Exhibit 10.5

TARGETED GENETICS CORPORATION

STOCK INCENTIVE PLAN

Effective as of March 3, 2009

 

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SECTION 1.

   INTRODUCTION    3

SECTION 2.

   DEFINITIONS    3

SECTION 3.

   ADMINISTRATION    7

SECTION 4.

   GENERAL    9

SECTION 5.

   SHARES SUBJECT TO PLAN AND SHARE LIMITS    10

SECTION 6.

   TERMS AND CONDITIONS OF OPTIONS    10

SECTION 7.

   PAYMENT FOR OPTION SHARES    12

SECTION 8.

   TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS    12

SECTION 9.

   TERMS AND CONDITIONS FOR STOCK GRANTS.    13

SECTION 10.

   TERMS AND CONDITIONS OF STOCK UNITS    14

SECTION 11.

   PROTECTION AGAINST DILUTION    15

SECTION 12.

   EFFECT OF A CORPORATE TRANSACTION    16

SECTION 13.

   LIMITATIONS ON RIGHTS    16

SECTION 14.

   WITHHOLDING TAXES    17

SECTION 15.

   DURATION AND AMENDMENTS    17

SECTION 16.

   ADDENDA    18

SECTION 17.

   SEVERABILITY    18

SECTION 18.

   EXECUTION    18

 

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TARGETED GENETICS CORPORATION

STOCK INCENTIVE PLAN

EFFECTIVE AS OF MARCH 3, 2009

SECTION 1. INTRODUCTION.

On March 26, 2007, the Board amended, restated and renamed the Targeted Genetics
Corporation 1999 Stock Option Plan into the Targeted Genetics Corporation Stock
Incentive Plan (the “Plan”), and the Plan became effective upon its approval by
the Company shareholders on May 17, 2007. Notwithstanding anything to the
contrary, stock options granted prior to the date the Plan became effective
shall be governed by the terms and provisions of the Targeted Genetics
Corporation 1999 Stock Option Plan and the applicable stock option agreement.

The Targeted Genetics Corporation 1999 Stock Option Plan was originally adopted
by the Board on January 21, 1999 and it was thereafter approved by the Company’s
shareholders on May 5, 1999. Such plan was last amended by the Board on
March 22, 2004 and approved by the Company’s shareholders on May 20, 2004. The
Plan was last amended by the Board on March 3, 2009 and approved by the
Company’s shareholders on May 14, 2009.

The purposes of the Plan are to promote the long-term success of the Company and
the creation of shareholder value by offering Key Service Providers an
opportunity to share in such long-term success by acquiring a proprietary
interest in the Company and to attract and retain the best available personnel
for positions of substantial responsibility, and to provide additional incentive
to Employees, Consultants and Directors.

The Plan seeks to achieve these purposes by providing for discretionary
long-term incentive Awards in the form of Options (which may constitute
Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation
Rights, Stock Grants and Stock Units.

The Plan shall be governed by, and construed in accordance with, the laws of the
State of Washington (except its choice-of-law provisions). Capitalized terms
shall have the meaning provided in Section 2 unless otherwise provided in the
Plan or any related Stock Option Agreement, SAR Agreement, Stock Grant Agreement
or Stock Unit Agreement.

SECTION 2. DEFINITIONS.

 

  (a) “Affiliate” means any entity other than a Subsidiary, if the Company
and/or one or more Subsidiaries own not less than 50% of such entity.

 

  (b) “Applicable Laws” means all applicable laws, rules, regulations and
requirements, including, but not limited to, all applicable U.S. federal or
state laws, any Stock Exchange rules or regulations, and the applicable laws,
rules or regulations of any other country or jurisdiction where Awards are
granted under the Plan or where Participants reside or provide services, as such
laws, rules, and regulations shall be in effect from time to time.

 

  (c) “Award” means any Grant of an Option, SAR, Stock Grant or Stock Unit under
the Plan.

 

  (d) “Board” means the Board of Directors of the Company, as constituted from
time to time.

 

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(e) “Cashless Exercise” means, to the extent that a Stock Option Agreement so
provides and as permitted by applicable law, a program approved by the Committee
in which payment may be made all or in part by delivery (on a form prescribed by
the Committee) of an irrevocable direction to a securities broker to sell Shares
and to deliver all or part of the sale proceeds to the Company in payment of the
aggregate Exercise Price and, if applicable, the amount necessary to satisfy the
Company’s withholding obligations at the minimum statutory withholding rates,
including, but not limited to, U.S. federal, state and local income taxes,
payroll taxes, and foreign taxes, if applicable.

(f) “Cause” means, except as may otherwise be provided in a Participant’s
employment agreement or Award agreement, a conviction of a Participant for a
felony crime or the failure of a Participant to contest prosecution for a felony
crime, or a Participant’s misconduct, fraud or dishonesty (as such terms are
defined by the Committee in its sole discretion), or any unauthorized use or
disclosure of confidential information or trade secrets, in each case as
determined by the Committee, and the Committee’s determination shall be
conclusive and binding.

(g) “Change in Control” means the occurrence of any one or more of the
following:

(i) the sale, transfer or disposition of all or substantially all of the
Company’s assets other than to (A) a corporation or other entity of which at
least a majority of its combined voting power is owned directly or indirectly by
the Company, (B) a corporation or other entity owned directly or indirectly by
the holders of capital stock of the Company in substantially the same
proportions as their ownership of Common Stock, or (C) an Excluded Entity (as
defined in subsection (ii) below)

(ii) the merger, consolidation or other business combination transaction of the
Company with or into another corporation, entity or person, other than a
transaction with or into another corporation, entity or person in which the
holders of at least a majority of the shares of voting capital stock of the
Company outstanding immediately prior to such transaction continue to hold
(either by such shares remaining outstanding in the continuing entity or by
their being converted into shares of voting capital stock of the surviving
entity) a majority of the total voting power represented by the shares of voting
capital stock of the Company (or the surviving entity) outstanding immediately
after such transaction (an “Excluded Entity”); or

(iii) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities of the Company representing more than 50% of the total combined
voting power of the Company’s then outstanding securities pursuant to a tender
or exchange offer made directly to the Company’s stockholders which the Board
does not recommend such stockholders accept.

A transaction (including a Corporate Transaction) shall not constitute a Change
in Control if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities
immediately before such transactions.

(h) “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations promulgated thereunder.

(i) “Committee” means a committee described in Section 3.

(j) “Common Stock” means the Company’s common stock.

(k) “Company” means Targeted Genetics Corporation, a Washington corporation, and
any successor.

(l) “Consultant” means an individual who performs bona-fide services to the
Company, a Parent, a Subsidiary or an Affiliate, other than as an Employee or
Director.

 

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(m) “Corporate Transaction” means a sale of all or substantially all of the
Company’s assets, or a merger, consolidation or other capital reorganization or
business combination transaction of the Company with or into another
corporation, entity or person.

(n) “Covered Employees” means those persons who are subject to the limitations
of Section 162(m) of the Code.

(o) “Director” means a member of the Board.

(p) “Disability” means “permanent and total disability” as such term is defined
in Section 22(e)(3) of the Code.

(q) “Employee” means any individual who is a common-law employee of the Company,
a Parent, a Subsidiary, or an Affiliate.

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

(s) “Exercise Price” means, in the case of an Option, the amount for which a
Share may be purchased upon exercise of such Option, as specified in the
applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, means
an amount, as specified in the applicable SAR Agreement, which is subtracted
from the Fair Market Value in determining the amount payable upon exercise of
such SAR.

(t) “Fair Market Value” means the market price of a Share as established in good
faith by the Committee or (a) if the Common Stock is listed on the Nasdaq
National Market, the closing selling price for the Common Stock as reported by
the Nasdaq National Market for a single trading day or (b) if the Common Stock
is listed on the New York Stock Exchange or the American Stock Exchange, the
closing selling price for the Common Stock as such price is officially quoted in
the composite tape of transactions on such exchange for a single trading day. If
there is no such reported price for the Common Stock for the date in question,
then such price on the last preceding date for which such price exists shall be
determinative of Fair Market Value. the market price of a Share as determined in
good faith by the Committee.

(u) “Fiscal Year” means the Company’s fiscal year.

(v) “Grant” means any grant of an Award under the Plan.

(w) “Incentive Stock Option” or “ISO” means an incentive stock option described
in Section 422 of the Code.

(x) “Key Service Provider” means an Employee, Director or Consultant who has
been selected by the Committee to receive an Award under the Plan.

(y) “Non-Employee Director” means a Director who is not an Employee.

(z) “Nonstatutory Stock Option” or “NSO” means a stock option that is not an
Incentive Stock Option.

(aa) “Option” means an ISO or NSO granted under the Plan entitling the Optionee
to purchase Shares.

(bb) “Optioned Stock” means Shares that are subject to an Option or that were
issued pursuant to the exercise of an Option.

(cc) “Optionee” means an individual, estate or other entity that holds an
Option.

 

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(dd) “Parent” means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

(ee) “Participant” means an individual or an estate or other entity that holds
an Award.

(ff) “Performance Goals” means one or more objective measurable performance
factors as determined by the Committee with respect to each Performance Period
based upon one or more factors, including, but not limited to: (i) operating
income; (ii) earnings before interest, taxes, depreciation and amortization
(“EBITDA”); (iii) earnings; (iv) cash flow; (v) market share; (vi) sales or
revenue; (vii) expenses; (viii) cost of goods sold; (ix) profit/loss or profit
margin; (x) working capital; (xi) return on equity or assets; (xii) earnings per
share; (xiii) economic value added (“EVA”); (xiv) stock price;
(xv) price/earnings ratio; (xvi) debt or debt-to-equity; (xvii) accounts
receivable; (xviii) writeoffs; (xix) cash; (xx) assets; (xxi) liquidity;
(xxii) operations; (xxiii) intellectual property (e.g., patents); (xxiv) product
development; (xxv) regulatory activity, including clinical trial activity;
(xxvi) manufacturing, production or inventory; (xxvii) mergers and acquisitions
or divestitures; (xxviii) business development activities; (xxix) financings;
(xxx) cash burn; and/or (xxxi) cash horizon, each with respect to the Company
and/or one or more of its Affiliates or operating units. Awards issued to
persons who are not Covered Employees may take into account other factors.

(gg) “Performance Period” means any period not exceeding thirty-six (36) months
as determined by the Committee, in its sole discretion. The Committee may
establish different Performance Periods for different Participants, and the
Committee may establish concurrent or overlapping Performance Periods.

(hh) “Plan” means this Targeted Genetics Corporation Stock Incentive Plan, as it
may be amended from time to time.

(ii) “Re-Price” means that the Company has lowered or reduced the Exercise Price
of outstanding Options and/or outstanding SARs for any Participant(s) in a
manner described by Item 402(i)(1) of SEC Regulation S-K (or its successor
provision).

(jj) “Retirement” means retirement as of the individual’s normal retirement date
under the Company’s 401(k) Plan or other similar successor plan applicable to
salaried employees.

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

(ll) “SAR Agreement” means the agreement described in Section 8 evidencing each
Award of a Stock Appreciation Right.

(mm) “SEC” means the Securities and Exchange Commission.

(nn) “Section 16 Persons” means those officers, directors or other persons who
are subject to Section 16 of the Exchange Act.

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

(pp) “Service” means the absence of any interruption or termination of service
as an Employee, Director or Consultant. Continuous Service Status shall not be
considered interrupted or terminated in the case of: (i) Company approved sick
leave; (ii) military leave; (iii) any other bona fide leave of absence approved
by the Committee, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to a
written Company policy. Also, Continuous Service Status as an Employee or

 

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Consultant shall not be considered interrupted or terminated in the case of a
transfer between locations of the Company or between the Company, its Parents,
Subsidiaries or Affiliates, or their respective successors, or a change in
status from an Employee to a Consultant or from a Consultant to an Employee.

(qq) “Share” means one share of Common Stock.

(rr) “Stock Appreciation Right” or “SAR” means a stock appreciation right
awarded under the Plan.

(ss) “Stock Exchange” means any stock exchange or consolidated stock price
reporting system on which prices for the Common Stock are quoted at any give
time.

(tt) “Stock Grant” means Shares awarded under the Plan.

(uu) “Stock Grant Agreement” means the agreement described in Section 9
evidencing each Award of a Stock Grant.

(vv) “Stock Option Agreement” means the agreement described in Section 6
evidencing each Award of an Option.

(ww) “Stock Unit” means a bookkeeping entry representing the equivalent of one
Share, as awarded under the Plan.

(xx) “Stock Unit Agreement” means the agreement described in Section 10
evidencing each Award of a Stock Unit.

(yy) “Subsidiary” means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company, if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

(zz) “10-Percent Shareholder” means an individual who owns more than 10% of the
total combined voting power of all classes of outstanding stock of the Company,
its Parent or any of its Subsidiaries. In determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be applied.

SECTION 3. ADMINISTRATION.

(a) General. The Plan shall be administered by the Board or a Committee, or a
combination thereof, as determined by the Board. The Plan may be administered by
different administrative bodies with respect to different classes of
Participants and, if permitted by Applicable Laws, the Board may authorize one
or more officers of the Company to make Awards under the Plan to Employees and
Consultants (who are not Section 16 Persons) within parameters specified by the
Board.

(b) Committee Composition. If a Committee has been appointed pursuant to this
Section 3, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of any Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and dissolve a Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws and, in
the case of a Committee administering the Plan in accordance with the
requirements of Rule 16b-3 or of Section 162(m) of the Code, to the extent
permitted or required by such provisions.

Unless the Board provides otherwise, the Board’s Compensation Committee shall be
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.

 

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The Committee shall have membership composition which enables (i) Awards to
Section 16 Persons to qualify as exempt from liability under Section 16(b) of
the Exchange Act and (ii) Awards to Covered Employees to qualify as
“performance-based compensation” as provided under Section 162(m) of the Code.

The Board may also appoint one or more separate committees of the Board, each
composed of two or more directors of the Company who need not qualify under Rule
16b-3 or under Section 162(m) of the Code, that may administer the Plan with
respect to Key Service Providers who are not Section 16 Persons or Covered
Employees, respectively, may grant Awards under the Plan to such Key Service
Providers and may determine all terms of such Awards.

Notwithstanding the foregoing, the Board shall constitute the Committee and
shall administer the Plan with respect to Non-Employee Directors, shall grant
Awards under the Plan to such Non-Employee Directors, and shall determine all
terms of such Awards.

(c) Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have full authority and sole discretion to take any actions it
deems necessary or advisable for the administration of the Plan. Such actions
shall include:

 

  (i) selecting Key Service Providers who are to receive Awards under the Plan;

 

  (ii) determining the type, number, vesting requirements and other features and
conditions of such Awards and amending such Awards;

 

  (iii) correcting any defect, supplying any omission, or reconciling any
inconsistency in the Plan or any Award agreement;

 

  (iv) accelerating the vesting, or extending the post-termination exercise
term, of Awards at any time and under such terms and conditions as it deems
appropriate;

 

  (v) interpreting the Plan;

 

  (vi) making all other decisions relating to the operation of the Plan; and

 

  (vii) adopting such plans or sub-plans as may be deemed necessary or
appropriate to provide for the participation by Key Service Providers of the
Company and its Subsidiaries and Affiliates who reside outside the U.S., which
plans and/or sub-plans shall be attached hereto as Appendices.

The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee’s determinations under the Plan shall be final
and binding on all persons.

(d) Indemnification. To the maximum extent permitted by applicable law, each
member of the Committee, or of the Board, shall be indemnified and held harmless
by the Company against and from (i) any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him or her 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 taken or
failure to act under the Plan or any Stock Option Agreement, SAR Agreement,
Stock Grant Agreement or Stock Unit Agreement, and (ii) from any and all amounts
paid by him or her in settlement thereof, with the Company’s approval, or paid
by him or her in satisfaction of any judgment in any such claim, action, suit,
or proceeding against him or her, provided he or she shall give 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 under the Company’s Articles of
Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under
any power that the Company may have to indemnify them or hold them harmless.

 

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SECTION 4. GENERAL.

(a) General Eligibility. Only Employees, Directors and Consultants shall be
eligible for designation as Key Service Providers by the Committee, in its sole
discretion.

(b) Incentive Stock Options. Only Key Service Providers who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Service Provider who is a 10-Percent
Shareholder shall not be eligible for the grant of an ISO unless the
requirements set forth in Section 422(c)(5) of the Code are satisfied.

(c) Restrictions on Shares. Any Shares issued pursuant to an Award shall be
subject to such rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine, in its sole discretion. Such
restrictions shall apply in addition to any restrictions that may apply to
holders of Shares generally and shall also comply to the extent necessary with
applicable law. In no event shall the Company be required to issue fractional
Shares under the Plan.

(d) Beneficiaries. Unless stated otherwise in an Award agreement, a Participant
may designate one or more beneficiaries with respect to an Award by timely
filing the prescribed form with the Company. A beneficiary designation may be
changed by filing the prescribed form with the Company at any time before the
Participant’s death. If no beneficiary was designated or if no designated
beneficiary survives the Participant, then after a Participant’s death any
vested Award(s) shall be transferred or distributed to the Participant’s estate.

(e) Performance Conditions. The Committee may, in its discretion, include
performance conditions in an Award. If performance conditions are included in
Awards to Covered Employees, then such Awards may be subject to the achievement
of Performance Goals established by the Committee. Such Performance Goals shall
be established and administered pursuant to the requirements of Section 162(m)
of the Code. Before any Shares underlying an Award or any Award payments subject
to Performance Goals are released to a Covered Employee with respect to a
Performance Period, the Committee shall certify in writing that the Performance
Goals for such Performance Period have been satisfied. Awards with performance
conditions that are granted to Key Service Providers who are not Covered
Employees need not comply with the requirements of Section 162(m) of the Code.

(f) No Rights as a Shareholder. A Participant, or a transferee of a Participant,
shall have no rights as a shareholder with respect to any Common Stock covered
by an Award until such person has satisfied all of the terms and conditions to
receive such Common Stock, has satisfied any applicable withholding or tax
obligations relating to the Award and the Shares have been issued (as evidenced
by an appropriate entry on the books of the Company or a duly authorized
transfer agent of the Company).

(g) Termination of Service. Unless the applicable Award agreement or, with
respect to Participants who reside in the U.S., the applicable employment
agreement provides otherwise, the following rules shall govern the vesting,
exercisability and term of outstanding Awards held by a Participant in the event
of termination of such Participant’s Service (in all cases subject to the term
of the Award as applicable): (i) upon termination of Service for any reason, all
unvested portions of any outstanding Awards shall be immediately forfeited
without consideration and the vested portions of any outstanding Stock Units
shall be settled; (ii) if the Service of a Participant is terminated for Cause,
then all unexercised Options and SARs, unvested portions of Stock Units and
unvested portions of Stock Grants shall terminate and be forfeited immediately
without consideration; (iii) if the Service of Participant is terminated for any
reason other than for Cause, death, Retirement or Disability, then the vested
portion of his/her then-outstanding Options/SARs may be exercised by such
Participant or his or her personal representative within three (3) months after
the date of such termination; or (iv) if the Service of a Participant is
terminated due to death, Retirement or Disability, the vested portion of his/her
then-outstanding Options/SARs may be exercised within twelve (12) months after
the date of termination of Service.

 

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(h) Director Fees. Subject to the consent and approval by the Board, each
Non-Employee Director may elect to receive a Stock Grant under the Plan in lieu
of payment of a portion of his or her regular annual retainer based on the Fair
Market Value of the Shares on the date any regular annual retainer would
otherwise be paid. For purposes of the Plan, a Non-Employee Director’s regular
annual retainer shall not include any additional retainer paid in connection
with service on any committee of the Board or paid for any other reason. Such an
election may be for any dollar or percentage amount equal to at least 25% of the
Non-Employee Director’s regular annual retainer (up to a limit of 100% of the
Non-Employee Director’s regular annual retainer). The election must be made
prior to the beginning of the annual B cycle which shall be any twelve
(12) month continuous period designated by the Board. Any amount of the regular
annual retainer not elected to be received as a Stock Grant shall be payable in
cash in accordance with the Company’s standard payment procedures. Shares
granted under this Section 4(h) shall otherwise be subject to the terms of the
Plan applicable to Non-Employee Directors or to Participants generally (other
than provisions specifically applying only to Employees).

SECTION 5. SHARES SUBJECT TO PLAN AND SHARE LIMITS.

(a) Basic Limitation. The stock issuable under the Plan shall be authorized but
unissued Shares or Shares acquired by the Company. The aggregate number of
Shares reserved for Awards under the Plan shall not exceed 4,200,000 Shares,
subject to adjustment pursuant to Section 11, which includes the 950,000 Shares
reserved for issuance under the Targeted Genetics Corporation 1999 Stock Option
Plan immediately prior to the Plan’s approval by the Company shareholders. All
of the Shares available for issuance under the Plan may be issued as Incentive
Stock Options.

(b) Additional Shares. If Awards are forfeited or are terminated for any other
reason before being exercised, then the Shares underlying such Awards shall
again become available for Awards under the Plan. SARs shall be counted in full
against the number of Shares available for issuance under the Plan, regardless
of the number of Shares issued upon settlement of the SARs. In addition, if a
stock option previously granted under the Targeted Genetics Corporation 1999
Stock Option Plan terminates, expires, or lapses for any reason, any Shares
subject to such stock option shall again be available to be the subject of an
Award under the Plan.

(c) Dividend Equivalents. Any dividend equivalents distributed under the Plan
shall not be applied against the number of Shares available for Awards.

(d) Share Limits.

(i) Limitation on Grants to Participants. Subject to adjustment as provided in
Section 11 below, the maximum aggregate number of Shares that may be subject to
Awards granted to any one person under the Plan for any Fiscal Year of the
Company shall be 150,000 Shares, provided that such limitation shall be 500,000
Shares during the fiscal year of any person’s initial year of service with the
Company.

(ii) Limits on Awards to Non-Employee Directors. Subject to adjustment pursuant
to Section 11, no Non-Employee Director shall receive Awards during any Fiscal
Year covering, in the aggregate, in excess of 50,000 Shares; provided that any
Shares received pursuant to an election under Section 4(h) shall not count
against such limit.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

(a) Stock Option Agreement. Each Grant of an Option under the Plan shall be
evidenced and governed exclusively by a Stock Option Agreement between the
Optionee and the Company. Such Option shall be subject to all applicable terms
and conditions of the Plan and may be subject to any other terms and conditions
that are not inconsistent with the Plan and that the Committee deems appropriate
for inclusion in a Stock Option Agreement (including without limitation any
performance conditions). The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical. The Stock Option Agreement
shall also specify whether the Option is an ISO or an NSO.

 

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(b) Number of Shares. Each Stock Option Agreement shall specify the number of
Shares that are subject to the Option and shall be subject to adjustment of such
number in accordance with Section 11.

(c) Exercise Price. An Option’s Exercise Price shall be established by the
Committee and set forth in a Stock Option Agreement. The Exercise Price of an
Option shall not be less than 100% of the Fair Market Value (110% for ISO grants
to 10-Percent Shareholders) on the date of Grant.

(d) Exercisability and Term. The Stock Option Agreement shall specify the term
of the Option; provided that the term of an Option shall in no event exceed ten
(10) years from the date of Grant. If not so established in the instrument
evidencing the Option, the Option shall vest and become exercisable according to
the following schedule, which may be waived or modified by the Committee at any
time:

 

Period of Service

  

Percent Vested

After 3 months    6.25% of the Shares subject to the Option For each additional
3-month period thereafter    An additional 6.25% of the Shares subject to the
Option After 4 years    100% of the Shares subject to the Option

A Stock Option Agreement may provide for accelerated vesting in the event of the
Participant’s death, Disability, or other events. Notwithstanding any other
provision of the Plan, no Option can be exercised after the expiration date
provided in the applicable Stock Option Agreement and no Option may provide
that, upon exercise of the Option, a new Option will automatically be granted.

(e) Modifications or Assumption of Options. Within the limitations of the Plan,
the Committee may modify, extend or assume outstanding options or may accept the
cancellation of outstanding options (whether granted by the Company or by
another issuer) in return for the grant of new Options for the same or a
different number of Shares, at the same or a different Exercise Price, and with
the same or different vesting provisions. Notwithstanding the preceding sentence
or anything to the contrary herein, the Committee may not Re-Price outstanding
Options unless there is approval by the Company shareholders and no modification
of an Option shall, without the consent of the Optionee, impair his or her
rights or obligations under such Option.

(f) Assignment or Transfer of Options. Except as otherwise provided in the
applicable Stock Option Agreement and then only to the extent permitted by
applicable law, no Option shall be transferable by the Optionee other than by
will or by the laws of descent and distribution. Except as otherwise provided in
the applicable Stock Option Agreement, an Option may be exercised during the
lifetime of the Optionee only by the Optionee or by the guardian or legal
representative of the Optionee. No Option or interest therein may be assigned,
pledged or hypothecated by the Optionee during his or her lifetime, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process.

 

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SECTION 7. PAYMENT FOR OPTION SHARES.

(a) Cash. The entire Exercise Price of Shares issued upon exercise of Options
shall be payable in cash at the time when such Shares are purchased.

(b) Surrender of Stock. To the extent provided for in the applicable Stock
Option Agreement, payment for all or any part of the Exercise Price may be made
with Shares which have already been owned by the Optionee; provided that the
Committee may, in its sole discretion, require that Shares tendered for payment
be previously held by the Optionee for a minimum duration. Such Shares shall be
valued at their Fair Market Value.

(c) Cashless Exercise. To the extent provided for in the applicable Stock Option
Agreement, payment for all or any part of the Exercise Price may be made through
Cashless Exercise.

(d) Other Forms of Payment. To the extent provided for in the applicable Stock
Option Agreement, payment for all or any part of the Exercise Price may be made
in any other form that is consistent with Applicable Laws, regulations and rules
and approved by the Committee.

In the case of an ISO granted under the Plan, payment shall be made only
pursuant to the express provisions of the applicable Stock Option Agreement. The
Stock Option Agreement may specify that payment may be made in any form(s)
described in this Section 7. In the case of an NSO granted under the Plan, the
Committee may, in its discretion at any time, accept payment in any form(s)
described in this Section 7.

SECTION 8. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

(a) SAR Agreement. Each Grant of a SAR under the Plan shall be evidenced and
governed exclusively by a SAR Agreement between the Participant and the Company.
Such SAR shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions that are not inconsistent with
the Plan and that the Committee deems appropriate for inclusion in a SAR
Agreement (including without limitation any performance conditions). A SAR
Agreement may provide for a maximum limit on the amount of any payout
notwithstanding the Fair Market Value on the date of exercise of the SAR. The
provisions of the various SAR Agreements entered into under the Plan need not be
identical. SARs may be granted in consideration of a reduction in the
Participant’s compensation.

(b) Number of Shares. Each SAR Agreement shall specify the number of Shares to
which the SAR pertains and shall be subject to adjustment of such number in
accordance with Section 11.

(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price which
shall be established by the Committee. The Exercise Price of a SAR shall not be
less than 100% of the Fair Market Value on the date of Grant.

(d) Exercisability and Term. The SAR Agreement shall specify the term of the SAR
which shall not exceed ten (10) years from the date of Grant. Unless the
applicable SAR Agreement provides otherwise, each SAR shall vest and become
exercisable with respect to 25% of the Shares subject to the SAR upon completion
of one year of Service measured from the vesting commencement date, the balance
of the Shares subject to the SAR shall vest and become exercisable in thirty-six
(36) equal installments upon completion of each month of Service thereafter, and
the term of the SAR shall be ten (10) years from the date of Grant. A SAR
Agreement may provide for accelerated vesting in the event of the Participant’s
death, Disability, or other events. SARs may be awarded in combination with
Options or Stock Grants, and such an Award shall provide that the SARs will not
be exercisable unless the related Options or Stock Grants are forfeited. A SAR
may be included in an ISO only at the time of Grant but may be included in an
NSO at the time of Grant or at any subsequent time, but not later than six
months before the expiration of such NSO. No SAR may provide that, upon exercise
of the SAR, a new SAR will automatically be granted.

 

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(e) Exercise of SARs. If, on the date when a SAR expires, the Exercise Price
under such SAR is less than the Fair Market Value on such date but any portion
of such SAR has not been exercised or surrendered, then such SAR shall
automatically be deemed to be exercised as of such date with respect to such
portion. Upon exercise of a SAR, the Participant (or any person having the right
to exercise the SAR) shall receive from the Company (i) Shares, (ii) cash or
(iii) any combination of Shares and cash, as the Committee shall determine at
the time of Grant of the SAR, in its sole discretion. The amount of cash and/or
the Fair Market Value of Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date of
exercise) of the Shares subject to the SARs exceeds the Exercise Price of the
Shares.

(f) Modification or Assumption of SARs. Within the limitations of the Plan, the
Committee may modify, extend or assume outstanding stock appreciation rights or
may accept the cancellation of outstanding stock appreciation rights (including
stock appreciation rights granted by another issuer) in return for the grant of
new SARs for the same or a different number of Shares, at the same or a
different Exercise Price, and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein,
unless there is approval by the Company shareholders, the Committee may not
Re-Price outstanding SARs and no modification of a SAR shall, without the
consent of the Participant, impair his or her rights or obligations under such
SAR.

(g) Assignment or Transfer of SARs. Except as otherwise provided in the
applicable SAR Agreement and then only to the extent permitted by applicable
law, no SAR shall be transferable by the Participant other than by will or by
the laws of descent and distribution. Except as otherwise provided in the
applicable SAR Agreement, a SAR may be exercised during the lifetime of the
Participant only by the Participant or by the guardian or legal representative
of the Participant. No SAR or interest therein may be assigned, pledged or
hypothecated by the Participant during his or her lifetime, whether by operation
of law or otherwise, or be made subject to execution, attachment or similar
process.

SECTION 9. TERMS AND CONDITIONS FOR STOCK GRANTS.

(a) Amount and Form of Awards. Awards under this Section 9 may be granted in the
form of a Stock Grant. Each Stock Grant Agreement shall specify the number of
Shares to which the Stock Grant pertains and shall be subject to adjustment of
such number in accordance with Section 11. A Stock Grant may also be awarded in
combination with NSOs, and such an Award may provide that the Stock Grant will
be forfeited in the event that the related NSOs are exercised.

(b) Stock Grant Agreement. Each Stock Grant awarded under the Plan shall be
evidenced and governed exclusively by a Stock Grant Agreement between the
Participant and the Company. Each Stock Grant shall be subject to all applicable
terms and conditions of the Plan and may be subject to any other terms and
conditions that are not inconsistent with the Plan and that the Committee deems
appropriate for inclusion in the applicable Stock Grant Agreement (including
without limitation any performance conditions). The provisions of the various
Stock Grant Agreements entered into under the Plan need not be identical.

(c) Payment for Stock Grants. Stock Grants may be issued with or without cash
consideration or any other form of legally permissible consideration approved by
the Committee.

(d) Vesting Conditions. Each Stock Grant may or may not be subject to vesting.
Any such vesting provision may provide that Shares shall vest based on Service
over time or shall vest, in full or in installments, upon satisfaction of
performance conditions specified in the Stock Grant Agreement which may include
Performance Goals pursuant to Section 4(e). Unless the applicable Stock Grant
Agreement provides otherwise, each Stock Grant shall vest with respect to 25% of
the Shares subject to the Stock Grant upon completion of each year of Service on
each of the first through fourth annual anniversaries of the vesting
commencement date. A Stock Grant Agreement may provide for accelerated vesting
in the event of the Participant’s death, Disability, or other events.

 

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(e) Assignment or Transfer of Stock Grants. Except as provided in the applicable
Stock Grant Agreement, and then only to the extent permitted by applicable law,
a Stock Grant awarded under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor’s
process, whether voluntarily, involuntarily or by operation of law. Any act in
violation of this Section 9(e) shall be void. However, this Section 9(e) shall
not preclude a Participant from designating a beneficiary who will receive any
vested outstanding Stock Grant Awards in the event of the Participant’s death,
nor shall it preclude a transfer of vested Stock Grant Awards by will or by the
laws of descent and distribution.

(f) Voting and Dividend Rights. The holder of a Stock Grant awarded under the
Plan shall have the same voting, dividend and other rights as the Company’s
other shareholders. A Stock Grant Agreement, however, may require that the
holder of such Stock Grant invest any cash dividends received in additional
Shares subject to the Stock Grant. Such additional Shares subject to the Stock
Grant shall be subject to the same conditions and restrictions as the Stock
Grant with respect to which the dividends were paid. Such additional Shares
subject to the Stock Grant shall not reduce the number of Shares available for
issuance under Section 5.

(g) Modification or Assumption of Stock Grants. Within the limitations of the
Plan, the Committee may modify or assume outstanding stock grants or may accept
the cancellation of outstanding stock grants (including stock granted by another
issuer) in return for the grant of new Stock Grants for the same or a different
number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Stock Grant shall, without the consent of the Participant,
impair his or her rights or obligations under such Stock Grant.

SECTION 10. TERMS AND CONDITIONS OF STOCK UNITS.

(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall be
evidenced and governed exclusively by a Stock Unit Agreement between the
Participant and the Company. Such Stock Units shall be subject to all applicable
terms and conditions of the Plan and may be subject to any other terms and
conditions that are not inconsistent with the Plan and that the Committee deems
appropriate for inclusion in the applicable Stock Unit Agreement (including
without limitation any performance conditions). The provisions of the various
Stock Unit Agreements entered into under the Plan need not be identical. Stock
Units may be granted in consideration of a reduction in the Participant’s other
compensation.

(b) Number of Shares. Each Stock Unit Agreement shall specify the number of
Shares to which the Stock Unit Grant pertains and shall be subject to adjustment
of such number in accordance with Section 11.

(c) Payment for Stock Units. Stock Units shall be issued without consideration.

(d) Vesting Conditions. Each Award of Stock Units may or may not be subject to
vesting. Any such vesting provision may provide that Shares shall vest based on
Service over time or shall vest, in full or in installments, upon satisfaction
of performance conditions specified in the Stock Unit Agreement which may
include Performance Goals pursuant to Section 4(e). Unless the applicable Stock
Unit Agreement provides otherwise, each Stock Unit shall vest with respect to
25% of the Shares subject to the Stock Unit upon completion of each year of
Service on each of the first through fourth annual anniversaries of the vesting
commencement date. A Stock Unit Agreement may provide for accelerated vesting in
the event of the Participant’s death, Disability, or other events.

(e) Voting and Dividend Rights. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan
may, at the Committee’s discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Share while the Stock Unit is outstanding.
Dividend equivalents may be

 

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converted into additional Stock Units. Settlement of dividend equivalents may be
made in the form of cash, in the form of Shares, or in a combination of both.
Prior to distribution, any dividend equivalents which are not paid shall be
subject to the same conditions and restrictions as the Stock Units to which they
attach.

(f) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units
may be made in the form of (a) cash, (b) Shares or (c) any combination of both,
as determined by the Committee at the time of the grant of the Stock Units, in
its sole discretion. Methods of converting Stock Units into cash may include
(without limitation) a method based on the average Fair Market Value of Shares
over a series of trading days. Vested Stock Units may be settled in a lump sum
or in installments. The distribution may occur or commence when the vesting
conditions applicable to the Stock Units have been satisfied or have lapsed, or
it may be deferred, in accordance with applicable law, to any later date. The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of
such Stock Units shall be subject to adjustment pursuant to Section 11.

(g) Creditors’ Rights. A holder of Stock Units shall have no rights other than
those of a general creditor of the Company. Stock Units represent an unfunded
and unsecured obligation of the Company, subject to the terms and conditions of
the applicable Stock Unit Agreement.

(h) Modification or Assumption of Stock Units. Within the limitations of the
Plan, the Committee may modify or assume outstanding stock units or may accept
the cancellation of outstanding stock units (including stock units granted by
another issuer) in return for the grant of new Stock Units for the same or a
different number of Shares and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein, no
modification of a Stock Unit shall, without the consent of the Participant,
impair his or her rights or obligations under such Stock Unit.

(i) Assignment or Transfer of Stock Units. Except as provided in the applicable
Stock Unit Agreement, and then only to the extent permitted by applicable law,
Stock Units shall not be anticipated, assigned, attached, garnished, optioned,
transferred or made subject to any creditor’s process, whether voluntarily,
involuntarily or by operation of law. Any act in violation of this Section 10(i)
shall be void. However, this Section 10(i) shall not preclude a Participant from
designating a beneficiary who will receive any outstanding vested Stock Units in
the event of the Participant’s death, nor shall it preclude a transfer of vested
Stock Units by will or by the laws of descent and distribution.

SECTION 11. PROTECTION AGAINST DILUTION.

(a) Adjustments. Subject to any action required under Applicable Laws by the
holders of capital stock of the Company, (i) the numbers and class of Shares or
other stock or securities: (x) available for future Awards under Section 5(a)
above, (y) set forth in Section 5(d) above, and (z) covered by each outstanding
Award, (ii) the Exercise Price of each outstanding Option, and (iii) any
repurchase price per Share applicable to Shares issued pursuant to any Award,
shall be proportionately adjusted by the Committee in the event of a stock
split, reverse stock split, stock dividend, combination, consolidation,
recapitalization (including a recapitalization through a large nonrecurring cash
dividend) or reclassification of the Shares, subdivision of the Shares, a rights
offering, a reorganization, merger, spin-off, split-up, change in corporate
structure or other similar occurrence. Any adjustment by the Committee pursuant
to this Section 11 shall be made in the Committee’s sole and absolute discretion
and shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or Exercise Price of
an Award. If, by reason of a transaction described in this Section 11 or an
adjustment pursuant to this Section 11, a Participant’s Award agreement covers
additional or different shares of stock or securities, then such additional or
different shares, and the Award agreement in respect thereof, shall be subject
to all of the terms, conditions and restrictions which were applicable to the
Award prior to such adjustment.

 

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(b) Participant Rights. Except as provided in this Section 11, a Participant
shall have no rights by reason of any issue by the Company of stock of any class
or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
If by reason of an adjustment pursuant to this Section 11 a Participant’s Award
covers additional or different shares of stock or securities, then such
additional or different shares and the Award in respect thereof shall be subject
to all of the terms, conditions and restrictions which were applicable to the
Award and the Shares subject to the Award prior to such adjustment.

(c) Fractional Shares. Any adjustment of Shares pursuant to this Section 11
shall be rounded down to the nearest whole number of Shares. Under no
circumstances shall the Company be required to authorize or issue fractional
shares and no consideration shall be provided as a result of any fractional
shares not being issued or authorized.

SECTION 12. EFFECT OF A CORPORATE TRANSACTION.

(a) Corporate Transaction. In the event that the Company is a party to a
Corporate Transaction, outstanding Awards shall be subject to the applicable
agreement of merger, reorganization, or sale of assets. Such agreement may
provide, without limitation, for the assumption or substitution of outstanding
Options, SARs, or Stock Units by the surviving entity or its parent, for the
assumption of outstanding Stock Grant Agreements by the surviving entity or its
parent, for the replacement of outstanding Options, SARs, and Stock Units with a
cash incentive program of the surviving entity which preserves the spread
existing on the unvested portions of such outstanding Awards at the time of the
transaction and provides for subsequent payout in accordance with the same
vesting provisions applicable to those Awards, for accelerated vesting of
outstanding Awards, or for the cancellation of outstanding Options, SARs, and
Stock Units, with or without consideration, in all cases without the consent of
the Participant. Notwithstanding the foregoing, if outstanding Options, SARs or
Stock Units are not assumed, substituted, or replaced with a cash incentive
program or any outstanding Stock Grant Agreements are not assumed pursuant to
Section 12(a), then such Awards shall terminate upon the consummation of the
Corporate Transaction; provided, however, that the Committee shall notify the
Participant that the Award will terminate at least five (5) days prior to the
date on which the Award terminates.

(b) Acceleration. The Committee may determine, at the time of grant of an Award
or thereafter, that such Award shall become fully vested as to all Shares
subject to such Award in the event that a Change in Control occurs. Unless
otherwise provided in the applicable Award agreement, employment agreement or
other applicable written agreement, in the event that a Change in Control occurs
and any outstanding Awards held by a current Key Service Provider is to be
terminated (in whole or in part) pursuant to the preceding paragraph, the
vesting (and exercisability, if applicable) of each such Award shall accelerate
such that the Award shall become vested (and exercisable, if applicable) in full
prior to the consummation of the Change in Control at such time and on such
conditions as the Committee shall determine.

SECTION 13. LIMITATIONS ON RIGHTS.

(a) No Entitlements. A Participant’s rights, if any, in respect of or in
connection with any Award is derived solely from the discretionary decision of
the Company to permit the individual to participate in the Plan and to benefit
from a discretionary Award. By accepting an Award under the Plan, a Participant
expressly acknowledges that there is no obligation on the part of the Company to
continue the Plan and/or grant any additional Awards. Any Award granted
hereunder is not intended to be compensation of a continuing or recurring
nature, or part of a Participant’s normal or expected compensation, and in no
way represents any portion of a Participant’s salary, compensation, or other
remuneration for purposes of pension benefits, severance, redundancy,
resignation or any other purpose.

 

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Neither the Plan nor any Award granted under the Plan shall be deemed to give
any individual a right to remain an Employee, Consultant or Director of the
Company, a Parent, a Subsidiary or an Affiliate. The Company and its Parent and
Subsidiaries and Affiliates reserve the right to terminate the Service of any
person at any time, and for any reason, subject to Applicable Laws, the
Company’s Articles of Incorporation and Bylaws and a written employment
agreement (if any), and such terminated person shall be deemed irrevocably to
have waived any claim to damages or specific performance for breach of contract
or dismissal, compensation for loss of office, tort or otherwise with respect to
the Plan or any outstanding Award that is forfeited and/or is terminated by its
terms or to any future Award.

(b) Shareholders’ Rights. A Participant shall have no dividend rights, voting
rights or other rights as a shareholder with respect to any Shares covered by
his or her Award prior to the issuance of such Shares (as evidenced by an
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company). No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such Shares are
issued, except as expressly provided in Section 11.

(c) Issuance Requirements. Any other provision of the Plan notwithstanding, the
obligation of the Company to issue Shares or other securities under the Plan
shall be subject to all Applicable Laws, rules and regulations and such approval
by any regulatory body as may be required. The Company reserves the right to
restrict, in whole or in part, the delivery of Shares or other securities
pursuant to any Award prior to the satisfaction of all legal requirements
relating to the issuance of such Shares or other securities, to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.

SECTION 14. WITHHOLDING TAXES.

(a) General. A Participant shall make arrangements satisfactory to the Company
for the satisfaction of any withholding tax obligations that arise in connection
with his or her Award. The Company shall not be required to issue any Shares or
make any cash payment under the Plan until such obligations are satisfied.

(b) Share Withholding. If a public market for the Company’s Shares exists, the
Committee may permit a Participant to satisfy all or part of his or her
withholding or income tax obligations by having the Company withhold all or a
portion of any Shares that otherwise would be issued to him or her or by
surrendering or attesting to all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued based on the value of the
actual trade or, if there is none, the Fair Market Value as of the previous day.
Any payment of taxes by assigning Shares to the Company may be subject to
restrictions, including, but not limited to, any restrictions required by rules
of the SEC. The Committee may, in its discretion, also permit a Participant to
satisfy withholding or income tax obligations related to an Award through
Cashless Exercise or through a sale of Shares underlying the Award.

SECTION 15. DURATION AND AMENDMENTS.

(a) Term of the Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under this Section 15. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the holders of capital
stock of the Company within twelve (12) months before or after the date the Plan
is adopted or, to the extent required by Applicable Laws, any date the Plan is
amended. Such approval shall be obtained in the manner and to the degree
required under the Applicable Laws.

(b) Right to Amend or Terminate the Plan. The Board may amend or terminate the
Plan at any time and for any reason. The termination of the Plan, or any
amendment thereof, shall not impair the rights or obligations of any Participant
under any Award previously granted under the Plan without the Participant’s
consent. No Awards shall be granted under the Plan after the Plan’s termination.
An amendment of the Plan shall be subject to the approval of the Company’s
shareholders only to the extent such approval is otherwise required by
Applicable Laws, regulations or rules.

 

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SECTION 16. ADDENDA.

The Committee may approve such addenda to the Plan as it may consider necessary
or appropriate for the purpose of granting Awards to Employees, Consultants or
Directors, which Awards may contain such terms and conditions as the Committee
deems necessary or appropriate to accommodate differences in local law, tax
policy or custom, which, if so required under Applicable Laws, may deviate from
the terms and conditions set forth in the Plan. The terms of any such addenda
shall supersede the terms of the Plan to the extent necessary to accommodate
such differences but shall not otherwise affect the terms of the Plan as in
effect for any other purpose.

SECTION 17. SEVERABILITY.

If any provision of the Plan or any Award is determined to be invalid, illegal
or unenforceable in any jurisdiction, or as to any person, or would disqualify
the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to Applicable Laws,
or, if it cannot be so construed or deemed amended without, in the Committee’s
determination, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award, and the
remainder of the Plan and any such Award shall remain in full force and effect.

SECTION 18. EXECUTION.

To record the adoption of the Plan by the Board, the Company has caused its duly
authorized officer to execute the Plan on behalf of the Company.

 

TARGETED GENETICS CORPORATION By  

/s/    David J. Poston

Title   Vice President, Finance and Chief Financial Officer

 

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