Exhibit 10.3(a)

 

KYTHERA BIOPHARMACEUTICALS, INC.
2012 EQUITY INCENTIVE AWARD PLAN

 

ARTICLE 1.

 

PURPOSE

 

The purpose of the Kythera Biopharmaceuticals, Inc. 2012 Equity Incentive Award
Plan (the “Plan”) is to promote the success and enhance the value of Kythera
Biopharmaceuticals, Inc. (the “Company”) by linking the individual interests of
the Employees, Consultants and members of the Board to those of the Company’s
stockholders and by providing such individuals with an incentive for outstanding
performance to generate superior returns to the Company’s stockholders.  The
Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of those individuals upon whose
judgment, interest, and special effort the successful conduct of the Company’s
operation is largely dependent.

 

ARTICLE 2.

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings
specified below, unless the context clearly indicates otherwise.  The singular
pronoun shall include the plural where the context so indicates.

 

2.1          “Administrator” shall mean the entity that conducts the general
administration of the Plan as provided in Article 13 hereof.  With reference to
the duties of the Administrator under the Plan which have been delegated to one
or more persons pursuant to Section 13.6 hereof, or which the Board has assumed,
the term “Administrator” shall refer to such person(s) unless the Committee or
the Board has revoked such delegation or the Board has terminated the assumption
of such duties.

 

2.2          “Affiliate” shall mean any Parent or Subsidiary.

 

2.3          “Applicable Accounting Standards” shall mean Generally Accepted
Accounting Principles in the United States, International Financial Reporting
Standards or such other accounting principles or standards as may apply to the
Company’s financial statements under United States federal securities laws from
time to time.

 

2.4          “Applicable Law” shall mean any applicable law, including without
limitation, (i) provisions of the Code, the Securities Act, the Exchange Act and
any rules or regulations thereunder; (ii) corporate, securities, tax or other
laws, statutes, rules, requirements or regulations, whether federal, state,
local or foreign; and (iii) rules of any securities exchange or automated
quotation system on which the Shares are listed, quoted or traded.

 

2.5          “Award” shall mean an Option, a Restricted Stock award, a
Restricted Stock Unit award, a Performance Award, a Dividend Equivalent award, a
Stock Payment award, an

 

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award of Stock Appreciation Rights, an Other Incentive Award or a Performance
Share award, which may be awarded or granted under the Plan.

 

2.6          “Award Agreement” shall mean any written notice, agreement,
contract or other instrument or document evidencing an Award, including through
electronic medium, which shall contain such terms and conditions with respect to
an Award as the Administrator shall determine, consistent with the Plan.

 

2.7          “Board” shall mean the Board of Directors of the Company.

 

2.8          “Change in Control” shall mean the occurrence of any of the
following events:

 

(a)           The consummation of a transaction or series of transactions (other
than an offering of Shares to the general public through a registration
statement filed with the Securities and Exchange Commission) whereby any
“person” or related “group” of “persons” (as such terms are used in Sections
13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its
Parents or Subsidiaries, an employee benefit plan maintained by the Company or
any of its Parents or Subsidiaries or a “person” that, prior to such
transaction, directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company possessing more than fifty percent (50%) of the total
combined voting power of the Company’s securities outstanding immediately after
such acquisition; or

 

(b)           During any period of two (2) consecutive years, individuals who,
at the beginning of such period, constitute the Board together with any new
director(s) (other than a director designated by a person who shall have entered
into an agreement with the Company to effect a transaction described in
Section 2.8(a) or Section 2.8(c) hereof) whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the two (2)-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or

 

(c)           The consummation by the Company (whether directly involving the
Company or indirectly involving the Company through one or more intermediaries)
of (x) a merger, consolidation, reorganization, or business combination, (y) a
sale or other disposition of all or substantially all of the Company’s assets in
any single transaction or series of related transactions or (z) the acquisition
of assets or stock of another entity, in each case, other than a transaction:

 

(i)            Which results in the Company’s voting securities outstanding
immediately before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of the Company or the
person that, as a result of the transaction, controls, directly or indirectly,
the Company or owns, directly or indirectly, all or substantially all of the
Company’s assets or otherwise succeeds to the business of the Company (the
Company or such person, the “Successor Entity”)), directly or indirectly, at
least a majority of the combined voting power of the Successor Entity’s
outstanding voting securities immediately after the transaction, and

 

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(ii)           After which no person or group beneficially owns voting
securities representing fifty percent (50%) or more of the combined voting power
of the Successor Entity; provided, however, that no person or group shall be
treated for purposes of this Section 2.8(c)(ii) as beneficially owning fifty
percent (50%) or more of the combined voting power of the Successor Entity
solely as a result of the voting power held in the Company prior to the
consummation of the transaction; or

 

(d)           Approval by the Company’s stockholders of a liquidation or
dissolution of the Company.

 

Notwithstanding the foregoing, if a Change in Control constitutes a payment
event with respect to any Award (or any portion of an Award) that provides for
the deferral of compensation that is subject to Section 409A of the Code, to the
extent required to avoid the imposition of additional taxes under Section 409A
of the Code, the transaction or event described in subsection (a), (b), (c) or
(d) with respect to such Award (or portion thereof) shall only constitute a
Change in Control for purposes of the payment timing of such Award if such
transaction also constitutes a “change in control event,” as defined in Treasury
Regulation Section 1.409A-3(i)(5).  Consistent with the terms of this
Section 2.8, the Administrator shall have full and final authority to determine
conclusively whether a Change in Control of the Company has occurred pursuant to
the above definition, the date of the occurrence of such Change in Control and
any incidental matters relating thereto.

 

2.9          “Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, together with the regulations and official guidance
promulgated thereunder, whether issued prior or subsequent to the grant of any
Award.

 

2.10        “Committee” shall mean the Compensation Committee of the Board, or
another committee or subcommittee of the Board described in Article 13 hereof.

 

2.11        “Common Stock” shall mean the common stock of the Company, par value
$$0.00001 per share.

 

2.12        “Company” shall mean Kythera Biopharmaceuticals, Inc., a Delaware
corporation.

 

2.13        “Consultant” shall mean any consultant or advisor engaged to provide
services to the Company or any Affiliate who qualifies as a consultant or
advisor under the applicable rules of Form S-8 Registration Statement or any
successor Form thereto or, prior to the Public Trading Date, under Rule 701 of
the Securities Act.

 

2.14        “Covered Employee” shall mean any Employee who is, or could become,
a “covered employee” within the meaning of Section 162(m) of the Code.

 

2.15        “Director” shall mean a member of the Board, as constituted from
time to time.

 

2.16        “Dividend Equivalent” shall mean a right to receive the equivalent
value (in cash or Shares) of dividends paid on Shares, awarded under Section 9.2
hereof.

 

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2.17        “DRO” shall mean a “domestic relations order” as defined by the Code
or Title I of the Employee Retirement Income Security Act of 1974, as amended
from time to time, or the rules thereunder.

 

2.18        “Effective Date” shall mean the date on which the Company’s
registration statement relating to its initial public offering becomes
effective, provided that the Board has adopted the Plan prior to such date,
subject to approval of the Plan by the Company’s stockholders.

 

2.19        “Eligible Individual” shall mean any person who is an Employee, a
Consultant or a Non-Employee Director, as determined by the Administrator.

 

2.20        “Employee” shall mean any officer or other employee (within the
meaning of Section 3401(c) of the Code) of the Company or any Affiliate.

 

2.21        “Equity Restructuring” shall mean a nonreciprocal transaction
between the Company and its stockholders, such as a stock dividend, stock split,
spin-off, rights offering or recapitalization through a large, nonrecurring cash
dividend, that affects the number or kind of Shares (or other securities of the
Company) or the share price of Common Stock (or other securities) and causes a
change in the per share value of the Common Stock underlying outstanding
stock-based Awards.

 

2.22        “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

 

2.23        “Fair Market Value” shall mean, as of any given date, the value of a
Share determined as follows:

 

(a)           If the Common Stock is (i) listed on any established securities
exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the
NASDAQ Global Select Market), (ii) listed on any national market system or
(iii) listed, quoted or traded on any automated quotation system, its Fair
Market Value shall be the closing sales price for a Share as quoted on such
exchange or system for such date or, if there is no closing sales price for a
Share on the date in question, the closing sales price for a Share on the last
preceding date for which such quotation exists, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

 

(b)           If the Common Stock is not listed on an established securities
exchange, national market system or automated quotation system, but the Common
Stock is regularly quoted by a recognized securities dealer, its Fair Market
Value shall be the mean of the high bid and low asked prices for such date or,
if there are no high bid and low asked prices for a Share on such date, the high
bid and low asked prices for a Share on the last preceding date for which such
information exists, as reported in The Wall Street Journal or such other source
as the Administrator deems reliable; or

 

(c)           If the Common Stock is neither listed on an established securities
exchange, national market system or automated quotation system nor regularly
quoted by a recognized securities dealer, its Fair Market Value shall be
established by the Administrator in good faith.

 

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Notwithstanding the foregoing, with respect to any Award granted after the
effectiveness of the Company’s registration statement relating to its initial
public offering and prior to the Public Trading Date, the Fair Market Value
shall mean the initial public offering price of a Share as set forth in the
Company’s final prospectus relating to its initial public offering filed with
the Securities and Exchange Commission.

 

2.24        “Greater Than 10% Stockholder” shall mean an individual then-owning
(within the meaning of Section 424(d) of the Code) more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or any
“parent corporation” or “subsidiary corporation” (as defined in Sections
424(e) and 424(f) of the Code, respectively).

 

2.25        “Incentive Stock Option” shall mean an Option that is intended to
qualify as an incentive stock option and conforms to the applicable provisions
of Section 422 of the Code.

 

2.26        “Individual Award Limit” shall mean the cash and share limits
applicable to Awards granted under the Plan, as set forth in Section 3.3 hereof.

 

2.27        “Non-Employee Director” shall mean a Director of the Company who is
not an Employee.

 

2.28        “Non-Qualified Stock Option” shall mean an Option that is not an
Incentive Stock Option or which is designated as an Incentive Stock Option but
does not meet the applicable requirements of Section 422 of the Code.

 

2.29        “Option” shall mean a right to purchase Shares at a specified
exercise price, granted under Article 6 hereof.  An Option shall be either a
Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that
Options granted to Non-Employee Directors and Consultants shall only be
Non-Qualified Stock Options.

 

2.30        “Other Incentive Award” shall mean an Award denominated in, linked
to or derived from Shares or value metrics related to Shares, granted pursuant
to Section 9.6 hereof.

 

2.31        “Parent” shall mean any entity (other than the Company), whether
domestic or foreign, in an unbroken chain of entities ending with the Company if
each of the entities other than the Company beneficially owns, at the time of
the determination, securities or interests representing more than fifty percent
(50%) of the total combined voting power of all classes of securities or
interests in one of the other entities in such chain.

 

2.32        “Participant” shall mean a person who has been granted an Award,
pursuant to the Plan.

 

2.33        “Performance Award” shall mean an Award that is granted under
Section 9.1 hereof.

 

2.34        “Performance-Based Compensation” shall mean any compensation that is
intended to qualify as “performance-based compensation” as described in
Section 162(m)(4)(C) of the Code.

 

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2.35        “Performance Criteria” shall mean the criteria (and adjustments)
that the Committee selects for an Award for purposes of establishing the
Performance Goal or Performance Goals for a Performance Period, determined as
follows:

 

(a)           The Performance Criteria that shall be used to establish
Performance Goals are limited to the following: (i) net earnings (either before
or after one or more of the following: (A) interest, (B) taxes,
(C) depreciation, (D) amortization and (E) non-cash equity-based compensation
expense); (ii) gross or net sales or revenue; (iii) net income (either before or
after taxes); (iv) adjusted net income; (v) operating earnings or profit;
(vi) cash flow (including, but not limited to, operating cash flow and free cash
flow); (vii) return on assets; (viii) return on capital; (ix) return on
stockholders’ equity; (x) total stockholder return; (xi) return on sales;
(xii) gross or net profit or operating margin; (xiii) costs; (xiv) funds from
operations; (xv) expenses; (xvi) working capital; (xvii) earnings per share;
(xviii) adjusted earnings per Share; (xix) price per Share; (xx) regulatory body
approval for commercialization of a product; (xxi) implementation or completion
of critical projects; (xxii) market share; (xxiii) economic value; (xxiv) debt
levels or reduction; (xxv) customer retention; (xxvi) sales-related goals;
(xxvii) comparisons with other stock market indices; (xxviii) operating
efficiency; (xxix) customer satisfaction and/or growth; (xxx) employee
satisfaction; (xxxi) research and development achievements; (xxxii) financing
and other capital raising transactions; (xxxiii) recruiting and maintaining
personnel; and (xxxiv) year-end cash, any of which may be measured either in
absolute terms for the Company or any operating unit of the Company or as
compared to any incremental increase or decrease or as compared to results of a
peer group or to market performance indicators or indices.

 

(b)           The Administrator may, in its sole discretion, provide that one or
more objectively determinable adjustments shall be made to one or more of the
Performance Goals.  Such adjustments may include, but are not limited to, one or
more of the following:  (i) items related to a change in accounting principle;
(ii) items relating to financing activities; (iii) expenses for restructuring or
productivity initiatives; (iv) other non-operating items; (v) items related to
acquisitions; (vi) items attributable to the business operations of any entity
acquired by the Company during the Performance Period; (vii) items related to
the sale or disposition of a business or segment of a business; (viii) items
related to discontinued operations that do not qualify as a segment of a
business under Applicable Accounting Standards; (ix) items attributable to any
stock dividend, stock split, combination or exchange of stock occurring during
the Performance Period; (x) any other items of significant income or expense
which are determined to be appropriate adjustments; (xi) items relating to
unusual or extraordinary corporate transactions, events or developments,
(xii)  items related to amortization of acquired intangible assets; (xiii) items
that are outside the scope of the Company’s core, on-going business activities;
(xiv) items related to acquired in-process research and development; (xv) items
relating to changes in tax laws; (xvi) items relating to major licensing or
partnership arrangements; (xvii) items relating to asset impairment charges;
(xviii) items relating to gains or losses for litigation, arbitration and
contractual settlements; or (xix) items relating to any other unusual or
nonrecurring events or changes in Applicable Laws, accounting principles or
business conditions.  For all Awards intended to qualify as Performance-Based
Compensation, such determinations shall be made within the time prescribed by,
and otherwise in compliance with, Section 162(m) of the Code.

 

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2.36        “Performance Goals” shall mean, with respect to a Performance
Period, one or more goals established in writing by the Administrator for the
Performance Period based upon one or more Performance Criteria.  Depending on
the Performance Criteria used to establish such Performance Goals, the
Performance Goals may be expressed in terms of overall Company performance or
the performance of an Affiliate, a division or business unit, or one or more
individuals.  The achievement of each Performance Goal shall be determined in
accordance with Applicable Accounting Standards, to the extent applicable.

 

2.37        “Performance Period” shall mean one or more periods of time, which
may be of varying and overlapping durations, as the Administrator may select,
over which the attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant’s right to, and the payment of, a
Performance Award.

 

2.38        “Performance Share Award” shall mean a contractual right awarded
under Section 9.5 hereof to receive a number of Shares or the Fair Market Value
of such number of Shares in cash based on the attainment of specified
Performance Goals or other criteria determined by the Administrator.

 

2.39        “Permitted Transferee” shall mean, with respect to a Participant,
(a) prior to the Public Trading Date, any “family member” of the Participant, as
defined under Rule 701 of the Securities Act and (b) on or after the Public
Trading Date, any “family member” of the Participant, as defined under the
General Instructions to Form S-8 Registration Statement under the Securities Act
or any successor Form thereto, or any other transferee specifically approved by
the Administrator, after taking into account Applicable Law.

 

2.40        “Plan” shall mean this Kythera Biopharmaceutical, Inc. 2012 Equity
Incentive Award Plan, as it may be amended from time to time.

 

2.41        “Prior Plan” shall mean the 2004 Stock Plan (amended and restated as
of August 18, 2005, as amended).

 

2.42        “Program” shall mean any program adopted by the Administrator
pursuant to the Plan containing the terms and conditions intended to govern a
specified type of Award granted under the Plan and pursuant to which such type
of Award may be granted under the Plan.

 

2.43            “Public Trading Date” shall mean the first date upon which the
Common Stock is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

 

2.44        “Restricted Stock” shall mean an award of Shares made under
Article 8 hereof that is subject to certain restrictions and may be subject to
risk of forfeiture or repurchase.

 

2.45        “Restricted Stock Unit” shall mean a contractual right awarded under
Section 9.4 hereof to receive in the future a Share or the Fair Market Value of
a Share in cash.

 

2.46        “Securities Act” shall mean the Securities Act of 1933, as amended.

 

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2.47        “Share Limit” shall have the meaning provided in
Section 3.1(a) hereof.

 

2.48        “Shares” shall mean shares of Common Stock.

 

2.49        “Stock Appreciation Right” shall mean a stock appreciation right
granted under Article 10 hereof.

 

2.50        “Stock Payment” shall mean a payment in the form of Shares awarded
under Section 9.3 hereof.

 

2.51        “Subsidiary” shall mean any entity (other than the Company), whether
domestic or foreign, in an unbroken chain of entities beginning with the Company
if each of the entities other than the last entity in the unbroken chain
beneficially owns, at the time of the determination, securities or interests
representing more than fifty percent (50%) of the total combined voting power of
all classes of securities or interests in one of the other entities in such
chain.

 

2.52        “Substitute Award” shall mean an Award granted under the Plan in
connection with a corporate transaction, such as a merger, combination,
consolidation or acquisition of property or stock, in any case, upon the
assumption of, or in substitution for, an outstanding equity award previously
granted by a company or other entity that is a party to such transaction;
provided, however, that in no event shall the term “Substitute Award” be
construed to refer to an award made in connection with the cancellation and
repricing of an Option or Stock Appreciation Right.

 

2.53        “Successor Entity” shall have the meaning provided in
Section 2.9(c)(i) hereof.

 

2.54        “Termination of Service” shall mean:

 

(a)  As to a Consultant, the time when the engagement of a Participant as a
Consultant to the Company and its Affiliates is terminated for any reason, with
or without cause, including, without limitation, by resignation, discharge,
death or retirement, but excluding terminations where the Consultant
simultaneously commences or remains in employment and/or service as an Employee
and/or Director with the Company or any Affiliate.

 

(b) As to a Non-Employee Director, the time when a Participant who is a
Non-Employee Director ceases to be a Director for any reason, including, without
limitation, a termination by resignation, failure to be elected, death or
retirement, but excluding terminations where the Participant simultaneously
commences or remains in employment and/or service as an Employee and/or
Consultant with the Company or any Affiliate.

 

(c) As to an Employee, the time when the employee-employer relationship between
a Participant and the Company and its Affiliates is terminated for any reason,
including, without limitation, a termination by resignation, discharge, death,
disability or retirement, but excluding terminations where the Participant
simultaneously commences or remains in service as a Consultant and/or Director
with the Company or any Affiliate.

 

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The Administrator, in its sole discretion, shall determine the effect of all
matters and questions relating to any Termination of Service, including without
limitation, whether a Termination of Service has occurred, whether any
Termination of Service resulted from a discharge for cause and whether any
particular leave of absence constitutes a Termination of Service; provided,
however, that, with respect to Incentive Stock Options, unless the Administrator
otherwise provides in the terms of any Program, Award Agreement or otherwise, or
as otherwise required by Applicable Law, a leave of absence, change in status
from an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Service only
if, and to the extent that, such leave of absence, change in status or other
change interrupts employment for the purposes of Section 422(a)(2) of the Code. 
For purposes of the Plan, a Participant’s employee-employer relationship or
consultancy relationship shall be deemed to be terminated in the event that the
Affiliate employing or contracting with such Participant ceases to remain an
Affiliate following any merger, sale of stock or other corporate transaction or
event (including, without limitation, a spin-off).

 

ARTICLE 3.

 

SHARES SUBJECT TO THE PLAN

 

3.1          Number of Shares. (1)

 

(a)           Subject to Sections 3.1(b), 14.1 and 14.2 hereof, the aggregate
number of Shares which may be issued or transferred pursuant to Awards under the
Plan shall be equal to the sum of (i) three hundred seventy-eight thousand one
hundred seventy-one (378,171) Shares, (ii) any Shares which, as of the Effective
Date, are (A) available for issuance under the Prior Plan or (B) underlying
awards outstanding under the Prior Plan that, on or after the Effective Date,
terminate, expire or lapse for any reason without the delivery of Shares to the
holder thereof, up to a maximum of two million one hundred thirteen thousand one
hundred eighty (2,113,180) Shares, and (iii) an annual increase on the first day
of each year beginning in 2013 and ending in 2022 equal to the lesser of (A) one
million five hundred twelve thousand six hundred eighty-seven (1,512,687)
Shares, (B) four percent (4%) of the Shares outstanding on the last day of the
immediately preceding fiscal year and (C) such smaller number of Shares as may
be determined by the Board (the “Share Limit”), of which up to fifteen million
five hundred five thousand forty eight (15,505,048) Shares  may be granted as
Incentive Stock Options, provided, however, that notwithstanding the foregoing,
Shares added to the Share Limit pursuant to Section 3.1(a)(ii) or
Section 3.1(a)(iii) shall be available for issuance as Incentive Stock Options
only to the extent that making such Shares available for issuance as Incentive
Stock Options would not cause any Incentive Stock Option to cease to qualify as
such.  Notwithstanding the foregoing, to the extent permitted under applicable
law and applicable stock exchange rules, Awards that provide for the delivery of
Shares subsequent to the applicable grant date may be granted in excess of the
Share Limit if such Awards provide for the forfeiture or cash settlement of such
Awards to the extent that insufficient Shares remain under the Share Limit at
the time that Shares would otherwise be issued in respect of such Award.  As of
the Effective Date, no further awards may be granted under the Prior Plan;
however, any awards under the Prior Plan that are outstanding as of the
Effective Date shall continue to be subject to the terms and conditions of the
Prior Plan.

 

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(1)         Gives effect to a 1-for-2.6443 reverse stock split effected October
8, 2012.

 

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(b)           The following Shares shall be available for future grants of
Awards under the Plan and shall be added back to the Share Limit in the same
number of Shares as were debited from the Share Limit in respect of the grant of
such Award (as may be adjusted in accordance with Section 14.2 hereof):
(i) Shares tendered by a Participant or withheld by the Company in payment of
the exercise price of an Option; (ii) Shares tendered by the Participant or
withheld by the Company to satisfy any tax withholding obligation with respect
to an Award; (iii) Shares subject to an Award that is forfeited, expires or is
settled for cash (in whole or in part,  provided that only that portion of
Shares related to the cash settlement shall be added back to the Share Limit),
to the extent of such forfeiture, expiration or cash settlement; and (iv) Shares
subject to Stock Appreciation Rights that are not issued in connection with the
settlement of the Stock Appreciation Rights on exercise thereof. 
Notwithstanding anything to the contrary contained herein, Shares purchased on
the open market with the cash proceeds from the exercise of Options shall not be
added back to the Share Limit and shall not be available for future grants of
Awards.  Any Shares repurchased by the Company under Section 8.4 hereof at the
same price paid by the Participant so that such Shares are returned to the
Company will again be available for Awards.  The payment of Dividend Equivalents
in cash in conjunction with any outstanding Awards shall not be counted against
the Shares available for issuance under the Plan.  Notwithstanding the
provisions of this Section 3.1(b), no Shares may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.

 

(c)           Substitute Awards shall not reduce the Shares authorized for grant
under the Plan.  Additionally, in the event that a company acquired by the
Company or any Affiliate, or with which the Company or any Affiliate combines,
has shares available under a pre-existing plan approved by its stockholders and
not adopted in contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing plan (as
adjusted, to the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or combination
to determine the consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used for Awards under
the Plan, and shall not reduce the Shares authorized for grant under the Plan;
provided, however, that Awards using such available shares shall not be made
after the date awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and shall only be made
to individuals who were not employed by or providing services to the Company or
its Affiliates immediately prior to such acquisition or combination.

 

3.2          Stock Distributed.  Any Shares distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Common Stock, treasury
Common Stock or Common Stock purchased on the open market.

 

3.3          Limitation on Number of Shares Subject to Awards (2). 
Notwithstanding any provision in the Plan to the contrary, and subject to
Section 14.2 hereof, the maximum aggregate number of Shares with respect to one
or more Awards that may be granted to any one person during any calendar year
shall be seven hundred fifty-six thousand three hundred forty-three (756,343)
and the maximum aggregate amount of cash that may be paid in cash during any
calendar year with respect to one or more Awards payable in cash shall be five
million dollars ($5,000,000) (together, the “Individual Award Limits”);
provided, however, that the foregoing limitations shall not apply until the
earliest of the

 

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(2)         Gives effect to a 1-for-2.6443 reverse stock split effected October
8, 2012.

 

10

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following events to occur after the Public Trading Date: (a) the first material
modification of the Plan (including any increase in the Share Limit in
accordance with Section 3.1 hereof); (b) the issuance of all of the Shares
reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the
first meeting of stockholders at which members of the Board are to be elected
that occurs after the close of the third calendar year following the calendar
year in which occurred the first registration of an equity security of the
Company under Section 12 of the Exchange Act; or (e) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.

 

ARTICLE 4.

 

GRANTING OF AWARDS

 

4.1          Participation.  The Administrator may, from time to time, select
from among all Eligible Individuals, those to whom one or more Awards shall be
granted and shall determine the nature and amount of each Award, which shall not
be inconsistent with the requirements of the Plan.  Except as provided in
Article 12 hereof regarding the automatic grant of Awards to Non-Employee
Directors or any applicable Program, no Eligible Individual shall have any right
to be granted an Award pursuant to the Plan.

 

4.2          Award Agreement.  Each Award shall be evidenced by an Award
Agreement stating the terms and conditions applicable to such Award, consistent
with the requirements of the Plan and any applicable Program.

 

4.3          Limitations Applicable to Section 16 Persons.  Notwithstanding
anything contained herein to the contrary, with respect to any Award granted or
awarded to any individual who is then subject to Section 16 of the Exchange Act,
the Plan, any applicable Program and the applicable Award Agreement shall be
subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange
Act and any amendments thereto) that are requirements for the application of
such exemptive rule, and such additional limitations shall be deemed to be
incorporated by reference into such Award to the extent permitted by Applicable
Law.

 

4.4          At-Will Service.  Nothing in the Plan or in any Program or Award
Agreement hereunder shall confer upon any Participant any right to continue as
an Employee, Director or Consultant of the Company or any Affiliate, or shall
interfere with or restrict in any way the rights of the Company or any
Affiliate, which rights are hereby expressly reserved, to discharge any
Participant at any time for any reason whatsoever, with or without cause, and
with or without notice, or to terminate or change all other terms and conditions
of any Participant’s employment or engagement, except to the extent expressly
provided otherwise in a written agreement between the Participant and the
Company or any Affiliate.

 

4.5          Foreign Participants.  Notwithstanding any provision of the Plan to
the contrary, in order to comply with the laws in other countries in which the
Company and its Affiliates operate or have Employees, Non-Employee Directors or
Consultants, or in order to comply with the requirements of any foreign
securities exchange, the Administrator, in its sole discretion, shall have the
power and authority to: (a) determine which Affiliates shall be covered by the

 

11

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Plan; (b) determine which Eligible Individuals outside the United States are
eligible to participate in the Plan; (c) modify the terms and conditions of any
Award granted to Eligible Individuals outside the United States to comply with
applicable foreign laws or listing requirements of any such foreign securities
exchange; (d) establish subplans and modify exercise procedures and other terms
and procedures, to the extent such actions may be necessary or advisable;
provided, however, that no such subplans and/or modifications shall increase the
Share Limit or Individual Award Limits contained in Sections 3.1 and 3.3 hereof,
respectively; and (e) take any action, before or after an Award is made, that it
deems advisable to obtain approval or comply with any necessary local
governmental regulatory exemptions or approvals or listing requirements of any
such foreign securities exchange.  Notwithstanding the foregoing, the
Administrator may not take any actions hereunder, and no Awards shall be
granted, that would violate Applicable Law.

 

4.6          Stand-Alone and Tandem Awards.  Awards granted pursuant to the Plan
may, in the sole discretion of the Administrator, be granted either alone, in
addition to, or in tandem with, any other Award granted pursuant to the Plan. 
Awards granted in addition to or in tandem with other Awards may be granted
either at the same time as or at a different time from the grant of such other
Awards.

 

ARTICLE 5.

 

PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED
COMPENSATION

 

5.1          Purpose.  The Committee, in its sole discretion, may determine
whether any Award is intended to qualify as Performance-Based Compensation. If
the Committee, in its sole discretion, decides to grant an Award to an Eligible
Individual that is intended to qualify as Performance-Based Compensation, then
the provisions of this Article 5 shall control over any contrary provision
contained in the Plan.  The Administrator may in its sole discretion grant
Awards to Eligible Individuals that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 5 and
that are not intended to qualify as Performance-Based Compensation.  Unless
otherwise specified by the Committee at the time of grant, the Performance
Criteria with respect to an Award intended to be Performance-Based Compensation
payable to a Covered Employee shall be determined on the basis of Applicable
Accounting Standards.

 

5.2          Applicability.  The grant of an Award to an Eligible Individual for
a particular Performance Period shall not require the grant of an Award to such
Eligible Individual in any subsequent Performance Period and the grant of an
Award to any one Eligible Individual shall not require the grant of an Award to
any other Eligible Individual in such period or in any other period.

 

5.3          Procedures with Respect to Performance-Based Awards.  To the extent
necessary to comply with the requirements of Section 162(m)(4)(C) of the Code,
with respect to any Award which is intended to qualify as Performance-Based
Compensation, no later than ninety (90) days following the commencement of any
Performance Period or any designated fiscal period or period of service (or such
earlier time as may be required under Section 162(m)

 

12

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of the Code), the Committee shall, in writing, (a) designate one or more
Eligible Individuals; (b) select the Performance Criteria applicable to the
Performance Period; (c) establish the Performance Goals and amounts of such
Awards, as applicable, which may be earned for such Performance Period based on
the Performance Goals; and (d) specify the relationship between the Performance
Criteria and the Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Covered Employee for such Performance Period. 
Following the completion of each Performance Period, the Committee shall certify
in writing whether and the extent to which the applicable Performance Goals have
been achieved for such Performance Period.  In determining the amount earned
under such Awards, unless otherwise provided in an applicable Program or Award
Agreement, the Committee shall have the right to reduce or eliminate (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant, including the
assessment of individual or corporate performance for the Performance Period.

 

5.4          Payment of Performance-Based Awards.  Unless otherwise provided in
the applicable Program or Award Agreement (and only to the extent otherwise
permitted by Section 162(m)(4)(C) of the Code), the holder of an Award that is
intended to qualify as Performance-Based Compensation must be employed by the
Company or an Affiliate throughout the applicable Performance Period.  Unless
otherwise provided in the applicable Performance Goals, Program or Award
Agreement, a Participant shall be eligible to receive payment pursuant to such
Awards for a Performance Period only if and to the extent the Performance Goals
for such applicable Performance Period are achieved.

 

5.5          Additional Limitations.  Notwithstanding any other provision of the
Plan and except as otherwise determined by the Administrator, any Award which is
granted to an Eligible Individual and is intended to qualify as
Performance-Based Compensation shall be subject to any additional limitations
imposed by Section 162(m) of the Code that are requirements for qualification as
Performance-Based Compensation, and the Plan, the Program and the Award
Agreement shall be deemed amended to the extent necessary to conform to such
requirements.

 

ARTICLE 6.

 

GRANTING OF OPTIONS

 

6.1          Granting of Options to Eligible Individuals.  The Administrator is
authorized to grant Options to Eligible Individuals from time to time, in its
sole discretion, on such terms and conditions as it may determine which shall
not be inconsistent with the Plan.

 

6.2          Qualification of Incentive Stock Options.  No Incentive Stock
Option shall be granted to any person who is not an Employee of the Company or
any “parent corporation” or “subsidiary corporation” of the Company (as defined
in Sections 424(e) and 424(f) of the Code, respectively).  No person who
qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock
Option unless such Incentive Stock Option conforms to the applicable provisions
of Section 422 of the Code.  Any Incentive Stock Option granted under the Plan
may be modified by the Administrator, with the consent of the Participant, to
disqualify such Option from treatment as an “incentive stock option” under
Section 422 of the Code. To the extent that the aggregate fair market value of
stock with respect to which “incentive stock options” (within

 

13

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the meaning of Section 422 of the Code, but without regard to Section 422(d) of
the Code) are exercisable for the first time by a Participant during any
calendar year under the Plan and all other plans of the Company and any
Affiliate corporation thereof exceeds $100,000, the Options shall be treated as
Non-Qualified Stock Options to the extent required by Section 422 of the Code. 
The rule set forth in the preceding sentence shall be applied by taking Options
and other “incentive stock options” into account in the order in which they were
granted and the Fair Market Value of stock shall be determined as of the time
the respective options were granted.  In addition, to the extent that any
Options otherwise fail to qualify as Incentive Stock Options, such Options shall
be treated as Nonqualified Stock Options.

 

6.3          Option Exercise Price.  Except as provided in Section 6.6 hereof,
the exercise price per Share subject to each Option shall be set by the
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted (or, as to Incentive
Stock Options, on the date the Option is modified, extended or renewed for
purposes of Section 424(h) of the Code).  In addition, in the case of Incentive
Stock Options granted to a Greater Than 10% Stockholder, such price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of a Share on
the date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code).

 

6.4          Option Term.  The term of each Option shall be set by the
Administrator in its sole discretion; provided, however, that the term shall not
be more than ten (10) years from the date the Option is granted, or five
(5) years from the date an Incentive Stock Option is granted to a Greater Than
10% Stockholder.  The Administrator shall determine the time period, including
the time period following a Termination of Service, during which the Participant
has the right to exercise the vested Options, which time period may not extend
beyond the stated term of the Option. Except as limited by the requirements of
Section 409A or Section 422 of the Code, the Administrator may extend the term
of any outstanding Option, and may extend the time period during which vested
Options may be exercised, in connection with any Termination of Service of the
Participant, and, subject to Section 14.1 hereof, may amend any other term or
condition of such Option relating to such a Termination of Service.

 

6.5          Option Vesting.

 

(a)           The terms and conditions pursuant to which an Option vests in the
Participant and becomes exercisable shall be determined by the Administrator and
set forth in the applicable Award Agreement.  Such vesting may be based on
service with the Company or any Affiliate, any of the Performance Criteria, or
any other criteria selected by the Administrator.  At any time after the grant
of an Option, the Administrator may, in its sole discretion and subject to
whatever terms and conditions it selects, accelerate the vesting of the Option,
including following a Termination of Service; provided, that in no event shall
an Option become exercisable following its expiration, termination or
forfeiture.

 

(b)           No portion of an Option which is unexercisable at a Participant’s
Termination of Service shall thereafter become exercisable, except as may be
otherwise provided by the Administrator either in an applicable Program, the
applicable Award Agreement or by action of the Administrator following the grant
of the Option.

 

14

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6.6          Substitute Awards.  Notwithstanding the foregoing provisions of
this Article 6 to the contrary, in the case of an Option that is a Substitute
Award, the price per Share of the Shares subject to such Option may be less than
the Fair Market Value per share on the date of grant, provided, however, that
the exercise price of any Substitute Award shall be determined in accordance
with the applicable requirements of Sections 424 and 409A of the Code.

 

6.7          Substitution of Stock Appreciation Rights.  The Administrator may,
in its sole discretion, substitute an Award of Stock Appreciation Rights for an
outstanding Option at any time prior to or upon exercise of such Option;
provided, however, that such Stock Appreciation Rights shall be exercisable with
respect to the same number of Shares for which such substituted Option would
have been exercisable, and shall also have the same exercise price and remaining
term as the substituted Option.

 

ARTICLE 7.

 

EXERCISE OF OPTIONS

 

7.1          Partial Exercise.  An exercisable Option may be exercised in whole
or in part.  However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise must be with respect to a minimum number of Shares.

 

7.2          Manner of Exercise.  All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company, or such other person or entity designated by the Administrator,
or his, her or its office, as applicable:

 

(a)           A written or electronic notice complying with the applicable
rules established by the Administrator stating that the Option, or a portion
thereof, is exercised.  The notice shall be signed by the Participant or other
person then entitled to exercise the Option or such portion of the Option;

 

(b)           Such representations and documents as the Administrator, in its
sole discretion, deems necessary or advisable to effect compliance with
Applicable Law.  The Administrator may, in its sole discretion, also take such
additional actions as it deems appropriate to effect such compliance including,
without limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;

 

(c)           In the event that the Option shall be exercised pursuant to
Section 11.3 hereof by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the Option,
as determined in the sole discretion of the Administrator; and

 

(d)           Full payment of the exercise price and applicable withholding
taxes to the stock administrator of the Company for the Shares with respect to
which the Option, or portion thereof, is exercised, in a manner permitted by the
Administrator in accordance with Sections 11.1 and 11.2 hereof.

 

15

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7.3          Notification Regarding Disposition.  The Participant shall give the
Company prompt written or electronic notice of any disposition of Shares
acquired by exercise of an Incentive Stock Option which occurs within (a) two
(2) years after the date of granting (including the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code) of such Option
to such Participant, or (b) one (1) year after the date of transfer of such
Shares to such Participant.

 

ARTICLE 8.

 

RESTRICTED STOCK

 

8.1          Award of Restricted Stock.

 

(a)           The Administrator is authorized to grant Restricted Stock to
Eligible Individuals, and shall determine the terms and conditions, including
the restrictions, applicable to each award of Restricted Stock, which terms and
conditions shall not be inconsistent with the Plan, and may impose such
conditions on the issuance of such Restricted Stock as it deems appropriate.

 

(b)           The Administrator shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that if a purchase
price is charged, such purchase price shall be no less than the par value of the
Shares to be purchased, unless otherwise permitted by Applicable Law.  In all
cases, legal consideration shall be required for each issuance of Restricted
Stock to the extent required by Applicable Law.

 

8.2          Rights as Stockholders.  Subject to Section 8.4 hereof, upon
issuance of Restricted Stock, the Participant shall have, unless otherwise
provided by the Administrator, all the rights of a stockholder with respect to
said shares, subject to the restrictions in an applicable Program or in the
applicable Award Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that, in the sole discretion of the Administrator, any extraordinary
distributions with respect to the shares shall be subject to the restrictions
set forth in Section 8.3 hereof.

 

8.3          Restrictions.  All shares of Restricted Stock (including any shares
received by Participants thereof with respect to shares of Restricted Stock as a
result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of an applicable Program or the applicable Award Agreement,
be subject to such restrictions and vesting requirements as the Administrator
shall provide.  Such restrictions may include, without limitation, restrictions
concerning voting rights and transferability and such restrictions may lapse
separately or in combination at such times and pursuant to such circumstances or
based on such criteria as selected by the Administrator, including, without
limitation, criteria based on the Participant’s continued employment,
directorship or consultancy with the Company, the Performance Criteria, Company
or Affiliate performance, individual performance or other criteria selected by
the Administrator.  By action taken after the Restricted Stock is issued, the
Administrator may, on such terms and conditions as it may determine to be
appropriate, accelerate the vesting of such Restricted Stock by removing any or
all of the restrictions imposed by the terms of an applicable

 

16

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Program and/or Award Agreement.  Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire.

 

8.4          Repurchase or Forfeiture of Restricted Stock.  If no purchase price
was paid by the Participant for the Restricted Stock, upon a Termination of
Service, the Participant’s rights in unvested Restricted Stock then subject to
restrictions shall lapse, and such Restricted Stock shall be surrendered to the
Company and cancelled without consideration. If a purchase price was paid by the
Participant for the Restricted Stock, upon a Termination of Service, the Company
shall have the right to repurchase from the Participant the unvested Restricted
Stock then-subject to restrictions at a cash price per share equal to the price
paid by the Participant for such Restricted Stock or such other amount as may be
specified in an applicable Program or the applicable Award Agreement.  The
Administrator in its sole discretion may provide that, upon certain events,
including without limitation a Change in Control, the Participant’s death,
retirement or disability, any other specified Termination of Service or any
other event, the Participant’s rights in unvested Restricted Stock shall not
terminate, such Restricted Stock shall vest and cease to be forfeitable and, if
applicable, the Company shall cease to have a right of repurchase.

 

8.5          Certificates for Restricted Stock.  Restricted Stock granted
pursuant to the Plan may be evidenced in such manner as the Administrator shall
determine.  Certificates or book entries evidencing shares of Restricted Stock
must include an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company may, in its
sole discretion, retain physical possession of any stock certificate until such
time as all applicable restrictions lapse.

 

8.6          Section 83(b) Election.  If a Participant makes an election under
Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of
the date of transfer of the Restricted Stock rather than as of the date or dates
upon which the Participant would otherwise be taxable under Section 83(a) of the
Code, the Participant shall be required to deliver a copy of such election to
the Company promptly after filing such election with the Internal Revenue
Service.

 

ARTICLE 9.

 

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS, RESTRICTED STOCK
UNITS, PERFORMANCE SHARE AWARDS, OTHER INCENTIVE AWARDS

 

9.1          Performance Awards.

 

(a)           The Administrator is authorized to grant Performance Awards to any
Eligible Individual and to determine whether such Performance Awards shall be
Performance-Based Compensation.  The value of Performance Awards may be linked
to any one or more of the Performance Criteria or other specific criteria
determined by the Administrator, in each case on a specified date or dates or
over any period or periods determined by the Administrator.

 

(b)           Without limiting Section 9.1(a) hereof, the Administrator may
grant Performance Awards to any Eligible Individual in the form of a cash bonus
payable upon the

 

17

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attainment of objective Performance Goals, or such other criteria, whether or
not objective, which are established by the Administrator, in each case on a
specified date or dates or over any period or periods determined by the
Administrator.  Any such bonuses paid to a Participant which are intended to be
Performance-Based Compensation shall be based upon objectively determinable
bonus formulas established in accordance with the provisions of Article 5
hereof.

 

9.2          Dividend Equivalents.

 

(a)           Subject to Section 9.2(b) hereof, Dividend Equivalents may be
granted by the Administrator, either alone or in tandem with another Award,
based on dividends declared on the Common Stock, to be credited as of dividend
payment dates during the period between the date the Dividend Equivalents are
granted to a Participant and the date such Dividend Equivalents terminate or
expire, as determined by the Administrator.  Such Dividend Equivalents shall be
converted to cash or additional Shares by such formula, at such time and subject
to such limitations as may be determined by the Administrator.  In addition, the
Administrator may provide that Dividend Equivalents with respect to Shares
covered by an Award shall only be paid out to the Participant at the same time
or times and to the same extent that the vesting conditions, if any, are
subsequently satisfied and the Award vests with respect to such Shares.

 

(b)           Notwithstanding the foregoing, no Dividend Equivalents shall be
payable with respect to Options or Stock Appreciation Rights, unless otherwise
determined by the Administrator.

 

9.3          Stock Payments.  The Administrator is authorized to make one or
more Stock Payments to any Eligible Individual.  The number or value of Shares
of any Stock Payment shall be determined by the Administrator and may be based
upon one or more Performance Criteria or any other specific criteria, including
service to the Company or any Affiliate, determined by the Administrator.  Stock
Payments may, but are not required to, be made in lieu of base salary, bonus,
fees or other cash compensation otherwise payable to such Eligible Individual.

 

9.4          Restricted Stock Units.  The Administrator is authorized to grant
Restricted Stock Units to any Eligible Individual.  The number and terms and
conditions of Restricted Stock Units shall be determined by the Administrator. 
The Administrator shall specify the date or dates on which the Restricted Stock
Units shall become fully vested and nonforfeitable, and may specify such
conditions to vesting as it deems appropriate, including conditions based on one
or more Performance Criteria or other specific criteria, including service to
the Company or any Affiliate, in each case, on a specified date or dates or over
any period or periods, as determined by the Administrator.  The Administrator
shall specify, or permit the Participant to elect, the conditions and dates upon
which the Shares underlying the Restricted Stock Units shall be issued, which
dates shall not be earlier than the date as of which the Restricted Stock Units
vest and become nonforfeitable and which conditions and dates shall be
consistent with the applicable provisions of Section 409A of the Code or an
exemption therefrom.  On the distribution dates, the Company shall issue to the
Participant one unrestricted, fully transferable Share (or the Fair Market Value
of one such Share in cash) for each vested and nonforfeitable Restricted Stock
Unit.

 

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9.5          Performance Share Awards.  Any Eligible Individual selected by the
Administrator may be granted one or more Performance Share Awards which shall be
denominated in a number of Shares and the vesting of which may be linked to any
one or more of the Performance Criteria, other specific performance criteria (in
each case on a specified date or dates or over any period or periods determined
by the Administrator) and/or time-vesting or other criteria, as determined by
the Administrator.

 

9.6          Other Incentive Awards.  The Administrator is authorized to grant
Other Incentive Awards to any Eligible Individual, which Awards may cover Shares
or the right to purchase Shares or have a value derived from the value of, or an
exercise or conversion privilege at a price related to, or that are otherwise
payable in or based on, Shares, shareholder value or shareholder return, in each
case, on a specified date or dates or over any period or periods determined by
the Administrator.  Other Incentive Awards may be linked to any one or more of
the Performance Criteria or other specific performance criteria determined
appropriate by the Administrator.

 

9.7          Other Terms and Conditions.  All applicable terms and conditions of
each Award described in this Article 9, including without limitation, as
applicable, the term, vesting conditions and exercise/purchase price applicable
to the Award, shall be set by the Administrator in its sole discretion,
provided, however, that the value of the consideration paid by a Participant for
an Award shall not be less than the par value of a Share, unless otherwise
permitted by Applicable Law.

 

9.8          Exercise upon Termination of Service.  Awards described in this
Article 9 are exercisable or distributable, as applicable, only while the
Participant is an Employee, Director or Consultant, as applicable.  The
Administrator, however, in its sole discretion may provide that such Award may
be exercised or distributed subsequent to a Termination of Service as provided
under an applicable Program, Award Agreement, payment deferral election and/or
upon certain events, including without limitation, a Change in Control, the
Participant’s death, retirement or disability or any other specified Termination
of Service.

 

ARTICLE 10.

 

STOCK APPRECIATION RIGHTS

 

10.1        Grant of Stock Appreciation Rights.

 

(a)           The Administrator is authorized to grant Stock Appreciation Rights
to Eligible Individuals from time to time, in its sole discretion, on such terms
and conditions as it may determine consistent with the Plan.

 

(b)           A Stock Appreciation Right shall entitle the Participant (or other
person entitled to exercise the Stock Appreciation Right pursuant to the Plan)
to exercise all or a specified portion of the Stock Appreciation Right (to the
extent then exercisable pursuant to its terms) and to receive from the Company
an amount determined by multiplying the difference obtained by subtracting the
exercise price per Share of the Stock Appreciation Right from the Fair Market
Value on the date of exercise of the Stock Appreciation Right by the number of
Shares with respect to which the Stock Appreciation Right shall have been
exercised, subject to

 

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any limitations the Administrator may impose.  Except as described in
Section 10.1(c) hereof, the exercise price per Share subject to each Stock
Appreciation Right shall be set by the Administrator, but shall not be less than
one hundred percent (100%) of the Fair Market Value on the date the Stock
Appreciation Right is granted.

 

(c)           Notwithstanding the provisions of Section 10.1(b) hereof to the
contrary, in the case of a Stock Appreciation Right that is a Substitute Award,
the price per share of the shares subject to such Stock Appreciation Right may
be less than 100% of the Fair Market Value per share on the date of grant;
provided, however, that the exercise price of any Substitute Award shall be
determined in accordance with the applicable requirements of Sections 424 and
409A of the Code.

 

10.2        Stock Appreciation Right Vesting.

 

(a)           The Administrator shall determine the period during which a
Participant shall vest in a Stock Appreciation Right and have the right to
exercise such Stock Appreciation Rights (subject to Section 10.4 hereof) in
whole or in part.  Such vesting may be based on service with the Company or any
Affiliate, any of the Performance Criteria or any other criteria selected by the
Administrator.  At any time after grant of a Stock Appreciation Right, the
Administrator may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the period during which the Stock Appreciation
Right vests.

 

(b)           No portion of a Stock Appreciation Right which is unexercisable at
Termination of Service shall thereafter become exercisable, except as may be
otherwise provided by the Administrator either in an applicable Program or Award
Agreement or by action of the Administrator following the grant of the Stock
Appreciation Right, including following a Termination of Service; provided, that
in no event shall a Stock Appreciation Right become exercisable following its
expiration, termination or forfeiture.

 

10.3        Manner of Exercise.  All or a portion of an exercisable Stock
Appreciation Right shall be deemed exercised upon delivery of all of the
following to the stock administrator of the Company, or such other person or
entity designated by the Administrator, or his, her or its office, as
applicable:

 

(a)           A written or electronic notice complying with the applicable
rules established by the Administrator stating that the Stock Appreciation
Rights, or a portion thereof, is exercised.  The notice shall be signed by the
Participant or other person then-entitled to exercise the Stock Appreciation
Rights or such portion of the Stock Appreciation Rights;

 

(b)           Such representations and documents as the Administrator, in its
sole discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal, state or
foreign securities laws or regulations.  The Administrator may, in its sole
discretion, also take whatever additional actions it deems appropriate to effect
such compliance;

 

(c)           In the event that the Stock Appreciation Right shall be exercised
pursuant to this Section 10.3 by any person or persons other than the
Participant, appropriate proof of the right of such person or persons to
exercise the Stock Appreciation Rights; and

 

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(d)                                 Full payment of the applicable withholding
taxes to the stock administrator of the Company for the Shares with respect to
which the Stock Appreciation Rights, or portion thereof, are exercised, in a
manner permitted by the Administrator in accordance with Sections 11.1 and 11.2
hereof.

 

10.4                        Stock Appreciation Right Term.  The term of each
Stock Appreciation Right shall be set by the Administrator in its sole
discretion; provided, however, that the term shall not be more than ten (10)
years from the date the Stock Appreciation Right is granted.  The Administrator
shall determine the time period, including the time period following a
Termination of Service, during which the Participant has the right to exercise
any vested Stock Appreciation Rights, which time period may not extend beyond
the expiration date of the Stock Appreciation Right term.  Except as limited by
the requirements of Section 409A of the Code, the Administrator may extend the
term of any outstanding Stock Appreciation Right, and may extend the time period
during which vested Stock Appreciation Rights may be exercised, in connection
with any Termination of Service of the Participant, and, subject to Section 14.1
hereof, may amend any other term or condition of such Stock Appreciation Rights
relating to such a Termination of Service.

 

ARTICLE 11.

 

ADDITIONAL TERMS OF AWARDS

 

11.1                        Payment.  The Administrator shall determine the
methods by which payments by any Participant with respect to any Awards granted
under the Plan shall be made, including, without limitation: (a) cash or check,
(b) Shares (including, in the case of payment of the exercise price of an Award,
Shares issuable pursuant to the exercise of the Award) held for such period of
time as may be required by the Administrator in order to avoid adverse
accounting consequences, in each case, having a Fair Market Value on the date of
delivery equal to the aggregate payments required, (c) delivery of a written or
electronic notice that the Participant has placed a market sell order with a
broker with respect to Shares then-issuable upon exercise or vesting of an
Award, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the aggregate
payments required; provided, however, that payment of such proceeds is then made
to the Company upon settlement of such sale or (d) other form of legal
consideration acceptable to the Administrator.  The Administrator shall also
determine the methods by which Shares shall be delivered or deemed to be
delivered to Participants.  Notwithstanding any other provision of the Plan to
the contrary, no Participant who is a Director or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act shall be
permitted to make payment with respect to any Awards granted under the Plan, or
continue any extension of credit with respect to such payment with a loan from
the Company or a loan arranged by the Company in violation of Section 13(k) of
the Exchange Act.

 

11.2                        Tax Withholding.  The Company and its Affiliates
shall have the authority and the right to deduct or withhold, or require a
Participant to remit to the Company or an Affiliate, an amount sufficient to
satisfy federal, state, local and foreign taxes (including the Participant’s
social security, Medicare and any other employment tax obligation) required by
law to be withheld with respect to any taxable event concerning a Participant
arising in connection with

 

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any Award.  The Administrator may in its sole discretion and in satisfaction of
the foregoing requirement allow a Participant to satisfy such obligations by any
payment means described in Section 11.1 hereof, including without limitation, by
allowing such Participant to elect to have the Company or an Affiliate withhold
Shares otherwise issuable under an Award (or allow the surrender of Shares). 
The number of Shares which may be so withheld or surrendered shall be limited to
the number of Shares which have a Fair Market Value on the date of withholding
or repurchase no greater than the aggregate amount of such liabilities based on
the minimum statutory withholding rates for federal, state, local and foreign
income tax and payroll tax purposes that are applicable to such supplemental
taxable income.  The Administrator shall determine the fair market value of the
Shares, consistent with applicable provisions of the Code, for tax withholding
obligations due in connection with a broker-assisted cashless Option or Stock
Appreciation Right exercise involving the sale of Shares to pay the Option or
Stock Appreciation Right exercise price or any tax withholding obligation.

 

11.3                        Transferability of Awards.

 

(a)                                 Except as otherwise provided in Section
11.3(b) or (c) hereof:

 

(i)                                     No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until such Award has been exercised, or the Shares
underlying such Award have been issued, and all restrictions applicable to such
Shares have lapsed;

 

(ii)                                  No Award or interest or right therein
shall be subject to the debts, contracts or engagements of the Participant or
his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by operation
of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy) unless and until such Award has
been exercised, or the Shares underlying such Award have been issued, and all
restrictions applicable to such Shares have lapsed, and any attempted
disposition of an Award prior to the satisfaction of these conditions shall be
null and void and of no effect, except to the extent that such disposition is
permitted by clause (i) of this provision; and

 

(iii)                               During the lifetime of the Participant, only
the Participant may exercise an Award (or any portion thereof) granted to him
under the Plan, unless it has been disposed of pursuant to a DRO; after the
death of the Participant, any exercisable portion of an Award may, prior to the
time when such portion becomes unexercisable under the Plan or the applicable
Program or Award Agreement, be exercised by his personal representative or by
any person empowered to do so under the deceased Participant’s will or under the
then-applicable laws of descent and distribution.

 

(b)                                 Notwithstanding Section 11.3(a) hereof, the
Administrator, in its sole discretion, may determine to permit a Participant or
a Permitted Transferee of such Participant to transfer an Award other than an
Incentive Stock Option (unless such Incentive Stock Option is to become a
Non-Qualified Stock Option) to any one or more Permitted Transferees of such

 

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Participant, subject to the following terms and conditions: (i) an Award
transferred to a Permitted Transferee shall not be assignable or transferable by
the Permitted Transferee (other than to another Permitted Transferee of the
applicable Participant) other than by will or the laws of descent and
distribution; (ii) an Award transferred to a Permitted Transferee shall continue
to be subject to all the terms and conditions of the Award as applicable to the
original Participant (other than the ability to further transfer the Award); and
(iii) the Participant (or transferring Permitted Transferee) and the Permitted
Transferee shall execute any and all documents requested by the Administrator,
including without limitation, documents to (A) confirm the status of the
transferee as a Permitted Transferee, (B) satisfy any requirements for an
exemption for the transfer under applicable federal, state and foreign
securities laws and (C) evidence the transfer.  In addition, and further
notwithstanding Section 11.3(a) hereof, the Administrator, in its sole
discretion, may determine to permit a Participant to transfer Incentive Stock
Options to a trust that constitutes a Permitted Transferee if, under Section 671
of the Code and applicable state law, the Participant is considered the sole
beneficial owner of the Incentive Stock Option while it is held in the trust.

 

(c)                                  Notwithstanding Section 11.3(a) hereof, a
Participant may, in the manner determined by the Administrator, designate a
beneficiary to exercise the rights of the Participant and to receive any
distribution with respect to any Award upon the Participant’s death.  A
beneficiary, legal guardian, legal representative, or other person claiming any
rights pursuant to the Plan is subject to all terms and conditions of the Plan
and any Program or Award Agreement applicable to the Participant, except to the
extent the Plan, the Program and the Award Agreement otherwise provide, and to
any additional restrictions deemed necessary or appropriate by the
Administrator.  If the Participant is married or a domestic partner in a
domestic partnership qualified under Applicable Law and resides in a “community
property” state, a designation of a person other than the Participant’s spouse
or domestic partner, as applicable, as his or her beneficiary with respect to
more than fifty percent (50%) of the Participant’s interest in the Award shall
not be effective without the prior written or electronic consent of the
Participant’s spouse or domestic partner.  If no beneficiary has been designated
or survives the Participant, payment shall be made to the person entitled
thereto pursuant to the Participant’s will or the laws of descent and
distribution.  Subject to the foregoing, a beneficiary designation may be
changed or revoked by a Participant at any time provided the change or
revocation is delivered to the Administrator prior to the Participant’s death.

 

11.4                        Conditions to Issuance of Shares.

 

(a)                                 Notwithstanding anything herein to the
contrary, neither the Company nor its Affiliates shall be required to issue or
deliver any certificates or make any book entries evidencing Shares pursuant to
the exercise of any Award, unless and until the Administrator has determined,
with advice of counsel, that the issuance of such Shares is in compliance with
Applicable Law, and the Shares are covered by an effective registration
statement or applicable exemption from registration.  In addition to the terms
and conditions provided herein, the Administrator may require that a Participant
make such reasonable covenants, agreements, and representations as the
Administrator, in its discretion, deems advisable in order to comply with any
such laws, regulations, or requirements.

 

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(b)                                 All Share certificates delivered pursuant to
the Plan and all Shares issued pursuant to book entry procedures are subject to
any stop-transfer orders and other restrictions as the Administrator deems
necessary or advisable to comply with Applicable Law.  The Administrator may
place legends on any Share certificate or book entry to reference restrictions
applicable to the Shares.

 

(c)                                  The Administrator shall have the right to
require any Participant to comply with any timing or other restrictions with
respect to the settlement, distribution or exercise of any Award, including a
window-period limitation, as may be imposed in the sole discretion of the
Administrator.

 

(d)                                 No fractional Shares shall be issued and the
Administrator shall determine, in its sole discretion, whether cash shall be
given in lieu of fractional Shares or whether such fractional Shares shall be
eliminated by rounding down.

 

(e)                                  Notwithstanding any other provision of the
Plan, unless otherwise determined by the Administrator or required by any
Applicable Law, the Company and/or its Affiliates may, in lieu of delivering to
any Participant certificates evidencing Shares issued in connection with any
Award, record the issuance of Shares in the books of the Company (or, as
applicable, its transfer agent or stock plan administrator).

 

11.5                        Forfeiture and Claw-Back Provisions.  Pursuant to
its general authority to determine the terms and conditions applicable to Awards
under the Plan, the Administrator shall have the right to provide, in the terms
of Awards made under the Plan, or to require a Participant to agree by separate
written or electronic instrument, that:

 

(a)                                 (i) any proceeds, gains or other economic
benefit actually or constructively received by the Participant upon any receipt
or exercise of the Award, or upon the receipt or resale of any Shares underlying
the Award, must be paid to the Company, and (ii) the Award shall terminate and
any unexercised portion of the Award (whether or not vested) shall be forfeited,
if (x) a Termination of Service occurs prior to a specified date, or within a
specified time period following receipt or exercise of the Award, or (y) the
Participant at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Administrator
or (z) the Participant incurs a Termination of Service for cause; and

 

(b)                                 All Awards (including any proceeds, gains or
other economic benefit actually or constructively received by the Participant
upon any receipt or exercise of any Award or upon the receipt or resale of any
Shares underlying the Award) shall be subject to the provisions of any claw-back
policy implemented by the Company, including without limitation, any claw-back
policy adopted to comply with the requirements of Applicable Law, including
without limitation the Dodd-Frank Wall Street Reform and Consumer Protection Act
and any rules or regulations promulgated thereunder, to the extent set forth in
such claw-back policy and/or in the applicable Award Agreement.

 

11.6                        Repricing.  Subject to limitations imposed by
Section 409A of the Code or other applicable law and the limitations contained
in Section 14.1 below, the Administrator shall have

 

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the authority, without the approval of the stockholders of the Company, to amend
any outstanding Award, in whole or in part, to increase or reduce the price per
Share or to cancel and replace an Award, in whole or in part, with cash and/or
another Award, including without limitation, another Option or Stock
Appreciation Right having a price per Share that is less than, greater than or
equal to the price per Share of the original Award.

 

11.7                        Cash Settlement.  Without limiting the generality of
any other provision of the Plan, the Administrator may provide, in an Award
Agreement or subsequent to the grant of an Award, in its discretion, that any
Award may be settled in cash, Shares or a combination thereof.

 

11.8                        Leave of Absence.  Unless the Administrator provides
otherwise, vesting of Awards granted hereunder shall be suspended during any
unpaid leave of absence.  A Participant shall not cease to be considered an
Employee, Non-Employee Director or Consultant, as applicable, in the case of any
(a) leave of absence approved by the Company, (b) transfer between locations of
the Company or between the Company and any of its Affiliates or any successor
thereof, or (c) change in status (Employee to Director, Employee to Consultant,
etc.), provided that such change does not affect the specific terms applying to
the Participant’s Award.

 

11.9                        Terms May Vary Between Awards.  The terms and
conditions of each Award shall be determined by the Administrator in its sole
discretion and the Administrator shall have complete flexibility to provide for
varied terms and conditions as between any Awards, whether of the same or
different Award type and/or whether granted to the same or different
Participants (in all cases, subject to the terms and conditions of the Plan).

 

ARTICLE 12.

 

NON-EMPLOYEE DIRECTOR AWARDS

 

12.1                        Non-Employee Director Awards.  The Board may grant
Awards to Non-Employee Directors, subject to the limitations of the Plan,
pursuant to a written non-discretionary formula established by the Committee, or
any successor committee thereto carrying out its responsibilities on the date of
grant of any such Award (the “Non-Employee Director Equity Compensation
Program”).  The Non-Employee Director Equity Compensation Program shall set
forth the type of Award(s) to be granted to Non-Employee Directors, the number
of Shares subject to Non-Employee Director Awards, the conditions on which such
Awards shall be granted, become exercisable and/or payable and expire, and such
other terms and conditions as the Committee (or such other successor committee
as described above) shall determine in its discretion.

 

ARTICLE 13.

 

ADMINISTRATION

 

13.1                        Administrator.  The Committee (or another committee
or a subcommittee of the Board assuming the functions of the Committee under the
Plan) shall administer the Plan (except as otherwise permitted herein, including
with respect to determinations under Section 3.1(a)(iii)(C)) and, unless
otherwise determined by the Board, shall consist solely of two or more
Non-Employee Directors appointed by and holding office at the pleasure of the
Board, each of

 

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whom is intended to qualify as a “non-employee director” as defined by Rule
16b-3 of the Exchange Act, an “outside director” for purposes of Section 162(m)
of the Code and an “independent director” under the rules of any securities
exchange or automated quotation system on which the Shares are listed, quoted or
traded, in each case, to the extent required under such provision; provided,
however, that any action taken by the Committee shall be valid and effective,
whether or not members of the Committee at the time of such action are later
determined not to have satisfied the requirements for membership set forth in
this Section 13.l or otherwise provided in any charter of the Committee.  Except
as may otherwise be provided in any charter of the Committee, appointment of
Committee members shall be effective upon acceptance of appointment, Committee
members may resign at any time by delivering written or electronic notice to the
Board, and vacancies in the Committee may only be filled by the Board. 
Notwithstanding the foregoing, (a) the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Awards granted to Non-Employee Directors and (b) the Board or
Committee may delegate its authority hereunder to the extent permitted by
Section 13.6 hereof.

 

13.2                        Duties and Powers of Administrator.  It shall be the
duty of the Administrator to conduct the general administration of the Plan in
accordance with its provisions.  The Administrator shall have the power to
interpret the Plan and all Programs and Award Agreements, and to adopt such
rules for the administration, interpretation and application of the Plan and any
Program as are not inconsistent with the Plan, to interpret, amend or revoke any
such rules and to amend any Program or Award Agreement, provided that the rights
or obligations of the holder of the Award that is the subject of any such
Program or Award Agreement are not affected adversely by such amendment unless
the consent of the Participant is obtained or such amendment is otherwise
permitted under Section 14.10 hereof.  Any such grant or award under the Plan
need not be the same with respect to each Participant.  Any such interpretations
and rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code.  In its sole discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan except with respect to matters which under Rule 16b-3
under the Exchange Act, Section 162(m) of the Code, or the rules of any
securities exchange or automated quotation system on which the Shares are
listed, quoted or traded are required to be determined in the sole discretion of
the Committee.

 

13.3                              Action by the Committee.  Unless otherwise
established by the Board or in any charter of the Committee or as required by
law, a majority of the Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a quorum is present, and
acts approved in writing by all members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee.  Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Affiliate, the Company’s independent certified public accountants, or any
executive compensation consultant or other professional retained by the Company
to assist in the administration of the Plan.

 

13.4                        Authority of Administrator.  Subject to any specific
designation in the Plan, the Administrator has the exclusive power, authority
and sole discretion to:

 

(a)                         Designate Eligible Individuals to receive Awards;

 

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(b)                         Determine the type or types of Awards to be granted
to each Eligible Individual;

 

(c)                          Determine the number of Awards to be granted and
the number of Shares to which an Award will relate;

 

(d)                         Determine the terms and conditions of any Award
granted pursuant to the Plan, including, but not limited to, the exercise price,
grant price, or purchase price, any performance criteria, any reload provision,
any restrictions or limitations on the Award, any schedule for vesting, lapse of
forfeiture restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, and any provisions related to non-competition
and recapture of gain on an Award, based in each case on such considerations as
the Administrator in its sole discretion determines;

 

(e)                          Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in cash, Shares, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;

 

(f)                           Prescribe the form of each Award Agreement, which
need not be identical for each Participant;

 

(g)                          Decide all other matters that must be determined in
connection with an Award;

 

(h)                         Establish, adopt, or revise any rules and
regulations as it may deem necessary or advisable to administer the Plan;

 

(i)                             Interpret the terms of, and any matter arising
pursuant to, the Plan, any Program or any Award Agreement; and

 

(j)                            Make all other decisions and determinations that
may be required pursuant to the Plan or as the Administrator deems necessary or
advisable to administer the Plan.

 

13.5                        Decisions Binding.  The Administrator’s
interpretation of the Plan, any Awards granted pursuant to the Plan, any
Program, any Award Agreement and all decisions and determinations by the
Administrator with respect to the Plan are final, binding, and conclusive on all
parties.

 

13.6                        Delegation of Authority.  To the extent permitted by
Applicable Law, the Board or Committee may from time to time delegate to a
committee of one or more members of the Board or, with respect to Options or
other rights with respect to Shares (but not Shares themselves), one or more
officers of the Company the authority to grant or amend Awards or to take other
administrative actions pursuant to this Article 13; provided, however, that in
no event shall an officer of the Company be delegated the authority to grant
Awards to, or amend Awards held by, the following individuals: (a) individuals
who are subject to Section 16 of the Exchange Act, (b) Covered Employees with
respect to Awards intended to constitute Performance-Based Compensation, or (c)
officers of the Company (or Directors) to whom authority to grant or

 

27

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amend Awards has been delegated hereunder; provided further, that any delegation
of administrative authority shall only be permitted to the extent it is
permissible under Section 162(m) of the Code and Applicable Law.  Any delegation
hereunder shall be subject to the restrictions and limits that the Board or
Committee specifies at the time of such delegation, and the Board may at any
time rescind the authority so delegated or appoint a new delegatee.  At all
times, the delegatee appointed under this Section 13.6 shall serve in such
capacity at the pleasure of the Board and the Committee.

 

ARTICLE 14.

 

MISCELLANEOUS PROVISIONS

 

14.1                        Amendment, Suspension or Termination of the Plan. 
Except as otherwise provided in this Section 14.1, the Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board.  However, without approval of the Company’s
stockholders given within twelve (12) months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
14.2 hereof, increase the Share Limit. Except as provided in Section 14.10
hereof, no amendment, suspension or termination of the Plan shall, without the
consent of the Participant, impair any rights or obligations under any Award
theretofore granted or awarded, unless the Award itself otherwise expressly so
provides.  No Awards may be granted or awarded during any period of suspension
or after termination of the Plan. The annual increase to the Share Limit (set
forth in Section 3.1(a)(iii) hereof) shall terminate on the tenth (10th)
anniversary of the Effective Date and, from and after such tenth (10th)
anniversary, no additional share increases shall occur pursuant to Section
3.1(a)(iii) hereof.  In addition, notwithstanding anything herein to the
contrary, no Incentive Stock Option shall be granted under the Plan after the
tenth (10th) anniversary of the Effective Date.

 

14.2                        Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.

 

(a)                                 In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other
distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of the Company’s stock or
the share price of the Company’s stock other than an Equity Restructuring, the
Administrator shall make equitable adjustments, if any, to reflect such change
with respect to (i) the aggregate number and kind of shares that may be issued
under the Plan (including, but not limited to, adjustments of the Share Limit
and Individual Award Limits); (ii) the number and kind of Shares (or other
securities or property) subject to outstanding Awards; (iii) the terms and
conditions of any outstanding Awards (including, without limitation, any
applicable performance targets or criteria with respect thereto); and/or (iv)
the grant or exercise price per share for any outstanding Awards under the
Plan.  Any adjustment affecting an Award intended as Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m) of
the Code unless otherwise determined by the Administrator.

 

(b)                                 In the event of any transaction or event
described in Section 14.2(a) hereof or any unusual or nonrecurring transactions
or events affecting the Company, any Affiliate, or

 

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the financial statements of the Company or any Affiliate, or of changes in
Applicable Law, the Administrator, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event, is hereby
authorized to take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:

 

(i)                                     To provide for either (A) termination of
any such Award 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 such
Award or realization of the Participant’s rights (and, for the avoidance of
doubt, if as of the date of the occurrence of the transaction or event described
in this Section 14.2, the Administrator determines in good faith that no amount
would have been attained upon the exercise of such Award or realization of the
Participant’s rights, then such Award may be terminated by the Company without
payment) or (B) the replacement of such Award with other rights or property
selected by the Administrator in its sole discretion having an aggregate value
not exceeding the amount that could have been attained upon the exercise of such
Award or realization of the Participant’s rights had such Award been currently
exercisable or payable or fully vested;

 

(ii)                                  To provide that such 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)                               To make adjustments in the number and type
of securities subject to outstanding Awards and Awards which may be granted in
the future and/or in the terms, conditions and criteria included in such Awards
(including the grant or exercise price, as applicable);

 

(iv)                              To provide that such Award shall be
exercisable or payable or fully vested with respect to all securities covered
thereby, notwithstanding anything to the contrary in the Plan or an applicable
Program or Award Agreement; and

 

(v)                                 To provide that the Award cannot vest, be
exercised or become payable after such event.

 

(c)                                  In connection with the occurrence of any
Equity Restructuring, and notwithstanding anything to the contrary in Sections
14.2(a) and 14.2(b) hereof:

 

(i)                                     The number and type of securities
subject to each outstanding Award and/or the exercise price or grant price
thereof, if applicable, shall be equitably adjusted; and/or

 

(ii)                                  The Administrator shall make such
equitable adjustments, if any, as the Administrator in its discretion may deem
appropriate to reflect such Equity Restructuring

 

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with respect to the aggregate number and kind of shares that may be issued under
the Plan (including, but not limited to, adjustments to the Share Limit and the
Individual Award Limits).

 

The adjustments provided under this Section 14.2(c) shall be nondiscretionary
and shall be final and binding on the affected Participant and the Company.

 

(d)                                 Change in Control.

 

(i)                                     Notwithstanding any other provision of
the Plan, in the event of a Change in Control, each outstanding Award shall be
assumed or an equivalent Award substituted by the successor corporation or a
parent or subsidiary of the successor corporation, in each case, as determined
by the Administrator.

 

(ii)                                  In the event that the successor
corporation in a Change in Control and its parents and subsidiaries refuse to
assume or substitute for any Award in accordance with Section 14.2(d)(i) hereof,
each such non-assumed/substituted Award shall become fully vested and, as
applicable, exercisable and shall be deemed exercised, immediately prior to the
consummation of such transaction, and all forfeiture restrictions on any or all
such Awards shall lapse at such time.  If an Award vests and, as applicable, is
exercised in lieu of assumption or substitution in connection with a Change in
Control, the Administrator shall notify the Participant of such vesting and any
applicable exercise period, and the Award shall terminate upon the Change in
Control.  For the avoidance of doubt, if the value of an Award that is
terminated in connection with this Section 14.2(d)(ii) is zero or negative at
the time of such Change in Control, such Award shall be terminated upon the
Change in Control without payment of consideration therefor.

 

(e)                                  The Administrator may, in its sole
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company that are not inconsistent with the provisions of the Plan.

 

(f)                                   With respect to Awards which are granted
to Covered Employees and are intended to qualify as Performance-Based
Compensation, no adjustment or action described in this Section 14.2 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify as
Performance-Based Compensation, unless the Administrator determines that the
Award should not so qualify.  No adjustment or action described in this Section
14.2 or in any other provision of the Plan shall be authorized to the extent
that such adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code.  Furthermore, no such adjustment or action shall be authorized with
respect to any Award to the extent such adjustment or action would result in
short-swing profits liability under Section 16 of the Exchange Act or violate
the exemptive conditions of Rule 16b-3 of the Exchange Act unless the
Administrator determines that the Award is not to comply with such exemptive
conditions.

 

(g)                                  The existence of the Plan, any Program, any
Award Agreement and/or any Award granted hereunder shall not affect or restrict
in any way the right or power of the Company or the stockholders of the Company
or any Affiliate to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s or such Affiliate’s

 

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capital structure or its business, any merger or consolidation of the Company or
any Affiliate, any issue of stock or of options, warrants or rights to purchase
stock or of bonds, debentures, preferred or prior preference stocks whose rights
are superior to or affect the Common Stock, the securities of any Affiliate or
the rights thereof or which are convertible into or exchangeable for Common
Stock or securities of any Affiliate, or the dissolution or liquidation of the
Company or any Affiliate, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

 

(h)                                 No action shall be taken under this Section
14.2 which shall cause an Award to fail to comply with Section 409A of the Code
or an exemption therefrom, in either case, to the extent applicable to such
Award, unless the Administrator determines any such adjustments to be
appropriate.

 

(i)                                     In the event of any pending stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the Shares or the share price of the
Common Stock including any Equity Restructuring, for reasons of administrative
convenience, the Company in its sole discretion may refuse to permit the
exercise of any Award during a period of thirty (30) days prior to the
consummation of any such transaction.

 

14.3                        Approval of Plan by Stockholders.  The Plan shall be
submitted for the approval of the Company’s stockholders within twelve (12)
months following the date of the Board’s initial adoption of the Plan.  Awards
may be granted or awarded prior to such stockholder approval; provided, that
such Awards shall not be exercisable, shall not vest and the restrictions
thereon shall not lapse and no Shares shall be issued pursuant thereto prior to
the time when the Plan is approved by the Company’s stockholders; and provided,
further, that if such approval has not been obtained at the end of such twelve
(12)-month period, all such Awards previously granted or awarded under the Plan
shall thereupon be canceled and become null and void.

 

14.4                        No Stockholders Rights.  Except as otherwise
provided herein or in an applicable Program or Award Agreement, a Participant
shall have none of the rights of a stockholder with respect to Shares covered by
any Award until the Participant becomes the record owner of such Shares.

 

14.5                        Paperless Administration.  In the event that the
Company establishes, for itself or using the services of a third party, an
automated system for the documentation, granting or exercise of Awards, such as
a system using an internet website or interactive voice response, then the
paperless documentation, granting or exercise of Awards by a Participant may be
permitted through the use of such an automated system.

 

14.6                        Effect of Plan upon Other Compensation Plans.  Other
than the termination of the Prior Plan, the adoption of the Plan shall not
affect any other compensation or incentive plans in effect for the Company or
any Affiliate.  Nothing in the Plan shall be construed to limit the right of the
Company or any Affiliate: (a) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Affiliate or (b) to grant or assume options or other rights or awards otherwise
than under the Plan in connection

 

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with any proper corporate purpose, including without limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.

 

14.7                        Compliance with Laws.  The Plan, the granting and
vesting of Awards under the Plan and the issuance and delivery of Shares and the
payment of money under the Plan or under Awards granted or awarded hereunder are
subject to compliance with all Applicable Law, and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith.  Any
securities delivered under the Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with Applicable Law.  To the extent
permitted by Applicable Law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such Applicable
Law.

 

14.8                        Titles and Headings, References to Sections of the
Code or Exchange Act.  The titles and headings of the sections in the Plan are
for convenience of reference only and, in the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control. References to
sections of the Code or the Exchange Act shall include any amendment or
successor thereto.

 

14.9                        Governing Law.  The Plan and any Programs or Award
Agreements hereunder shall be administered, interpreted and enforced under the
internal laws of the State of Delaware without regard to conflicts of laws
thereof.

 

14.10                 Section 409A.  To the extent that the Administrator
determines that any Award granted under the Plan is subject to Section 409A of
the Code, the Plan, any applicable Program and the Award Agreement covering such
Award shall be interpreted in accordance with Section 409A of the Code. 
Notwithstanding any provision of the Plan to the contrary, in the event that,
following the Effective Date, the Administrator determines that any Award may be
subject to Section 409A of the Code, the Administrator may adopt such amendments
to the Plan, any applicable Program and the Award Agreement or adopt other
policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions, that the Administrator
determines are necessary or appropriate to avoid the imposition of taxes on the
Award under Section 409A of the Code, either through compliance with the
requirements of Section 409A of the Code or with an available exemption
therefrom.

 

14.11                 No Rights to Awards.  No Eligible Individual or other
person shall have any claim to be granted any Award pursuant to the Plan, and
neither the Company nor the Administrator is obligated to treat Eligible
Individuals, Participants or any other persons uniformly.

 

14.12                 Unfunded Status of Awards.  The Plan is intended to be an
“unfunded” plan for incentive compensation.  With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Program or Award Agreement shall give the

 

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Participant any rights that are greater than those of a general creditor of the
Company or any Affiliate.

 

14.13                 Indemnification.  To the extent allowable pursuant to
Applicable Law, each member of the Board and any officer or other employee to
whom authority to administer any component of the Plan is delegated shall be
indemnified and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act pursuant to the Plan and against and from any
and all amounts paid by him or her in satisfaction of judgment in such action,
suit, or proceeding against him or her; provided, however, that he or she gives
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf. 
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled pursuant to the
Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

 

14.14                 Relationship to other Benefits.  No payment pursuant to
the Plan shall be taken into account in determining any benefits under any
pension, retirement, savings, profit sharing, group insurance, welfare or other
benefit plan of the Company or any Affiliate except to the extent otherwise
expressly provided in writing in such other plan or an agreement thereunder.

 

14.15                 Expenses.  The expenses of administering the Plan shall be
borne by the Company and its Affiliates.

 

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*  *  *  *  *

 

I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Kythera Biopharmaceuticals, Inc. on March 29, 2012.

 

*  *  *  *  *

 

I hereby certify that the foregoing Plan was approved by the stockholders of
Kythera Biopharmaceuticals, Inc. on September 21, 2012.

 

Executed on this 16th day of October, 2012.

 

 

 

/s/ Keith L. Klein

 

Keith L. Klein, Secretary

 

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