pre-established objective corporate performance goals based on one or
more of the following criteria: (1) earnings per share; (2) revenues or margins;
(3) cash flow; (4) operating margin; (5) return on net assets, investment,
capital, or equity; (6) direct contribution; (7) net income; pretax earnings;
(8) earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings after interest expense and before
extraordinary or special items; operating income; income before interest income
or expense, unusual items and income taxes, local, state or federal and
excluding budgeted and actual bonuses which might be paid under any ongoing
bonus plans of the Company; (9) working capital; (10) management of fixed costs
or variable costs; (11) identification or consummation of investment
opportunities or completion of specified projects in accordance with corporate
business plans, including strategic mergers, acquisitions or divestitures;
(12) total shareholder return; (13) debt reduction; (14) costs or expenses; (15)
ratios (including one or more of price-to-earnings, debt-to-assets, debt-to-net
assets and ratios regarding liquidity, solvency, fiscal capacity, productivity
or risk); (16) unit volume; (17) value creation; (18) market share; (19) market
capitalization; (20) employee retention; (21) production metrics; and (22) stock
price. In addition, such performance goals may be based upon the attainment of
specified levels of the Corporation’s performance under one or more of the
measures described above relative to the performance of other entities and may
also be based on the performance of any of the Corporation’s business units or
divisions or any Parent or Subsidiary. Performance goals may include a minimum
threshold level of performance below which no award will be earned, levels of
performance at which specified portions of an award will be earned and a maximum
level of performance at which an award will be fully earned.  In furtherance of
the foregoing, if and to the extent that the Corporation intends that an award
granted under the Plan pursuant to this paragraph to any covered employee shall
qualify as qualified performance-based compensation, all decisions regarding the
grant of such award shall be made only by members of the Committee who qualify
as “outside directors” within the meaning of Treas. Reg. § 1.162-27(e)(3).

 

IX.                              SECTION 409A

 

Notwithstanding anything in the Plan or any Award Agreement to the contrary, to
the extent that any amount or benefit that constitutes “deferred compensation”
to a Participant under Section 409A and applicable guidance thereunder is
otherwise payable or distributable to a Participant under the Plan or any Award
Agreement solely by reason of the occurrence of a change in control or due to
the Participant’s disability or “separation from service” (as such term is
defined under Section 409A), such amount or benefit will not be payable or
distributable to the Participant by reason of such circumstance unless the
Committee determines in good faith that (i) the circumstances giving rise to
such change in control event, disability or separation from service meet the
definition of a change in control event, disability, or separation from service,
as the case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed
or final

 

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regulations, or (ii) the payment or distribution of such amount or benefit would
be exempt from the application of Section 409A by reason of the short term
deferral exemption or otherwise.  Any payment or distribution that otherwise
would be made to a Participant who is a Specified Employee (as determined by the
Committee in good faith) on account of separation from service may not be made
before the date which is six months after the date of the Specified Employee’s
separation from service (or if earlier, upon the Specified Employee’s death)
unless the payment or distribution is exempt from the application of
Section 409A by reason of the short term deferral exemption or otherwise.

 

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APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A.                                    ASSUMED OPTIONS shall mean the stock
options assumed by the Corporation from Acacia Research that were exercisable
for Acacia Research - CombiMatrix stock and which include, but are not limited
to, the options outstanding as of the date of the Transaction that were granted
under the Acacia Research Corporation 2002 CombiMatrix Stock Incentive Plan, the
CombiMatrix Corporation 1998 Stock Option Plan, the CombiMatrix Corporation 2000
Stock Awards Plan and the Acacia Research Corporation 1996 Stock Option Plan.

 

B.                                    AWARD shall mean a stock option or stock
appreciation right granted under the Discretionary Option/Stock Appreciation
Grant Program pursuant to Article Two of the Plan or a grant of unvested shares
of Common Stock, a restricted stock unit or other share-based awards granted
under the Stock Issuance Program pursuant to Article Three of the Plan.

 

C.                                    AWARD AGREEMENT shall mean the
document(s) evidencing a grant of an option or stock appreciation right under
the Discretionary Option/Stock Appreciation Right Grant Program or a Stock
Issuance Agreement.

 

D.                                    BOARD shall mean the Corporation’s Board
of Directors.

 

E.                                     CERTIFICATE OF INCORPORATION shall mean
the Certificate of Incorporation of CombiMatrix Corporation filed with the
Delaware Secretary of State on the Plan Effective Date and all subsequent
amendments, supplements, modifications and replacements thereof.

 

F.                                      CODE shall mean the Internal Revenue
Code of 1986, as amended.

 

G.                                    COMMITTEE shall mean the committee of two
(2) or more non-employee Board members appointed by the Board to administer the
Discretionary Option/Stock Appreciation Right Grant Program with respect to
Section 16 Insiders.

 

H.                                   COMMON STOCK shall mean the Corporation’s
Common Stock (as defined in the Certificate of Incorporation).

 

I.                                        CORPORATION shall mean CombiMatrix
Corporation, a Delaware corporation, and any corporate successor to all or
substantially all of the assets or voting stock of CombiMatrix Corporation,
which shall by appropriate action adopt the Plan.

 

J.                                        DISCRETIONARY OPTION/STOCK
APPRECIATION RIGHT GRANT PROGRAM shall mean the Discretionary Option/Stock
Appreciation Right Grant Program in effect under Article Two of the Plan.

 

K.                                    EMPLOYEE shall mean an individual who is
in the employ of the Corporation (or any Parent or Subsidiary), subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance.

 

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L.                                     EXECUTIVE OFFICER COMMITTEE shall mean
the committee comprised of two (2) or more executive officers of the Corporation
appointed by the Board to administer the Discretionary Option/Stock Appreciation
Right Grant Program and Stock Issuance Program with respect to persons other
than Section 16 Insiders, but subject to the applicable limitations and
requirements of the Delaware Corporate Law.

 

M.                                 EXERCISE DATE shall mean the date on which
the Corporation shall have received written notice of the option exercise.

 

N.                                    FAIR MARKET VALUE per share of Common
Stock on any relevant date shall be determined in accordance with the following
provisions:

 

(i)                                     If the Common Stock is at the time
traded on the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question, as such
price is reported on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.

 

(ii)                                  If the Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

 

(iii)                               If the Common Stock is at the time not
traded on the Nasdaq National Market or listed on any Stock Exchange, but is
regularly traded in any over-the-counter market, then the Fair Market Value
shall be the average of the bid and asked prices per share of Common Stock in
such over-the-counter market on the date in question.  If there are no bid and
asked prices on the date in question, then the Fair Market Value shall be the
average of the bid and asked prices in such over-the-counter market on the last
preceding date for which such prices exist.

 

(iv)                              If the Common Stock is at the time not traded
as described in (i), (ii) or (iii) above, then the Fair Market Value of a share
of Common Stock shall be determined by the Plan Administrator, after taking into
account such factors as it deems appropriate.

 

O.                                    IMMEDIATE FAMILY shall mean any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law and shall include adoptive relationships.

 

P.                                      INCENTIVE OPTION shall mean an option
which satisfies the requirements of Code Section 422.

 

Q.                                    MISCONDUCT shall, with respect to any
Participant, have the meaning specified in the Participant’s award agreement. 
In the absence of any definition in the award agreement, “Misconduct” shall have
the equivalent meaning or the same meaning as “misconduct” or

 

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“cause” set forth in any employment, consulting or other agreement for the
performance of services between the Participant and the Corporation or, in the
absence of any such agreement or any such definition in such agreement, such
term shall mean the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
person of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary)in a material manner. The foregoing definition shall not be deemed to
be inclusive of all the acts or omissions which the Corporation (or any Parent
or Subsidiary) may consider as grounds for the dismissal or discharge of any
Optionee, Participant or other person in the Service of the Corporation (or any
Parent or Subsidiary).

 

R.                                    1934 ACT shall mean the Securities
Exchange Act of 1934, as amended.

 

S.                                      NON-STATUTORY OPTION shall mean an
option not intended to satisfy the requirements of Code Section 422.

 

T.                                     OPTIONEE shall mean any person to whom an
option is granted under the Discretionary Option Grant Program.

 

U.                                    PARENT shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

 

V.                                    PARTICIPANT shall mean any person who is
issued shares of Common Stock, restricted stock units or other share-based
awards under the Stock Issuance Program.

 

W.                                 PERMANENT DISABILITY OR PERMANENTLY DISABLED
shall mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
continuous duration of twelve (12) months or more.

 

X.                                    PLAN shall mean the Corporation’s 2006
Stock Incentive Plan, as amended and as set forth in this document.

 

Y.                                    PLAN ADMINISTRATOR shall mean the
particular body, whether the Committee or the Board, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

 

Z.                                     PLAN EFFECTIVE DATE shall mean the date
on which the Plan, as amended and restated, is approved by the stockholders of
the Corporation.

 

AA.                           SECTION 16 INSIDER shall mean an officer or
director of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act.

 

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BB.                           SERVICE shall mean the performance of services for
the Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.

 

CC.                           SPECIFIED EMPLOYEE shall mean a specified employee
as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final
regulations under Section 409A, determined in accordance with procedures
established by the Corporation and applied uniformly with respect to all plans
maintained by the Corporation that are subject to Section 409A.

 

DD.                           STOCK EXCHANGE shall mean the Nasdaq Stock Market,
the American Stock Exchange or the New York Stock Exchange.

 

EE.                             STOCK ISSUANCE AGREEMENT shall mean the
agreement entered into by the Corporation and the Participant at the time of
issuance of shares of Common Stock under the Stock Issuance Program which may
grant restricted stock, restricted stock unit or other share-based awards.

 

FF.                               STOCK ISSUANCE PROGRAM shall mean the stock
issuance program in effect under Article Three of the Plan.

 

GG.                           SUBSIDIARY shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

 

HH.                         10% STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).

 

II.                                   WITHHOLDING TAXES shall mean the minimum
Federal, state and local income and employment withholding taxes to which the
holder of options, stock appreciation rights, unvested shares of Common Stock,
restricted stock units or other share-based awards may become subject in
connection with the exercise or vesting of such Awards.

 

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