Exhibit 10.1

 

IRONWOOD PHARMACEUTICALS, INC.

 

AMENDED AND RESTATED

2010 EMPLOYEE, DIRECTOR AND CONSULTANT

EQUITY INCENTIVE PLAN

 

1.                                       DEFINITIONS.

 

Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Ironwood Pharmaceuticals, Inc. 2010 Employee,
Director and Consultant Equity Incentive Plan, have the following meanings:

 

Administrator means the Board of Directors, unless it has delegated power to act
on its behalf to the Committee, in which case the Administrator means the
Committee.

 

Affiliate means a corporation which, for purposes of Section 424 of the Code, is
a parent or subsidiary of the Company, direct or indirect.

 

Agreement means an agreement between the Company and a Participant delivered
pursuant to the Plan and pertaining to a Stock Right, in such form as the
Administrator shall approve.

 

Board of Directors means the Board of Directors of the Company.

 

Cause means, with respect to a Participant (a) dishonesty with respect to the
Company or any Affiliate, (b) insubordination, substantial malfeasance or
non-feasance of duty, (c) unauthorized disclosure of confidential information,
(d) breach by a Participant of any provision of any employment, consulting,
advisory, nondisclosure, non-competition or similar agreement between the
Participant and the Company or any Affiliate, and (e) conduct substantially
prejudicial to the business of the Company or any Affiliate; provided, however,
that any provision in an agreement between a Participant and the Company or an
Affiliate, which contains a conflicting definition of Cause for termination and
which is in effect at the time of such termination, shall supersede this
definition with respect to that Participant.  The determination of the
Administrator as to the existence of Cause will be conclusive on the Participant
and the Company.

 

Code means the United States Internal Revenue Code of 1986, as amended including
any successor statute, regulation and guidance thereto.

 

Committee means the committee of the Board of Directors to which the Board of
Directors has delegated power to act under or pursuant to the provisions of the
Plan, or a subcommittee thereof that consists solely of two or more “outside”
directors, as required under Section 162(m) of the Code.

 

Common Stock means shares of the Company’s Class A Common Stock, $0.001 par
value per share.

 

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Company means Ironwood Pharmaceuticals, Inc., a Delaware corporation.

 

Consultant means any natural person who is an advisor or consultant that
provides bona fide services to the Company or its Affiliates, provided that such
services are not in connection with the offer or sale of securities in a capital
raising transaction, and do not directly or indirectly promote or maintain a
market for the Company’s or its Affiliates’ securities.

 

Disability or Disabled means permanent and total disability as defined in
Section 22(e)(3) of the Code.

 

Employee means any employee of the Company or of an Affiliate (including,
without limitation, an employee who is also serving as an officer or director of
the Company or of an Affiliate), designated by the Administrator to be eligible
to be granted one or more Stock Rights under the Plan.

 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

Fair Market Value of a Share of Common Stock means:

 

(1)           If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly reported
for the Common Stock, the closing or, if not applicable, the last price of the
Common Stock on the composite tape or other comparable reporting system for the
trading day on the applicable date and if such applicable date is not a trading
day, the last market trading day prior to such date;

 

(2)           If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if sales prices are not
regularly reported for the Common Stock for the trading day referred to in
clause (1), and if bid and asked prices for the Common Stock are regularly
reported, the mean between the bid and the asked price for the Common Stock at
the close of trading in the over-the-counter market for the trading day on which
Common Stock was traded on the applicable date and if such applicable date is
not a trading day, the last market trading day prior to such date; and

 

(3)           If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.

 

ISO means an option meant to qualify as an incentive stock option under
Section 422 of the Code.

 

Non-Qualified Option means an option which is not intended to qualify as an ISO.

 

Option means an ISO or Non-Qualified Option granted under the Plan.

 

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Participant means an Employee, director or Consultant of the Company or an
Affiliate to whom one or more Stock Rights are granted under the Plan. As used
herein, “Participant” shall include “Participant’s Survivors” where the context
requires.

 

Performance-Based Award means a Stock Right as set forth in Paragraph 9 hereof.

 

Performance Goals means performance goals based on one or more of the following
criteria: achievement of research, clinical trial or other drug development
objectives; achievement of regulatory objectives; achievement of manufacturing
and/or supply chain objectives; sales; revenues; assets; expenses; earnings or
earnings per share; earnings before interest and taxes (EBIT) or EBIT per share;
earnings before interest, taxes, depreciation and amortization (EBITDA) or
EBITDA per share; return on equity, investment, capital or assets; one or more
operating ratios; borrowing levels, leverage ratios or credit rating; market
share; capital expenditures; cash flow or cash flow per share; stock price;
stockholder return; income, pre-tax income, net income, operating income,
pre-tax profit, operating profit, net operating profit or economic profit; gross
margin, operating margin, profit margin, return on operating revenue, return on
operating assets, cash from operations, operating ratio or operating revenue;
market capitalization; customer expansion or retention; acquisitions or
divestitures (in whole or in part) and/or integration activities related
thereto; joint ventures, collaborations, licenses and strategic alliances,
and/or the management and performance of such relationships; spin-offs,
split-ups or similar transactions; reorganizations; recapitalizations,
restructurings, financings (issuance of debt or equity) or refinancings;
achievement of litigation-related objectives and/or objectives related to
litigation expenses; achievement of human resource, organizational and/or
personnel objectives; achievement of information technology or information
services objectives; or achievement of real estate, facilities or space-planning
objectives.

 

The foregoing performance goals may be determined: (a) on an absolute basis,
(b) relative to internal goals or levels attained in prior years, (c) related to
other companies or indices, or (d) as ratios expressing relationships between
two or more Performance Goals. Where applicable, the Performance Goals may be
expressed in terms of attaining a specified level of the particular criterion or
the attainment of a percentage increase or decrease in the particular criterion,
and may be applied to the Company and/or an Affiliate of the Company, or a
division or strategic business unit of the Company and/or an Affiliate of the
Company, all as determined by the Committee. The Performance Goals may include a
threshold level of performance below which no Performance-Based Award will be
issued or no vesting will occur, levels of performance at which
Performance-Based Awards will be issued or specified vesting will occur, and a
maximum level of performance above which no additional issuances will be made or
at which full vesting will occur. In the areas of drug research, development,
regulatory affairs and commercialization, if a third party partner that is party
to a licensing or

 

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collaboration agreement with the Company accomplishes a development milestone,
regulatory achievement, or commercialization or sales target with the partnered
asset, then such third party partner’s accomplishment shall constitute an
achievement of the Company.

 

The satisfaction of each of the foregoing Performance Goals shall be subject to
certification by the Committee. The Committee has the authority to make
adjustments to the Performance Goals provided that any such adjustments do not
otherwise violate Section 162(m) of the Code or the terms of the Plan. In the
case of Performance-Based Awards that are not intended to comply with
Section 162(m) of the Code, the Committee may designate performance criteria
from among the foregoing or such other performance criteria as it shall
determine in its sole discretion.

 

Plan means this Ironwood Pharmaceuticals, Inc. 2010 Employee, Director and
Consultant Equity Incentive Plan.

 

Securities Act means the Securities Act of 1933, as amended.

 

Shares means shares of the Common Stock as to which Stock Rights have been or
may be granted under the Plan or any shares of capital stock into which the
Shares are changed or for which they are exchanged within the provisions of
Paragraph 3 of the Plan.  The Shares issued under the Plan may be authorized and
unissued shares or shares held by the Company in its treasury, or both.

 

Stock-Based Award means a grant by the Company under the Plan of an equity award
or an equity based award which is not an Option or a Stock Grant.

 

Stock Grant means a grant by the Company of Shares under the Plan.

 

Stock Right means a right to Shares or the value of Shares of the Company
granted pursuant to the Plan — an ISO, a Non-Qualified Option, a Stock Grant or
a Stock-Based Award.

 

Survivor means a deceased Participant’s legal representatives and/or any person
or persons who acquired the Participant’s rights to a Stock Right by will or by
the laws of descent and distribution.

 

2.                                       PURPOSES OF THE PLAN.

 

The Plan is intended to encourage ownership of Shares by Employees and directors
of and certain Consultants to the Company and its Affiliates in order to attract
and retain such people, to induce them to work for the benefit of the Company or
of an Affiliate and to provide additional incentive for them to promote the
success of the Company or of an Affiliate.  The Plan provides for the granting
of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards.

 

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3.                                       SHARES SUBJECT TO THE PLAN.

 

(a)           The number of Shares which may be issued from time to time
pursuant to this Plan shall be the sum of: (i) 6,000,000 shares of Common Stock
and (ii) any shares of common stock that are represented by awards granted under
the Company’s 1998 Amended and Restated Stock Option Plan, the Amended and
Restated 2002 Stock Incentive Plan, the 2002 California Stock Incentive Plan and
the Amended and Restated 2005 Stock Incentive Plan that are forfeited, expire or
are cancelled without delivery of shares of common stock or which result in the
forfeiture of shares of common stock back to the Company on or after the
effective date of this plan, or the equivalent of such number of Shares after
the Administrator, in its sole discretion, has interpreted the effect of any
stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 20 of this Plan; provided, however,
that no more than 16,700,000 Shares shall be added to the Plan pursuant to
subsection (ii).

 

(b)           Notwithstanding Subparagraph (a) above, on the first day of each
fiscal year of the Company during the period beginning in fiscal year 2011, and
ending on the second day of fiscal year 2019, the number of Shares that may be
issued from time to time pursuant to the Plan, shall be increased by an amount
equal to the lesser of (i) 6,600,000 or the equivalent of such number of Shares
after the Administrator, in its sole discretion, has interpreted the effect of
any stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 20 of the Plan; (ii) 4% of the number
of outstanding shares of common stock on such date; and (iii) an amount
determined by the Board of Directors.  The increase in the number of Shares
available for issuance under this Plan set forth in this Subparagraph (b) shall
be subject to the approval of the Board of Directors and shall be effective upon
the first day of each applicable fiscal year; provided, however, that in the
event the Board of Directors has not approved an increase on or before the first
day of the applicable fiscal year, the number of Shares available for issuance
under this Plan shall remain the same until such time that the Board of
Directors approves an increase under this Paragraph (b).

 

(c)           If an Option ceases to be “outstanding”, in whole or in part
(other than by exercise), or if the Company shall reacquire (at not more than
its original issuance price) any Shares issued pursuant to a Stock Grant or
Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or
otherwise terminated or results in any Shares not being issued, the unissued or
reacquired Shares which were subject to such Stock Right shall again be
available for issuance from time to time pursuant to this Plan.  Notwithstanding
the foregoing, if a Stock Right is exercised, in whole or in part, by tender of
Shares or if the Company or an Affiliate’s tax withholding obligation is
satisfied by withholding Shares, the number of Shares deemed to have been issued
under the Plan for purposes of the limitation set forth in Paragraph 3(a) above
shall be the number of Shares that were subject to the Stock Right or portion
thereof, and not the net number of Shares actually issued.  However, in the case
of ISOs, the foregoing provisions shall be subject to any limitations under the
Code.

 

4.                                       ADMINISTRATION OF THE PLAN.

 

The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator.

 

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Subject to the provisions of the Plan, the Administrator is authorized to:

 

(a)           Interpret the provisions of the Plan and all Stock Rights and to
make all rules and determinations which it deems necessary or advisable for the
administration of the Plan;

 

(b)           Determine which Employees, directors and Consultants shall be
granted Stock Rights;

 

(c)           Determine the number of Shares for which a Stock Right or Stock
Rights shall be granted, provided, however, that in no event shall Stock Rights
with respect to more than 1,000,000 Shares be granted to any Participant in any
fiscal year;

 

(d)           Specify the terms and conditions upon which a Stock Right or Stock
Rights may be granted;

 

(e)           Determine Performance Goals; and

 

(f)            Adopt any sub-plans applicable to residents of any specified
jurisdiction as it deems necessary or appropriate in order to comply with or
take advantage of any tax or other laws applicable to the Company, any Affiliate
or to Participants or to otherwise facilitate the administration of the Plan,
which sub-plans may include additional restrictions or conditions applicable to
Stock Rights or Shares issuable pursuant to a Stock Right; provided, however,
that all such interpretations, rules, determinations, terms and conditions shall
be made and prescribed in the context of: (x) not causing any adverse tax
consequences under Section 409A of the Code and (y) preserving the tax status
under Section 422 of the Code of those Options which are designated as ISOs. 
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Right granted under
it shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.  In addition, if the Administrator is the
Committee, the Board of Directors may take any action under the Plan that would
otherwise be the responsibility of the Committee.

 

To the extent permitted under applicable law, the Board of Directors or the
Committee may allocate all or any portion of its responsibilities and powers to
any one or more of its members and may delegate all or any portion of its
responsibilities and powers to any other person selected by it.  The Board of
Directors or the Committee may revoke any such allocation or delegation at any
time.  Notwithstanding the foregoing, only the Board of Directors or the
Committee shall be authorized to grant a Stock Right to any director of the
Company or to any “officer” of the Company (as defined by Rule 16a-1 under the
Exchange Act).

 

5.                                       ELIGIBILITY FOR PARTICIPATION.

 

The Administrator will, in its sole discretion, name the Participants in the
Plan; provided, however, that each Participant must be an Employee, director or
Consultant of the Company or of an Affiliate at the time a Stock Right is
granted.  Notwithstanding the foregoing, the Administrator may authorize the
grant of a Stock Right to a person not then an Employee, director or Consultant
of the Company or of an Affiliate; provided, however, that the actual grant of
such Stock Right shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the execution of the Agreement
evidencing such Stock

 

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Right.  ISOs may be granted only to Employees who are deemed to be residents of
the United States for tax purposes.  Non-Qualified Options, Stock Grants and
Stock-Based Awards may be granted to any Employee, director or Consultant of the
Company or an Affiliate.  The granting of any Stock Right to any individual
shall neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Stock Rights or any grant under any other
benefit plan established by the Company or any Affiliate for Employees,
directors or Consultants.

 

6.                                       TERMS AND CONDITIONS OF OPTIONS.

 

Each Option shall be set forth in writing in an Option Agreement, duly executed
by the Company and, to the extent required by law or requested by the Company,
by the Participant.  The Administrator may provide that Options be granted
subject to such terms and conditions, consistent with the terms and conditions
specifically required under this Plan, as the Administrator may deem appropriate
including, without limitation, subsequent approval by the shareholders of the
Company of this Plan or any amendments thereto.  The Option Agreements shall be
subject to at least the following terms and conditions:

 

(a)           Non-Qualified Options:  Each Option intended to be a Non-Qualified
Option shall be subject to the terms and conditions which the Administrator
determines to be appropriate and in the best interest of the Company, subject to
the following minimum standards for any such Non-Qualified Option:

 

(i)                                     Exercise Price: Each Option Agreement
shall state the exercise price (per share) of the Shares covered by each Option,
which exercise price shall be determined by the Administrator and shall be at
least equal to the Fair Market Value per share of Common Stock on the date of
grant of the Option.

 

(ii)                                  Number of Shares: Each Option Agreement
shall state the number of Shares to which it pertains.

 

(iii)                               Option Periods:  Each Option Agreement shall
state the date or dates on which it first is exercisable and the date after
which it may no longer be exercised, and may provide that the Option rights
accrue or become exercisable in installments over a period of months or years,
or upon the occurrence of certain conditions or the attainment of stated goals
or events.

 

(iv)                              Option Conditions:  Exercise of any Option may
be conditioned upon the Participant’s execution of a Share purchase agreement in
form satisfactory to the Administrator providing for certain protections for the
Company and its other shareholders, including requirements that:

 

A.                                   The Participant’s or the Participant’s
Survivors’ right to sell or transfer the Shares may be restricted; and

 

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B.                                     The Participant or the Participant’s
Survivors may be required to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any applicable
restrictions.

 

(b)           ISOs:  Each Option intended to be an ISO shall be issued only to
an Employee who is deemed to be a resident of the United States for tax
purposes, and shall be subject to the following terms and conditions, with such
additional restrictions or changes as the Administrator determines are
appropriate but not in conflict with Section 422 of the Code and relevant
regulations and rulings of the Internal Revenue Service:

 

(i)                                     Minimum standards:  The ISO shall meet
the minimum standards required of Non-Qualified Options, as described in
Paragraph 6(a) above, except clause (i) thereunder.

 

(ii)                                  Exercise Price:  Immediately before the
ISO is granted, if the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:

 

A.                                   10% or less of the total combined voting
power of all classes of stock of the Company or an Affiliate, the exercise price
per share of the Shares covered by each ISO shall not be less than 100% of the
Fair Market Value per share of the Common Stock on the date of grant of the
Option; or

 

B.                                     More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, the
exercise price per share of the Shares covered by each ISO shall not be less
than 110% of the Fair Market Value per share of the Common Stock on the date of
grant of the Option.

 

(iii)                               Term of Option:  For Participants who own:

 

A.                                   10% or less of the total combined voting
power of all classes of stock of the Company or an Affiliate, each ISO shall
terminate not more than ten years from the date of the grant or at such earlier
time as the Option Agreement may provide; or

 

B.                                     More than 10% of the total combined
voting power of all classes of stock of the Company or an Affiliate, each ISO
shall terminate not more than five years from the date of the grant or at such
earlier time as the Option Agreement may provide.

 

(iv)                              Limitation on Yearly Exercise:  The Option
Agreements shall restrict the amount of ISOs which may become exercisable in any
calendar year (under this or any other ISO plan of the Company or an Affiliate)
so that the aggregate Fair Market Value (determined on the date each ISO is
granted) of the stock with respect to which ISOs are exercisable for the

 

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first time by the Participant in any calendar year does not exceed $100,000.

 

7.                                       TERMS AND CONDITIONS OF STOCK GRANTS.

 

Each Stock Grant to a Participant shall state the principal terms in an
Agreement duly executed by the Company and, to the extent required by law or
requested by the Company, by the Participant.  The Agreement shall be in a form
approved by the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards:

 

(a)           Each Agreement shall state the purchase price per share, if any,
of the Shares covered by each Stock Grant, which purchase price shall be
determined by the Administrator but shall not be less than the minimum
consideration required by the Delaware General Corporation Law, if any, on the
date of the grant of the Stock Grant;

 

(b)           Each Agreement shall state the number of Shares to which the Stock
Grant pertains; and

 

(c)           Each Agreement shall include the terms of any right of the Company
to restrict or reacquire the Shares subject to the Stock Grant, including the
time or attainment of Performance Goals upon which such rights shall accrue and
the purchase price therefor, if any.

 

8.                                       TERMS AND CONDITIONS OF OTHER
STOCK-BASED AWARDS.

 

The Administrator shall have the right to grant other Stock-Based Awards based
upon the Common Stock having such terms and conditions as the Administrator may
determine, including, without limitation, the grant of Shares based upon certain
conditions, the grant of securities convertible into Shares and the grant of
stock appreciation rights, phantom stock awards or stock units.  The principal
terms of each Stock-Based Award shall be set forth in an Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant.  The Agreement shall be in a form approved by the
Administrator and shall contain terms and conditions which the Administrator
determines to be appropriate and in the best interest of the Company.

 

The Company intends that the Plan and any Stock-Based Awards granted hereunder
be exempt from the application of Section 409A of the Code or meet the
requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of
the Code, to the extent applicable, and be operated in accordance with
Section 409A so that any compensation deferred under any Stock-Based Award (and
applicable investment earnings) shall not be included in income under
Section 409A of the Code.  Any ambiguities in the Plan shall be construed to
effect the intent as described in this Paragraph 8.

 

9.                                       PERFORMANCE-BASED AWARDS.

 

A Participant’s Performance-Based Award shall be determined based on the
attainment of written Performance Goals, which must be objective and approved by
the Committee while the outcome for that performance period is substantially
uncertain, and no more than ninety (90)

 

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days after the commencement of the performance period to which the Performance
Goal relates or, if less, the number of days which is equal to twenty-five
percent (25%) of the relevant performance period. The Committee shall determine
whether, with respect to a performance period, the applicable Performance Goals
have been met with respect to a given Participant and, if they have, to so
certify and ascertain the amount of the applicable Performance-Based Award. No
Performance-Based Awards will vest for such performance period until such
certification is made by the Committee. The number of Shares issued in respect
of a Performance-Based Award to a given Participant may be less than the amount
determined by the applicable Performance Goal formula, at the discretion of the
Committee.

 

10.                                 EXERCISE OF OPTIONS AND ISSUE OF SHARES.

 

An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company or its designee (in a form acceptable to the
Administrator, which may include electronic notice), together with provision for
payment of the aggregate exercise price in accordance with this Paragraph 10 for
the Shares as to which the Option is being exercised, and upon compliance with
any other condition(s) set forth in the Option Agreement.  Such notice shall be
signed by the person exercising the Option (which signature may be provided
electronically in a form acceptable to the Administrator), shall state the
number of Shares with respect to which the Option is being exercised and shall
contain any representation required by the Plan or the Option Agreement. 
Payment of the exercise price for the Shares as to which such Option is being
exercised shall be made (a) in United States dollars in cash or by check, or
(b) at the discretion of the Administrator, through delivery of shares of Common
Stock held for at least six months (if required to avoid negative accounting
treatment) having a Fair Market Value equal as of the date of the exercise to
the aggregate cash exercise price for the number of Shares as to which the
Option is being exercised, or (c) at the discretion of the Administrator, by
having the Company retain from the Shares otherwise issuable upon exercise of
the Option, a number of Shares having a Fair Market Value equal as of the date
of exercise to the aggregate exercise price for the number of Shares as to which
the Option is being exercised, or (d) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator, or (e) at the discretion of
the Administrator, by any combination of (a), (b), (c) and (d) above or (f) at
the discretion of the Administrator, by payment of such other lawful
consideration as the Administrator may determine. Notwithstanding the foregoing,
the Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.

 

The Company shall then reasonably promptly deliver the Shares as to which such
Option was exercised to the Participant (or to the Participant’s Survivors, as
the case may be).  In determining what constitutes “reasonably promptly,” it is
expressly understood that the issuance and delivery of the Shares may be delayed
by the Company in order to comply with any law or regulation (including, without
limitation, state securities or “blue sky” laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.  The Shares
shall, upon delivery, be fully paid, non-assessable Shares.

 

The Administrator shall have the right to accelerate the date of exercise of any
installment of any Option; provided that the Administrator shall not accelerate
the exercise date of any installment of any Option granted to an Employee as an
ISO (and not previously

 

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converted into a Non-Qualified Option pursuant to Paragraph 23) without the
prior approval of the Employee if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
Paragraph 6(b)(iv).

 

The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant’s Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any Option shall be made only after
the Administrator determines whether such amendment would constitute a
“modification” of any Option which is an ISO (as that term is defined in
Section 424(h) of the Code) or would cause any adverse tax consequences for the
holder of any Option including, but not limited to, pursuant to Section 409A of
the Code.

 

11.                                 ACCEPTANCE OF STOCK GRANTS AND STOCK-BASED
AWARDS AND ISSUE OF SHARES.

 

A Stock Grant or Stock-Based Award (or any part or installment thereof) shall be
accepted by executing the applicable Agreement and delivering it to the Company
or its designee, together with provision for payment of the aggregate exercise
price, if any, in accordance with this Paragraph 11 for the Shares as to which
such Stock Grant or Stock-Based Award is being accepted, and upon compliance
with any other conditions set forth in the applicable Agreement.  Payment of the
purchase price for the Shares as to which such Stock Grant or Stock-Based Award
is being accepted shall be made (a) in United States dollars in cash or by
check, or (b) at the discretion of the Administrator, through delivery of shares
of Common Stock held for at least six months (if required to avoid negative
accounting treatment) and having a Fair Market Value equal as of the date of
acceptance of the Stock Grant or Stock Based-Award to the purchase price of the
Stock Grant or Stock-Based Award, or (c) at the discretion of the Administrator,
by any combination of (a) and (b) above; or (d) at the discretion of the
Administrator, by payment of such other lawful consideration as the
Administrator may determine.

 

The Company shall then, if required by the applicable Agreement, reasonably
promptly deliver the Shares as to which such Stock Grant or Stock-Based Award
was accepted to the Participant (or to the Participant’s Survivors, as the case
may be), subject to any escrow provision set forth in the applicable Agreement. 
In determining what constitutes “reasonably promptly,” it is expressly
understood that the issuance and delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or “blue sky” laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.

 

The Administrator may, in its discretion, amend any term or condition of an
outstanding Stock Grant, Stock-Based Award or applicable Agreement provided
(i) such term or condition as amended is permitted by the Plan, (ii) any such
amendment shall be made only with the consent of the Participant to whom the
Stock Grant or Stock-Based Award was made, if the amendment is adverse to the
Participant, and (iii) any such amendment shall be made only after the

 

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Administrator determines whether such amendment would cause any adverse tax
consequences to the Participant, including, but not limited to, pursuant to
Section 409A of the Code.

 

12.                                 RIGHTS AS A SHAREHOLDER.

 

No Participant to whom a Stock Right has been granted shall have rights as a
shareholder with respect to any Shares covered by such Stock Right, except after
due exercise of the Option or acceptance of the Stock Grant or as set forth in
any Agreement, and tender of the aggregate exercise or purchase price, if any,
for the Shares being purchased pursuant to such exercise or acceptance and
registration of the Shares in the Company’s share register in the name of the
Participant.

 

13.                                 ASSIGNABILITY AND TRANSFERABILITY OF STOCK
RIGHTS.

 

By its terms, a Stock Right granted to a Participant shall not be transferable
by the Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as approved by the Administrator in its discretion and set
forth in the applicable Agreement provided that no Stock Right may be
transferred by a Participant for value.  Notwithstanding the foregoing, an ISO
transferred except in compliance with clause (i) above shall no longer qualify
as an ISO.  The designation of a beneficiary of a Stock Right by a Participant,
with the prior approval of the Administrator and in such form as the
Administrator shall prescribe, shall not be deemed a transfer prohibited by this
Paragraph 13.  Except as provided above, a Stock Right shall only be exercisable
or may only be accepted, during the Participant’s lifetime, by such Participant
(or by his or her legal representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.  Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Stock Right or of
any rights granted thereunder contrary to the provisions of this Plan, or the
levy of any attachment or similar process upon a Stock Right, shall be null and
void.

 

14.                                 EFFECT ON OPTIONS OF TERMINATION OF SERVICE
OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

 

Except as otherwise provided in a Participant’s Option Agreement, in the event
of a termination of service (whether as an Employee, director or Consultant)
with the Company or an Affiliate before the Participant has exercised an Option,
the following rules apply:

 

(a)           A Participant who ceases to be an Employee, director or Consultant
of the Company or of an Affiliate (for any reason other than termination for
Cause, Disability, or death for which events there are special rules in
Paragraphs 15, 16, and 17, respectively), may exercise any Option granted to him
or her to the extent that the Option is exercisable on the date of such
termination of service, but only within such term as the Administrator has
designated in a Participant’s Option Agreement.

 

(b)           Except as provided in Subparagraph (c) below, or Paragraph 16 or
17, in no event may an Option intended to be an ISO, be exercised later than
three months after the Participant’s termination of employment.

 

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(c)           The provisions of this Paragraph (c), and not the provisions of
Paragraph 16 or 17, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment, director status or
consultancy; provided, however, in the case of a Participant’s Disability or
death within three months after the termination of employment, director status
or consultancy, the Participant or the Participant’s Survivors may exercise the
Option within one year after the date of the Participant’s termination of
service, but in no event after the date of expiration of the term of the Option.

 

(d)           Notwithstanding anything herein to the contrary, if subsequent to
a Participant’s termination of employment, termination of director status or
termination of consultancy, but prior to the exercise of an Option, the
Administrator determines that, either prior or subsequent to the Participant’s
termination, the Participant engaged in conduct which would constitute Cause,
then such Participant shall forthwith cease to have any right to exercise any
Option.

 

(e)           A Participant to whom an Option has been granted under the Plan
who is absent from the Company or an Affiliate because of temporary disability
(any disability other than a Disability as defined in Paragraph 1 hereof), or
who is on leave of absence for any purpose, shall not, during the period of any
such absence, be deemed, by virtue of such absence alone, to have terminated
such Participant’s employment, director status or consultancy with the Company
or with an Affiliate, except as the Administrator may otherwise expressly
provide; provided, however, that, for ISOs, any leave of absence granted by the
Administrator of greater than ninety days, unless pursuant to a contract or
statute that guarantees the right to reemployment, shall cause such ISO to
become a Non-Qualified Option on the 181st day following such leave of absence.

 

(f)            Except as required by law or as set forth in a Participant’s
Option Agreement, Options granted under the Plan shall not be affected by any
change of a Participant’s status within or among the Company and any Affiliates,
so long as the Participant continues to be an Employee, director or Consultant
of the Company or any Affiliate.

 

15.                                 EFFECT ON OPTIONS OF TERMINATION OF SERVICE
FOR CAUSE.

 

Except as otherwise provided in a Participant’s Option Agreement, the following
rules apply if the Participant’s service (whether as an Employee, director or
Consultant) with the Company or an Affiliate is terminated for Cause prior to
the time that all his or her outstanding Options have been exercised:

 

(a)           All outstanding and unexercised Options as of the time the
Participant is notified that his or her service is terminated for Cause will
immediately be forfeited.

 

(b)           Cause is not limited to events which have occurred prior to a
Participant’s termination of service, nor is it necessary that the
Administrator’s finding of Cause occur prior to termination.  If the
Administrator determines, subsequent to a Participant’s termination of service
but prior to the exercise of an Option, that either prior or subsequent to the
Participant’s termination the Participant engaged in conduct which would
constitute Cause, then the right to exercise any Option is forfeited.

 

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16.                                 EFFECT ON OPTIONS OF TERMINATION OF SERVICE
FOR DISABILITY.

 

Except as otherwise provided in a Participant’s Option Agreement:

 

(a)           A Participant who ceases to be an Employee, director or Consultant
of the Company or of an Affiliate by reason of Disability may exercise any
Option granted to him or her to the extent that the Option has become
exercisable but has not been exercised on the date of Disability.

 

(b)           A Disabled Participant may exercise the Option only within the
period ending one year after the date of the Participant’s termination due to
Disability, notwithstanding that the Participant might have been able to
exercise the Option as to some or all of the Shares on a later date if the
Participant had not become Disabled and had continued to be an Employee,
director or Consultant or, if earlier, within the originally prescribed term of
the Option.

 

(c)           The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination).  If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.

 

17.                                 EFFECT ON OPTIONS OF DEATH WHILE AN
EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except as otherwise provided in a Participant’s Option Agreement:

 

(a)           In the event of the death of a Participant while the Participant
is an Employee, director or Consultant of the Company or of an Affiliate, such
Option may be exercised by the Participant’s Survivors to the extent that the
Option has become exercisable but has not been exercised on the date of death.

 

(b)           If the Participant’s Survivors wish to exercise the Option, they
must take all necessary steps to exercise the Option within one year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later date
if he or she had not died and had continued to be an Employee, director or
Consultant or, if earlier, within the originally prescribed term of the Option.

 

18.                                 PURCHASE FOR INVESTMENT.

 

Unless the offering and sale of the Shares to be issued upon the particular
exercise or acceptance of a Stock Right shall have been effectively registered
under the Securities Act, the Company shall be under no obligation to issue the
Shares covered by such exercise unless and until the following conditions have
been fulfilled:

 

(a)           The person who exercises or accepts such Stock Right shall warrant
to the Company, prior to the receipt of such Shares, that such person is
acquiring such Shares for his or her own account, for investment, and not with a
view to, or for sale in connection with, the

 

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distribution of any such Shares, in which event the person acquiring such Shares
shall be bound by the provisions of the following legend (or a legend in
substantially similar form) which shall be endorsed upon the certificate
evidencing the Shares issued pursuant to such exercise or such grant:

 

“The shares represented by this certificate have been taken for investment and
they may not be sold or otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration Statement with respect to such
shares shall be effective under the Securities Act of 1933, as amended, or
(b) the Company shall have received an opinion of counsel satisfactory to it
that an exemption from registration under such Act is then available, and
(2) there shall have been compliance with all applicable state securities laws.”

 

(b)           At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be issued upon such
particular exercise or acceptance in compliance with the Securities Act without
registration thereunder.

 

19.                                 DISSOLUTION OR LIQUIDATION OF THE COMPANY.

 

Upon the dissolution or liquidation of the Company, all Options granted under
this Plan which as of such date shall not have been exercised and all Stock
Grants and Stock-Based Awards which have not been accepted will terminate and
become null and void; provided, however, that if the rights of a Participant or
a Participant’s Survivors have not otherwise terminated and expired, the
Participant or the Participant’s Survivors will have the right immediately prior
to such dissolution or liquidation to exercise or accept any Stock Right to the
extent that the Stock Right is exercisable or subject to acceptance as of the
date immediately prior to such dissolution or liquidation.  Upon the dissolution
or liquidation of the Company, any outstanding Stock-Based Awards shall
immediately terminate unless otherwise determined by the Administrator or
specifically provided in the applicable Agreement.

 

20.                                 ADJUSTMENTS.

 

Upon the occurrence of any of the following events, a Participant’s rights with
respect to any Stock Right granted to him or her hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in a Participant’s
Agreement:

 

(a)           Stock Dividends and Stock Splits.  If (i) the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, or (ii) additional shares or new or different
shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock, each Stock Right and
the number of shares of Common Stock deliverable thereunder shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made including, in the exercise or purchase price per
share, to reflect such events.  The number of Shares subject to the limitations
in Paragraphs 3(a), 3(b) and 4(c) shall also be proportionately adjusted upon
the occurrence of such events.

 

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(b)           Corporate Transactions.  If the Company is to be consolidated with
or acquired by another entity in a merger, consolidation, or sale of all or
substantially all of the Company’s assets other than a transaction to merely
change the state of incorporation (a “Corporate Transaction”), the Administrator
or the board of directors of any entity assuming the obligations of the Company
hereunder (the “Successor Board”), shall, as to outstanding Options, either
(i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the Shares then subject to such Options
either the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Corporate Transaction or securities of any
successor or acquiring entity; or (ii) upon written notice to the Participants,
provide that such Options must be exercised (either (A) to the extent then
exercisable or, (B) at the discretion of the Administrator, any such Options
being made partially or fully exercisable for purposes of this Subparagraph
(b)), within a specified number of days of the date of such notice, at the end
of which period such Options which have not been exercised shall terminate; or
(iii) terminate such Options in exchange for payment of an amount equal to the
consideration payable upon consummation of such Corporate Transaction to a
holder of the number of shares of Common Stock into which such Option would have
been exercisable (either (A) to the extent then exercisable or, (B) at the
discretion of the Administrator, any such Options being made partially or fully
exercisable for purposes of this Subparagraph (b)) less the aggregate exercise
price thereof.  For purposes of determining the payments to be made pursuant to
Subclause (iii) above, in the case of a Corporate Transaction the consideration
for which, in whole or in part, is other than cash, the consideration other than
cash shall be valued at the fair value thereof as determined in good faith by
the Board of Directors.

 

With respect to outstanding Stock Grants, the Administrator or the Successor
Board, shall make appropriate provision for the continuation of such Stock
Grants on the same terms and conditions by substituting on an equitable basis
for the Shares then subject to such Stock Grants either the consideration
payable with respect to the outstanding Shares of Common Stock in connection
with the Corporate Transaction or securities of any successor or acquiring
entity.  In lieu of the foregoing, in connection with any Corporate Transaction,
the Administrator may provide that, upon consummation of the Corporate
Transaction, each outstanding Stock Grant shall be terminated in exchange for
payment of an amount equal to the consideration payable upon consummation of
such Corporate Transaction to a holder of the number of shares of Common Stock
comprising such Stock Grant (to the extent such Stock Grant is no longer subject
to any forfeiture or repurchase rights then in effect or, at the discretion of
the Administrator, all forfeiture and repurchase rights being waived upon such
Corporate Transaction).

 

In taking any of the actions permitted under this Paragraph 20(b), the
Administrator shall not be obligated by the Plan to treat all Stock Rights, all
Stock Rights held by a Participant, or all Stock Rights of the same type,
identically.

 

(c)           Recapitalization or Reorganization.  In the event of a
recapitalization or reorganization of the Company other than a Corporate
Transaction pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option or accepting a Stock Grant after the
recapitalization or reorganization shall be entitled to receive for the price
paid upon such exercise or acceptance if any, the number of replacement
securities which would have been received if

 

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such Option had been exercised or Stock Grant accepted prior to such
recapitalization or reorganization.

 

(d)           Adjustments to Stock-Based Awards.  Upon the happening of any of
the events described in Subparagraphs (a), (b) or (c) above, any outstanding
Stock-Based Award shall be appropriately adjusted to reflect the events
described in such Subparagraphs.  The Administrator or the Successor Board shall
determine the specific adjustments to be made under this Paragraph 20,
including, but not limited to the effect of any, Corporate Transaction and,
subject to Paragraph 4, its determination shall be conclusive.  Except as
permitted in this Paragraph 20(d), the Administrator may not, without obtaining
stockholder approval: (a) amend the terms of any outstanding Stock-Based Award
to reduce the exercise price of such Stock-Based Award; (b) cancel any
outstanding Stock-Based Award in exchange for an Option or Stock-Based Award
with an exercise price that is less than the exercise price of the original
Stock-Based Award; or (c) cancel any outstanding Stock-Based Award with an
exercise price above the current stock price in exchange for cash or other
securities.

 

(e)           Modification of Options.  Notwithstanding the foregoing, any
adjustments made pursuant to Subparagraph (a), (b) or (c) above with respect to
Options shall be made only after the Administrator determines whether such
adjustments would constitute a “modification” of any ISOs (as that term is
defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of Options, including, but not limited to, pursuant
to Section 409A of the Code.  If the Administrator determines that such
adjustments made with respect to Options would constitute a modification or
other adverse tax consequence, it may refrain from making such adjustments,
unless the holder of an Option specifically agrees in writing that such
adjustment be made and such writing indicates that the holder has full knowledge
of the consequences of such “modification” on his or her income tax treatment
with respect to the Option.  This Subparagraph (e) shall not apply to the
acceleration of the vesting of any ISO that would cause any portion of the ISO
to violate the annual vesting limitation contained in Section 422(d) of the
Code, as described in Paragraph 6(b)(iv).

 

Except as permitted in this Paragraph 20(d), the Administrator may not, without
obtaining stockholder approval: (a) amend the terms of any outstanding Option to
reduce the exercise price of such Option; (b) cancel any outstanding Option in
exchange for an Option or Stock-Based Award with an exercise price that is less
than the exercise price of the original Option; or (c) cancel any outstanding
Option with an exercise price above the current stock price in exchange for cash
or other securities.

 

(f)            Modification of Performance-Based Awards.  Notwithstanding the
foregoing, with respect to any Performance-Based Award that is intended to
comply as “performance based compensation” under Section 162(m) of the Code, the
Committee may adjusted proportionately, the number of Shares payable pursuant to
a Performance-Based Award to reflect the Corporate Transaction or other event
but may not otherwise increase the number of Shares, and the Committee may not
waive the achievement of the applicable Performance Goals except in the case of
death or Disability of the Participant.

 

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21.                                 ISSUANCES OF SECURITIES.

 

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 price of shares subject to Stock Rights.  Except as expressly
provided herein, no adjustments shall be made for dividends paid in cash or in
property (including without limitation, securities) of the Company prior to any
issuance of Shares pursuant to a Stock Right.

 

22.                                 FRACTIONAL SHARES.

 

No fractional shares shall be issued under the Plan and the person exercising a
Stock Right shall receive from the Company cash in lieu of such fractional
shares equal to the Fair Market Value thereof.

 

23.                                 CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS; TERMINATION OF ISOS.

 

The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant’s
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an Employee of the Company
or an Affiliate at the time of such conversion.  At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed
to give any Participant the right to have such Participant’s ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action.  The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.

 

24.                                 WITHHOLDING.

 

In the event that any federal, state, or local income taxes, employment taxes,
Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts
are required by applicable law or governmental regulation to be withheld from
the Participant’s salary, wages or other remuneration in connection with the
exercise or acceptance of a Stock Right or in connection with a Disqualifying
Disposition (as defined in Paragraph 25) or upon the lapsing of any forfeiture
provision or right of repurchase or for any other reason required by law, the
Company may withhold from the Participant’s compensation, if any, or may require
that the Participant advance in cash to the Company, or to any Affiliate of the
Company which employs or employed the Participant, the statutory minimum amount
of such withholdings unless a different withholding arrangement, including the
use of shares of the Company’s Common Stock, is authorized by the Administrator
(and permitted by law).  For purposes hereof, the fair market value of the
shares withheld for purposes of payroll withholding shall be determined in the
manner set forth under the definition of Fair Market Value provided in Paragraph
1 above, as of the most recent practicable date prior to the date of exercise. 
If the Fair Market Value of the

 

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shares withheld is less than the amount of payroll withholdings required, the
Participant may be required to advance the difference in cash to the Company or
the Affiliate employer.  The Administrator in its discretion may condition the
exercise of an Option for less than the then Fair Market Value on the
Participant’s payment of such additional withholding.

 

25.                                 NOTICE TO COMPANY OF DISQUALIFYING
DISPOSITION.

 

Each Employee who receives an ISO must agree to notify the Company in writing
immediately after the Employee makes a Disqualifying Disposition of any Shares
acquired pursuant to the exercise of an ISO.  A Disqualifying Disposition is
defined in Section 424(c) of the Code and includes any disposition (including
any sale or gift) of such Shares before the later of (a) two years after the
date the Employee was granted the ISO, or (b) one year after the date the
Employee acquired Shares by exercising the ISO, except as otherwise provided in
Section 424(c) of the Code.  If the Employee has died before such Shares are
sold, these holding period requirements do not apply and no Disqualifying
Disposition can occur thereafter.

 

26.                                 TERMINATION OF THE PLAN.

 

The Plan will terminate on December 17, 2019.  The Plan may be terminated at an
earlier date by vote of the shareholders or the Board of Directors of the
Company; provided, however, that any such earlier termination shall not affect
any Agreements executed prior to the effective date of such termination. 
Termination of the Plan shall not affect any Stock Rights theretofore granted.

 

27.                                 AMENDMENT OF THE PLAN AND AGREEMENTS.

 

The Plan may be amended by the shareholders of the Company.  The Plan may also
be amended by the Administrator, including, without limitation, to the extent
necessary to qualify any or all outstanding Stock Rights granted under the Plan
or Stock Rights to be granted under the Plan for favorable federal income tax
treatment as may be afforded incentive stock options under Section 422 of the
Code (including deferral of taxation upon exercise); to the extent necessary to
qualify the shares issuable upon exercise or acceptance of any outstanding Stock
Rights granted, or Stock Rights to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers; and, in order to continue to comply with
Section 162(m) of the Code.  Any amendment approved by the Administrator which
the Administrator determines is of a scope that requires shareholder approval
shall be subject to obtaining such shareholder approval.  Any modification or
amendment of the Plan shall not, without the consent of a Participant, adversely
affect his or her rights under a Stock Right previously granted to him or her. 
With the consent of the Participant affected, the Administrator may amend
outstanding Agreements in a manner which may be adverse to the Participant but
which is not inconsistent with the Plan.  In the discretion of the
Administrator, outstanding Agreements may be amended by the Administrator in a
manner which is not adverse to the Participant.

 

28.                                 EMPLOYMENT OR OTHER RELATIONSHIP.

 

Nothing in this Plan or any Agreement shall be deemed to prevent the Company or
an Affiliate from terminating the employment, consultancy or director status of
a Participant, nor to

 

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prevent a Participant from terminating his or her own employment, consultancy or
director status or to give any Participant a right to be retained in employment
or other service by the Company or any Affiliate for any period of time.

 

29.                                 GOVERNING LAW.

 

This Plan shall be construed and enforced in accordance with the laws of the
State of Delaware.

 

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