Exhibit 10.1

 

AMENDMENT AND RESTATEMENT OF
THE 2001 INCENTIVE AWARD PLAN OF
WATSON PHARMACEUTICALS, INC.

 

Watson Pharmaceuticals, Inc., a Nevada corporation, adopted the 2001 Incentive
Award Plan of Watson Pharmaceuticals, Inc. (the “Plan”), effective as of
February 12, 2001 (the “Effective Date”), for the benefit of its eligible
Employees, Consultants and Directors.  The Plan was subsequently amended
effective as of May 16, 2001, May 19, 2003, and August 4, 2003.

 

The Plan is hereby amended and restated in its entirety to provide for certain
additional types of awards to eligible Employees, Consultants and Directors. 
This amendment and restatement of the Plan is effective as of May 13, 2005,
subject to the approval of this amendment and restatement of the Plan by the
stockholders of the Company.  Awards authorized under this amendment and
restatement of the Plan that were not authorized under the Plan (as in effect
prior to this amendment and restatement) shall not be granted unless and until
this amendment and restatement of the Plan is so approved.  If this amendment
and restatement of the Plan is not so approved, this amendment and restatement
of the Plan shall be null and void and of no further force and effect, and the
Plan (as in effect prior to such amendment and restatement) shall continue in
full force and effect in accordance with the terms and conditions thereof.

 

The purposes of the Plan are as follows:

 

(1)                                  To provide an additional incentive for
Directors, key Employees and Consultants (as such terms are defined below) to
further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company stock and/or rights which
recognize such growth, development and financial success.

 

(2)                                  To enable the Company to obtain and retain
the services of Directors, key Employees and Consultants considered essential to
the long range success of the Company by offering them an opportunity to own
stock in the Company and/or rights which will reflect the growth, development
and financial success of the Company.

 

ARTICLE I.

DEFINITIONS

 

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

 

1.1.                              “ADMINISTRATOR” SHALL MEAN THE ENTITY THAT
CONDUCTS THE GENERAL ADMINISTRATION OF THE PLAN AS PROVIDED HEREIN.  WITH
REFERENCE TO THE ADMINISTRATION OF THE PLAN WITH RESPECT TO AWARDS GRANTED TO
INDEPENDENT DIRECTORS, THE TERM “ADMINISTRATOR” SHALL REFER TO THE BOARD.  WITH
REFERENCE TO THE ADMINISTRATION OF THE PLAN WITH RESPECT TO ANY OTHER AWARD, THE
TERM “ADMINISTRATOR” SHALL REFER TO THE COMMITTEE UNLESS THE BOARD HAS ASSUMED
THE AUTHORITY FOR ADMINISTRATION OF THE PLAN GENERALLY AS PROVIDED IN
SECTION 11.1.  WITH REFERENCE TO THE DUTIES OF

 

1

--------------------------------------------------------------------------------

 

the Committee under the Plan which have been delegated to one or more persons
pursuant to Section 11.5, the term “Administrator” shall refer to such person(s)
unless the Committee or the Board has revoked such delegation.

 

1.2.                              “AWARD” SHALL MEAN AN OPTION, A RESTRICTED
STOCK AWARD, A RESTRICTED STOCK UNIT AWARD,  A DIVIDEND EQUIVALENTS AWARD, A
DEFERRED STOCK AWARD, A STOCK PAYMENT AWARD OR A STOCK APPRECIATION RIGHT, WHICH
MAY BE AWARDED OR GRANTED UNDER THE PLAN (COLLECTIVELY, “AWARDS”).

 

1.3.                              “AWARD AGREEMENT” SHALL MEAN A WRITTEN
AGREEMENT EXECUTED BY AN AUTHORIZED OFFICER OF THE COMPANY AND THE HOLDER WHICH
SHALL CONTAIN SUCH TERMS AND CONDITIONS WITH RESPECT TO AN AWARD AS THE
ADMINISTRATOR SHALL DETERMINE, CONSISTENT WITH THE PLAN.

 

1.4.                              “AWARD LIMIT” SHALL MEAN FIVE HUNDRED THOUSAND
(500,000) SHARES OF COMMON STOCK, AS ADJUSTED PURSUANT TO SECTION 12.3.

 

1.5.                              “BOARD” SHALL MEAN THE BOARD OF DIRECTORS OF
THE COMPANY.

 

1.6.                              “CHANGE IN CONTROL” SHALL MEAN THE OCCURRENCE
OF ANY OF THE FOLLOWING:

 

(A)                                  A SALE OF ASSETS REPRESENTING FIFTY PERCENT
(50%) OR MORE OF THE NET BOOK VALUE AND OF THE FAIR MARKET VALUE OF THE
COMPANY’S CONSOLIDATED ASSETS (IN A SINGLE TRANSACTION OR IN A SERIES OF RELATED
TRANSACTIONS);

 

(B)                                 A LIQUIDATION OR DISSOLUTION OF THE COMPANY;

 

(C)                                  A MERGER OR CONSOLIDATION INVOLVING THE
COMPANY OR ANY SUBSIDIARY OF THE COMPANY AFTER THE COMPLETION OF WHICH:  (I) IN
THE CASE OF A MERGER (OTHER THAN A TRIANGULAR MERGER) OR A CONSOLIDATION
INVOLVING THE COMPANY, THE STOCKHOLDERS OF THE COMPANY IMMEDIATELY PRIOR TO THE
COMPLETION OF SUCH MERGER OR CONSOLIDATION BENEFICIALLY OWN (WITHIN THE MEANING
OF RULE 13D-3 PROMULGATED UNDER THE EXCHANGE ACT, OR COMPARABLE SUCCESSOR
RULES), DIRECTLY OR INDIRECTLY, OUTSTANDING VOTING SECURITIES REPRESENTING LESS
THAN SIXTY PERCENT (60%) OF THE COMBINED VOTING POWER OF THE SURVIVING ENTITY IN
SUCH MERGER OR CONSOLIDATION, AND (II) IN THE CASE OF A TRIANGULAR MERGER
INVOLVING THE COMPANY OR A SUBSIDIARY OF THE COMPANY, THE STOCKHOLDERS OF THE
COMPANY IMMEDIATELY PRIOR TO THE COMPLETION OF SUCH MERGER BENEFICIALLY OWN
(WITHIN THE MEANING OF RULE 13D-3 PROMULGATED UNDER THE EXCHANGE ACT, OR
COMPARABLE SUCCESSOR RULES), DIRECTLY OR INDIRECTLY, OUTSTANDING VOTING
SECURITIES REPRESENTING LESS THAN SIXTY PERCENT (60%) OF THE COMBINED VOTING
POWER OF THE SURVIVING ENTITY IN SUCH MERGER AND LESS THAN SIXTY PERCENT (60%)
OF THE COMBINED VOTING POWER OF THE PARENT OF THE SURVIVING ENTITY IN SUCH
MERGER;

 

(D)                                 AN ACQUISITION BY ANY PERSON, ENTITY OR
“GROUP” (WITHIN THE MEANING OF SECTION 13(D) OR 14(D) OF THE EXCHANGE ACT OR ANY
COMPARABLE SUCCESSOR PROVISIONS), OTHER THAN ANY EMPLOYEE BENEFIT PLAN, OR
RELATED TRUST, SPONSORED OR MAINTAINED BY THE COMPANY OR AN AFFILIATE OF THE
COMPANY AND OTHER THAN IN A MERGER OR CONSOLIDATION OF THE TYPE REFERRED TO IN
SUBSECTION (C), OF BENEFICIAL OWNERSHIP (WITHIN THE

 

2

--------------------------------------------------------------------------------

 

meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rules) of outstanding voting securities of the Company representing
more than thirty percent (30%) of the combined voting power of the Company (in a
single transaction or series of related transactions); or

 

(E)                                  IN THE EVENT THAT THE INDIVIDUALS WHO, AS
OF THE EFFECTIVE DATE, ARE MEMBERS OF THE BOARD (THE “INCUMBENT BOARD”), CEASE
FOR ANY REASON TO CONSTITUTE AT LEAST FIFTY PERCENT (50%) OF THE BOARD;
PROVIDED, THAT IF THE ELECTION, OR NOMINATION FOR ELECTION BY THE COMPANY’S
STOCKHOLDERS, OF ANY NEW MEMBER OF THE BOARD IS APPROVED BY A VOTE OF AT LEAST
FIFTY PERCENT (50%) OF THE INCUMBENT BOARD, SUCH NEW MEMBER OF THE BOARD SHALL
BE CONSIDERED AS A MEMBER OF THE INCUMBENT BOARD.

 

1.7.                              “CODE” SHALL MEAN THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.

 

1.8.                              “COMMITTEE” SHALL MEAN THE COMPENSATION
COMMITTEE OF THE BOARD, OR ANOTHER COMMITTEE OR SUBCOMMITTEE OF THE BOARD,
APPOINTED AS PROVIDED IN SECTION 11.1.

 

1.9.                              “COMMON STOCK” SHALL MEAN THE COMMON STOCK OF
THE COMPANY, PAR VALUE $0.0033 PER SHARE.

 

1.10.                        “COMPANY” SHALL MEAN WATSON PHARMACEUTICALS, INC.,
A NEVADA CORPORATION.

 

1.11.                        “CONSULTANT” SHALL MEAN ANY CONSULTANT OR ADVISER
IF:  (A) THE CONSULTANT OR ADVISER RENDERS BONA FIDE SERVICES TO THE COMPANY;
(B) THE SERVICES RENDERED BY THE CONSULTANT OR ADVISER 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
SECURITIES; AND (C) THE CONSULTANT OR ADVISER IS A NATURAL PERSON WHO HAS
CONTRACTED DIRECTLY WITH THE COMPANY TO RENDER SUCH SERVICES.

 

1.12.                        “DEFERRED STOCK” SHALL MEAN RIGHTS TO RECEIVE
COMMON STOCK AWARDED UNDER SECTION 8.4 OF THE PLAN.

 

1.13.                        “DIRECTOR” SHALL MEAN A MEMBER OF THE BOARD.

 

1.14.                        “DIVIDEND EQUIVALENT” SHALL MEAN A RIGHT TO RECEIVE
THE EQUIVALENT VALUE (IN CASH OR COMMON STOCK) OF DIVIDENDS PAID ON COMMON
STOCK, AWARDED UNDER SECTION 8.2 OF THE PLAN.

 

1.15.                        “DRO” SHALL MEAN A DOMESTIC RELATIONS ORDER AS
DEFINED BY THE CODE OR TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, OR THE RULES THEREUNDER.

 

1.16.                        “EMPLOYEE” SHALL MEAN ANY OFFICER OR OTHER EMPLOYEE
(AS DEFINED IN ACCORDANCE WITH SECTION 3401(C) OF THE CODE) OF THE COMPANY, OR
OF ANY CORPORATION WHICH IS A SUBSIDIARY.

 

3

--------------------------------------------------------------------------------

 

1.17.                        “EXCHANGE ACT” SHALL MEAN THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

 

1.18.                        “FAIR MARKET VALUE” OF A SHARE OF COMMON STOCK AS
OF A GIVEN DATE SHALL BE:  (A) THE CLOSING PRICE OF A SHARE OF COMMON STOCK ON
THE PRINCIPAL EXCHANGE ON WHICH SHARES OF COMMON STOCK ARE THEN TRADING, IF ANY
(OR AS REPORTED ON ANY COMPOSITE INDEX WHICH INCLUDES SUCH PRINCIPAL EXCHANGE),
ON THE TRADING DAY PREVIOUS TO SUCH DATE, OR IF SHARES WERE NOT TRADED ON THE
TRADING DAY PREVIOUS TO SUCH DATE, THEN ON THE NEXT PRECEDING DATE ON WHICH A
TRADE OCCURRED, OR (B) IF COMMON STOCK IS NOT TRADED ON AN EXCHANGE BUT IS
QUOTED ON NASDAQ OR A SUCCESSOR QUOTATION SYSTEM, THE MEAN BETWEEN THE CLOSING
REPRESENTATIVE BID AND ASKED PRICES FOR THE COMMON STOCK ON THE TRADING DAY
PREVIOUS TO SUCH DATE AS REPORTED BY NASDAQ OR SUCH SUCCESSOR QUOTATION SYSTEM,
OR (C) IF COMMON STOCK IS NOT PUBLICLY TRADED ON AN EXCHANGE AND NOT QUOTED ON
NASDAQ OR A SUCCESSOR QUOTATION SYSTEM, THE FAIR MARKET VALUE OF A SHARE OF
COMMON STOCK AS ESTABLISHED BY THE ADMINISTRATOR ACTING IN GOOD FAITH.

 

1.19.                        “HOLDER” SHALL MEAN A PERSON WHO HAS BEEN GRANTED
OR AWARDED AN AWARD.

 

1.20.                        “INCENTIVE STOCK OPTION” SHALL MEAN AN OPTION WHICH
CONFORMS TO THE APPLICABLE PROVISIONS OF SECTION 422 OF THE CODE AND WHICH IS
DESIGNATED AS AN INCENTIVE STOCK OPTION BY THE ADMINISTRATOR.

 

1.21.                        “INDEPENDENT DIRECTOR” SHALL MEAN A MEMBER OF THE
BOARD WHO IS NOT AN EMPLOYEE.

 

1.22.                        “NON-QUALIFIED STOCK OPTION” SHALL MEAN AN OPTION
WHICH IS NOT DESIGNATED AS AN INCENTIVE STOCK OPTION BY THE ADMINISTRATOR.

 

1.23.                        “OPTION” SHALL MEAN A STOCK OPTION GRANTED UNDER
ARTICLE IV OF THE PLAN.  AN OPTION GRANTED UNDER THE PLAN SHALL, AS DETERMINED
BY THE ADMINISTRATOR, BE EITHER A NON-QUALIFIED STOCK OPTION OR AN INCENTIVE
STOCK OPTION; PROVIDED, HOWEVER, THAT OPTIONS GRANTED TO INDEPENDENT DIRECTORS
AND CONSULTANTS SHALL BE NON-QUALIFIED STOCK OPTIONS.

 

1.24.                        “PERFORMANCE CRITERIA” SHALL MEAN ANY ONE OR MORE
OF THE FOLLOWING BUSINESS CRITERIA WITH RESPECT TO THE COMPANY, ANY SUBSIDIARY
OR ANY DIVISION OR OPERATING UNIT THEREOF:  (A) REVENUE OR SALES, (B) NET
INCOME, (C) PRE-TAX INCOME, (D) OPERATING INCOME, (E) CASH FLOW, (F) EARNINGS
PER SHARE, (G) RETURN ON EQUITY, (H) RETURN ON INVESTED CAPITAL OR ASSETS,
(I) COST REDUCTIONS OR SAVINGS, (J) FUNDS FROM OPERATIONS, (K) APPRECIATION IN
THE FAIR MARKET VALUE OF COMMON STOCK, OR (L) EARNINGS BEFORE ANY ONE OR MORE OF
THE FOLLOWING:  (I) INTEREST, (II) TAXES, (III) DEPRECIATION OR
(IV) AMORTIZATION, EACH AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.

 

1.25.                        “PLAN” SHALL MEAN THE 2001 INCENTIVE AWARD PLAN OF
WATSON PHARMACEUTICALS, INC., AS AMENDED.

 

1.26.                        “RESTRICTED STOCK” SHALL MEAN COMMON STOCK AWARDED
UNDER ARTICLE VII OF THE PLAN.

 

4

--------------------------------------------------------------------------------

 

1.27.                        “RESTRICTED STOCK UNITS” SHALL MEAN RIGHTS TO
RECEIVE COMMON STOCK AWARDED UNDER SECTION 8.5 OF THE PLAN.

 

1.28.                        “RULE 16B-3” SHALL MEAN RULE 16B-3 PROMULGATED
UNDER THE EXCHANGE ACT, AS SUCH RULE MAY BE AMENDED FROM TIME TO TIME.

 

1.29.                        “SECTION 162(M) PARTICIPANT” SHALL MEAN ANY KEY
EMPLOYEE DESIGNATED BY THE ADMINISTRATOR AS A KEY EMPLOYEE WHOSE COMPENSATION
FOR THE FISCAL YEAR IN WHICH THE KEY EMPLOYEE IS SO DESIGNATED OR A FUTURE
FISCAL YEAR MAY BE SUBJECT TO THE LIMIT ON DEDUCTIBLE COMPENSATION IMPOSED BY
SECTION 162(M) OF THE CODE.

 

1.30.                        “SECURITIES ACT” SHALL MEAN THE SECURITIES ACT OF
1933, AS AMENDED.

 

1.31.                        “STOCK APPRECIATION RIGHT” SHALL MEAN A STOCK
APPRECIATION RIGHT GRANTED UNDER ARTICLE IX OF THE PLAN.

 

1.32.                        “STOCK PAYMENT” SHALL MEAN:  (A) A PAYMENT IN THE
FORM OF SHARES OF COMMON STOCK, OR (B) AN OPTION OR OTHER RIGHT TO PURCHASE
SHARES OF COMMON STOCK, AS PART OF A DEFERRED COMPENSATION ARRANGEMENT, MADE IN
LIEU OF ALL OR ANY PORTION OF THE COMPENSATION, INCLUDING WITHOUT LIMITATION,
SALARY, BONUSES AND COMMISSIONS, THAT OTHERWISE WOULD BECOME PAYABLE TO A KEY
EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT IN CASH, AWARDED UNDER SECTION 8.3
OF THE PLAN.

 

1.33.                        “SUBSIDIARY” SHALL MEAN ANY CORPORATION IN AN
UNBROKEN CHAIN OF CORPORATIONS BEGINNING WITH THE COMPANY IF EACH OF THE
CORPORATIONS OTHER THAN THE LAST CORPORATION IN THE UNBROKEN CHAIN THEN OWNS
STOCK POSSESSING FIFTY PERCENT (50%) OR MORE OF THE TOTAL COMBINED VOTING POWER
OF ALL CLASSES OF STOCK IN ONE OF THE OTHER CORPORATIONS IN SUCH CHAIN.

 

1.34.                        “SUBSTITUTE AWARD” SHALL MEAN AN OPTION GRANTED
UNDER THIS PLAN UPON THE ASSUMPTION OF, OR IN SUBSTITUTION FOR, OUTSTANDING
EQUITY AWARDS PREVIOUSLY GRANTED BY A COMPANY OR OTHER ENTITY IN CONNECTION WITH
A CORPORATE TRANSACTION, SUCH AS A MERGER, COMBINATION, CONSOLIDATION OR
ACQUISITION OF PROPERTY OR STOCK; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THE
TERM “SUBSTITUTE AWARD” BE CONSTRUED TO REFER TO AN AWARD MADE IN CONNECTION
WITH THE CANCELLATION AND REPRICING OF AN OPTION.

 

1.35.                        “TERMINATION OF CONSULTANCY” SHALL MEAN THE TIME
WHEN THE ENGAGEMENT OF A HOLDER AS A CONSULTANT TO THE COMPANY OR A SUBSIDIARY
IS TERMINATED FOR ANY REASON, WITH OR WITHOUT CAUSE, INCLUDING, BUT NOT BY WAY
OF LIMITATION, BY RESIGNATION, DISCHARGE, DEATH OR RETIREMENT, BUT EXCLUDING
TERMINATIONS WHERE THERE IS A SIMULTANEOUS COMMENCEMENT OF EMPLOYMENT WITH THE
COMPANY OR ANY SUBSIDIARY, OR ANY PARENT THEREOF.  THE ADMINISTRATOR, IN ITS
ABSOLUTE DISCRETION, SHALL DETERMINE THE EFFECT OF ALL MATTERS AND QUESTIONS
RELATING TO TERMINATION OF CONSULTANCY, INCLUDING, BUT NOT BY WAY OF LIMITATION,
THE QUESTION OF WHETHER A TERMINATION OF CONSULTANCY RESULTED FROM A DISCHARGE
FOR GOOD CAUSE, AND ALL QUESTIONS OF WHETHER A PARTICULAR LEAVE OF ABSENCE
CONSTITUTES A TERMINATION OF CONSULTANCY.  NOTWITHSTANDING ANY OTHER PROVISION
OF THE PLAN, THE COMPANY OR ANY SUBSIDIARY HAS AN ABSOLUTE AND UNRESTRICTED
RIGHT TO TERMINATE A CONSULTANT’S SERVICE AT ANY TIME FOR ANY REASON WHATSOEVER,
WITH OR WITHOUT CAUSE, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN
WRITING.

 

5

--------------------------------------------------------------------------------

 

1.36.                        “TERMINATION OF DIRECTORSHIP” SHALL MEAN THE TIME
WHEN A HOLDER WHO IS AN INDEPENDENT DIRECTOR CEASES TO BE A DIRECTOR FOR ANY
REASON, INCLUDING, BUT NOT BY WAY OF LIMITATION, A TERMINATION BY RESIGNATION,
REMOVAL, FAILURE TO BE ELECTED, DEATH OR RETIREMENT.  THE BOARD, IN ITS SOLE AND
ABSOLUTE DISCRETION, SHALL DETERMINE THE EFFECT OF ALL MATTERS AND QUESTIONS
RELATING TO TERMINATION OF DIRECTORSHIP WITH RESPECT TO INDEPENDENT DIRECTORS.

 

1.37.                        “TERMINATION OF EMPLOYMENT” SHALL MEAN THE TIME
WHEN THE EMPLOYEE-EMPLOYER RELATIONSHIP BETWEEN A HOLDER AND THE COMPANY OR ANY
SUBSIDIARY IS TERMINATED FOR ANY REASON, WITH OR WITHOUT CAUSE, INCLUDING, BUT
NOT BY WAY OF LIMITATION, A TERMINATION BY RESIGNATION, DISCHARGE, DEATH,
DISABILITY OR RETIREMENT; BUT EXCLUDING:  (A) TERMINATIONS WHERE THERE IS A
SIMULTANEOUS REEMPLOYMENT OR CONTINUING EMPLOYMENT OF A HOLDER BY THE COMPANY OR
ANY SUBSIDIARY, OR ANY PARENT THEREOF, (B) AT THE DISCRETION OF THE
ADMINISTRATOR, TERMINATIONS WHICH RESULT IN A TEMPORARY SEVERANCE OF THE
EMPLOYEE-EMPLOYER RELATIONSHIP, AND (C) AT THE DISCRETION OF THE ADMINISTRATOR,
TERMINATIONS WHICH ARE FOLLOWED BY THE SIMULTANEOUS ESTABLISHMENT OF A
CONSULTING RELATIONSHIP BY THE COMPANY OR A SUBSIDIARY, OR ANY PARENT THEREOF,
WITH THE FORMER EMPLOYEE.  THE ADMINISTRATOR, IN ITS ABSOLUTE DISCRETION, SHALL
DETERMINE THE EFFECT OF ALL MATTERS AND QUESTIONS RELATING TO TERMINATION OF
EMPLOYMENT, INCLUDING, BUT NOT BY WAY OF LIMITATION, THE QUESTION OF WHETHER A
TERMINATION OF EMPLOYMENT RESULTED FROM A DISCHARGE FOR GOOD CAUSE, AND ALL
QUESTIONS OF WHETHER A PARTICULAR LEAVE OF ABSENCE CONSTITUTES A TERMINATION OF
EMPLOYMENT; PROVIDED, HOWEVER, THAT, WITH RESPECT TO INCENTIVE STOCK OPTIONS,
UNLESS OTHERWISE DETERMINED BY THE ADMINISTRATOR IN ITS DISCRETION, A LEAVE OF
ABSENCE, CHANGE IN STATUS FROM AN EMPLOYEE TO AN INDEPENDENT CONTRACTOR OR OTHER
CHANGE IN THE EMPLOYEE-EMPLOYER RELATIONSHIP SHALL CONSTITUTE A TERMINATION OF
EMPLOYMENT IF, AND TO THE EXTENT THAT, SUCH LEAVE OF ABSENCE, CHANGE IN STATUS
OR OTHER CHANGE INTERRUPTS EMPLOYMENT FOR THE PURPOSES OF SECTION 422(A)(2) OF
THE CODE AND THE THEN APPLICABLE REGULATIONS AND REVENUE RULINGS UNDER SAID
SECTION.

 

ARTICLE II.

SHARES SUBJECT TO PLAN

 

2.1.                              SHARES SUBJECT TO PLAN.

 

(A)                                  THE SHARES OF STOCK SUBJECT TO AWARDS SHALL
BE COMMON STOCK, INITIALLY SHARES OF THE COMPANY’S COMMON STOCK.  SUBJECT TO
ADJUSTMENT AS PROVIDED IN SECTION 12.3, THE AGGREGATE NUMBER OF SUCH SHARES OF
COMMON STOCK WHICH MAY BE ISSUED PURSUANT TO AWARDS UNDER THE PLAN SHALL NOT
EXCEED FOURTEEN MILLION (14,000,000) SHARES.  SUBJECT TO ADJUSTMENT AS PROVIDED
IN SECTION 12.3, THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE
ISSUED PURSUANT TO RESTRICTED STOCK AWARDS, RESTRICTED STOCK UNIT AWARDS,
DIVIDEND EQUIVALENT AWARDS, DEFERRED STOCK AWARDS, OR STOCK PAYMENT AWARDS SHALL
NOT EXCEED ONE MILLION (1,000,000) SHARES.  THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF SUCH OPTIONS OR RIGHTS OR UPON ANY SUCH AWARDS MAY BE EITHER
PREVIOUSLY AUTHORIZED BUT UNISSUED SHARES OR TREASURY SHARES.

 

(B)                                 THE MAXIMUM NUMBER OF SHARES WHICH MAY BE
SUBJECT TO AWARDS GRANTED UNDER THE PLAN TO ANY INDIVIDUAL IN ANY FISCAL YEAR OF
THE COMPANY SHALL NOT EXCEED THE

 

6

--------------------------------------------------------------------------------

 

Award Limit.  To the extent required by Section 162(m) of the Code, shares
subject to Awards which are canceled continue to be counted against the Award
Limit.

 

2.2.                              ADD-BACK OF OPTIONS AND OTHER RIGHTS.  IF ANY
OPTION, OR OTHER RIGHT TO ACQUIRE SHARES OF COMMON STOCK UNDER ANY OTHER AWARD
UNDER THE PLAN, EXPIRES OR IS CANCELED WITHOUT HAVING BEEN FULLY EXERCISED, OR
IS EXERCISED IN WHOLE OR IN PART FOR CASH AS PERMITTED BY THE PLAN, THE NUMBER
OF SHARES SUBJECT TO SUCH OPTION OR OTHER RIGHT BUT AS TO WHICH SUCH OPTION OR
OTHER RIGHT WAS NOT EXERCISED PRIOR TO ITS EXPIRATION, CANCELLATION OR EXERCISE
MAY AGAIN BE OPTIONED, GRANTED OR AWARDED HEREUNDER, SUBJECT TO THE LIMITATIONS
OF SECTION 2.1.  FURTHERMORE, ANY SHARES SUBJECT TO AWARDS WHICH ARE ADJUSTED
PURSUANT TO SECTION 12.3 AND BECOME EXERCISABLE WITH RESPECT TO SHARES OF STOCK
OF ANOTHER CORPORATION SHALL BE CONSIDERED CANCELLED AND MAY AGAIN BE OPTIONED,
GRANTED OR AWARDED HEREUNDER, SUBJECT TO THE LIMITATIONS OF SECTION 2.1.  
SHARES OF COMMON STOCK WHICH ARE DELIVERED BY THE HOLDER IN PAYMENT OF THE
EXERCISE PRICE THEREOF OR TAX WITHHOLDING THEREON, MAY AGAIN BE OPTIONED,
GRANTED OR AWARDED HEREUNDER, SUBJECT TO THE LIMITATIONS OF SECTION 2.1.  IF ANY
SHARES OF RESTRICTED STOCK ARE SURRENDERED BY THE HOLDER OR REPURCHASED BY THE
COMPANY PURSUANT TO SECTION 7.4 OR 7.5 HEREOF, SUCH SHARES MAY AGAIN BE
OPTIONED, GRANTED OR AWARDED HEREUNDER, SUBJECT TO THE LIMITATIONS OF
SECTION 2.1.  NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 2.2, NO SHARES OF
COMMON STOCK MAY AGAIN BE OPTIONED, GRANTED OR AWARDED IF SUCH ACTION WOULD
CAUSE AN INCENTIVE STOCK OPTION TO FAIL TO QUALIFY AS AN INCENTIVE STOCK OPTION
UNDER SECTION 422 OF THE CODE.

 

ARTICLE III.

GRANTING OF AWARDS

 

3.1.                              AWARD AGREEMENT.  EACH AWARD SHALL BE
EVIDENCED BY AN AWARD AGREEMENT.  AWARD AGREEMENTS EVIDENCING AWARDS INTENDED TO
QUALIFY AS PERFORMANCE-BASED COMPENSATION AS DESCRIBED IN
SECTION 162(M)(4)(C) OF THE CODE SHALL CONTAIN SUCH TERMS AND CONDITIONS AS MAY
BE NECESSARY TO MEET THE APPLICABLE PROVISIONS OF SECTION 162(M) OF THE CODE.
AWARD AGREEMENTS EVIDENCING INCENTIVE STOCK OPTIONS SHALL CONTAIN SUCH TERMS AND
CONDITIONS AS MAY BE NECESSARY TO MEET THE APPLICABLE PROVISIONS OF SECTION 422
OF THE CODE.

 

3.2.                              PROVISIONS APPLICABLE TO SECTION 162(M)
PARTICIPANTS.

 

(A)                                  THE COMMITTEE, IN ITS DISCRETION, MAY
DETERMINE WHETHER AN AWARD IS TO QUALIFY AS PERFORMANCE-BASED COMPENSATION AS
DESCRIBED IN SECTION 162(M)(4)(C) OF THE CODE.

 

(B)                                 NOTWITHSTANDING ANYTHING IN THE PLAN TO THE
CONTRARY, THE COMMITTEE MAY GRANT ANY AWARD TO A SECTION 162(M) PARTICIPANT,
INCLUDING A RESTRICTED STOCK AWARD, A RESTRICTED STOCK UNIT AWARD, A DIVIDEND
EQUIVALENT AWARD, A DEFERRED STOCK AWARD OR A STOCK PAYMENT AWARD, THE
RESTRICTIONS WITH RESPECT TO WHICH LAPSE UPON THE ATTAINMENT OF PERFORMANCE
GOALS WHICH ARE RELATED TO ONE OR MORE OF THE PERFORMANCE CRITERIA AND ANY AWARD
DESCRIBED IN ARTICLE VIII THAT VESTS OR BECOMES EXERCISABLE OR PAYABLE UPON THE
ATTAINMENT OF PERFORMANCE GOALS WHICH ARE RELATED TO ONE OR MORE OF THE
PERFORMANCE CRITERIA.

 

7

--------------------------------------------------------------------------------

 

(C)                                  TO THE EXTENT NECESSARY TO COMPLY WITH THE
PERFORMANCE-BASED COMPENSATION REQUIREMENTS OF SECTION 162(M)(4)(C) OF THE CODE,
WITH RESPECT TO ANY AWARD GRANTED UNDER ARTICLES VII AND VIII WHICH MAY BE
GRANTED TO ONE OR MORE SECTION 162(M) PARTICIPANTS, NO LATER THAN NINETY (90)
DAYS FOLLOWING THE COMMENCEMENT OF ANY FISCAL YEAR IN QUESTION OR ANY OTHER
DESIGNATED FISCAL PERIOD OR PERIOD OF SERVICE (OR SUCH OTHER TIME AS MAY BE
REQUIRED OR PERMITTED BY SECTION 162(M) OF THE CODE), THE COMMITTEE SHALL, IN
WRITING, (I) DESIGNATE ONE OR MORE SECTION 162(M) PARTICIPANTS, (II) SELECT THE
PERFORMANCE CRITERIA APPLICABLE TO THE FISCAL YEAR OR OTHER DESIGNATED FISCAL
PERIOD OR PERIOD OF SERVICE, (III) ESTABLISH THE VARIOUS PERFORMANCE TARGETS, IN
TERMS OF AN OBJECTIVE FORMULA OR STANDARD, AND AMOUNTS OF SUCH AWARDS, AS
APPLICABLE, WHICH MAY BE EARNED FOR SUCH FISCAL YEAR OR OTHER DESIGNATED FISCAL
PERIOD OR PERIOD OF SERVICE, AND (IV) SPECIFY THE RELATIONSHIP BETWEEN
PERFORMANCE CRITERIA AND THE PERFORMANCE TARGETS AND THE AMOUNTS OF SUCH AWARDS,
AS APPLICABLE, TO BE EARNED BY EACH SECTION 162(M) PARTICIPANT FOR SUCH FISCAL
YEAR OR OTHER DESIGNATED FISCAL PERIOD OR PERIOD OF SERVICE.  FOLLOWING THE
COMPLETION OF EACH FISCAL YEAR OR OTHER DESIGNATED FISCAL PERIOD OR PERIOD OF
SERVICE, THE COMMITTEE SHALL CERTIFY IN WRITING WHETHER THE APPLICABLE
PERFORMANCE TARGETS HAVE BEEN ACHIEVED FOR SUCH FISCAL YEAR OR OTHER DESIGNATED
FISCAL PERIOD OR PERIOD OF SERVICE.  IN DETERMINING THE AMOUNT EARNED BY A
SECTION 162(M) PARTICIPANT, THE COMMITTEE SHALL HAVE THE RIGHT TO REDUCE (BUT
NOT TO INCREASE) THE AMOUNT PAYABLE AT A GIVEN LEVEL OF PERFORMANCE TO TAKE INTO
ACCOUNT ADDITIONAL FACTORS THAT THE COMMITTEE MAY DEEM RELEVANT TO THE
ASSESSMENT OF INDIVIDUAL OR CORPORATE PERFORMANCE FOR THE FISCAL YEAR OR OTHER
DESIGNATED FISCAL PERIOD OR PERIOD OF SERVICE.

 

(D)                                 FURTHERMORE, NOTWITHSTANDING ANY OTHER
PROVISION OF THE PLAN, ANY AWARD WHICH IS GRANTED TO A SECTION 162(M)
PARTICIPANT AND IS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION AS
DESCRIBED IN SECTION 162(M)(4)(C) OF THE CODE SHALL BE SUBJECT TO ANY ADDITIONAL
LIMITATIONS SET FORTH IN SECTION 162(M) OF THE CODE (INCLUDING ANY AMENDMENT TO
SECTION 162(M) OF THE CODE) OR ANY REGULATIONS OR RULINGS ISSUED THEREUNDER THAT
ARE REQUIREMENTS FOR QUALIFICATION AS PERFORMANCE-BASED COMPENSATION AS
DESCRIBED IN SECTION 162(M)(4)(C) OF THE CODE, AND THE PLAN SHALL BE DEEMED
AMENDED TO THE EXTENT NECESSARY TO CONFORM TO SUCH REQUIREMENTS.

 

3.3.                              LIMITATIONS APPLICABLE TO SECTION 16 PERSONS. 
NOTWITHSTANDING ANY OTHER PROVISION OF THE PLAN, THE PLAN, AND ANY AWARD GRANTED
OR AWARDED TO ANY INDIVIDUAL WHO IS THEN SUBJECT TO SECTION 16 OF THE EXCHANGE
ACT, SHALL BE SUBJECT TO ANY ADDITIONAL LIMITATIONS SET FORTH IN ANY APPLICABLE
EXEMPTIVE RULE UNDER SECTION 16 OF THE EXCHANGE ACT (INCLUDING ANY AMENDMENT TO
RULE 16B-3 OF THE EXCHANGE ACT) THAT ARE REQUIREMENTS FOR THE APPLICATION OF
SUCH EXEMPTIVE RULE.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLAN AND
AWARDS GRANTED OR AWARDED HEREUNDER SHALL BE DEEMED AMENDED TO THE EXTENT
NECESSARY TO CONFORM TO SUCH APPLICABLE EXEMPTIVE RULE.

 

8

--------------------------------------------------------------------------------

 

3.4.                              CONSIDERATION.  IN CONSIDERATION OF THE
GRANTING OF AN AWARD UNDER THE PLAN, THE HOLDER SHALL AGREE, IN THE AWARD
AGREEMENT, TO REMAIN IN THE EMPLOY OF (OR TO CONSULT FOR OR TO SERVE AS AN
INDEPENDENT DIRECTOR OF, AS APPLICABLE) THE COMPANY OR ANY SUBSIDIARY FOR A
PERIOD OF AT LEAST ONE YEAR (OR SUCH SHORTER PERIOD AS MAY BE FIXED IN THE AWARD
AGREEMENT OR BY ACTION OF THE ADMINISTRATOR FOLLOWING GRANT OF THE AWARD) AFTER
THE AWARD IS GRANTED (OR, IN THE CASE OF AN INDEPENDENT DIRECTOR, UNTIL THE NEXT
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY).

 

3.5.                              AT-WILL EMPLOYMENT.  NOTHING IN THE PLAN OR IN
ANY AWARD AGREEMENT HEREUNDER SHALL CONFER UPON ANY HOLDER ANY RIGHT TO CONTINUE
IN THE EMPLOY OF, OR AS A CONSULTANT FOR, THE COMPANY OR ANY SUBSIDIARY, OR AS A
DIRECTOR OF THE COMPANY, OR SHALL INTERFERE WITH OR RESTRICT IN ANY WAY THE
RIGHTS OF THE COMPANY AND ANY SUBSIDIARY, WHICH ARE HEREBY EXPRESSLY RESERVED,
TO DISCHARGE ANY HOLDER AT ANY TIME FOR ANY REASON WHATSOEVER, WITH OR WITHOUT
CAUSE, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN A WRITTEN EMPLOYMENT
AGREEMENT BETWEEN THE HOLDER AND THE COMPANY AND ANY SUBSIDIARY.

 

ARTICLE IV.

GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS

 

4.1.                              ELIGIBILITY.  ANY EMPLOYEE OR CONSULTANT
SELECTED BY THE ADMINISTRATOR PURSUANT TO SECTION 4.4(A)(I) SHALL BE ELIGIBLE TO
BE GRANTED AN OPTION.  EACH INDEPENDENT DIRECTOR OF THE COMPANY SHALL BE
ELIGIBLE TO BE GRANTED OPTIONS AT THE TIMES AND IN THE MANNER SET FORTH IN
SECTION 4.5.

 

4.2.                              DISQUALIFICATION FOR STOCK OWNERSHIP.  NO
PERSON MAY BE GRANTED AN INCENTIVE STOCK OPTION UNDER THE PLAN IF SUCH PERSON,
AT THE TIME THE INCENTIVE STOCK OPTION IS GRANTED, OWNS STOCK POSSESSING MORE
THAN 10% OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK OF THE
COMPANY OR ANY THEN EXISTING SUBSIDIARY OR PARENT CORPORATION (WITHIN THE
MEANING OF SECTION 422 OF THE CODE) UNLESS SUCH INCENTIVE STOCK OPTION CONFORMS
TO THE APPLICABLE PROVISIONS OF SECTION 422 OF THE CODE.

 

4.3.                              QUALIFICATION OF INCENTIVE STOCK OPTIONS.  NO
INCENTIVE STOCK OPTION SHALL BE GRANTED TO ANY PERSON WHO IS NOT AN EMPLOYEE.

 

4.4.                              GRANTING OF OPTIONS TO EMPLOYEES AND
CONSULTANTS.

 

(A)                                  THE ADMINISTRATOR SHALL FROM TIME TO TIME,
IN ITS ABSOLUTE DISCRETION, AND, SUBJECT TO APPLICABLE LIMITATIONS OF THE PLAN:

 

(i)                                     Determine which Employees are key
Employees and select from among the key Employees or Consultants (including
Employees or Consultants who have previously received Awards under the Plan)
such of them as in its opinion should be granted Options;

 

9

--------------------------------------------------------------------------------

 

(ii)                                  Subject to the Award Limit, determine the
number of shares to be subject to such Options granted to the selected key
Employees or Consultants;

 

(iii)                               Subject to Section 4.3, determine whether
such Options are to be Incentive Stock Options or Non-Qualified Stock Options
and whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and

 

(iv)                              Determine the terms and conditions of such
Options, consistent with the Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be limited
to, such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.

 

(B)                                 UPON THE SELECTION OF A KEY EMPLOYEE OR
CONSULTANT TO BE GRANTED AN OPTION, THE ADMINISTRATOR SHALL INSTRUCT THE
SECRETARY OF THE COMPANY TO ISSUE THE OPTION AND MAY IMPOSE SUCH CONDITIONS ON
THE GRANT OF THE OPTION AS IT DEEMS APPROPRIATE.

 

(C)                                  ANY INCENTIVE STOCK OPTION GRANTED UNDER
THE PLAN MAY BE MODIFIED BY THE ADMINISTRATOR, WITH THE CONSENT OF THE HOLDER,
TO DISQUALIFY SUCH OPTION FROM TREATMENT AS AN “INCENTIVE STOCK OPTION” UNDER
SECTION 422 OF THE CODE.

 

4.5.                              GRANTING OF OPTIONS TO INDEPENDENT DIRECTORS. 
THE BOARD SHALL FROM TIME TO TIME, IN ITS ABSOLUTE DISCRETION, AND SUBJECT TO
APPLICABLE LIMITATIONS OF THE PLAN:

 

(A)                                  SELECT FROM AMONG THE INDEPENDENT DIRECTORS
(INCLUDING INDEPENDENT DIRECTORS WHO HAVE PREVIOUSLY RECEIVED OPTIONS UNDER THE
PLAN) SUCH OF THEM AS IN ITS OPINION SHOULD BE GRANTED OPTIONS;

 

(B)                                 SUBJECT TO THE AWARD LIMIT, DETERMINE THE
NUMBER OF SHARES TO BE SUBJECT TO SUCH OPTIONS GRANTED TO THE SELECTED
INDEPENDENT DIRECTORS; AND

 

(C)                                  DETERMINE THE TERMS AND CONDITIONS OF SUCH
OPTIONS, CONSISTENT WITH THE PLAN.

 

ALL THE FOREGOING OPTION GRANTS AUTHORIZED BY THIS SECTION 4.5 ARE SUBJECT TO
STOCKHOLDER APPROVAL OF THE PLAN.

 

4.6.                              OPTIONS IN LIEU OF CASH COMPENSATION.  OPTIONS
MAY BE GRANTED UNDER THE PLAN TO EMPLOYEES AND CONSULTANTS IN LIEU OF CASH
BONUSES WHICH WOULD OTHERWISE BE PAYABLE TO SUCH EMPLOYEES AND CONSULTANTS, AND
TO INDEPENDENT DIRECTORS IN LIEU OF DIRECTORS’ FEES WHICH WOULD OTHERWISE BE
PAYABLE TO SUCH INDEPENDENT DIRECTORS, PURSUANT TO SUCH POLICIES WHICH MAY BE
ADOPTED BY THE ADMINISTRATOR FROM TIME TO TIME.

 

10

--------------------------------------------------------------------------------

 

ARTICLE V.

TERMS OF OPTIONS

 

5.1.                              OPTION PRICE.  THE PRICE PER SHARE OF THE
SHARES SUBJECT TO EACH OPTION GRANTED TO EMPLOYEES, INDEPENDENT DIRECTORS AND
CONSULTANTS SHALL BE SET BY THE ADMINISTRATOR; PROVIDED, HOWEVER, THAT:

 

(A)                                  IN THE CASE OF OPTIONS INTENDED TO QUALIFY
AS PERFORMANCE-BASED COMPENSATION AS DESCRIBED IN SECTION 162(M)(4)(C) OF THE
CODE, SUCH PRICE SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE OF A SHARE
OF COMMON STOCK ON THE DATE THE OPTION IS GRANTED;

 

(B)                                 IN THE CASE OF INCENTIVE STOCK OPTIONS SUCH
PRICE SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE OF A SHARE OF COMMON
STOCK ON THE DATE THE OPTION IS GRANTED (OR THE DATE THE OPTION IS MODIFIED,
EXTENDED OR RENEWED FOR PURPOSES OF SECTION 424(H) OF THE CODE);

 

(C)                                  IN THE CASE OF INCENTIVE STOCK OPTIONS
GRANTED TO AN INDIVIDUAL THEN OWNING (WITHIN THE MEANING OF SECTION 424(D) OF
THE CODE) MORE THAN 10% OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF
STOCK OF THE COMPANY OR ANY SUBSIDIARY OR PARENT CORPORATION THEREOF (WITHIN THE
MEANING OF SECTION 422 OF THE CODE), SUCH PRICE SHALL NOT BE LESS THAN 110% OF
THE FAIR MARKET VALUE OF A SHARE OF COMMON STOCK ON THE DATE THE OPTION IS
GRANTED (OR THE DATE THE OPTION IS MODIFIED, EXTENDED OR RENEWED FOR PURPOSES OF
SECTION 424(H) OF THE CODE); AND

 

(D)                                 IN THE CASE OF NON-QUALIFIED STOCK OPTIONS,
SUCH PRICE SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE OF A SHARE OF
COMMON STOCK ON THE DATE THE OPTION IS GRANTED.

 

5.2.                              OPTION TERM.  THE TERM OF AN OPTION GRANTED TO
AN EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT SHALL BE SET BY THE
ADMINISTRATOR IN ITS DISCRETION; PROVIDED, HOWEVER, THAT, IN THE CASE OF
INCENTIVE STOCK OPTIONS, THE TERM SHALL NOT BE MORE THAN TEN (10) YEARS FROM THE
DATE THE INCENTIVE STOCK OPTION IS GRANTED, OR FIVE (5) YEARS FROM THE DATE THE
INCENTIVE STOCK OPTION IS GRANTED IF THE INCENTIVE STOCK OPTION IS GRANTED TO AN
INDIVIDUAL THEN OWNING (WITHIN THE MEANING OF SECTION 424(D) OF THE CODE) MORE
THAN 10% OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK OF THE
COMPANY OR ANY SUBSIDIARY OR PARENT CORPORATION THEREOF (WITHIN THE MEANING OF
SECTION 422 OF THE CODE).  EXCEPT AS LIMITED BY REQUIREMENTS OF SECTION 422 OF
THE CODE AND REGULATIONS AND RULINGS THEREUNDER APPLICABLE TO INCENTIVE STOCK
OPTIONS, THE ADMINISTRATOR MAY EXTEND THE TERM OF ANY OUTSTANDING OPTION IN
CONNECTION WITH ANY TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR
TERMINATION OF CONSULTANCY OF THE HOLDER, OR AMEND ANY OTHER TERM OR CONDITION
OF SUCH OPTION RELATING TO SUCH A TERMINATION OF EMPLOYMENT, TERMINATION OF
DIRECTORSHIP OR TERMINATION OF CONSULTANCY.

 

11

--------------------------------------------------------------------------------

 

5.3.                              OPTION VESTING.

 

(A)                                  THE PERIOD DURING WHICH THE RIGHT TO
EXERCISE, IN WHOLE OR IN PART, AN OPTION GRANTED TO AN EMPLOYEE, INDEPENDENT
DIRECTOR OR A CONSULTANT VESTS IN THE HOLDER SHALL BE SET BY THE ADMINISTRATOR
AND THE ADMINISTRATOR MAY DETERMINE THAT AN OPTION MAY NOT BE EXERCISED IN WHOLE
OR IN PART FOR A SPECIFIED PERIOD AFTER IT IS GRANTED; PROVIDED, HOWEVER, THAT,
UNLESS THE ADMINISTRATOR OTHERWISE PROVIDES IN THE TERMS OF THE AWARD AGREEMENT
OR OTHERWISE, NO OPTION SHALL BE EXERCISABLE BY ANY HOLDER WHO IS THEN SUBJECT
TO SECTION 16 OF THE EXCHANGE ACT WITHIN THE PERIOD ENDING SIX MONTHS AND ONE
DAY AFTER THE DATE THE OPTION IS GRANTED.  AT ANY TIME AFTER GRANT OF AN OPTION,
THE ADMINISTRATOR MAY, IN ITS SOLE AND ABSOLUTE DISCRETION AND SUBJECT TO
WHATEVER TERMS AND CONDITIONS IT SELECTS, ACCELERATE THE PERIOD DURING WHICH AN
OPTION GRANTED TO AN EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT VESTS.

 

(B)                                 NO PORTION OF AN OPTION GRANTED TO AN
EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT WHICH IS UNEXERCISABLE AT
TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR TERMINATION OF
CONSULTANCY, AS APPLICABLE, SHALL THEREAFTER BECOME EXERCISABLE, EXCEPT AS MAY
BE OTHERWISE PROVIDED BY THE ADMINISTRATOR EITHER IN THE AWARD AGREEMENT OR BY
ACTION OF THE ADMINISTRATOR FOLLOWING THE GRANT OF THE OPTION.

 

(C)                                  TO THE EXTENT THAT THE AGGREGATE FAIR
MARKET VALUE OF STOCK WITH RESPECT TO WHICH “INCENTIVE STOCK OPTIONS” (WITHIN
THE MEANING OF SECTION 422 OF THE CODE, BUT WITHOUT REGARD TO SECTION 422(D) OF
THE CODE) ARE EXERCISABLE FOR THE FIRST TIME BY A HOLDER DURING ANY CALENDAR
YEAR UNDER THE PLAN, AND ALL OTHER PLANS OF THE COMPANY AND ANY SUBSIDIARY OR
PARENT CORPORATION THEREOF, WITHIN THE MEANING OF SECTION 424 OF THE CODE,
EXCEEDS $100,000, THE OPTIONS SHALL BE TREATED AS NON-QUALIFIED STOCK OPTIONS TO
THE EXTENT REQUIRED BY SECTION 422 OF THE CODE.  THE RULE SET FORTH IN THE
PRECEDING SENTENCE SHALL BE APPLIED BY TAKING OPTIONS AND OTHER “INCENTIVE STOCK
OPTIONS” INTO ACCOUNT IN THE ORDER IN WHICH THEY WERE GRANTED.  FOR PURPOSES OF
THIS SECTION 5.3(C), THE FAIR MARKET VALUE OF STOCK SHALL BE DETERMINED AS OF
THE TIME THE OPTION OR OTHER “INCENTIVE STOCK OPTIONS” WITH RESPECT TO SUCH
STOCK IS GRANTED.

 

5.4.                              SUBSTITUTE AWARDS.  NOTWITHSTANDING THE
FOREGOING PROVISIONS OF THIS ARTICLE V TO THE CONTRARY, IN THE CASE OF AN OPTION
THAT IS A SUBSTITUTE AWARD, THE PRICE PER SHARE OF THE SHARES SUBJECT TO SUCH
OPTION MAY BE LESS THAN THE FAIR MARKET VALUE PER SHARE ON THE DATE OF GRANT,
PROVIDED, THAT THE EXCESS OF:  (A) THE AGGREGATE FAIR MARKET VALUE (AS OF THE
DATE SUCH SUBSTITUTE AWARD IS GRANTED) OF THE SHARES SUBJECT TO THE SUBSTITUTE
AWARD, OVER (B) THE AGGREGATE EXERCISE PRICE THEREOF, DOES NOT EXCEED THE EXCESS
OF:  (C) THE AGGREGATE FAIR MARKET VALUE (AS OF THE TIME IMMEDIATELY PRECEDING
THE TRANSACTION GIVING RISE TO THE SUBSTITUTE AWARD, SUCH FAIR MARKET VALUE TO
BE DETERMINED BY THE COMMITTEE) OF THE SHARES OF THE PREDECESSOR ENTITY THAT
WERE SUBJECT TO THE GRANT ASSUMED OR SUBSTITUTED FOR BY THE COMPANY, OVER
(D) THE AGGREGATE EXERCISE PRICE OF SUCH SHARES.

 

5.5.                              SUBSTITUTION OF STOCK APPRECIATION RIGHTS. 
THE ADMINISTRATOR MAY PROVIDE IN THE AWARD AGREEMENT EVIDENCING THE GRANT OF AN
OPTION THAT THE ADMINISTRATOR, IN ITS SOLE DISCRETION, SHALL HAVE THE RIGHT TO
SUBSTITUTE A STOCK APPRECIATION RIGHT FOR SUCH OPTION AT ANY TIME PRIOR TO OR
UPON EXERCISE OF SUCH OPTION, SUBJECT TO THE PROVISIONS OF SECTION 9.2;
PROVIDED, THAT SUCH STOCK APPRECIATION RIGHT SHALL BE EXERCISABLE WITH RESPECT
TO THE SAME NUMBER OF

 

12

--------------------------------------------------------------------------------

 

shares of Common Stock for which such substituted Option would have been
exercisable and at the Option exercise price per share.

 

ARTICLE VI.

EXERCISE OF OPTIONS

 

6.1.                              PARTIAL EXERCISE.  AN EXERCISABLE OPTION MAY
BE EXERCISED IN WHOLE OR IN PART.  HOWEVER, AN OPTION SHALL NOT BE EXERCISABLE
WITH RESPECT TO FRACTIONAL SHARES AND THE ADMINISTRATOR MAY REQUIRE THAT, BY THE
TERMS OF THE OPTION, A PARTIAL EXERCISE BE WITH RESPECT TO A MINIMUM NUMBER OF
SHARES.

 

6.2.                              MANNER OF EXERCISE.  ALL OR A PORTION OF AN
EXERCISABLE OPTION SHALL BE DEEMED EXERCISED UPON DELIVERY OF ALL OF THE
FOLLOWING TO THE SECRETARY OF THE COMPANY, OR SUCH OTHER PERSON OR ENTITY
DESIGNATED BY THE BOARD, OR HIS, HER OR ITS OFFICE, AS APPLICABLE:

 

(A)                                  A WRITTEN NOTICE COMPLYING WITH THE
APPLICABLE RULES ESTABLISHED BY THE ADMINISTRATOR STATING THAT THE OPTION, OR A
PORTION THEREOF, IS EXERCISED.  THE NOTICE SHALL BE SIGNED BY THE HOLDER OR
OTHER PERSON THEN ENTITLED TO EXERCISE THE OPTION OR SUCH PORTION OF THE OPTION;

 

(B)                                 SUCH REPRESENTATIONS AND DOCUMENTS AS THE
ADMINISTRATOR, IN ITS ABSOLUTE DISCRETION, DEEMS NECESSARY OR ADVISABLE TO
EFFECT COMPLIANCE WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AND ANY
OTHER FEDERAL OR STATE SECURITIES LAWS OR REGULATIONS.  THE ADMINISTRATOR MAY,
IN ITS ABSOLUTE DISCRETION, ALSO TAKE WHATEVER ADDITIONAL ACTIONS IT DEEMS
APPROPRIATE TO EFFECT SUCH COMPLIANCE INCLUDING, WITHOUT LIMITATION, PLACING
LEGENDS ON SHARE CERTIFICATES AND ISSUING STOP-TRANSFER NOTICES TO AGENTS AND
REGISTRARS;

 

(C)                                  IN THE EVENT THAT THE OPTION SHALL BE
EXERCISED PURSUANT TO SECTION 12.1 BY ANY PERSON OR PERSONS OTHER THAN THE
HOLDER, APPROPRIATE PROOF OF THE RIGHT OF SUCH PERSON OR PERSONS TO EXERCISE THE
OPTION; AND

 

(D)                                 FULL CASH PAYMENT TO THE SECRETARY OF THE
COMPANY FOR THE SHARES WITH RESPECT TO WHICH THE OPTION, OR PORTION THEREOF, IS
EXERCISED.  HOWEVER, THE ADMINISTRATOR MAY, IN ITS DISCRETION, (I)  ALLOW
PAYMENT, IN WHOLE OR IN PART, THROUGH THE DELIVERY OF SHARES OF COMMON STOCK
WHICH HAVE BEEN OWNED BY THE HOLDER FOR AT LEAST SIX MONTHS, DULY ENDORSED FOR
TRANSFER TO THE COMPANY WITH A FAIR MARKET VALUE ON THE DATE OF DELIVERY EQUAL
TO THE AGGREGATE EXERCISE PRICE OF THE OPTION OR EXERCISED PORTION THEREOF;
(II) ALLOW PAYMENT, IN WHOLE OR IN PART, THROUGH THE SURRENDER OF SHARES OF
COMMON STOCK THEN ISSUABLE UPON EXERCISE OF THE OPTION HAVING A FAIR MARKET
VALUE ON THE DATE OF OPTION EXERCISE EQUAL TO THE AGGREGATE EXERCISE PRICE OF
THE OPTION OR EXERCISED PORTION THEREOF; (III) ALLOW PAYMENT, IN WHOLE OR IN
PART, THROUGH THE DELIVERY OF PROPERTY OF ANY KIND WHICH CONSTITUTES GOOD AND
VALUABLE CONSIDERATION; (IV) ALLOW PAYMENT, IN WHOLE OR IN PART, THROUGH THE
DELIVERY OF A NOTICE THAT THE HOLDER HAS PLACED A MARKET SELL ORDER WITH A
BROKER WITH RESPECT TO SHARES OF COMMON STOCK THEN ISSUABLE

 

13

--------------------------------------------------------------------------------

 

UPON EXERCISE OF THE OPTION, AND THAT THE BROKER HAS BEEN DIRECTED TO PAY A
SUFFICIENT PORTION OF THE NET PROCEEDS OF THE SALE TO THE COMPANY IN
SATISFACTION OF THE OPTION EXERCISE PRICE, PROVIDED, THAT PAYMENT OF SUCH
PROCEEDS IS THEN MADE TO THE COMPANY UPON SETTLEMENT OF SUCH SALE; OR (V) ALLOW
PAYMENT THROUGH ANY COMBINATION OF THE CONSIDERATION PROVIDED IN THE FOREGOING
PARAGRAPHS (I), (II), (III) AND (IV); PROVIDED, HOWEVER, THAT THE PAYMENT IN THE
MANNER PRESCRIBED IN THE PRECEDING PARAGRAPHS SHALL NOT BE PERMITTED TO THE
EXTENT THAT THE ADMINISTRATOR DETERMINES THAT PAYMENT IN SUCH MANNER SHALL
RESULT IN AN EXTENSION OR MAINTENANCE OF CREDIT, AN ARRANGEMENT FOR THE
EXTENSION OF CREDIT, OR A RENEWAL OR AN EXTENSION OF CREDIT IN THE FORM OF A
PERSONAL LOAN TO OR FOR ANY DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY THAT IS
PROHIBITED BY SECTION 13(K) OF THE EXCHANGE ACT OR OTHER APPLICABLE LAW.

 

6.3.                              CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. 
THE COMPANY SHALL NOT BE REQUIRED TO ISSUE OR DELIVER ANY CERTIFICATE OR
CERTIFICATES FOR SHARES OF STOCK PURCHASED UPON THE EXERCISE OF ANY OPTION OR
PORTION THEREOF PRIOR TO FULFILLMENT OF ALL OF THE FOLLOWING CONDITIONS:

 

(A)                                  THE ADMISSION OF SUCH SHARES TO LISTING ON
ALL STOCK EXCHANGES ON WHICH SUCH CLASS OF STOCK IS THEN LISTED;

 

(B)                                 THE COMPLETION OF ANY REGISTRATION OR OTHER
QUALIFICATION OF SUCH SHARES UNDER ANY STATE OR FEDERAL LAW, OR UNDER THE
RULINGS OR REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER
GOVERNMENTAL REGULATORY BODY WHICH THE ADMINISTRATOR SHALL, IN ITS ABSOLUTE
DISCRETION, DEEM NECESSARY OR ADVISABLE;

 

(C)                                  THE OBTAINING OF ANY APPROVAL OR OTHER
CLEARANCE FROM ANY STATE OR FEDERAL GOVERNMENTAL AGENCY WHICH THE ADMINISTRATOR
SHALL, IN ITS ABSOLUTE DISCRETION, DETERMINE TO BE NECESSARY OR ADVISABLE;

 

(D)                                 THE LAPSE OF SUCH REASONABLE PERIOD OF TIME
FOLLOWING THE EXERCISE OF THE OPTION AS THE ADMINISTRATOR MAY ESTABLISH FROM
TIME TO TIME FOR REASONS OF ADMINISTRATIVE CONVENIENCE; AND

 

(E)                                  THE RECEIPT BY THE COMPANY OF FULL PAYMENT
FOR SUCH SHARES, INCLUDING PAYMENT OF ANY APPLICABLE WITHHOLDING TAX, WHICH IN
THE DISCRETION OF THE ADMINISTRATOR MAY BE IN THE FORM OF CONSIDERATION USED BY
THE HOLDER TO PAY FOR SUCH SHARES UNDER SECTION 6.2(D).

 

6.4.                              RIGHTS AS STOCKHOLDERS.  HOLDERS SHALL NOT BE,
NOR HAVE ANY OF THE RIGHTS OR PRIVILEGES OF, STOCKHOLDERS OF THE COMPANY IN
RESPECT OF ANY SHARES PURCHASABLE UPON THE EXERCISE OF ANY PART OF AN OPTION
UNLESS AND UNTIL CERTIFICATES REPRESENTING SUCH SHARES HAVE BEEN ISSUED BY THE
COMPANY TO SUCH HOLDERS.

 

6.5.                              OWNERSHIP AND TRANSFER RESTRICTIONS.  THE
ADMINISTRATOR, IN ITS ABSOLUTE DISCRETION, MAY IMPOSE SUCH RESTRICTIONS ON THE
OWNERSHIP AND TRANSFERABILITY OF THE SHARES PURCHASABLE UPON THE EXERCISE OF AN
OPTION AS IT DEEMS APPROPRIATE.  ANY SUCH RESTRICTION SHALL BE SET FORTH IN THE
RESPECTIVE AWARD AGREEMENT AND MAY BE REFERRED TO ON THE CERTIFICATES EVIDENCING
SUCH SHARES.  THE HOLDER SHALL GIVE THE COMPANY PROMPT NOTICE OF ANY DISPOSITION
OF

 

14

--------------------------------------------------------------------------------

 

shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder, or (b) one year after the transfer of such shares to such
Holder.

 

6.6.                              ADDITIONAL LIMITATIONS ON EXERCISE OF
OPTIONS.  HOLDERS MAY BE REQUIRED TO COMPLY WITH ANY TIMING OR OTHER
RESTRICTIONS WITH RESPECT TO THE SETTLEMENT OR EXERCISE OF AN OPTION, INCLUDING
A WINDOW-PERIOD LIMITATION, AS MAY BE IMPOSED IN THE DISCRETION OF THE
ADMINISTRATOR.

 

ARTICLE VII.

AWARD OF RESTRICTED STOCK

 

7.1.                              ELIGIBILITY.  SUBJECT TO THE AWARD LIMIT,
RESTRICTED STOCK MAY BE AWARDED TO ANY EMPLOYEE WHOM THE ADMINISTRATOR
DETERMINES IS A KEY EMPLOYEE, OR ANY INDEPENDENT DIRECTOR OR ANY CONSULTANT,
WHOM THE ADMINISTRATOR DETERMINES SHOULD RECEIVE SUCH AN AWARD.

 

7.2.                              AWARD OF RESTRICTED STOCK.

 

(A)                                  THE ADMINISTRATOR MAY FROM TIME TO TIME, IN
ITS ABSOLUTE DISCRETION:

 

(i)                                     Determine which Employees are key
Employees, and select from among the key Employees, Independent Directors or
Consultants (including Employees, Independent Directors or Consultants who have
previously received other Awards under the Plan) such of them as in its opinion
should be awarded Restricted Stock; and

 

(ii)                                  Determine the purchase price, if any, and
other terms and conditions applicable to such Restricted Stock, consistent with
the Plan.

 

(B)                                 THE ADMINISTRATOR SHALL ESTABLISH THE
PURCHASE PRICE, IF ANY, AND FORM OF PAYMENT FOR RESTRICTED STOCK; PROVIDED,
HOWEVER, THAT SUCH PURCHASE PRICE SHALL BE NO LESS THAN THE PAR VALUE OF THE
COMMON STOCK TO BE PURCHASED, UNLESS OTHERWISE PERMITTED BY APPLICABLE STATE
LAW.  IN ALL CASES, LEGAL CONSIDERATION SHALL BE REQUIRED FOR EACH ISSUANCE OF
RESTRICTED STOCK.

 

(C)                                  UPON THE SELECTION OF AN EMPLOYEE,
INDEPENDENT DIRECTOR OR CONSULTANT TO BE AWARDED RESTRICTED STOCK, THE
ADMINISTRATOR SHALL INSTRUCT THE SECRETARY OF THE COMPANY TO ISSUE SUCH
RESTRICTED STOCK AND MAY IMPOSE SUCH CONDITIONS ON THE ISSUANCE OF SUCH
RESTRICTED STOCK AS IT DEEMS APPROPRIATE.

 

7.3.                              RIGHTS AS STOCKHOLDERS.  SUBJECT TO
SECTION 7.4, UPON DELIVERY OF THE SHARES OF RESTRICTED STOCK TO THE ESCROW
HOLDER PURSUANT TO SECTION 7.7, THE HOLDER SHALL HAVE, UNLESS OTHERWISE PROVIDED
BY THE ADMINISTRATOR, ALL THE RIGHTS OF A STOCKHOLDER WITH RESPECT TO SAID
SHARES, SUBJECT TO THE RESTRICTIONS IN HIS OR HER AWARD AGREEMENT, INCLUDING THE
RIGHT TO

 

15

--------------------------------------------------------------------------------

 

receive all dividends and other distributions paid or made with respect to the
shares; provided, however, that, in the discretion of the Administrator, any
dividends or distributions with respect to the Common Stock shall be subject to
the restrictions set forth in Section 7.4.

 

7.4.                              RESTRICTION.  ALL SHARES OF RESTRICTED STOCK
ISSUED UNDER THE PLAN (INCLUDING ANY SHARES RECEIVED BY HOLDERS THEREOF WITH
RESPECT TO SHARES OF RESTRICTED STOCK AS A RESULT OF STOCK DIVIDENDS, STOCK
SPLITS OR ANY OTHER FORM OF RECAPITALIZATION) SHALL, IN THE TERMS OF EACH
INDIVIDUAL AWARD AGREEMENT, BE SUBJECT TO SUCH RESTRICTIONS AS THE ADMINISTRATOR
SHALL PROVIDE, WHICH RESTRICTIONS MAY INCLUDE, WITHOUT LIMITATION, RESTRICTIONS
CONCERNING VOTING RIGHTS AND TRANSFERABILITY AND RESTRICTIONS BASED ON DURATION
OF EMPLOYMENT, DIRECTORSHIP OR CONSULTANCY WITH THE COMPANY, OR ANY SUBSIDIARY,
OR ANY PARENT THEREOF, COMPANY PERFORMANCE AND INDIVIDUAL PERFORMANCE, OR ANY
ONE OR MORE OF THE PERFORMANCE CRITERIA OR OTHER SPECIFIC PERFORMANCE CRITERIA
DETERMINED APPROPRIATE BY THE ADMINISTRATOR; PROVIDED, HOWEVER, THAT, UNLESS THE
ADMINISTRATOR OTHERWISE PROVIDES IN THE TERMS OF THE AWARD AGREEMENT OR
OTHERWISE, NO SHARE OF RESTRICTED STOCK GRANTED TO A PERSON SUBJECT TO
SECTION 16 OF THE EXCHANGE ACT SHALL BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED
UNTIL AT LEAST SIX MONTHS AND ONE DAY HAVE ELAPSED FROM THE DATE ON WHICH THE
RESTRICTED STOCK WAS ISSUED; AND, PROVIDED, FURTHER, THAT, EXCEPT WITH RESPECT
TO SHARES OF RESTRICTED STOCK GRANTED TO SECTION 162(M) PARTICIPANTS, BY ACTION
TAKEN AFTER THE RESTRICTED STOCK IS ISSUED, THE ADMINISTRATOR MAY, ON SUCH TERMS
AND CONDITIONS AS IT MAY DETERMINE TO BE APPROPRIATE, REMOVE ANY OR ALL OF THE
RESTRICTIONS IMPOSED BY THE TERMS OF THE AWARD AGREEMENT.  RESTRICTED STOCK MAY
NOT BE SOLD OR ENCUMBERED UNTIL ALL RESTRICTIONS ARE TERMINATED OR EXPIRE.  IF
NO CONSIDERATION WAS PAID BY THE HOLDER UPON ISSUANCE, A HOLDER’S RIGHTS IN
UNVESTED RESTRICTED STOCK SHALL LAPSE, AND SUCH RESTRICTED STOCK SHALL BE
SURRENDERED TO THE COMPANY WITHOUT CONSIDERATION, UPON TERMINATION OF
EMPLOYMENT, TERMINATION OF DIRECTORSHIP, OR TERMINATION OF CONSULTANCY, AS
APPLICABLE; PROVIDED, HOWEVER, THAT THE ADMINISTRATOR IN ITS SOLE AND ABSOLUTE
DISCRETION MAY PROVIDE THAT SUCH RIGHTS SHALL NOT LAPSE IN THE EVENT OF A
TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR TERMINATION OF
CONSULTANCY, AS APPLICABLE, FOLLOWING A “CHANGE OF OWNERSHIP OR CONTROL” (WITHIN
THE MEANING OF TREASURY REGULATION SECTION 1.162-27(E)(2)(V) OR ANY SUCCESSOR
REGULATION THERETO) OF THE COMPANY OR BECAUSE OF THE HOLDER’S DEATH OR
DISABILITY; AND, PROVIDED, FURTHER, EXCEPT WITH RESPECT TO SHARES OF RESTRICTED
STOCK GRANTED TO SECTION 162(M) PARTICIPANTS THAT IS INTENDED TO QUALIFY AS
PERFORMANCE-BASED COMPENSATION AS DESCRIBED IN SECTION 162(M)(4)(C) OF THE CODE,
THE ADMINISTRATOR IN ITS SOLE AND ABSOLUTE DISCRETION MAY PROVIDE THAT NO SUCH
LAPSE OR SURRENDER SHALL OCCUR IN THE EVENT OF A TERMINATION OF EMPLOYMENT,
TERMINATION OF DIRECTORSHIP, OR TERMINATION OF CONSULTANCY,  AS APPLICABLE,
WITHOUT CAUSE OR FOLLOWING ANY CHANGE IN CONTROL OR BECAUSE OF THE HOLDER’S
RETIREMENT, OR OTHERWISE.

 

7.5.                              REPURCHASE OF RESTRICTED STOCK.  THE
ADMINISTRATOR SHALL PROVIDE IN THE TERMS OF EACH INDIVIDUAL AWARD AGREEMENT THAT
THE COMPANY SHALL HAVE THE RIGHT TO REPURCHASE FROM THE HOLDER THE RESTRICTED
STOCK THEN SUBJECT TO RESTRICTIONS UNDER THE AWARD AGREEMENT IMMEDIATELY UPON A
TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP, OR TERMINATION OF
CONSULTANCY, AS APPLICABLE, AT A CASH PRICE PER SHARE EQUAL TO THE PRICE PAID BY
THE HOLDER FOR SUCH RESTRICTED STOCK; PROVIDED, HOWEVER, THAT THE ADMINISTRATOR
IN ITS SOLE AND ABSOLUTE DISCRETION MAY PROVIDE THAT NO SUCH RIGHT OF REPURCHASE
SHALL EXIST IN THE EVENT OF A TERMINATION OF EMPLOYMENT, TERMINATION OF
DIRECTORSHIP OR TERMINATION OF CONSULTANCY, AS APPLICABLE, FOLLOWING A “CHANGE
OF OWNERSHIP OR CONTROL” (WITHIN THE MEANING OF TREASURY REGULATION

 

16

--------------------------------------------------------------------------------

 

Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Holder’s death or disability; and, provided, further, that,
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants that is intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, the Administrator in its sole and
absolute discretion may provide that no such right of repurchase shall exist in
the event of a Termination of Employment, Termination of Directorship, or
Termination of Consultancy, as applicable, without cause or following any Change
in Control or because of the Holder’s retirement, or otherwise.

 

7.6.                              ESCROW.  THE SECRETARY OF THE COMPANY OR SUCH
OTHER ESCROW HOLDER AS THE ADMINISTRATOR MAY APPOINT SHALL RETAIN PHYSICAL
CUSTODY OF EACH CERTIFICATE REPRESENTING RESTRICTED STOCK UNTIL ALL OF THE
RESTRICTIONS IMPOSED UNDER THE AWARD AGREEMENT WITH RESPECT TO THE SHARES
EVIDENCED BY SUCH CERTIFICATE EXPIRE OR SHALL HAVE BEEN REMOVED.

 

7.7.                              LEGEND.  IN ORDER TO ENFORCE THE RESTRICTIONS
IMPOSED UPON SHARES OF RESTRICTED STOCK HEREUNDER, THE ADMINISTRATOR SHALL CAUSE
A LEGEND OR LEGENDS TO BE PLACED ON CERTIFICATES REPRESENTING ALL SHARES OF
RESTRICTED STOCK THAT ARE STILL SUBJECT TO RESTRICTIONS UNDER AWARD AGREEMENTS,
WHICH LEGEND OR LEGENDS SHALL MAKE APPROPRIATE REFERENCE TO THE CONDITIONS
IMPOSED THEREBY.

 

7.8.                              SECTION 83(B) ELECTION.  IF A HOLDER MAKES AN
ELECTION UNDER SECTION 83(B) OF THE CODE, OR ANY SUCCESSOR SECTION THERETO, TO
BE TAXED WITH RESPECT TO THE RESTRICTED STOCK AS OF THE DATE OF TRANSFER OF THE
RESTRICTED STOCK RATHER THAN AS OF THE DATE OR DATES UPON WHICH THE HOLDER WOULD
OTHERWISE BE TAXABLE UNDER SECTION 83(A) OF THE CODE, THE HOLDER SHALL DELIVER A
COPY OF SUCH ELECTION TO THE COMPANY IMMEDIATELY AFTER FILING SUCH ELECTION WITH
THE INTERNAL REVENUE SERVICE.

 

ARTICLE VIII.

DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS, RESTRICTED STOCK UNITS

 

8.1.                              ELIGIBILITY.  SUBJECT TO THE AWARD LIMIT, ONE
OR MORE DIVIDEND EQUIVALENT AWARDS, DEFERRED STOCK AWARDS, STOCK PAYMENT AWARDS,
AND/OR RESTRICTED STOCK UNIT AWARDS MAY BE GRANTED TO ANY EMPLOYEE WHOM THE
ADMINISTRATOR DETERMINES IS A KEY EMPLOYEE, OR ANY INDEPENDENT DIRECTOR OR ANY
CONSULTANT, WHOM THE ADMINISTRATOR DETERMINES SHOULD RECEIVE SUCH AN AWARD.

 

8.2.                              DIVIDEND EQUIVALENTS. 

 

(A)                                  ANY KEY EMPLOYEE, INDEPENDENT DIRECTOR OR
CONSULTANT SELECTED BY THE ADMINISTRATOR MAY BE GRANTED DIVIDEND EQUIVALENTS
BASED ON THE DIVIDENDS DECLARED ON THE COMMON STOCK, TO BE CREDITED AS OF
DIVIDEND PAYMENT DATES, DURING THE PERIOD BETWEEN THE DATE A STOCK APPRECIATION
RIGHT, DEFERRED STOCK AWARD, OR RESTRICTED STOCK UNIT AWARD IS GRANTED, AND THE
DATE SUCH STOCK APPRECIATION RIGHT, DEFERRED STOCK AWARD, OR RESTRICTED STOCK
UNIT AWARD VESTS, IS EXERCISED, IS DISTRIBUTED, TERMINATES OR EXPIRES, AS
DETERMINED BY THE

 

17

--------------------------------------------------------------------------------

 

Administrator.  Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Administrator.

 

(B)                                 ANY HOLDER OF AN OPTION WHO IS AN EMPLOYEE,
INDEPENDENT DIRECTOR OR CONSULTANT SELECTED BY THE ADMINISTRATOR MAY BE GRANTED
DIVIDEND EQUIVALENTS BASED ON THE DIVIDENDS DECLARED ON THE COMMON STOCK, TO BE
CREDITED AS OF DIVIDEND PAYMENT DATES, DURING THE PERIOD BETWEEN THE DATE AN
OPTION IS GRANTED, AND THE DATE SUCH OPTION VESTS, IS EXERCISED, TERMINATES OR
EXPIRES, AS DETERMINED BY THE ADMINISTRATOR.  SUCH DIVIDEND EQUIVALENTS SHALL BE
CONVERTED TO CASH OR ADDITIONAL SHARES OF COMMON STOCK BY SUCH FORMULA AND AT
SUCH TIME AND SUBJECT TO SUCH LIMITATIONS AS MAY BE DETERMINED BY THE
ADMINISTRATOR.

 

(C)                                  DIVIDEND EQUIVALENTS GRANTED WITH RESPECT
TO OPTIONS INTENDED TO BE QUALIFIED PERFORMANCE-BASED COMPENSATION FOR PURPOSES
OF SECTION 162(M) OF THE CODE SHALL BE PAYABLE, WITH RESPECT TO PRE-EXERCISE
PERIODS, REGARDLESS OF WHETHER SUCH OPTION IS SUBSEQUENTLY EXERCISED.

 

8.3.                              STOCK PAYMENTS.  ANY KEY EMPLOYEE, INDEPENDENT
DIRECTOR OR CONSULTANT SELECTED BY THE ADMINISTRATOR MAY RECEIVE STOCK PAYMENTS
IN THE MANNER DETERMINED FROM TIME TO TIME BY THE ADMINISTRATOR.  THE NUMBER OF
SHARES SHALL BE DETERMINED BY THE ADMINISTRATOR AND MAY BE BASED UPON THE
PERFORMANCE CRITERIA OR OTHER SPECIFIC PERFORMANCE CRITERIA DETERMINED
APPROPRIATE BY THE ADMINISTRATOR, DETERMINED ON THE DATE SUCH STOCK PAYMENT IS
MADE OR ON ANY DATE THEREAFTER.

 

8.4.                              DEFERRED STOCK.  ANY KEY EMPLOYEE, INDEPENDENT
DIRECTOR OR CONSULTANT SELECTED BY THE ADMINISTRATOR MAY BE GRANTED AN AWARD OF
DEFERRED STOCK IN THE MANNER DETERMINED FROM TIME TO TIME BY THE ADMINISTRATOR. 
THE NUMBER OF SHARES OF DEFERRED STOCK SHALL BE DETERMINED BY THE ADMINISTRATOR
AND MAY BE BASED UPON THE PERFORMANCE CRITERIA OR OTHER SPECIFIC PERFORMANCE
CRITERIA DETERMINED TO BE APPROPRIATE BY THE ADMINISTRATOR, IN EACH CASE ON A
SPECIFIED DATE OR DATES OR OVER ANY PERIOD OR PERIODS DETERMINED BY THE
ADMINISTRATOR.  COMMON STOCK UNDERLYING A DEFERRED STOCK AWARD SHALL NOT BE
ISSUED UNTIL THE DEFERRED STOCK AWARD SHALL HAVE VESTED, PURSUANT TO A VESTING
SCHEDULE OR PERFORMANCE CRITERIA SET BY THE ADMINISTRATOR.  THE ADMINISTRATOR
SHALL SPECIFY THE DISTRIBUTION DATES APPLICABLE TO EACH DEFERRED STOCK AWARD
WHICH SHALL BE NO EARLIER THAN THE VESTING DATES OR EVENTS OF THE AWARD AND MAY
BE DETERMINED AT THE ELECTION OF THE EMPLOYEE, INDEPENDENT DIRECTOR OR
CONSULTANT.  UNLESS OTHERWISE PROVIDED BY THE ADMINISTRATOR, A HOLDER OF
DEFERRED STOCK SHALL HAVE NO RIGHTS AS A COMPANY STOCKHOLDER WITH RESPECT TO
SUCH DEFERRED STOCK UNTIL SUCH TIME AS THE AWARD HAS VESTED AND THE COMMON STOCK
UNDERLYING THE AWARD HAS BEEN ISSUED.

 

8.5.                              RESTRICTED STOCK UNITS.  ANY KEY EMPLOYEE,
INDEPENDENT DIRECTOR OR CONSULTANT SELECTED BY THE ADMINISTRATOR MAY BE GRANTED
AN AWARD OF RESTRICTED STOCK UNITS IN THE MANNER DETERMINED FROM TIME TO TIME BY
THE ADMINISTRATOR.  THE ADMINISTRATOR IS AUTHORIZED TO MAKE AWARDS OF RESTRICTED
STOCK UNITS IN SUCH AMOUNTS AND SUBJECT TO SUCH TERMS AND CONDITIONS AS
DETERMINED BY THE ADMINISTRATOR.  THE ADMINISTRATOR SHALL SPECIFY THE DATE OR
DATES ON WHICH THE RESTRICTED STOCK UNITS SHALL BECOME FULLY VESTED AND
NONFORFEITABLE, AND MAY SPECIFY SUCH CONDITIONS TO VESTING AS IT DEEMS
APPROPRIATE, AND MAY  SPECIFY THAT SUCH RESTRICTED

 

18

--------------------------------------------------------------------------------

 

Stock Units become fully vested and nonforfeitable pursuant to the satisfaction
of one or more Performance Goals or other specific performance goals as the
Administrator determines to be appropriate at the time of the grant of the
Restricted Stock Units or thereafter, in each case on a specified date or dates
or over any period or periods determined by the Administrator.  The
Administrator shall specify the distribution dates applicable to each award of
Restricted Stock Units which shall be no earlier than the vesting dates or
events of the award and may be determined at the election of the Employee,
Independent Director or Consultant.  On the distribution dates, the Company
shall issue to the Participant one unrestricted, fully transferable share of
Common Stock for each Restricted Stock Unit distributed.  The Administrator
shall specify the purchase price, if any, to be paid by the Employee,
Independent Director or Consultant to the Company for such shares of Common
Stock to be distributed pursuant to the Restricted Stock Unit award.

 

8.6.                              TERM.  THE TERM OF A DIVIDEND EQUIVALENT
AWARD, DEFERRED STOCK AWARD, STOCK PAYMENT AWARD AND/OR RESTRICTED STOCK UNIT
AWARD SHALL BE SET BY THE ADMINISTRATOR IN ITS DISCRETION.

 

8.7.                              EXERCISE OR PURCHASE PRICE.  THE ADMINISTRATOR
MAY ESTABLISH THE EXERCISE OR PURCHASE PRICE OF SHARES OF DEFERRED STOCK, SHARES
DISTRIBUTED AS A STOCK PAYMENT AWARD OR SHARES DISTRIBUTED PURSUANT TO A
RESTRICTED STOCK UNIT AWARD; PROVIDED, HOWEVER, THAT SUCH PRICE SHALL NOT BE
LESS THAN THE PAR VALUE OF A SHARE OF COMMON STOCK, UNLESS OTHERWISE PERMITTED
BY APPLICABLE STATE LAW.

 

8.8.                              EXERCISE UPON TERMINATION OF EMPLOYMENT,
TERMINATION OF CONSULTANCY OR TERMINATION OF DIRECTORSHIP.  A DIVIDEND
EQUIVALENT AWARD, DEFERRED STOCK AWARD, STOCK PAYMENT AWARD AND/OR RESTRICTED
STOCK UNIT AWARD IS EXERCISABLE OR DISTRIBUTABLE ONLY WHILE THE HOLDER IS AN
EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR, AS APPLICABLE; PROVIDED, HOWEVER,
THAT THE ADMINISTRATOR IN ITS SOLE AND ABSOLUTE DISCRETION MAY PROVIDE THAT THE
DIVIDEND EQUIVALENT AWARD, DEFERRED STOCK AWARD, STOCK PAYMENT AWARD AND/OR
RESTRICTED STOCK UNIT AWARD MAY BE EXERCISED OR DISTRIBUTED SUBSEQUENT TO A
TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR TERMINATION OF
CONSULTANCY FOLLOWING A “CHANGE OF CONTROL OR OWNERSHIP” (WITHIN THE MEANING OF
SECTION 1.162-27(E)(2)(V) OR ANY SUCCESSOR REGULATION THERETO) OF THE COMPANY.

 

8.9.                              FORM OF PAYMENT.  PAYMENT OF THE AMOUNT
DETERMINED UNDER SECTION 8.2 ABOVE SHALL BE IN CASH, IN COMMON STOCK OR A
COMBINATION OF BOTH, AS DETERMINED BY THE ADMINISTRATOR.  TO THE EXTENT ANY
PAYMENT UNDER THIS ARTICLE VIII IS EFFECTED IN COMMON STOCK, IT SHALL BE MADE
SUBJECT TO SATISFACTION OF ALL PROVISIONS OF SECTION 6.3.

 

ARTICLE IX.

STOCK APPRECIATION RIGHTS

 

9.1.                              GRANT OF STOCK APPRECIATION RIGHTS.  A STOCK
APPRECIATION RIGHT MAY BE GRANTED TO ANY KEY EMPLOYEE, INDEPENDENT DIRECTOR OR
CONSULTANT SELECTED BY THE ADMINISTRATOR.  A STOCK APPRECIATION RIGHT MAY BE
GRANTED:  (A) IN CONNECTION AND SIMULTANEOUSLY WITH THE GRANT

 

19

--------------------------------------------------------------------------------

 

of an Option, (b) with respect to a previously granted Option, or
(c) independent of an Option.  A Stock Appreciation Right shall be subject to
such terms and conditions not inconsistent with the Plan as the Administrator
shall impose and shall be evidenced by an Award Agreement.

 

9.2.                              COUPLED STOCK APPRECIATION RIGHTS.

 

(A)                                  A COUPLED STOCK APPRECIATION RIGHT (“CSAR”)
SHALL BE RELATED TO A PARTICULAR OPTION AND SHALL BE EXERCISABLE ONLY WHEN AND
TO THE EXTENT THE RELATED OPTION IS EXERCISABLE.

 

(B)                                 A CSAR MAY BE GRANTED TO THE HOLDER FOR NO
MORE THAN THE NUMBER OF SHARES SUBJECT TO THE SIMULTANEOUSLY OR PREVIOUSLY
GRANTED OPTION TO WHICH IT IS COUPLED.

 

(C)                                  A CSAR SHALL ENTITLE THE HOLDER (OR OTHER
PERSON ENTITLED TO EXERCISE THE OPTION PURSUANT TO THE PLAN) TO SURRENDER TO THE
COMPANY UNEXERCISED A PORTION OF THE OPTION TO WHICH THE CSAR RELATES (TO THE
EXTENT THEN EXERCISABLE PURSUANT TO ITS TERMS) AND TO RECEIVE FROM THE COMPANY
IN EXCHANGE THEREFOR AN AMOUNT DETERMINED BY MULTIPLYING THE DIFFERENCE OBTAINED
BY SUBTRACTING THE OPTION EXERCISE PRICE FROM THE FAIR MARKET VALUE OF A SHARE
OF COMMON STOCK ON THE DATE OF EXERCISE OF THE CSAR BY THE NUMBER OF SHARES OF
COMMON STOCK WITH RESPECT TO WHICH THE CSAR SHALL HAVE BEEN EXERCISED, SUBJECT
TO ANY LIMITATIONS THE ADMINISTRATOR MAY IMPOSE.

 

9.3.                              INDEPENDENT STOCK APPRECIATION RIGHTS.

 

(A)                                  AN INDEPENDENT STOCK APPRECIATION RIGHT
(“ISAR”) SHALL BE UNRELATED TO ANY OPTION AND SHALL HAVE A TERM SET BY THE
ADMINISTRATOR.  AN ISAR SHALL BE EXERCISABLE IN SUCH INSTALLMENTS AS THE
ADMINISTRATOR MAY DETERMINE.  AN ISAR SHALL COVER SUCH NUMBER OF SHARES OF
COMMON STOCK AS THE ADMINISTRATOR MAY DETERMINE; PROVIDED, HOWEVER, THAT UNLESS
THE ADMINISTRATOR OTHERWISE PROVIDES IN THE TERMS OF THE ISAR OR OTHERWISE, NO
ISAR GRANTED TO A PERSON SUBJECT TO SECTION 16 OF THE EXCHANGE ACT SHALL BE
EXERCISABLE UNTIL AT LEAST SIX MONTHS HAVE ELAPSED FROM (BUT EXCLUDING) THE DATE
ON WHICH THE OPTION WAS GRANTED.  THE EXERCISE PRICE PER SHARE OF COMMON STOCK
SUBJECT TO EACH ISAR SHALL BE SET BY THE ADMINISTRATOR; PROVIDED, THAT SUCH
EXERCISE PRICE PER SHARE SHALL NOT BE LESS THAN 100% OF THE FAIR MARKET VALUE OF
A SHARE OF COMMON STOCK ON THE DATE THE ISAR IS GRANTED.  AN ISAR IS EXERCISABLE
ONLY WHILE THE HOLDER IS AN EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT;
PROVIDED, THAT THE ADMINISTRATOR MAY DETERMINE THAT THE ISAR MAY BE EXERCISED
SUBSEQUENT TO TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR
TERMINATION OF CONSULTANCY WITHOUT CAUSE, OR FOLLOWING A CHANGE IN CONTROL OF
THE COMPANY, OR BECAUSE OF THE HOLDER’S RETIREMENT, DEATH OR DISABILITY, OR
OTHERWISE.

 

(B)                                 AN ISAR SHALL ENTITLE THE HOLDER (OR OTHER
PERSON ENTITLED TO EXERCISE THE ISAR PURSUANT TO THE PLAN) TO EXERCISE ALL OR A
SPECIFIED PORTION OF THE ISAR (TO THE EXTENT THEN EXERCISABLE PURSUANT TO ITS
TERMS) AND TO RECEIVE FROM THE COMPANY AN AMOUNT DETERMINED BY MULTIPLYING THE
DIFFERENCE OBTAINED BY SUBTRACTING THE EXERCISE PRICE PER SHARE OF THE ISAR FROM
THE FAIR MARKET VALUE OF A SHARE OF COMMON STOCK ON THE DATE OF EXERCISE OF THE

 

20

--------------------------------------------------------------------------------

 

ISAR by the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Administrator may
impose.

 

9.4.                              PAYMENT AND LIMITATIONS ON EXERCISE.

 

(A)                                  PAYMENT OF THE AMOUNTS DETERMINED UNDER
SECTION 9.2(C) AND 9.3(B) ABOVE SHALL BE IN CASH, IN COMMON STOCK (BASED ON ITS
FAIR MARKET VALUE AS OF THE DATE THE STOCK APPRECIATION RIGHT IS EXERCISED) OR A
COMBINATION OF BOTH, AS DETERMINED BY THE ADMINISTRATOR.  TO THE EXTENT SUCH
PAYMENT IS EFFECTED IN COMMON STOCK IT SHALL BE MADE SUBJECT TO SATISFACTION OF
ALL PROVISIONS OF SECTION 6.3 ABOVE PERTAINING TO OPTIONS.

 

(B)                                 HOLDERS OF STOCK APPRECIATION RIGHTS MAY BE
REQUIRED TO COMPLY WITH ANY TIMING OR OTHER RESTRICTIONS WITH RESPECT TO THE
SETTLEMENT OR EXERCISE OF A STOCK APPRECIATION RIGHT, INCLUDING A WINDOW-PERIOD
LIMITATION, AS MAY BE IMPOSED IN THE DISCRETION OF THE ADMINISTRATOR.

 

ARTICLE X.

 

COMPLIANCE WITH SECTION 409A OF THE CODE

 

10.1.                        AWARDS SUBJECT TO CODE SECTION 409A.  ANY AWARD
THAT CONSTITUTES, OR PROVIDES FOR, A DEFERRAL OF COMPENSATION SUBJECT TO
SECTION 409A OF THE CODE (A “SECTION 409A AWARD”) SHALL SATISFY THE REQUIREMENTS
OF SECTION 409A OF THE CODE AND THIS ARTICLE X, TO THE EXTENT APPLICABLE.  THE
AWARD AGREEMENT WITH RESPECT TO A SECTION 409A AWARD SHALL INCORPORATE THE TERMS
AND CONDITIONS REQUIRED BY SECTION 409A OF THE CODE AND THIS ARTICLE X.

 

10.2.                        DISTRIBUTIONS UNDER A SECTION 409A AWARD.

 

(A)                                  SUBJECT TO SUBSECTION (B), ANY SHARES OF
COMMON STOCK, CASH OR OTHER PROPERTY OR AMOUNTS TO BE PAID OR DISTRIBUTED UPON
THE GRANT, ISSUANCE, VESTING, EXERCISE OR PAYMENT OF A SECTION 409A AWARD SHALL
BE DISTRIBUTED IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 409A(A)(2) OF THE
CODE, AND SHALL NOT BE DISTRIBUTED EARLIER THAN:

 

(i)                                     the Holder’s separation from service, as
determined by the Secretary of the Treasury,

 

(ii)                                  the date the Holder becomes disabled,

 

(iii)                               the Holder’s death,

 

(iv)                              a specified time (or pursuant to a fixed
schedule) specified under the Award Agreement at the date of the deferral of
such compensation,

 

(v)                                 to the extent provided by the Secretary of
the Treasury, a change in the ownership or effective control of the Company or a

 

21

--------------------------------------------------------------------------------

 

Subsidiary, or in the ownership of a substantial portion of the assets of the
Company or a Subsidiary, or

 

(vi)                              the occurrence of an unforeseeable emergency
with respect to the Holder.

 

(B)                                 IN THE CASE OF A HOLDER WHO IS A SPECIFIED
EMPLOYEE, THE REQUIREMENT OF PARAGRAPH (A)(I) SHALL BE MET ONLY IF THE
DISTRIBUTIONS WITH RESPECT TO THE SECTION 409A AWARD MAY NOT BE MADE BEFORE THE
DATE WHICH IS SIX MONTHS AFTER THE HOLDER’S SEPARATION FROM SERVICE (OR, IF
EARLIER, THE DATE OF THE HOLDER’S DEATH).  FOR PURPOSES OF THIS SUBSECTION (B),
A HOLDER SHALL BE A SPECIFIED EMPLOYEE IF SUCH HOLDER IS A KEY EMPLOYEE (AS
DEFINED IN SECTION 416(I) OF THE CODE WITHOUT REGARD TO PARAGRAPH (5) THEREOF)
OF A CORPORATION ANY STOCK OF WHICH IS PUBLICLY TRADED ON AN ESTABLISHED
SECURITIES MARKET OR OTHERWISE, AS DETERMINED UNDER SECTION 409A(A)(2)(B)(I) OF
THE CODE AND THE TREASURY REGULATIONS THEREUNDER.

 

(C)                                  THE REQUIREMENT OF PARAGRAPH (A)(VI) SHALL
BE MET ONLY IF, AS DETERMINED UNDER TREASURY REGULATIONS UNDER
SECTION 409A(A)(2)(B)(II) OF THE CODE, THE AMOUNTS DISTRIBUTED WITH RESPECT TO
THE UNFORESEEABLE EMERGENCY DO NOT EXCEED THE AMOUNTS NECESSARY TO SATISFY SUCH
UNFORESEEABLE EMERGENCY PLUS AMOUNTS NECESSARY TO PAY TAXES REASONABLY
ANTICIPATED AS A RESULT OF THE DISTRIBUTION, AFTER TAKING INTO ACCOUNT THE
EXTENT TO WHICH SUCH UNFORESEEABLE EMERGENCY IS OR MAY BE RELIEVED THROUGH
REIMBURSEMENT OR COMPENSATION BY INSURANCE OR OTHERWISE OR BY LIQUIDATION OF THE
HOLDER’S ASSETS (TO THE EXTENT THE LIQUIDATION OF SUCH ASSETS WOULD NOT ITSELF
CAUSE SEVERE FINANCIAL HARDSHIP).

 

(D)                                 FOR PURPOSES OF THIS SECTION, THE TERMS
SPECIFIED THEREIN SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED THERETO UNDER
SECTION 409A OF THE CODE AND THE TREASURY REGULATIONS THEREUNDER.

 

10.3.                        PROHIBITION ON ACCELERATION OF BENEFITS.  THE TIME
OR SCHEDULE OF ANY DISTRIBUTION OR PAYMENT OF ANY SHARES OF COMMON STOCK, CASH
OR OTHER PROPERTY OR AMOUNTS UNDER A SECTION 409A AWARD SHALL NOT BE
ACCELERATED, EXCEPT AS OTHERWISE PERMITTED UNDER SECTION 409A(A)(3) OF THE CODE
AND THE TREASURY REGULATIONS THEREUNDER.

 

10.4.                        ELECTIONS UNDER SECTION 409A AWARDS.

 

(A)                                  ANY DEFERRAL ELECTION PROVIDED UNDER OR
WITH RESPECT TO AN AWARD TO ANY EMPLOYEE, INDEPENDENT DIRECTOR OR CONSULTANT, OR
TO THE HOLDER OF A SECTION 409A AWARD, SHALL SATISFY THE REQUIREMENTS OF
SECTION 409A(A)(4)(B) OF THE CODE, TO THE EXTENT APPLICABLE, AND, EXCEPT AS
OTHERWISE PERMITTED UNDER PARAGRAPH (I) OR (II), ANY SUCH DEFERRAL ELECTION WITH
RESPECT TO COMPENSATION FOR SERVICES PERFORMED DURING A TAXABLE YEAR SHALL BE
MADE NOT LATER THAN THE CLOSE OF THE PRECEDING TAXABLE YEAR, OR AT SUCH OTHER
TIME AS PROVIDED IN TREASURY REGULATIONS.

 

(i)                                     In the case of the first year in which
an Employee, Independent Director or Consultant, or the Holder, becomes eligible
to participate in the Plan, any such deferral election may be made with respect
to services to be performed subsequent to the election with thirty (30) days
after the date the

 

22

--------------------------------------------------------------------------------

 

Employee, Independent Director or Consultant, or the Holder, becomes eligible to
participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the
Code.

 

(ii)                                  In the case of any performance-based
compensation based on services performed by an Employee, Independent Director or
Consultant, or the Holder, over a period of at least twelve (12) months, any
such deferral election may be made no later than six months before the end of
the period, as provided under Section 409A(a)(4)(B)(iii) of the Code.

 

(B)                                 IN THE EVENT THAT A SECTION 409A AWARD
PERMITS, UNDER A SUBSEQUENT ELECTION BY THE HOLDER OF SUCH SECTION 409A AWARD, A
DELAY IN A DISTRIBUTION OR PAYMENT OF ANY SHARES OF COMMON STOCK, CASH OR OTHER
PROPERTY OR AMOUNTS UNDER SUCH SECTION 409A AWARD, OR A CHANGE IN THE FORM OF
DISTRIBUTION OR PAYMENT, SUCH SUBSEQUENT ELECTION SHALL SATISFY THE REQUIREMENTS
OF SECTION 409A(A)(4)(C) OF THE CODE, AND:

 

(i)                                     such subsequent election may not take
effect until at least twelve (12) months after the date on which the election is
made,

 

(ii)                                  in the case such subsequent election
relates to a distribution or payment not described in Section 10.2(a)(ii),
(iii) or (vi), the first payment with respect to such election may be deferred
for a period of not less than five years from the date such distribution or
payment otherwise would have been made, and

 

(iii)                               in the case such subsequent election relates
to a distribution or payment described in Section 10.2(a)(iv), such election may
not be made less than twelve (12) months prior to the date of the first
scheduled distribution or payment under Section 10.2(a)(iv).

 

10.5.                        COMPLIANCE IN FORM AND OPERATION.  A SECTION 409A
AWARD, AND ANY ELECTION UNDER OR WITH RESPECT TO SUCH SECTION 409A AWARD, SHALL
COMPLY IN FORM AND OPERATION WITH THE REQUIREMENTS OF SECTION 409A OF THE CODE
AND THE TREASURY REGULATIONS THEREUNDER.

 

23

--------------------------------------------------------------------------------

 

ARTICLE XI.

 

ADMINISTRATION

 

11.1.                        COMPENSATION COMMITTEE.  THE COMPENSATION COMMITTEE
(OR ANOTHER COMMITTEE OR A SUBCOMMITTEE OF THE BOARD ASSUMING THE FUNCTIONS OF
THE COMMITTEE UNDER THE PLAN) SHALL CONSIST SOLELY OF TWO OR MORE INDEPENDENT
DIRECTORS APPOINTED BY AND HOLDING OFFICE AT THE PLEASURE OF THE BOARD, EACH OF
WHOM IS BOTH A “NON-EMPLOYEE DIRECTOR” AS DEFINED BY RULE 16B-3 AND AN “OUTSIDE
DIRECTOR” FOR PURPOSES OF SECTION 162(M) OF THE CODE.  APPOINTMENT OF COMMITTEE
MEMBERS SHALL BE EFFECTIVE UPON ACCEPTANCE OF APPOINTMENT.  COMMITTEE MEMBERS
MAY RESIGN AT ANY TIME BY DELIVERING WRITTEN NOTICE TO THE BOARD.  VACANCIES IN
THE COMMITTEE MAY BE FILLED BY THE BOARD.

 

11.2.                        DUTIES AND POWERS OF COMMITTEE.  IT SHALL BE THE
DUTY OF THE COMMITTEE TO CONDUCT THE GENERAL ADMINISTRATION OF THE PLAN IN
ACCORDANCE WITH ITS PROVISIONS.  THE COMMITTEE SHALL HAVE THE POWER TO INTERPRET
THE PLAN AND THE AWARD AGREEMENTS, AND TO ADOPT SUCH RULES FOR THE
ADMINISTRATION, INTERPRETATION AND APPLICATION OF THE PLAN AS ARE CONSISTENT
THEREWITH, TO INTERPRET, AMEND OR REVOKE ANY SUCH RULES AND TO AMEND ANY AWARD
AGREEMENT PROVIDED THAT THE RIGHTS OR OBLIGATIONS OF THE HOLDER OF THE AWARD
THAT IS THE SUBJECT OF ANY SUCH AWARD AGREEMENT ARE NOT AFFECTED ADVERSELY.  ANY
SUCH GRANT OR AWARD UNDER THE PLAN NEED NOT BE THE SAME WITH RESPECT TO EACH
HOLDER.  ANY SUCH INTERPRETATIONS AND RULES WITH RESPECT TO INCENTIVE STOCK
OPTIONS SHALL BE CONSISTENT WITH THE PROVISIONS OF SECTION 422 OF THE CODE.  IN
ITS ABSOLUTE DISCRETION, THE BOARD MAY AT ANY TIME AND FROM TIME TO TIME
EXERCISE ANY AND ALL RIGHTS AND DUTIES OF THE COMMITTEE UNDER THE PLAN EXCEPT
WITH RESPECT TO MATTERS WHICH UNDER RULE 16B-3 OR SECTION 162(M) OF THE CODE, OR
ANY REGULATIONS OR RULES ISSUED THEREUNDER, ARE REQUIRED TO BE DETERMINED IN THE
SOLE DISCRETION OF THE COMMITTEE.  NOTWITHSTANDING THE FOREGOING, THE FULL
BOARD, ACTING BY A MAJORITY OF ITS MEMBERS IN OFFICE, SHALL CONDUCT THE GENERAL
ADMINISTRATION OF THE PLAN WITH RESPECT TO AWARDS GRANTED TO INDEPENDENT
DIRECTORS.

 

11.3.                        MAJORITY RULE; UNANIMOUS WRITTEN CONSENT.  THE
COMMITTEE SHALL ACT BY A MAJORITY OF ITS MEMBERS IN ATTENDANCE AT A MEETING AT
WHICH A QUORUM IS PRESENT OR BY A MEMORANDUM OR OTHER WRITTEN INSTRUMENT SIGNED
BY ALL MEMBERS OF THE COMMITTEE.

 

11.4.                        COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH
ACTIONS.  MEMBERS OF THE COMMITTEE SHALL RECEIVE SUCH COMPENSATION, IF ANY, FOR
THEIR SERVICES AS MEMBERS AS MAY BE DETERMINED BY THE BOARD.  ALL EXPENSES AND
LIABILITIES WHICH MEMBERS OF THE COMMITTEE INCUR IN CONNECTION WITH THE
ADMINISTRATION OF THE PLAN SHALL BE BORNE BY THE COMPANY.  THE COMMITTEE MAY,
WITH THE APPROVAL OF THE BOARD, EMPLOY ATTORNEYS, CONSULTANTS, ACCOUNTANTS,
APPRAISERS, BROKERS OR OTHER PERSONS.  THE COMMITTEE, THE COMPANY AND THE
COMPANY’S OFFICERS AND DIRECTORS SHALL BE ENTITLED TO RELY UPON THE ADVICE,
OPINIONS OR VALUATIONS OF ANY SUCH PERSONS.  ALL ACTIONS TAKEN AND ALL
INTERPRETATIONS AND DETERMINATIONS MADE BY THE COMMITTEE OR THE BOARD IN GOOD
FAITH SHALL BE FINAL AND BINDING UPON ALL HOLDERS, THE COMPANY AND ALL OTHER
INTERESTED PERSONS.  NO MEMBERS OF THE COMMITTEE OR BOARD SHALL BE PERSONALLY
LIABLE FOR ANY ACTION, DETERMINATION OR INTERPRETATION MADE IN GOOD FAITH WITH
RESPECT TO THE PLAN OR AWARDS, AND ALL MEMBERS OF THE COMMITTEE AND THE BOARD
SHALL BE FULLY PROTECTED BY THE COMPANY IN RESPECT OF ANY SUCH ACTION,
DETERMINATION OR INTERPRETATION.

 

24

--------------------------------------------------------------------------------

 

11.5.                        DELEGATION OF AUTHORITY TO GRANT AWARDS.  THE
COMMITTEE MAY, BUT NEED NOT, DELEGATE FROM TIME TO TIME SOME OR ALL OF ITS
AUTHORITY TO GRANT AWARDS UNDER THE PLAN TO A COMMITTEE CONSISTING OF ONE OR
MORE MEMBERS OF THE COMMITTEE OR OF ONE OR MORE OFFICERS OF THE COMPANY, TO THE
EXTENT PERMITTED BY APPLICABLE STATE LAW; PROVIDED, HOWEVER, THAT THE COMMITTEE
MAY NOT DELEGATE ITS AUTHORITY TO GRANT AWARDS TO INDIVIDUALS:  (A) WHO ARE
SUBJECT ON THE DATE OF THE GRANT TO THE REPORTING RULES UNDER SECTION 16(A) OF
THE EXCHANGE ACT, (B) WHO ARE SECTION 162(M) PARTICIPANTS, OR (C) WHO ARE
OFFICERS OF THE COMPANY WHO ARE DELEGATED AUTHORITY BY THE COMMITTEE HEREUNDER. 
ANY DELEGATION HEREUNDER SHALL BE SUBJECT TO THE RESTRICTIONS AND LIMITS THAT
THE COMMITTEE SPECIFIES AT THE TIME OF SUCH DELEGATION OF AUTHORITY AND MAY BE
RESCINDED AT ANY TIME BY THE COMMITTEE.  AT ALL TIMES, ANY COMMITTEE APPOINTED
UNDER THIS SECTION 11.5 SHALL SERVE IN SUCH CAPACITY AT THE PLEASURE OF THE
COMMITTEE.

 

ARTICLE XII.

 

MISCELLANEOUS PROVISIONS

 

12.1.                        TRANSFERABILITY OF AWARDS.

 

(A)                                  EXCEPT AS OTHERWISE PROVIDED IN
SECTION 12.1(B):

 

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

 

(ii)                                  No Option, Restricted Stock award,
Deferred Stock award, Stock Appreciation Right, Dividend Equivalent  award,
Stock Payment award, or Restricted Stock Unit award, or any interest or right
therein, shall be liable for the debts, contracts or engagements of the Holder
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence; and

 

(iii)                               During the lifetime of the Holder, only the
Holder may exercise an Option or other Award (or any portion thereof) granted to
him under the Plan, unless it has been disposed of pursuant to a DRO; after the
death of the Holder, any exercisable portion of an Option or other Award may,
prior to the time when such portion becomes unexercisable under the Plan or the
applicable Award Agreement, be exercised by his personal representative or by

 

25

--------------------------------------------------------------------------------

 

any person empowered to do so under the deceased Holder’s will or under the then
applicable laws of descent and distribution.

 

(B)                                 NOTWITHSTANDING SECTION 12.1(A), THE
ADMINISTRATOR, IN ITS SOLE DISCRETION, MAY DETERMINE TO PERMIT A HOLDER TO
TRANSFER A NON-QUALIFIED STOCK OPTION TO ANY ONE OR MORE PERMITTED TRANSFEREES
(AS DEFINED BELOW), SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:  (I) A
NON-QUALIFIED STOCK OPTION TRANSFERRED TO A PERMITTED TRANSFEREE SHALL NOT BE
ASSIGNABLE OR TRANSFERABLE BY THE PERMITTED TRANSFEREE OTHER THAN BY WILL OR THE
LAWS OF DESCENT AND DISTRIBUTION; (II) ANY NON-QUALIFIED STOCK OPTION WHICH IS
TRANSFERRED TO A PERMITTED TRANSFEREE SHALL CONTINUE TO BE SUBJECT TO ALL THE
TERMS AND CONDITIONS OF THE NON-QUALIFIED STOCK OPTION AS APPLICABLE TO THE
ORIGINAL HOLDER (OTHER THAN THE ABILITY TO FURTHER TRANSFER THE NON-QUALIFIED
STOCK OPTION); AND (III) THE HOLDER AND THE PERMITTED TRANSFEREE SHALL EXECUTE
ANY AND ALL DOCUMENTS REQUESTED BY THE ADMINISTRATOR, INCLUDING, WITHOUT
LIMITATION DOCUMENTS TO (A) CONFIRM THE STATUS OF THE TRANSFEREE AS A PERMITTED
TRANSFEREE, (B) SATISFY ANY REQUIREMENTS FOR AN EXEMPTION FOR THE TRANSFER UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND (C) EVIDENCE THE TRANSFER.  FOR
PURPOSES OF THIS SECTION 12.1(B), “PERMITTED TRANSFEREE” SHALL MEAN, WITH
RESPECT TO A HOLDER, ANY CHILD, STEPCHILD, GRANDCHILD, PARENT, STEPPARENT,
GRANDPARENT, SPOUSE, FORMER SPOUSE, SIBLING, NIECE, NEPHEW, MOTHER-IN-LAW,
FATHER-IN-LAW, SON-IN-LAW, DAUGHTER-IN-LAW, BROTHER-IN-LAW, OR SISTER-IN-LAW,
INCLUDING ADOPTIVE RELATIONSHIPS, ANY PERSON SHARING THE HOLDER’S HOUSEHOLD
(OTHER THAN A TENANT OR EMPLOYEE), A TRUST IN WHICH THESE PERSONS (OR THE
HOLDER) CONTROL THE MANAGEMENT OF ASSETS, AND ANY OTHER ENTITY IN WHICH THESE
PERSONS (OR THE HOLDER) OWN MORE THAN FIFTY PERCENT OF THE VOTING INTERESTS, OR
ANY OTHER TRANSFEREE SPECIFICALLY APPROVED BY THE ADMINISTRATOR AFTER TAKING
INTO ACCOUNT ANY STATE OR FEDERAL TAX OR SECURITIES LAWS APPLICABLE TO
TRANSFERABLE NON-QUALIFIED STOCK OPTIONS.

 

12.2.                        AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. 
EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 12.2, THE PLAN MAY BE WHOLLY OR
PARTIALLY AMENDED OR OTHERWISE MODIFIED, SUSPENDED OR TERMINATED AT ANY TIME OR
FROM TIME TO TIME BY THE BOARD.  HOWEVER, WITHOUT APPROVAL OF THE COMPANY’S
STOCKHOLDERS GIVEN WITHIN TWELVE (12) MONTHS BEFORE OR AFTER THE ACTION BY THE
BOARD, NO ACTION OF THE BOARD MAY, EXCEPT AS PROVIDED IN SECTION 12.3,
(I) INCREASE THE LIMITS IMPOSED IN SECTION 2.1 ON THE MAXIMUM NUMBER OF SHARES
WHICH MAY BE ISSUED UNDER THE PLAN, OR THE MAXIMUM NUMBER OF SHARES WHICH MAY BE
GRANTED OR ISSUED AS RESTRICTED STOCK AWARDS, RESTRICTED STOCK UNIT AWARDS,
DIVIDEND EQUIVALENT AWARDS, DEFERRED STOCK AWARDS, OR STOCK PAYMENT AWARDS,
(II) EXPAND THE CLASSES OF PERSONS TO WHOM AWARDS MAY BE GRANTED UNDER THE PLAN,
OR (III) DECREASE  THE EXERCISE PRICE OF ANY OUTSTANDING OPTION OR STOCK
APPRECIATION RIGHT GRANTED UNDER THE PLAN.  NO AMENDMENT, SUSPENSION OR
TERMINATION OF THE PLAN SHALL, WITHOUT THE CONSENT OF THE HOLDER, ALTER OR
IMPAIR ANY RIGHTS OR OBLIGATIONS UNDER ANY AWARD THERETOFORE GRANTED OR AWARDED,
UNLESS THE AWARD ITSELF OTHERWISE EXPRESSLY SO PROVIDES.  NO AWARDS MAY BE
GRANTED OR AWARDED DURING ANY PERIOD OF SUSPENSION OR AFTER TERMINATION OF THE
PLAN, AND IN NO EVENT MAY ANY AWARD BE GRANTED UNDER THE PLAN AFTER THE FIRST TO
OCCUR OF THE FOLLOWING EVENTS:

 

(A)                                  THE EXPIRATION OF TEN (10) YEARS FROM THE
DATE THE PLAN IS ADOPTED BY THE BOARD; OR

 

26

--------------------------------------------------------------------------------

 

(B)                                 THE EXPIRATION OF TEN (10) YEARS FROM THE
DATE THE PLAN IS APPROVED BY THE COMPANY’S STOCKHOLDERS UNDER SECTION 12.4.

 

12.3.                        CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.

 

(A)                                  SUBJECT TO SECTION 12.3(E), IN THE EVENT
THAT THE ADMINISTRATOR DETERMINES THAT ANY DIVIDEND OR OTHER DISTRIBUTION
(WHETHER IN THE FORM OF CASH, COMMON STOCK, OTHER SECURITIES OR OTHER PROPERTY),
RECAPITALIZATION, RECLASSIFICATION, STOCK SPLIT, REVERSE STOCK SPLIT,
REORGANIZATION, MERGER, CONSOLIDATION, SPLIT-UP, SPIN-OFF, COMBINATION,
REPURCHASE, LIQUIDATION, DISSOLUTION, OR SALE, TRANSFER, EXCHANGE OR OTHER
DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, OR
EXCHANGE OF COMMON STOCK OR OTHER SECURITIES OF THE COMPANY, ISSUANCE OF
WARRANTS OR OTHER RIGHTS TO PURCHASE COMMON STOCK OR OTHER SECURITIES OF THE
COMPANY, OR OTHER SIMILAR CORPORATE TRANSACTION OR EVENT, IN THE ADMINISTRATOR’S
SOLE DISCRETION, AFFECTS THE COMMON STOCK SUCH THAT AN ADJUSTMENT IS DETERMINED
BY THE ADMINISTRATOR TO BE APPROPRIATE IN ORDER TO PREVENT DILUTION OR
ENLARGEMENT OF THE BENEFITS OR POTENTIAL BENEFITS INTENDED TO BE MADE AVAILABLE
UNDER THE PLAN OR WITH RESPECT TO AN AWARD, THEN THE ADMINISTRATOR SHALL, IN
SUCH MANNER AS IT MAY DEEM EQUITABLE, ADJUST ANY OR ALL OF:

 

(i)                                     The number and kind of shares of Common
Stock (or other securities or property) with respect to which Awards may be
granted or awarded (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which may be
issued under the Plan, and the maximum number and kind of shares which may be
granted or issued as Restricted Stock awards, Restricted Stock Unit awards,
Dividend Equivalent awards, Deferred Stock awards or Stock Payment awards, and
adjustments of the Award Limit);

 

(ii)                                  The number and kind of shares of Common
Stock (or other securities or property) subject to outstanding Awards; and

 

(iii)                               The grant or exercise price with respect to
any Award.

 

(B)                                 SUBJECT TO SECTIONS 12.3(C) AND 12.3(E), IN
THE EVENT OF ANY TRANSACTION OR EVENT DESCRIBED IN SECTION 12.3(A) OR ANY
UNUSUAL OR NONRECURRING TRANSACTIONS OR EVENTS AFFECTING THE COMPANY, ANY
AFFILIATE OF THE COMPANY, OR THE FINANCIAL STATEMENTS OF THE COMPANY OR ANY
AFFILIATE, OR OF CHANGES IN APPLICABLE LAWS, REGULATIONS OR ACCOUNTING
PRINCIPLES, THE ADMINISTRATOR, IN ITS SOLE AND ABSOLUTE DISCRETION, AND ON SUCH
TERMS AND CONDITIONS AS IT DEEMS APPROPRIATE, EITHER BY THE TERMS OF THE AWARD
OR BY ACTION TAKEN PRIOR TO THE OCCURRENCE OF SUCH TRANSACTION OR EVENT AND
EITHER AUTOMATICALLY OR UPON THE HOLDER’S REQUEST, IS HEREBY AUTHORIZED TO TAKE
ANY ONE OR MORE OF THE FOLLOWING ACTIONS WHENEVER THE ADMINISTRATOR DETERMINES
THAT SUCH ACTION IS APPROPRIATE IN ORDER TO PREVENT DILUTION OR ENLARGEMENT OF
THE BENEFITS OR POTENTIAL BENEFITS INTENDED TO BE MADE AVAILABLE UNDER THE PLAN
OR WITH RESPECT TO ANY AWARD UNDER THE PLAN, TO FACILITATE SUCH TRANSACTIONS OR
EVENTS OR TO GIVE EFFECT TO SUCH CHANGES IN LAWS, REGULATIONS OR PRINCIPLES:

 

27

--------------------------------------------------------------------------------

 

(i)                                     To provide for either the purchase of
any such Award for an amount of cash equal to the amount that could have been
attained upon the exercise of such Award or realization of the Holder’s rights
had such Award been currently exercisable or payable or fully vested or the
replacement of such Award with other rights or property selected by the
Administrator in its sole discretion;

 

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

 

(iii)                               To provide that such Award shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in Section 5.3 or the provisions of such Award;

 

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

 

(v)                                 To make adjustments in the number and type
of shares of Common Stock (or other securities or property) subject to
outstanding Awards, and/or in the terms and conditions of (including the grant,
exercise or purchase price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may be granted in the
future.

 

(vi)                              To provide that, for a specified period of
time prior to such event, the restrictions imposed under an Award Agreement upon
some or all shares of Restricted Stock, Restricted Stock Units or Deferred Stock
may be terminated, and, in the case of Restricted Stock, some or all shares of
such Restricted Stock may cease to be subject to repurchase under Section 7.5 or
forfeiture under Section 7.4 after such event.

 

(C)                                  NOTWITHSTANDING ANY OTHER PROVISION OF THE
PLAN, IN THE EVENT OF A CHANGE IN CONTROL, EACH OUTSTANDING AWARD SHALL REMAIN
OUTSTANDING, OR SHALL BE ASSUMED OR AN EQUIVALENT AWARD SUBSTITUTED BY THE
SUCCESSOR CORPORATION, OR A PARENT OR SUBSIDIARY OF THE SUCCESSOR CORPORATION. 
IN THE EVENT THAT THE SUCCESSOR CORPORATION, OR A PARENT OR SUBSIDIARY OF THE
SUCCESSOR CORPORATION, WITH RESPECT TO THE CHANGE IN CONTROL TRANSACTION REFUSES
TO ASSUME OR SUBSTITUTE FOR THE AWARD, THE HOLDER SHALL HAVE THE RIGHT TO
EXERCISE THE AWARD AS TO ALL OF THE SHARES SUBJECT THERETO, INCLUDING SHARES AS
TO WHICH SUCH AWARD OTHERWISE WOULD NOT BE EXERCISABLE, AND THE HOLDER SHALL
HAVE THE RIGHT TO VEST IN, AND RECEIVED A DISTRIBUTION OF, SUCH AWARD, WITH
RESPECT TO ALL OF THE SHARES SUBJECT THERETO.  IF AN AWARD BECOMES EXERCISABLE
IN LIEU OF ASSUMPTION OR SUBSTITUTION BY THE SUCCESSOR CORPORATION, OR A PARENT
OR SUBSIDIARY CORPORATION, WITH RESPECT TO A CHANGE IN CONTROL TRANSACTION, THE
ADMINISTRATOR SHALL NOTIFY THE HOLDER THAT THE AWARD SHALL BE FULLY EXERCISABLE
FOR A PERIOD OF NOT LESS THAN FIFTEEN (15) DAYS FROM THE DATE OF SUCH NOTICE
PRIOR TO THE CHANGE IN CONTROL TRANSACTION, AND THE AWARD SHALL TERMINATE UPON
THE

 

28

--------------------------------------------------------------------------------

 

expiration of such period.  For purposes of this Section 12.3(c), the Award
shall be assumed, or an equivalent award shall be substituted for such Award,
if, following the Change in Control transaction, the Award or substituted award
confers on the Holder the right to purchase or receive, for each share subject
to the Award immediately prior to the Change in Control transaction, the
consideration (whether in stock, cash, or other securities or property, or a
combination thereof) received or to be received for each share of Common Stock
in the Change in Control transaction on the effective date of the Change in
Control transaction (and if holders of shares of Common Stock were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that, if
such consideration received in the Change in Control transaction was not solely
common stock of the successor corporation or its parent, the Administrator may,
with the consent of the successor corporation or its parent, provide for the
consideration to be received upon the exercise, vesting or distribution of the
assumed Award or substituted award, for each share subject to the Award, to be
solely common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by the holders of Common
Stock in the Change in Control transaction.

 

(D)                                 SUBJECT TO SECTIONS 12.3(E), 3.2 AND 3.3,
THE ADMINISTRATOR MAY, IN ITS DISCRETION, INCLUDE SUCH FURTHER PROVISIONS AND
LIMITATIONS IN ANY AWARD OR AWARD AGREEMENT AS IT MAY DEEM EQUITABLE AND IN THE
BEST INTERESTS OF THE COMPANY.

 

(E)                                  WITH RESPECT TO AWARDS WHICH ARE GRANTED TO
SECTION 162(M) PARTICIPANTS AND ARE INTENDED TO QUALIFY AS PERFORMANCE-BASED
COMPENSATION UNDER SECTION 162(M)(4)(C), NO ADJUSTMENT OR ACTION DESCRIBED IN
THIS SECTION 12.3 OR IN ANY OTHER PROVISION OF THE PLAN SHALL BE AUTHORIZED TO
THE EXTENT THAT SUCH ADJUSTMENT OR ACTION WOULD CAUSE SUCH AWARD TO FAIL TO SO
QUALIFY UNDER SECTION 162(M)(4)(C), OR ANY SUCCESSOR PROVISIONS THERETO. NO
ADJUSTMENT OR ACTION DESCRIBED IN THIS SECTION 12.3 OR IN ANY OTHER PROVISION OF
THE PLAN SHALL BE AUTHORIZED TO THE EXTENT THAT SUCH ADJUSTMENT OR ACTION WOULD
CAUSE THE PLAN TO VIOLATE SECTION 422(B)(1) OF THE CODE.  FURTHERMORE, NO SUCH
ADJUSTMENT OR ACTION SHALL BE AUTHORIZED TO THE EXTENT SUCH ADJUSTMENT OR ACTION
WOULD RESULT IN SHORT-SWING PROFITS LIABILITY UNDER SECTION 16 OR VIOLATE THE
EXEMPTIVE CONDITIONS OF RULE 16B-3 UNLESS THE ADMINISTRATOR DETERMINES THAT THE
AWARD IS NOT TO COMPLY WITH SUCH EXEMPTIVE CONDITIONS.  THE NUMBER OF SHARES OF
COMMON STOCK SUBJECT TO ANY AWARD SHALL ALWAYS BE ROUNDED TO THE NEXT WHOLE
NUMBER.

 

(F)                                    NOTWITHSTANDING THE FOREGOING, IN THE
EVENT THAT THE COMPANY BECOMES A PARTY TO A TRANSACTION THAT IS INTENDED TO
QUALIFY FOR “POOLING OF INTERESTS” ACCOUNTING TREATMENT AND, BUT FOR ONE OR MORE
OF THE PROVISIONS OF THIS PLAN OR ANY AWARD AGREEMENT WOULD SO QUALIFY, THEN
THIS PLAN AND ANY AWARD AGREEMENT SHALL BE INTERPRETED SO AS TO PRESERVE SUCH
ACCOUNTING TREATMENT, AND TO THE EXTENT THAT ANY PROVISION OF THE PLAN OR ANY
AWARD AGREEMENT WOULD DISQUALIFY THE TRANSACTION FROM POOLING OF INTERESTS
ACCOUNTING TREATMENT (INCLUDING, IF APPLICABLE, AN ENTIRE AWARD AGREEMENT), THEN
SUCH PROVISION SHALL BE NULL AND VOID.  ALL DETERMINATIONS TO BE MADE IN
CONNECTION WITH THE PRECEDING SENTENCE SHALL BE MADE BY THE INDEPENDENT
ACCOUNTING FIRM WHOSE OPINION WITH RESPECT TO “POOLING OF INTERESTS” TREATMENT
IS REQUIRED AS A CONDITION TO THE COMPANY’S CONSUMMATION OF SUCH TRANSACTION.

 

29

--------------------------------------------------------------------------------

 

(G)                                 THE EXISTENCE OF THE PLAN, THE AWARD
AGREEMENT AND THE AWARDS GRANTED HEREUNDER SHALL NOT AFFECT OR RESTRICT IN ANY
WAY THE RIGHT OR POWER OF THE COMPANY OR THE SHAREHOLDERS OF THE COMPANY TO MAKE
OR AUTHORIZE ANY ADJUSTMENT, RECAPITALIZATION, REORGANIZATION OR OTHER CHANGE IN
THE COMPANY’S CAPITAL STRUCTURE OR ITS BUSINESS, ANY MERGER OR CONSOLIDATION OF
THE COMPANY, ANY ISSUE OF STOCK OR OF OPTIONS, WARRANTS OR RIGHTS TO PURCHASE
STOCK OR OF BONDS, DEBENTURES, PREFERRED OR PRIOR PREFERENCE STOCKS WHOSE RIGHTS
ARE SUPERIOR TO OR AFFECT THE COMMON STOCK OR THE RIGHTS THEREOF OR WHICH ARE
CONVERTIBLE INTO OR EXCHANGEABLE FOR COMMON STOCK, OR THE DISSOLUTION OR
LIQUIDATION OF THE COMPANY, OR ANY SALE OR TRANSFER OF ALL OR ANY PART OF ITS
ASSETS OR BUSINESS, OR ANY OTHER CORPORATE ACT OR PROCEEDING, WHETHER OF A
SIMILAR CHARACTER OR OTHERWISE.

 

(H)                                 NO ACTION SHALL BE TAKEN UNDER THIS
SECTION 12.3 WHICH SHALL CAUSE AN AWARD TO FAIL TO COMPLY WITH SECTION 409A OF
THE CODE OR THE TREASURY REGULATIONS THEREUNDER, TO THE EXTENT APPLICABLE TO
SUCH AWARD.

 

12.4.                        APPROVAL OF PLAN BY STOCKHOLDERS.  THE PLAN WILL BE
SUBMITTED FOR THE APPROVAL OF THE COMPANY’S STOCKHOLDERS WITHIN TWELVE (12)
MONTHS AFTER THE DATE OF THE BOARD’S INITIAL ADOPTION OF THE PLAN.  AWARDS MAY
BE GRANTED OR AWARDED PRIOR TO SUCH STOCKHOLDER APPROVAL, PROVIDED, THAT SUCH
AWARDS SHALL NOT BE EXERCISABLE NOR SHALL SUCH AWARDS VEST PRIOR TO THE TIME
WHEN THE PLAN IS APPROVED BY THE STOCKHOLDERS, AND PROVIDED FURTHER, THAT IF
SUCH APPROVAL HAS NOT BEEN OBTAINED AT THE END OF SAID TWELVE-MONTH PERIOD, ALL
AWARDS PREVIOUSLY GRANTED OR AWARDED UNDER THE PLAN SHALL THEREUPON BE CANCELED
AND BECOME NULL AND VOID.   IN ADDITION, IF THE BOARD DETERMINES THAT AWARDS
OTHER THAN OPTIONS OR STOCK APPRECIATION RIGHTS WHICH MAY BE GRANTED TO
SECTION 162(M) PARTICIPANTS SHOULD CONTINUE TO BE ELIGIBLE TO QUALIFY AS
PERFORMANCE-BASED COMPENSATION UNDER SECTION 162(M)(4)(C) OF THE CODE, THE
PERFORMANCE CRITERIA MUST BE DISCLOSED TO AND APPROVED BY THE COMPANY’S
STOCKHOLDERS NO LATER THAN THE FIRST STOCKHOLDER MEETING THAT OCCURS IN THE
FIFTH YEAR FOLLOWING THE YEAR IN WHICH THE COMPANY’S STOCKHOLDERS PREVIOUSLY
APPROVED THE PLAN, AS AMENDED AND RESTATED TO INCLUDE THE PERFORMANCE CRITERIA.

 

12.5.                        TAX WITHHOLDING.  THE COMPANY SHALL BE ENTITLED TO
REQUIRE PAYMENT IN CASH OR DEDUCTION FROM OTHER COMPENSATION PAYABLE TO EACH
HOLDER OF ANY SUMS REQUIRED BY FEDERAL, STATE OR LOCAL TAX LAW TO BE WITHHELD
WITH RESPECT TO THE GRANT, ISSUANCE, VESTING, EXERCISE OR PAYMENT OF ANY AWARD. 
THE ADMINISTRATOR MAY IN ITS DISCRETION AND IN SATISFACTION OF THE FOREGOING
REQUIREMENT ALLOW SUCH HOLDER TO ELECT TO HAVE THE COMPANY WITHHOLD SHARES OF
COMMON STOCK OTHERWISE ISSUABLE UNDER SUCH AWARD (OR ALLOW THE RETURN OF SHARES
OF COMMON STOCK) HAVING A FAIR MARKET VALUE EQUAL TO THE SUMS REQUIRED TO BE
WITHHELD.  NOTWITHSTANDING ANY OTHER PROVISION OF THE PLAN, THE NUMBER OF SHARES
OF COMMON STOCK WHICH MAY BE WITHHELD WITH RESPECT TO THE ISSUANCE, VESTING,
EXERCISE OR PAYMENT OF ANY AWARD (OR WHICH MAY BE REPURCHASED FROM THE HOLDER OF
SUCH AWARD WITHIN SIX MONTHS AFTER SUCH SHARES OF COMMON STOCK WERE ACQUIRED BY
THE HOLDER FROM THE COMPANY) IN ORDER TO SATISFY THE HOLDER’S FEDERAL AND STATE
INCOME AND PAYROLL TAX LIABILITIES WITH RESPECT TO THE ISSUANCE, VESTING,
EXERCISE OR PAYMENT OF THE AWARD SHALL BE LIMITED TO THE NUMBER OF SHARES WHICH
HAVE A FAIR MARKET VALUE ON THE DATE OF WITHHOLDING OR REPURCHASE EQUAL TO THE
AGGREGATE AMOUNT OF SUCH LIABILITIES BASED ON THE MINIMUM STATUTORY WITHHOLDING
RATES FOR FEDERAL AND STATE TAX INCOME AND PAYROLL TAX PURPOSES THAT ARE
APPLICABLE TO SUCH SUPPLEMENTAL TAXABLE INCOME.

 

30

--------------------------------------------------------------------------------

 

12.6.                        PROHIBITION ON REPRICING.  SUBJECT TO SECTION 12.3,
THE ADMINISTRATOR SHALL NOT, WITHOUT THE APPROVAL OF THE STOCKHOLDERS OF THE
COMPANY, AUTHORIZE THE AMENDMENT OF ANY OUTSTANDING AWARD TO REDUCE ITS PRICE
PER SHARE.  FURTHERMORE, NO AWARD SHALL BE CANCELED AND REPLACED WITH THE GRANT
OF AN AWARD HAVING A LESSER PRICE PER SHARE WITHOUT THE FURTHER APPROVAL OF
STOCKHOLDERS OF THE COMPANY.

 

12.7.                        FORFEITURE PROVISIONS.  PURSUANT TO ITS GENERAL
AUTHORITY TO DETERMINE THE TERMS AND CONDITIONS APPLICABLE TO AWARDS AND THE
AWARD AGREEMENTS UNDER THE PLAN, THE ADMINISTRATOR SHALL HAVE THE RIGHT TO
PROVIDE, IN THE TERMS OF AWARDS MADE UNDER THE PLAN, OR TO REQUIRE A HOLDER TO
AGREE BY SEPARATE WRITTEN INSTRUMENT, THAT:  (A)(I) ANY PROCEEDS, GAINS OR OTHER
ECONOMIC BENEFIT ACTUALLY OR CONSTRUCTIVELY RECEIVED BY THE HOLDER UPON ANY
RECEIPT OR EXERCISE OF THE AWARD, OR UPON THE RECEIPT OR RESALE OF ANY COMMON
STOCK UNDERLYING THE AWARD, MUST BE PAID TO THE COMPANY, AND (II) THE AWARD
SHALL TERMINATE AND ANY UNEXERCISED PORTION OF THE AWARD (WHETHER OR NOT VESTED)
SHALL BE FORFEITED, IF (B)(I) A TERMINATION OF EMPLOYMENT, TERMINATION OF
DIRECTORSHIP OR  TERMINATION OF CONSULTANCY OCCURS PRIOR TO A SPECIFIED DATE, OR
WITHIN A SPECIFIED TIME PERIOD FOLLOWING RECEIPT OR EXERCISE OF THE AWARD, OR
(II) THE HOLDER AT ANY TIME, OR DURING A SPECIFIED TIME PERIOD, ENGAGES IN ANY
ACTIVITY IN COMPETITION WITH THE COMPANY, OR WHICH IS INIMICAL, CONTRARY OR
HARMFUL TO THE INTERESTS OF THE COMPANY, AS FURTHER DEFINED BY THE ADMINISTRATOR
OR (III) THE HOLDER INCURS A TERMINATION OF EMPLOYMENT, TERMINATION OF
DIRECTORSHIP OR TERMINATION OF CONSULTANCY FOR “CAUSE” (AS SUCH TERM IS DEFINED
IN THE SOLE AND ABSOLUTE DISCRETION OF THE COMMITTEE, OR AS SET FORTH IN A
WRITTEN AGREEMENT RELATING TO SUCH AWARD BETWEEN THE COMPANY AND THE HOLDER).

 

12.8.                        EFFECT OF PLAN UPON OPTIONS AND COMPENSATION
PLANS.  THE ADOPTION OF THE PLAN SHALL NOT AFFECT ANY OTHER COMPENSATION OR
INCENTIVE PLANS IN EFFECT FOR THE COMPANY OR ANY SUBSIDIARY.  NOTHING IN THE
PLAN SHALL BE CONSTRUED TO LIMIT THE RIGHT OF THE COMPANY:  (A) TO ESTABLISH ANY
OTHER FORMS OF INCENTIVES OR COMPENSATION FOR EMPLOYEES, DIRECTORS OR
CONSULTANTS OF THE COMPANY OR ANY SUBSIDIARY, OR (B) TO GRANT OR ASSUME OPTIONS
OR OTHER RIGHTS OR AWARDS OTHERWISE THAN UNDER THE PLAN IN CONNECTION WITH ANY
PROPER CORPORATE PURPOSE INCLUDING BUT NOT BY WAY OF LIMITATION, THE GRANT OR
ASSUMPTION OF OPTIONS IN CONNECTION WITH THE ACQUISITION BY PURCHASE, LEASE,
MERGER, CONSOLIDATION OR OTHERWISE, OF THE BUSINESS, STOCK OR ASSETS OF ANY
CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY, FIRM OR ASSOCIATION.

 

12.9.                        COMPLIANCE WITH LAWS.  THE PLAN, THE GRANTING AND
VESTING OF AWARDS UNDER THE PLAN AND THE ISSUANCE AND DELIVERY OF SHARES OF
COMMON STOCK AND THE PAYMENT OF MONEY UNDER THE PLAN OR UNDER AWARDS GRANTED OR
AWARDED HEREUNDER ARE SUBJECT TO COMPLIANCE WITH ALL APPLICABLE FEDERAL AND
STATE LAWS, RULES AND REGULATIONS (INCLUDING BUT NOT LIMITED TO STATE AND
FEDERAL SECURITIES LAW AND FEDERAL MARGIN REQUIREMENTS) AND TO SUCH APPROVALS BY
ANY LISTING, REGULATORY OR GOVERNMENTAL AUTHORITY AS MAY, IN THE OPINION OF
COUNSEL FOR THE COMPANY, BE NECESSARY OR ADVISABLE IN CONNECTION THEREWITH.  ANY
SECURITIES DELIVERED UNDER THE PLAN SHALL BE SUBJECT TO SUCH RESTRICTIONS, AND
THE PERSON ACQUIRING SUCH SECURITIES SHALL, IF REQUESTED BY THE COMPANY, PROVIDE
SUCH ASSURANCES AND REPRESENTATIONS TO THE COMPANY AS THE COMPANY MAY DEEM
NECESSARY OR DESIRABLE TO ASSURE COMPLIANCE WITH ALL APPLICABLE LEGAL
REQUIREMENTS.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLAN AND AWARDS
GRANTED OR AWARDED HEREUNDER SHALL BE DEEMED AMENDED TO THE EXTENT NECESSARY TO
CONFORM TO SUCH LAWS, RULES AND REGULATIONS.

 

31

--------------------------------------------------------------------------------

 

12.10.                  TITLES.  TITLES ARE PROVIDED HEREIN FOR CONVENIENCE ONLY
AND ARE NOT TO SERVE AS A BASIS FOR INTERPRETATION OR CONSTRUCTION OF THE PLAN.

 

12.11.                  GOVERNING LAW.  THE PLAN AND ANY AGREEMENTS HEREUNDER
SHALL BE ADMINISTERED, INTERPRETED AND ENFORCED UNDER THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS THEREOF.

 

*  *  *

 

I hereby certify that the foregoing amendment and restatement of the Plan was
duly adopted by the Board of Directors of Watson Pharmaceuticals, Inc. on
March 29, 2005.

 

Executed on this 13th day of May, 2005.

 

 

/s/David A. Buchen

 

 

Secretary

 

 

*  *  *

 

I hereby certify that the foregoing amendment and restatement of the Plan was
approved by the stockholders of Watson Pharmaceuticals, Inc. on May 13, 2005.

 

Executed on this 13th day of May, 2005.

 

 

/s/David A. Buchen

 

 

Secretary

 

 

32

--------------------------------------------------------------------------------