Exhibit 10.1

QUESTCOR PHARMACEUTICALS, INC.

2006 EQUITY INCENTIVE AWARD PLAN

ARTICLE I

PURPOSE

The purpose of the Questcor Pharmaceuticals, Inc. 2006 Equity Incentive Award
Plan (the “Plan”) is to promote the success and enhance the value of Questcor
Pharmaceuticals, Inc., a California corporation (the “Company”), by linking the
personal interests of the members of the Board, Employees, and Consultants to
those of Company shareholders and by providing such individuals with an
incentive for performance to generate returns to Company shareholders. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees,
and Consultants upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.

ARTICLE II

DEFINITIONS AND CONSTRUCTION

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

2.1 “Administrator” means 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 13.1. With reference
to the duties of the Committee under the Plan which have been delegated to one
or more persons pursuant to Section 13.5, the term “Administrator” shall refer
to such person(s) unless the Committee or the Board has revoked such delegation.

2.2 “Award” means an Option, a Restricted Stock award, a Stock Appreciation
Right award, a Dividend Equivalents award, a Stock Payment award, a Restricted
Stock Unit award or a Performance-Based Award granted to a Participant pursuant
to the Plan.

2.3 “Award Agreement” means any written or electronic agreement, contract, or
other instrument or document evidencing an Award.

2.4 “Board” means the Board of Directors of the Company.

2.5 “Cause,” unless otherwise defined in an employment or services agreement
between the Participant and the Company or any Parent or Subsidiary or Successor
Entity, means:

(a) a Participant’s conviction or no contest plea to a felony, or a crime
involving moral turpitude, under any federal or state criminal law;

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(b) the commission of a fraud by a Participant against the Company or any Parent
or Subsidiary or Successor Entity;

(c) with respect to a Participant who is an Employee, the repeated, unexplained
or unjustified absence by an Employee from the Company or any Parent or
Subsidiary or Successor Entity; or

(d) the gross negligence or willful misconduct of a Participant where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or any Parent or Subsidiary or
Successor Entity.

The existence of “Cause” shall be determined by the Administrator, in its sole
discretion. The foregoing definition shall not in any way preclude or restrict
the right of the Company or any Parent or Subsidiary or Successor Entity to
discharge or dismiss any Participant or other person in the service of the
Company or any Parent or Subsidiary or Successor Entity for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of
the Plan, to constitute grounds for termination for Cause.

2.6 “Change in Control” means and includes each of the following:

(a) the acquisition, directly or indirectly, by any “person” or “group” (as
those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act
and the rules thereunder) of “beneficial ownership” (as determined pursuant to
Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in
the election of directors (“voting securities”) of the Company that represent
50% or more of the combined voting power of the Company’s then outstanding
voting securities, other than:

(i) an acquisition by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any person controlled by the Company or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any person controlled
by the Company, or

(ii) an acquisition of voting securities by the Company or a corporation owned,
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of the stock of the Company.

(b) individuals who, as of the Effective Date, constitute the Board together
with any new director(s) whose appointment or election by the Board or
nomination for election by the Company’s shareholders was approved by a vote of
at a majority of the directors then still in office who either were directors on
the Effective Date or whose election or nomination for election was previously
so approved (other than any director designated by a person who shall have
entered into an agreement with the Company to effect a transaction described in
Section 2.6(a) or Section 2.6(c)), cease for any reason to constitute a majority
thereof;

(c) the consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets, in each
case other than a transaction which results in the Company’s voting securities
outstanding immediately before the transaction continuing to represent

 

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

(d) the liquidation or dissolution of the Company.

For purposes of subsection (a) above, the calculation of voting power shall be
made as if the date of the acquisition were a record date for a vote of the
Company’s shareholders, and for purposes of subsection (c) above, the
calculation of voting power shall be made as if the date of the consummation of
the transaction were a record date for a vote of the Company’s shareholders.

The Administrator shall have full and final authority, which shall be exercised
in its discretion, to determine conclusively whether a Change in Control of the
Company has occurred pursuant to the above definition, and the date of the
occurrence of such Change in Control and any incidental matters relating
thereto.

2.7 “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations issued thereunder.

2.8 “Committee” means the committee of the Board described in Article 13.

2.9 “Consultant” means any consultant or adviser if:

(a) The consultant or adviser renders bona fide services to the Company or any
Parent or Subsidiary;

(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 or any Parent or Subsidiary to render such services.

2.10 “Covered Employee” means an Employee who is, or is likely to become, a
“covered employee” within the meaning of Section 162(m)(3) of the Code.

2.11 “Disability” means a permanent and total disability within the meaning of
Section 22(e)(3) of the Code, as it may be amended from time to time.

2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to
Article 8 to receive the equivalent value (in cash or Stock) of dividends paid
on Stock.

2.13 “Effective Date” has the meaning set forth in Section 14.1.

2.14 “Eligible Individual” means any person who is a member of the Board, a
Consultant or an Employee, as determined by the Administrator.

 

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2.15 “Employee” means any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Company or any Parent or Subsidiary.

2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time.

2.17 “Expiration Date” has the meaning set forth in Section 14.2.

2.18 “Fair Market Value” means, as of any date, the value of Stock determined as
follows:

(a) If the Stock is listed on any established stock exchange or a national
market system, including without limitation The Nasdaq Global Market or The
Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value shall be
the closing sales price for such stock as quoted on such exchange or system for
the last market trading day prior to the date of determination for which a
closing sales price is reported, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;

(b) If the Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean of the
closing bid and asked prices for the Stock on the date prior to the date of
determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or

(c) In the absence of an established market for the Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.

2.19 “Good Reason” means, without a Participant’s express written consent, the
occurrence of any of the following actions in connection with a Change in
Control:

(a) a material reduction in job responsibilities given the Participant’s
position with the Company or any Parent or Subsidiary or Successor Entity, and
the Participant’s prior responsibilities with the Company or any Parent or
Subsidiary or Successor Entity;

(b) any reduction in the Participant’s annual base compensation from the Company
or any Parent or Subsidiary or Successor Entity as in effect immediately prior
to such reduction; or

(c) a relocation of the Participant’s workplace for the Company or any Parent or
Subsidiary or Successor Entity to a facility or location more than twenty-five
(25) miles from the Participant’s workplace immediately prior to such
relocation; provided, however, that the new workplace also increases the
Participant’s commuting distance from the Participant’s primary residence.

A Participant shall provide thirty (30) day’s written notice to the Company or
any Parent or Subsidiary or Successor Entity (whichever entity is the
Participant’s employer) of any resignation for “Good Reason.”

2.20 “Incentive Stock Option” means an Option that is intended to be an
incentive stock option and meets the requirements of Section 422 of the Code or
any successor provision thereto.

 

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2.21 “Independent Director” means a member of the Board who is not an Employee.

2.22 “Minimum Vesting Awards” has the meaning set forth in Section 11.7.

2.23 “Non-Employee Director” means a member of the Board who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or
any successor rule.

2.24 “Non-Qualified Stock Option” means an Option that is not intended to be or
otherwise does not qualify as an Incentive Stock Option.

2.25 “Option” means a right granted to a Participant pursuant to Article 5 of
the Plan to purchase a specified number of shares of Stock at a specified price
during specified time periods. An Option may be either an Incentive Stock Option
or a Non-Qualified Stock Option.

2.26 “Parent” means any “parent corporation” as defined in Section 424(e) of the
Code and any applicable regulations promulgated thereunder of the Company or any
other entity which beneficially owns, directly or indirectly, a majority of the
outstanding voting stock or voting power of the Company.

2.27 “Participant” means any Eligible Individual who, as a member of the Board,
a Consultant or an Employee, has been granted an Award pursuant to the Plan.

2.28 “Performance-Based Award” means an Award granted to selected Covered
Employees pursuant to Articles 6 and 8, but which is subject to the terms and
conditions set forth in Article 9.

2.29 “Performance Criteria” means the criteria that the Administrator selects
for purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net earnings
(either before or after interest, taxes, depreciation and amortization), sales
or revenue, net income (either before or after taxes), operating earnings, cash
flow (including, but not limited to, operating cash flow and free cash flow),
return on net assets, return on stockholders’ equity, return on sales, gross or
net profit margin, working capital, earnings per share and price per share of
Stock, the achievement of certain scientific milestones, customer retention
rates, licensing, partnership or other strategic transactions, execution of a
corporate collaboration agreement relating to a product candidate of the
Company, acceptance by the U.S. Food and Drug Administration (“FDA”) or a
comparable foreign regulatory authority of a final New Drug Application or
similar document, approval for marketing of a product candidate of the Company
by the FDA or a comparable foreign regulatory authority, obtaining a specified
level of financing for the Company, as determined by the Committee, including
through government grants (or similar awards) and the issuance of securities,
commencement of a particular stage of clinical trials for a product candidate of
the Company, or the achievement of one or more corporate, divisional or
individual scientific or inventive measures. Any of the criteria identified
above may be measured either in absolute terms or as compared to any incremental
increase or as compared to results of a peer group. The Administrator shall,
within the time prescribed by Section 162(m) of the Code, define in an objective
fashion the manner of calculating the Performance Criteria it selects to use for
such Performance Period for such Participant.

 

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2.30 “Performance Goals” means, for a Performance Period, the goals established
in writing by the Administrator for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a Subsidiary, division or
other operational unit, or an individual. The Administrator, in its discretion,
may, within the time prescribed by Section 162(m) of the Code, adjust or modify
the calculation of Performance Goals for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants (i) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event, or development, or (ii) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the Company,
or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting principles,
or business conditions.

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

2.32 “Plan” means this Questcor Pharmaceuticals, Inc. 2006 Equity Incentive
Award Plan, as it may be amended from time to time.

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

2.34 “Restricted Stock” means Stock awarded to a Participant pursuant to Article
6 that is subject to certain restrictions and may be subject to risk of
forfeiture or repurchase.

2.35 “Restricted Stock Unit” means a right to receive a share of Stock during
specified time periods granted pursuant to Section 8.3.

2.36 “Securities Act” means the Securities Act of 1933, as amended from time to
time.

2.37 “Section 409A Award” has the meaning set forth in Section 10.1.

2.38 “Stock” means the common stock of the Company and such other securities of
the Company that may be substituted for Stock pursuant to Article 12.

2.39 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a
specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value of such number of shares of Stock on the date the SAR was
granted as set forth in the applicable Award Agreement.

2.40 “Stock Payment” means (a) a payment in the form of shares of Stock, or
(b) an option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Section 8.2.

2.41 “Subsidiary” means any “subsidiary corporation” as defined in
Section 424(f) of the Code and any applicable regulations promulgated thereunder
of the Company or any other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Company.

 

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2.42 “Successor Entity” has the meaning set forth in Section 2.6.

2.43 “Termination of Consultancy” means the time when the engagement of a
Participant as a Consultant to the Company or a Parent or 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 Parent or Subsidiary. 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 Parent or 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.

2.44 “Termination of Directorship” shall mean the time when a Participant who is
a Non-Employee Director ceases to be a member of the Board for any reason,
including, but not by way of limitation, a termination by resignation, 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 Non-Employee Directors.

2.45 “Termination of Employment” shall mean the time when the employee-employer
relationship between a Participant and the Company or any Parent or 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 Participant by the Company or any
Parent or Subsidiary, (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
Parent or Subsidiary with the fanner 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.

 

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ARTICLE III

SHARES SUBJECT TO THE PLAN

3.1 Number of Shares.

(a) Subject to Article 12 and Section 3.1(b), the aggregate number of shares of
Stock which may be issued or transferred pursuant to Awards under the Plan shall
be 9,750,000 shares as of the Effective Date.

(b) To the extent that an Award under Plan terminates, expires, or lapses for
any reason, any shares of Stock subject to the Award shall again be available
for the grant of an Award pursuant to the Plan. To the extent permitted by
applicable law or any exchange rule, shares of Stock issued in assumption of, or
in substitution for, any outstanding awards of any entity acquired in any form
of combination by the Company or any Parent or Subsidiary shall not be counted
against shares of Stock available for grant pursuant to this Plan. If any shares
of Restricted Stock are forfeited by a Participant or repurchased by the Company
pursuant to Section 6.3 hereof, such shares shall again be available for the
grant of an Award pursuant to the Plan. The payment of Dividend Equivalents in
cash in conjunction with any outstanding Awards shall not be counted against the
shares available for issuance under the Plan.

(c) Notwithstanding the provisions of this Section 3.1, no shares of 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.

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

3.3 Limitation on Number of Shares Subject to Incentive Stock Options. The
maximum number of shares of Stock that may be issued pursuant to Options that
are intended to be Incentive Stock Options shall be 9,750,000 shares.

3.4 Individual Participant Limitations. Notwithstanding any provision in the
Plan to the contrary, and subject to Article 12, the maximum number of shares of
Stock with respect to one or more Awards that may be granted to any one
Participant during any calendar year shall be 600,000, except for an employee
serving as Chief Executive Officer of the Company, who is eligible to be granted
options covering an aggregate number of shares of up to 1,500,000 in a calendar
year. Notwithstanding the foregoing, in connection with his or her initial
service to the Company, the aggregate number of shares of Stock with respect to
which Awards may be granted to any Participant shall not exceed 1,000,000 shares
of Stock during the calendar year which includes such individual’s initial
service to the Company.

ARTICLE IV

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility. Persons eligible to participate in this Plan include Employees,
Consultants and members of the Board, as determined by the Administrator.

 

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4.2 Participation. Subject to the provisions of the Plan, the Administrator may,
from time to time, select from among all Eligible Individuals those to whom
Awards shall be granted and shall determine the nature and amount of each Award.
No individual shall have any right to be granted an Award pursuant to this Plan.

ARTICLE V

STOCK OPTIONS

5.1 General. The Administrator is authorized to grant Options to Eligible
Individuals on the following terms and conditions:

(a) Exercise Price. The exercise price per share of Stock subject to an Option
shall be determined by the Administrator and set forth in the Award Agreement;
provided that the exercise price per share for any Option shall not be less than
100% of the Fair Market Value of a share of Stock on the date of grant.

(b) Time and Conditions of Exercise. The Administrator shall determine the time
or times at which an Option may be exercised in whole or in part; provided that
the term of any Option granted under the Plan shall not exceed ten years. The
Administrator shall also determine the performance or other conditions, if any,
that must be satisfied before all or part of an Option may be exercised.

(c) Payment. The Administrator shall determine the methods, terms and conditions
by which the exercise price of an Option may be paid, and the form and manner of
payment, including, without limitation, payment in the form of cash, a
promissory note bearing interest at no less than such rate as shall then
preclude the imputation of interest under the Code, shares of Stock, or other
property acceptable to the Administrator and payment through the delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable 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, and the methods by which shares of Stock shall be delivered or deemed
to be delivered to Participants. Notwithstanding any other provision of the Plan
to the contrary, no Participant who is a member of the Board or an “executive
officer” of the Company within the meaning of Section 13(k) of the Exchange Act
shall be permitted to pay the exercise price of an Option, or continue any
extension of credit with respect to the exercise price of an Option with a loan
from the Company or a loan arranged by the Company, in any method which would
violate Section 13(k) of the Exchange Act.

(d) Evidence of Grant. All Options shall be evidenced by an Award Agreement
between the Company and the Participant. The Award Agreement shall include such
additional provisions as may be specified by the Administrator.

 

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5.2 Incentive Stock Options. Incentive Stock Options may be granted only to
employees (as defined in accordance with Section 3401(c) of the Code) of the
Company or a Subsidiary which constitutes a “subsidiary corporation” of the
Company within Section 424(f) of the Code or a Parent which constitutes a
“parent corporation” of the Company within the meaning of Section 424(e) of the
Code, and the terms of any Incentive Stock Options granted pursuant to the Plan
must comply with the following additional provisions of this Section 5.2 in
addition to the requirements of Section 5.1:

(a) Ten Percent Owners. An Incentive Stock Option shall be granted to any
individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company or any “subsidiary corporation” of the Company or “parent corporation”
of the Company (each within the meaning of Section 424 of the Code) only if such
Option is granted at an exercise price per share that is not less than 110% of
the Fair Market Value per share of the Stock on the date of the grant and the
Option is exercisable for no more than five years from the date of grant.

(b) Transfer Restriction. An Incentive Stock Option shall not be transferable by
the Participant other than by will or by the laws of descent or distribution.

(c) Right to Exercise. During a Participant’s lifetime, an Incentive Stock
Option may be exercised only by the Participant.

(d) Failure to Meet Requirements. Any Option (or portion thereof) purported to
be an Incentive Stock Option which, for any reason, fails to meet the
requirements of Section 422 of the Code shall be considered a Non-Qualified
Stock Option.

5.3 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 to right to substitute a Stock Appreciation
Right for such Option at any time prior to or upon exercise of such Option;
provided that such Stock Appreciation Right shall be exercisable with respect to
the same number of shares of Stock for which such substituted Option would have
been exercisable.

ARTICLE VI

RESTRICTED STOCK AWARDS

6.1 Grant of Restricted Stock. The Administrator is authorized to make Awards of
Restricted Stock to any Eligible Individual selected by the Administrator in
such amounts and subject to such terms and conditions as determined by the
Administrator. All Awards of Restricted Stock shall be evidenced by an Award
Agreement.

6.2 Issuance and Restrictions. Restricted Stock shall be subject to such
repurchase restrictions, forfeiture restrictions, restrictions on
transferability and other restrictions as the Administrator may impose
(including, without limitation, limitations on the right to vote Restricted
Stock or the right to receive dividends on the Restricted Stock). These
restrictions may lapse separately or in combination at such times, pursuant to
such circumstances or installments or otherwise as the Administrator determines
at the time of the grant of the Award or thereafter. Alternatively, these
restrictions may lapse 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 Award or thereafter, in each case on
a specified date or dates or over any period or periods determined by the
Administrator.

 

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6.3 Repurchase or Forfeiture. Except as otherwise determined by the
Administrator at the time of the grant of the Award or thereafter, upon a
Participant’s Termination of Employment, Termination of Directorship or
Termination of Consultancy during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be forfeited or subject
to repurchase by the Company (or its assignee) under such terms as the
Administrator shall determine; provided, however, that the Administrator may
(a) provide in any Restricted Stock Award Agreement that restrictions or
forfeiture conditions relating to Restricted Stock will be waived in whole or in
part in the event of a Participant’s Termination of Employment, Termination of
Directorship or Termination of Consultancy under certain circumstances, and
(b) in other cases waive in whole or in part restrictions or forfeiture
conditions relating to Restricted Stock.

6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Administrator shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse or the Award
Agreement may provide that the shares shall be held in escrow by an escrow agent
designated by the Company.

ARTICLE VII

STOCK APPRECIATION RIGHTS

7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any Eligible Individual selected by the Administrator. 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.

7.2 Terms of Stock Appreciation Rights.

(a) A Stock Appreciation Right shall have a term set by the Administrator. A
Stock Appreciation Right shall be exercisable in such installments as the
Administrator may determine. A Stock Appreciation Right shall cover such number
of shares of Stock as the Administrator may determine. The exercise price per
share of Stock subject to each Stock Appreciation Right shall be set by the
Administrator and set forth in the Award Agreement, except that in no event
shall the exercise price be less than 100% of the Fair Market Value of the Stock
underlying the Stock Appreciation Right at the time the Stock Appreciation Right
is granted.

(b) A Stock Appreciation Right shall entitle the Participant (or other person
entitled to exercise the Stock Appreciation Right pursuant to the Plan) to
exercise all or a specified portion of the Stock Appreciation Right (to the
extent then exercisable pursuant to its terms) and to receive from the Company
an amount determined by multiplying (i) the amount (if any) by which the Fair
Market Value of a share of Stock on the date of exercise of the Stock
Appreciation Right exceeds the exercise price per share of the Stock
Appreciation Right, by (ii) the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, subject to any
limitations the Administrator may impose.

 

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7.3 Payment and Limitations on Exercise.

(a) Subject to Sections 7.3(b) and (c), payment of the amounts determined under
Sections 7.2(b) above shall be in cash, in 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.

(b) To the extent payment for a Stock Appreciation Right is to be made in cash,
the Award Agreement shall specify the date of payment, which may be different
than the date of exercise of the Stock Appreciation Right. If the date of
payment for a Stock Appreciation Right is later than the date of exercise, the
Award Agreement may specify that the Participant be entitled to earnings on such
amount until paid.

(c) To the extent any payment under Section 7.2(b) is effected in Stock, it
shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options.

7.4 Compliance with Code Section 409A. Notwithstanding anything in this Article
7 to the contrary, all Awards of Stock Appreciation Rights shall be structured
to satisfy the requirements of Code Section 409A, as provided in Section 10
below.

ARTICLE VIII

OTHER TYPES OF AWARDS

8.1 Dividend Equivalents.

(a) Any Eligible Individual selected by the Administrator may be granted
Dividend Equivalents based on the dividends on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Administrator. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined by
the Administrator.

(b) Dividend Equivalents granted with respect to Options or SARs that are
intended to be Qualified Performance-Based Compensation shall be payable, with
respect to pre-exercise periods, regardless of whether such Option or SAR is
subsequently exercised.

8.2 Stock Payments. Any Eligible Individual selected by the Administrator may
receive Stock Payments in the manner determined from time to time by the
Administrator; provided, that unless otherwise determined by the Administrator
such Stock Payments, which may be subject to vesting, shall be made in lieu of
base salary, bonus, or other cash compensation otherwise payable to such
Eligible Individual. The number of shares shall be determined by the
Administrator and may be based upon the Performance Goals or other specific
performance goals determined appropriate by the Administrator.

8.3 Restricted Stock Units. The Administrator is authorized to make Awards of
Restricted Stock Units to any Eligible Individual selected by the Administrator
in such amounts and subject to such terms and conditions as determined by the
Administrator. At the time of grant, 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. Alternatively, Restricted Stock Units may become fully vested and
nonforfeitable pursuant to the satisfaction of one or more Performance Goals or
other specific performance goals as the

 

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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. At the time of
grant, the Administrator shall specify the maturity date applicable to each
grant of Restricted Stock Units which shall be no earlier than the vesting date
or dates of the Award and may be determined at the election of the Eligible
Individual to whom the Award is granted. On the maturity date, the Company shall
transfer to the Participant one unrestricted, fully transferable share of Stock
for each Restricted Stock Unit that is vested and scheduled to be distributed on
such date and not previously forfeited. The Administrator shall specify the
purchase price, if any, to be paid by the Participant to the Company for such
shares of Stock.

8.4 Term. Except as otherwise provided herein, the term of any Award of Dividend
Equivalents, Stock Payments or Restricted Stock Units shall be set by the
Administrator in its discretion.

8.5 Exercise or Purchase Price. The Administrator may establish the exercise or
purchase price, if any, of any Award of Stock Payments or Restricted Stock
Units; provided, however, that such price shall not be less than the par value
of a share of Stock on the date of grant, unless otherwise permitted by
applicable state law.

8.6 Form of Payment. Payments with respect to any Awards granted under Sections
8.1, 8.2 or 8.3 shall be made in cash, in Stock or a combination of both, as
determined by the Administrator.

8.7 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Administrator and shall be
evidenced by a written Award Agreement.

8.8 Compliance with Code Section 409A. Notwithstanding anything in this Article
8 to the contrary, all Awards of Dividend Equivalents, Stock Payments, and
Restricted Stock Units shall be structured to satisfy the requirements of Code
Section 409A, as provided in Section 10 below.

ARTICLE IX

PERFORMANCE-BASED AWARDS

9.1 Purpose. The purpose of this Article 9 is to provide the Administrator the
ability to qualify Awards other than Options and SARs and that are granted
pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the
Administrator, in its discretion, decides to grant a Performance-Based Award to
a Covered Employee, the provisions of this Article 9 shall control over any
contrary provision contained in Articles 6 or 8; provided, however, that the
Administrator may in its discretion grant Awards to Covered Employees that are
based on Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 9.

9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Administrator to receive Performance-Based Awards. The
designation of a Covered Employee as a Participant for a Performance Period
shall not in any manner entitle the Participant to receive an Award for the
period. Moreover, designation of a Covered Employee as a Participant for a
particular Performance Period shall not require designation of such Covered
Employee as a Participant in any subsequent Performance Period and designation
of one Covered Employee as a Participant shall not require designation of any
other Covered Employees as a Participant in such period or in any other period.

 

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9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary
to comply with the Qualified Performance-Based Compensation requirements of
Section 162(m)(4)(C) of the Code, with respect to any Award granted under
Articles 6 and 8 which may be granted to one or more Covered Employees, 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
Administrator shall, in writing, (a) designate one or more Covered Employees,
(b) select the Performance Criteria applicable to the Performance Period,
(c) establish the Performance Goals, and amounts of such Awards, as applicable,
which may be earned for such Performance Period, and (d) specify the
relationship between Performance Criteria and the Performance Goals and the
amounts of such Awards, as applicable, to be earned by each Covered Employee for
such Performance Period. Following the completion of each Performance Period,
the Administrator shall certify in writing whether the applicable Performance
Goals have been achieved for such Performance Period. In determining the amount
earned by a Covered Employee, the Administrator shall have the right to reduce
or eliminate (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Administrator may
deem relevant to the assessment of individual or corporate performance for the
Performance Period.

9.4 Payment of Performance-Based Awards. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by the Company or a
Parent or Subsidiary on the day a Performance-Based Award for such Performance
Period is paid to the Participant. Furthermore, a Participant shall be eligible
to receive payment pursuant to a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved.

9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute
Qualified Performance-Based Compensation 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 qualified 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.

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 10, 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 10. If any deferral of compensation is
to be permitted in connection with a 409A Award, the Committee shall establish
rules and procedures relating to such deferral in a manner intended to comply
with the requirements of Section 409A of the Code, including, without
limitation, the time when an election to defer may be made, the time period of
the deferral and the events that would result in payment of the deferred amount,
the interest or other earnings attributable to the deferral and the method of
funding, if any, attributable to the deferred amount.

 

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10.2 Distributions under a Section 409A Award. Any shares of Stock 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, subject to any
additional limitations in Section 409A and the Treasury Regulations issued
thereunder, shall not be distributed earlier than:

(a) the Participant’s separation from service;

(b) the date the Participant becomes disabled;

(c) the Participant’s death;

(d) a specified time (or pursuant to a fixed schedule) specified under the Award
Agreement at the date of the deferral compensation;

(e) a change in the ownership or effective control of the Company or a Parent or
Subsidiary, or in the ownership of a substantial portion of the assets of the
Company or a Parent or Subsidiary; or

(f) the occurrence of an unforeseeable emergency with respect to the
Participant.

10.3 Prohibition on Acceleration of Benefits. The time or schedule of any
distribution or payment of any shares of Stock 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. Any deferral election provided under
or with respect to an Award to any Eligible Individual, or to the Participant
holding a Section 409A Award, shall satisfy the requirements of
Section 409A(a)(4)(B) of the Code, to the extent applicable, and 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.

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.

ARTICLE XI

PROVISIONS APPLICABLE TO AWARDS

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

 

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11.2 Award Agreement. Awards under the Plan shall be evidenced by Award
Agreements that set forth the terms, conditions and limitations for each Award
which may include the term of an Award, the provisions applicable in the event
of the Participant’s Termination of Employment, Termination of Directorship or
Termination of Consultancy, and the Company’s authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind an Award.

11.3 Limits on Transfer.

(a) Except as otherwise provided by the Administrator pursuant to
Section 11.3(b), no right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Company or a Parent or Subsidiary, or shall be subject to any lien, obligation,
or liability of such Participant to any other party other than the Company or a
Parent or Subsidiary. Except as otherwise provided by the Administrator pursuant
to Section 11.3(b), no Award shall be assigned, transferred, or otherwise
disposed of by a Participant other than by will or the laws of descent and
distribution, 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.

(b) Notwithstanding Section 11.3(a), the Administrator, in its sole discretion,
may permit an Award (other than an Incentive Stock Option) to be transferred to,
exercised by and paid to any one or more Permitted Transferees (as defined
below), subject to the following terms and conditions: (i) an Award transferred
to a Permitted Transferee shall not be assignable or transferable by the
Permitted Transferee other than by will or the laws of descent and distribution;
(ii) any Award which is transferred to a Permitted Transferee shall continue to
be subject to all the terms and conditions of the Award as applicable to the
original Participant (other than the ability to further transfer the Award); and
(iii) the Participant 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 11.3(b), “Permitted Transferee” shall mean, with respect to a
Participant, 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 Participant’s household (other
than a tenant or employee), a trust in which these persons (or the Participant)
control the management of assets, and any other entity in which these persons
(or the Participant) own more than fifty percent of the voting interests, or any
other transferee specifically approved by the Administrator.

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

 

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11.5 Stock Certificates; Book-Entry Procedures.

(a) Notwithstanding anything herein to the contrary, the Company shall not be
required to issue or deliver any certificates evidencing shares of Stock
pursuant to the exercise of any Award, unless and until the Board has
determined, with advice of counsel, that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange on
which the shares of Stock are listed or traded. All Stock certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other
restrictions as the Administrator deems necessary or advisable to comply with
federal, state, or foreign jurisdiction, securities or other laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The
Administrator may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions
provided herein, the Administrator may require that a Participant make such
reasonable covenants, agreements, and representations as the Administrator, in
its discretion, deems advisable in order to comply with any such laws,
regulations, or requirements. The Administrator shall have the right to require
any Participant to comply with any timing or other restrictions with respect to
the settlement or exercise of any Award, including a window-period limitation,
as may be imposed in the discretion of the Administrator.

(b) Notwithstanding any other provision of the Plan, unless otherwise determined
by the Administrator or required by applicable law, rule or regulation, the
Company shall not deliver to any Participant certificates evidencing shares of
Stock issued in connection with any Award and instead such shares of Stock shall
be recorded in the books of the Company (or, as applicable, its transfer agent
or stock plan administrator).

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

11.7 Minimum Vesting Periods. Subject to Article XII hereof, any Awards granted
under Article VI, Section 8.3 or Article IX hereof (the “Minimum Vesting
Awards”), granted after July 25, 2011 that vest solely based on the passage of
time may not provide for vesting any faster than the following schedule: (i) no
more than one-third vested prior to the first anniversary of the award date,
(ii) no more than two-thirds vested prior to the second anniversary of the award
date and (iii) the balance shall vest at a rate no more than ratably over the
period from the second anniversary of the award date to the third anniversary of
the award date. Subject to Article XII hereof, any Minimum Vesting Awards
granted after July 25, 2011 that do no vest solely based on the passage of time
shall not vest any faster than ratably over the period from the award date to
the first anniversary of the award date.

 

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ARTICLE XII

CHANGES IN CAPITAL STRUCTURE

12.1 Adjustments.

(a) In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation, spin-off, recapitalization, distribution of
Company assets to shareholders (other than normal cash dividends), or any other
corporate event affecting the Stock or the share price of the Stock, the
Administrator may make such proportionate adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such change with
respect to (i) the aggregate number and type of shares that may be issued under
the Plan (including, but not limited to, adjustments of the limitations in
Sections 3.1 and 3.3); (ii) the terms and conditions of any outstanding Awards
(including, without limitation, any applicable performance targets or criteria
with respect thereto); and (iii) the grant, exercise or purchase price per share
for any outstanding Awards under the Plan. Any adjustment affecting an Award
intended as Qualified Performance-Based Compensation shall be made consistent
with the requirements of Section 162(m) of the Code.

(b) In the event of any transaction or event described in Section 12.1(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 (including without limitation any Change in Control), or of changes in
applicable laws, regulations or accounting principles, and whenever the
Administrator determines that such action is appropriate in order to prevent the
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, the Administrator, in its sole discretion and
on such terms and conditions as it deems appropriate, either by the terms of the
Award or by action taken prior to the occurrence of such transaction or event
and either automatically or upon the Participant’s request, is hereby authorized
to take any one or more of the following actions:

(i) To provide for either (A) termination of any such Award in exchange for an
amount of cash, if any, equal to the amount that would have been received upon
the exercise of such Award or realization of the Participant’s rights (and, for
the avoidance of doubt, if as of the date of the occurrence of the transaction
or event described in this Section 12.1(b) the Administrator determines in good
faith that no amount would have been attained upon the exercise of such Award or
realization of the Participant’s rights, then such Award may be terminated by
the Company without payment) or (B) the replacement of such Award with other
rights or property selected by the Administrator in its sole discretion;

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

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

 

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

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

12.2 Acceleration Upon a Change in Control.

(a) Notwithstanding Section 12.1(b), if a Change in Control occurs and a
Participant’s Awards are not continued, converted, assumed, or replaced by
(i) the Company or a Parent or Subsidiary of the Company, or (ii) a Successor
Entity, such Awards shall become fully exercisable and/or payable, as
applicable, and all forfeiture, repurchase and other restrictions on such Awards
shall lapse immediately prior to such Change in Control. Upon, or in
anticipation of, a Change in Control, the Administrator may cause any and all
Awards outstanding hereunder to terminate at a specific time in the future,
including but not limited to the date of such Change in Control, and shall give
each Participant the right to exercise such Awards during a period of time as
the Administrator, in its sole and absolute discretion, shall determine

(b) With respect to any Participant who was providing services as an Employee,
member of the Board or Consultant, if such Participant has a Termination of
Employment, Termination of Directorship or Termination of Consultancy in
contemplation of a Change in Control, other than by reason of a discharge by the
Company, any Parent or Subsidiary or any Successor Entity for Cause, a
resignation by the Participant without Good Reason, or the Participant’s death
or Disability, within the sixty (60) days prior to the consummation of a Change
in Control, any Awards held by such Participant shall become exercisable and/or
payable, as applicable, and the forfeiture, repurchase and other restrictions on
such Awards shall lapse in accordance with the schedule set forth in
Section 12.2(f) below immediately prior to the date of such Change in Control
and such Awards shall be exercisable for the longer of twelve (12) months
following such Change in Control or the expiration of any applicable
underwriters’ lock-up agreements and thereafter shall terminate, but such period
shall not extend beyond the expiration date of such Awards.

(c) With respect to any Participant who was providing services as an Employee,
member of the Board or Consultant immediately prior to the consummation of a
Change in Control, if such Participant has a Termination of Employment,
Termination of Directorship or Termination of Consultancy other than by reason
of the Participant’s discharge by the Company, any Parent or Subsidiary or any
Successor Entity for Cause, a resignation by the Participant without Good
Reason, or the Participant’s death or Disability, within the thirteen
(13) months following such Change in Control, any Awards held by such
Participant shall become exercisable and/or payable, as applicable, and the
forfeiture, repurchase and other restrictions on such Awards shall lapse in
accordance with the schedule set forth in Section 12.2(f) below on the date of
such Termination of Employment, Termination of Directorship or Termination of
Consultancy and such Awards shall be exercisable for the longer of twelve
(12) months following such Change in Control or the expiration of any applicable
underwriters’ lock-up agreements and thereafter shall terminate, but such period
shall not extend beyond the expiration date of such Awards.

(d) With respect to any Participant who was providing services as an Employee,
member of the Board or Consultant immediately prior to the consummation of a
Change in Control, if such Participant does not have a Termination of
Employment, Termination of Directorship or

 

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Termination of Consultancy prior to thirteen (13) months after such Change in
Control, any Awards held by such Participant shall become exercisable and/or
payable, as applicable, and the forfeiture, repurchase and other restrictions on
such Awards shall lapse in accordance with the schedule set forth in
Section 12.2(f) below at the end of such thirteen (13) month period and such
Awards shall be exercisable for the longer of twelve (12) months following the
end of such thirteen (13) month period or the expiration of any applicable
underwriters’ lock-up agreements and thereafter shall terminate, but such period
shall not extend beyond the expiration date of such Awards.

(e) Notwithstanding anything to the contrary in this Article 12, an Award
Agreement evidencing an Award may provide that a Participant shall have
additional rights under such Award in the event of a Change in Control.

(f) For purposes of this Section 12.2, Awards shall become exercisable and/or
payable, as applicable, and the forfeiture, repurchase and other restrictions on
such Awards shall lapse pursuant to Sections 12.2(b), (c) and (d) in accordance
with the number of years of service a Participant has with the Company, or any
Parent or Subsidiary (or any predecessor organization, including, without
limitation, RiboGene, Inc.), or any Successor Entity as of the date of
determination (measured from the Participant’s date of hire) as follows:

 

Length of Service   

Percentage of Award to

Become Exercisable and/or

Payable and Percentage of

Award as to Which Forfeiture,

Repurchase and Other

Restrictions Shall Lapse

  0-180 days      0 %  181 days to 1 year      25 %  1 year and 1 day to 2 years
     50 %  Greater than 2 years      100 % 

12.3 No Other Rights. Except as expressly provided in the Plan, no Participant
shall have any rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger,
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan or pursuant to action of the Administrator under the Plan,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Stock
subject to an Award or the grant or exercise price of any Award.

ARTICLE XIII

ADMINISTRATION

13.1 Administrator. The Administrator of the Plan shall be the Compensation
Committee of the Board (or another committee or a subcommittee of the Board to
which the Board delegates administration of the Plan) (such committee, the
“Committee”), which Committee shall consist solely of two or more members of the
Board each of whom is both an “outside director,” within the meaning of
Section 162(m) of the Code and a Non-Employee Director. Notwithstanding the

 

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foregoing: (a) the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to all Awards
granted to Independent Directors, and for purposes of such Awards the term
“Administrator” as used in this Plan shall be deemed to refer to the Board and
(b) the Committee may delegate its authority hereunder to the extent permitted
by Section 13.5. Appointment of Committee members shall be effective upon
acceptance of appointment. In its sole discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the Administrator
under the Plan except with respect to matters which under Rule 16b-3 under the
Exchange Act 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. Committee members may resign at any time by delivering written notice
to the Board. Vacancies in the Committee may only be filled by the Board.

13.2 Action by the Administrator. A majority of the Administrator shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present, and, subject to applicable law, acts
approved in writing by a majority of the Administrator in lieu of a meeting,
shall be deemed the acts of the Administrator. Each member of the Administrator
is entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company’s independent certified public accountants, or
any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.

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

(a) Designate Participants to receive Awards;

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

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

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

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

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

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

 

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

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

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

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

13.5 Delegation of Authority. To the extent permitted by applicable law, the
Committee may from time to time delegate to a committee of one or more members
of the Board or one or more officers of the Company the authority to grant or
amend Awards to Participants other than (a) senior executives of the Company who
are subject to Section 16 of the Exchange Act, (b) Covered Employees, or
(c) officers of the Company (or members of the Board) to whom authority to grant
or amend Awards has been delegated hereunder. Any delegation hereunder shall be
subject to the restrictions and limits that the Committee specifies at the time
of such delegation, and the Committee may at any time rescind the authority so
delegated or appoint a new delegatee. At all times, the delegatee appointed
under this Section 13.5 shall serve in such capacity at the pleasure of the
Committee.

ARTICLE XIV

EFFECTIVE AND EXPIRATION DATES

14.1 Effective Date. The Plan will be effective as of the date on which the Plan
is approved by the Company’s shareholders (the “Effective Date”).

14.2 Expiration Date. The Plan will expire on, and no Award may be granted
pursuant to the Plan after, the earlier of the tenth anniversary of (i) the date
this Plan is approved by the Board or (ii) the Effective Date (the “Expiration
Date”). Any Awards that are outstanding on the Expiration Date shall remain in
force according to the terms of the Plan and the applicable Award Agreement.

ARTICLE XV

AMENDMENT, MODIFICATION, AND TERMINATION

15.1 Amendment, Modification, and Termination. The Board may terminate, amend or
modify the Plan at any time and from time to time; provided, however, that
(a) to the extent necessary to comply with any applicable law, regulation, or
stock exchange rule, the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required, and (b) shareholder
approval is required for any amendment to the Plan that increases the number of
shares available under the Plan (other than any adjustment as provided by
Article 12).

 

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15.2 Awards Previously Granted. No termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously granted
pursuant to the Plan without the prior written consent of the Participant.

ARTICLE XVI

GENERAL PROVISIONS

16.1 No Rights to Awards. No Participant, Employee, or other person shall have
any claim to be granted any Award pursuant to the Plan, and neither the Company
nor the Administrator is obligated to treat Participants, Employees, and other
persons uniformly.

16.2 No Shareholder Rights. Except as otherwise provided herein, a Participant
shall have none of the rights of a shareholder with respect to shares of Stock
covered by any Award until the Participant becomes the record owner of such
shares of Stock.

16.3 Withholding. The Company or any Parent or Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company an amount sufficient to satisfy federal, state, local and foreign
taxes (including the Participant’s employment tax obligations) required by law
to be withheld with respect to any taxable event concerning a Participant
arising as a result of this Plan. The Administrator may in its discretion and in
satisfaction of the foregoing requirement allow a Participant to elect to have
the Company or a Parent or Subsidiary, as applicable, withhold shares of Stock
otherwise issuable under an Award (or allow the return of shares of 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 Stock
which may be withheld with respect to the issuance, vesting, exercise or payment
of any Award (or which may be repurchased from the Participant of such Award
within six months (or such other period as may be determined by the
Administrator) after such shares of Stock were acquired by the Participant from
the Company) in order to satisfy the Participant’s federal, state, local and
foreign 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, state, local and foreign income tax and payroll
tax purposes that are applicable to such supplemental taxable income.

16.4 No Right to Employment or Services. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Parent or Subsidiary to terminate any Participant’s employment or services
at any time, nor confer upon any Participant any right to continue in the employ
or service of the Company or any Parent or Subsidiary.

16.5 Unfunded Status of Awards. The Plan is intended to be an unfunded plan for
incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Parent or Subsidiary.

16.6 Indemnification. To the extent allowable pursuant to applicable law, the
Administrator (and each member thereof) shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she

 

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may be a party or in which he or she may be involved by reason of any action or
failure to act pursuant to the Plan and against and from any and all amounts
paid by him or her in satisfaction of judgment in such action, suit, or
proceeding against him or her; provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled pursuant to the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.

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

16.8 Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.

16.9 Titles and Headings. The titles and headings of the Sections in the Plan
are for convenience of reference only and, in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.

16.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Administrator shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.

16.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
Participant 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
under 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.

16.12 Government and Other Regulations. The obligation of the Company to make
payment of awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by government agencies as may be
required. The Company shall be under no obligation to register pursuant to the
Securities Act, any of the shares of Stock paid pursuant to the Plan. If the
shares paid pursuant to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

16.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California, without
regard to the conflicts of law principles thereof.

 

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