EXHIBIT 10.1


 


NPS PHARMACEUTICALS, INC.


 


1998 STOCK OPTION PLAN(1)


 


1.             GENERAL.


 


1.1           Purpose.
The 1998 Stock Option Plan has been established by the Company to provide a
means by which employees, directors, and consultants of the Company and its
Affiliates may be given the opportunity to benefit from increases in value of
NPS stock through the granting of Options. NPS seeks to (a) retain the
services of present employees, directors, and consultants; (b) secure and
retain the services of new employees, directors, and consultants; and (c) provide
incentives for such persons to exert maximum efforts for the success of the
Company and thereby promote the long-term interest of the Company, including
the growth in value of the Company’s equity and enhancement of long-term
stockholder return.


 


1.2           Types
of Options. The Company intends
that the Options issued under the Plan shall, in the discretion of the Board or
any Board Committee (see paragraph 3.2), be either Incentive Stock Options or
Nonstatutory Stock Options (defined below).


 


1.3           Definitions.
Unless otherwise defined, capitalized terms shall have the meaning set forth in
Section 2.


 


2.             DEFINITIONS.


 


2.1           Affiliate
means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and
(f) respectively, of the Code.


 


2.2           Board
means the Board of Directors of the Company.


 


2.3           Code
means the Internal Revenue Code of 1986, as amended.


 


2.4           Committee
means a Committee appointed by the Board in accordance with paragraph 3.2
herein.


 


2.5           Company
means NPS Pharmaceuticals, Inc., a Delaware corporation.


 


2.6           Consultant
means any person (including an advisor) engaged by the Company or an Affiliate
to render consulting services under arrangements intended to compensate such
person for such services. The term “Consultant” shall not include a Director
who is paid only a director’s fee by the Company or who is not compensated by
the Company for services as a Director.


 


2.7           Continuous
Status as an Employee, Director, or Consultant
means the employment or relationship as an Employee, Director, or Consultant is
not interrupted or terminated by the Company or any Affiliate. The Board, in
its sole discretion, may determine whether Continuous Status as an Employee,
Director, or Consultant shall be considered interrupted in the case of:


 


2.7.1        any
leave of absence approved by the Board, including sick leave, military leave,
or any other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed 90 days unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; or


 


2.7.2        transfers
between locations of the Company or between the Company, Affiliates or its
successor.


 






(1)   As Amended by the Board of
Directors and ratified by the Stockholders in May, 2008.


 

















 


2.8           Day
of Determination means the date of the
occurrence of an event that requires the determination of the Fair Market Value
of an award made hereunder.


 


2.9           Director
means a member of the Board.


 


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


 


2.11         Employee
means any person, including Officers and Directors, employed by the Company or
any Affiliate. Neither service as a Director nor payment of a director’s fee by
the Company shall be sufficient to constitute “employment” by the Company.


 


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


 


2.13         Fair
Market Value means, as of any date,
the value of the common stock of the Company as determined as follows:


 


2.13.1      If
the common stock is listed on any established stock exchange or a national
market system, including without limitation, the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”)
System, the Fair Market Value of a share of common stock shall be the closing
price for such stock on the Day of Determination as quoted on such system as
reported in the Wall Street Journal or such other source as the Board deems
reliable. In the event the Day of Determination falls on a date that the Nasdaq
system is closed, then the Fair Market Value shall be the closing sales price
for such stock on the last market trading day prior to the Day of Determination
as quoted on such system as reported in the Wall Street Journal or such other
source as the Board deems reliable.


 


2.13.2      If
the common stock is quoted on Nasdaq (but not on the National Market System
thereof) or is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a share of common stock shall
be the mean between the bid and asked prices for the common stock on the last
market trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;


 


2.13.3      In
the absence of an established market for the common stock, the Fair Market
Value shall be determined in good faith by the Board.


 


2.14         Incentive
Stock Option (or “ISO”) means an Option
intended to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.


 


2.15         Non-Employee
Director means a Director who is
considered to be a “Non-Employee Director” in accordance with Rule 16b-3(b)(3), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.


 


2.16         Nonstatutory
Stock Option (or “NSO”) means an Option not
intended to qualify or not eligible to qualify as an ISO or an ISO which,
subsequent to its date of grant, no longer qualifies as an ISO under Section 422
of the Code.


 


2.17         Officer
means a person who is an officer of the Company within the meaning of Section 16a-1(f) of
the Exchange Act and the rules and regulations promulgated thereunder.


 


2.18         Option
means a stock option granted pursuant to the Plan.


 


2.19         Option
Agreement means a written
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant.


 


2.20         Optionee
means an Employee, Director, or Consultant who holds an outstanding Option.


 

















 


2.21         Outside
Director means a Director who is
considered to be an “Outside Director” in accordance with Section 162(m) of
the Code, or any other applicable Code sections, regulations, or
interpretations of the IRS.


 


2.22         Plan
means this 1998 Stock Option Plan.


 


2.23         Rule 16b-3
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.


 


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


 


3.             ADMINISTRATION.


 


3.1           Powers
and Authority. The Plan shall be
administered by or under the direction of the Board unless and until the Board
delegates administration to a Committee, as provided in paragraph 3.2. The
Board shall have the power subject to and within the limitations of the express
provisions of the Plan:


 


3.1.1        To
determine from time to time: (a) which of the persons eligible under the
Plan shall be granted Options; (b) when and how Options shall be granted; (c) whether
an Option shall be intended to qualify as an ISO; (d) the provisions of
each Option granted (which need not be identical) including the time or times
when a person shall be permitted to receive stock pursuant to the exercise of
such Option; (e) whether a person shall be permitted to exercise such
Option; and (f) the number of shares with respect to which Options shall
be granted to each such person.


 


3.1.2        To
construe and interpret the Plan and Options granted under it, and to establish,
amend, and revoke rules and regulations for its administration. The Board,
in the exercise of this power, may correct any defect, omission, or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.


 


3.1.3        To
amend the Plan as provided in Section 12.


 


3.1.4        Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company.


 


3.2           Delegation.
The Board may delegate administration of the Plan to a Board committee composed
of not fewer than two members (the “Committee”). All members of the Committee
shall be Outside Directors or Non-Employee Directors, to the extent necessary
to comply with the applicable provisions of Rule 16b-3 and Section 162(m).
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board (and references in this Plan to the Board shall in such
event, be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan. The Board or the Committee may
delegate to the Chief Executive Officer of the Company the authority to make
grants to eligible persons who are not subject to Section 16 of the
Exchange Act, provided such authority is limited as to time, aggregate and
individual award amounts and/or such other terms as the Board or the Committee
deems necessary or desirable.


 


3.3           Director
Status. Any requirement that
an administrator of the Plan be a Non-Employee Director or an Outside Director
shall not apply if the Board or the Committee expressly declares that such
requirement shall not apply.


 

















 


4.             SHARES
SUBJECT TO THE PLAN.


 


4.1           Available
Shares. Subject to the provisions
of Section 11, the number of shares that may be issued pursuant to Options
granted hereunder shall not exceed in the aggregate six million five hundred
thousand (6,500,000) shares of the Company’s common stock.


 


4.2           Forfeited
or Canceled Shares. Any shares of stock
for which an Option has been granted under the Plan that are forfeited because
of the failure to meet an Option grant contingency or condition shall again be
available for delivery pursuant to new grants under the Plan. To the extent any
shares of stock covered by an Option are not delivered to an Optionee or
beneficiary because the award is forfeited or canceled, or the shares of stock
are not delivered because the award is settled in cash, such shares shall not
be deemed to have been delivered for purposes of determining the maximum number
of shares of stock available for delivery under the Plan.


 


4.3           Payment
with Shares. If the exercise price
of any Option granted under the Plan is satisfied by tendering shares of stock
to the Company (by either actual delivery or by attestation), only the number
of shares of stock issued net of the shares of stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of stock
available for delivery under the Plan.


 


4.4           Plan
Limits. Shares of stock
delivered under the Plan in settlement, assumption, or substitution of
outstanding awards (or obligations to grant future awards) under the plans or
arrangements of another entity shall not reduce the maximum number of shares of
stock available for delivery under the Plan, to the extent that such
settlement, assumption, or substitution is a result of the Company or Affiliate
acquiring another entity (or an interest in another entity). Subject to the
provisions of Section 11, the maximum number of shares that may be covered
by grants to any one individual shall be 750,000 shares during any three
consecutive calendar years.


 


5.             ELIGIBILITY.


 


5.1           Option
Type. ISOs may be granted
only to Employees. NSOs may be granted to Employees, Directors, or Consultants.


 


5.2           Section 16 Compliance.
No Officer or Director shall be eligible for the benefits of the Plan unless at
the time discretion is exercised in the selection of an Officer or Director as
a person to whom Options may be granted, or in the determination of the number
of shares which may be covered by Options granted to the Officer or Director,
the Plan otherwise complies with the requirements of Rule 16b-3. This
paragraph 5.2 shall not apply if the Board or Committee expressly declares that
it shall not apply.


 


6.             OPTION
PROVISIONS. Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:


 


6.1           Term.
No Option shall be exercisable after the expiration of ten years from the date
it was granted.


 


6.2           Price.
The exercise price of each Option shall be not less than 100% of the Fair
Market Value of the stock subject to the Option on the date the Option is
granted.


 


6.3           Consideration.
The purchase price of stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable statutes and regulations:


 


6.3.1        in
cash; or


 


6.3.2        by
delivery of already-owned shares of common stock of the Company, held by the
Optionee for at least six months, or a combination of cash and already-owned
shares of common stock of the Company; or


 

















 


6.3.3        according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the Company)
with the person to whom the Option is granted or to whom the Option is
transferred pursuant to paragraph 6.4; or


 


6.3.4        pursuant
to a broker assisted exercise same-day sales program; or


 


6.3.5        as
required in the discretion of the Board or the Committee, either at the time of
the grant or exercise of the Option; or


 


6.3.6        any
combination of 6.3.1 through 6.3.5  above.


 


In the case of any
deferred payment arrangement, interest shall be payable at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.


 


6.4           Transferability.


 


6.4.1        Incentive Stock Options.
In order for an Option to qualify for treatment as an ISO, it may not be
transferable except by will or by the laws of descent and distribution. In the
event an Optionee transfers such Option, such transfer shall constitute a
disqualifying event and the Option shall no longer qualify as an ISO but shall
be considered a NSO under the terms of this Plan.


 


6.4.2        Nonstatutory Stock Option.
The Board or Committee may, in its discretion, authorize all or a portion of
the NSOs to be granted to an Optionee to be on terms that permit transfer by
such Optionee to (a) the spouse, children, or grandchildren of the
Optionee (“Immediate Family Members”), (b) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (c) a partnership
in which such Immediate Family Members are the only partners, provided that (i) there
may be no consideration for any such transfer, (ii) the Option Agreement
pursuant to which such Options are granted must expressly provide for
transferability in a manner consistent with this Section, (iii) subsequent
transfers of transferred Options shall be prohibited except those occurring by
will or the laws of descent and distribution, and (iv) the Options shall
continue to be subject to all the terms and conditions that applied prior to
transfer in the same manner and to the same extent as non-transferred Options,
including paragraphs 6.5 through 6.9. The Options shall be exercisable by the
transferee only to the extent, and for the periods specified in such sections.
The Company expressly disclaims any obligation to provide notice to a transferee
of the termination of the Option.


 


6.4.3        Unless
transfer by an Optionee is specifically provided for in an Option Agreement, a
NSO shall not be transferable except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder
(a “QDRO”), and shall be exercisable during the lifetime of the person to whom
the NSO is granted only by such person or any transferee pursuant to a QDRO.


 


6.5           Vesting.
The total number of shares of stock subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). The
Option Agreement may provide that from time to time during each of such
installment periods, the Option may become exercisable (“vest”) with respect to
some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully exercised. The
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance criteria) as the
Board may deem appropriate. The provisions of this paragraph 6.5 are subject to
any Option provisions governing the minimum number of shares as to which an
Option may be exercised.


 

















 


6.6           Securities
Law Compliance. The Company may
require any Optionee, or any person to whom an Option is transferred under
paragraph 6.4, as a condition of exercising any such Option, (a) to give
written assurances satisfactory to the Company as to the Optionee’s knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (b) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Option for such person’s own account and not with any present
intention of selling or otherwise distributing the stock. These requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
(i) the issuance of the shares upon the exercise of the Option has been
registered under a then currently effective registration statement under the
Securities Act, or (ii) as to any particular requirement, a determination
is made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.


 


6.7           Termination
of Employment or Relationship as an Employee, Director, or Consultant.
In the event an Optionee’s Continuous Status as an Employee, Director, or
Consultant terminates (other than upon the Optionee’s death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board, and only to the extent that the Optionee was
entitled to exercise at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the case of an ISO, the Board shall determine such period of time (in no event
to exceed three months from the date of termination) when the Option is
granted. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to the Plan. Provided, however, that in the event an employee is a
Covered Employee as defined under the Company’s Severance Plan, and such
employee’s status as an employee is terminated as a result of a
change-in-control as defined in the Severance Plan and such employee has
elected to receive the severance benefit provided for in the Severance Plan
then all employee’s vested options shall remain exercisable for a period of two
years from the date of termination of such employee’s employment with the
Company.


 


6.8           Retirement
of Optionee. Notwithstanding any
contrary Plan provision, in the event an Optionee’s employment as an Employee,
Director, or Consultant terminates due to Optionee’ s Retirement, the Optionee
shall vest in that number of shares subject to the Option that would have
vested had the Optionee remained an Employee, Director or Consultant for an
additional two (2) years from the date of Retirement. In addition, the
Option shall remain exercisable until the expiration of its term. For purposes
of this paragraph, Retirement shall mean the termination of service with the
Company or an Affiliate of an Optionee on or after the date on which the
Optionee’s number of completed years of service with the Company or Affiliate
and age equal or exceed seventy (70) (including termination due to death or
Disability after such time).


 


6.9           Disability
of Optionee. In the event an
Optionee’s Continuous Status as an Employee, Director, or Consultant terminates
as a result of the Optionee’s Disability, the Optionee may exercise his or her
Option, but only within twelve months from the date of such termination (or
such shorter period specified in the Option Agreement), and only to the extent
that the Optionee was entitled to exercise at the date of such termination (but
in no event later than the expiration of the term of such Option as set forth
in the Option Agreement). If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to the Plan.


 


6.10         Death
of Optionee. In the event of the
death of an Optionee, the Option may be exercised, at any time within eighteen
months following the date of death (or such shorter period specified in the
Option Agreement, but in no event later than the expiration of the term of such
Option as set forth


 

















 


in
the Option Agreement), by the Optionee’s estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee’s estate or a person who
acquired the right to exercise the Option by bequest or inheritance, or by
assignment as provided herein, does not exercise the Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan.


 


6.11         Early
Exercise. The Option Agreement
may, but need not, include a provision whereby the Optionee may elect at any
time while an Employee, Director, or Consultant to exercise the Option as to
any part or all of the shares subject to the Option prior to the full vesting
of the Option. Any nonvested shares so purchased may be subject to a repurchase
right in favor of the Company or to any other restriction the Board determines
to be appropriate.


 


6.12         Withholding.
To the extent provided by the terms of an Option Agreement, the Optionee may
satisfy any federal, state, or local tax withholding obligation relating to the
exercise of such Option by any of the following means or by a combination of
such means:


 


6.12.1     cash
payment; or


 


6.12.2     authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or


 


6.12.3     delivering
to the Company owned and unencumbered shares of the common stock of the
Company.


 


7.             NO
REPRICING, CANCELLATION, OR RE-GRANT OF OPTIONS.  Except for certain adjustments due to
corporate transactions described in Section 11, the exercise price for any
outstanding Option granted under the Plan may not be decreased after the Day of
Determination for such Option grant nor may an outstanding Option granted under
the Plan be surrendered to the Company as consideration in exchange for the
grant of a new Option with a lower exercise price.


 


8.             COVENANTS
OF THE COMPANY.


 


8.1           Stock
Availability. During the terms of
the Option granted under the Plan, the Company shall keep available at all
times the number of shares of stock required to satisfy such grants up to the
number of shares of stock authorized under the Plan.


 


8.2           Authority.
The Company shall seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to issue
and sell shares of stock acquired under the grants, provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency, the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock under such Options unless and until such authority is obtained.


 


9.             USE
OF PROCEEDS FROM STOCK.  Proceeds from
the exercise of Options under the Plan shall constitute general funds of the
Company.


 


10.           MISCELLANEOUS.


 


10.1         Acceleration.
The Board or the Committee shall have the power to accelerate the time at which
an Option may first be exercised or the time during which an Option or any part
thereof will vest, notwithstanding the provisions in the Option Agreement
stating the time at which it may first be exercised or the time during which it
will vest.


 

















 


10.2         Ownership
Rights. Neither an Optionee
nor any person to whom an Option is transferred under paragraph 6.4 shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to any shares subject to such Option unless and until such person has
satisfied all requirements for exercise of the Option pursuant to its terms.


 


10.3         Employment
Rights. Nothing in the Plan or
any instrument executed pursuant thereto shall confer upon any Employee,
Director, Consultant, Optionee, or other holder of Options any right to
continue in the employ of the Company or any Affiliate (or to continue acting
as a Director or Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or relationship as a Director or
Consultant of any Employee, Director, Consultant, or Optionee with or without
cause.


 


10.4         ISO
Value Limit. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which ISOs granted after 1998 are exercisable for the first time by
any Optionee during any calendar year under all plans of the Company and its
Affiliates exceeds $100,000, the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
NSOs.


 


11.           ADJUSTMENTS
UPON CHANGES IN STOCK AND CORPORATE TRANSACTIONS.


 


11.1         Stock
Adjustments. If any change is made
in the stock subject to the Plan, or subject to any Option (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in property
other than cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or otherwise), the Plan and
outstanding Options will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding Options.


 


11.2         Corporate
Transactions. In the event of: (a) a
merger or consolidation in which the Company is not the surviving corporation; (b) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company’s common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash, or otherwise; (c) a strategic corporate event, such as a
merger or acquisition, where the Company is technically the surviving entity,
but where other elements of a change of control are present, i.e. change in
management team or board composition; (d) a transaction which the Board
determines in its sole discretion to constitute a change in control of the
Company; or (e) any capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged,
then, the time during which Options outstanding under the Plan become vested
shall be accelerated and all outstanding Options shall become immediately
exercisable upon such event and such Options shall continue to be exercisable
until the later of (i) twenty-four (24) months from the effective date of
such event, or (ii) the time specified in the Option Agreement during
which the Option is exercisable following an Optionee’s termination of service;
provided, however, that in no event shall the Option be exercisable after the
expiration of its term.


 


12.           AMENDMENT
OF THE PLAN.


 


12.1         Amendments.
The Board at any time, and from time to time, may amend the Plan. However, as
provided in Section 11, no amendment shall be effective unless approved by
the stockholders of the Company within twelve months before or after the
adoption of the amendment, where the amendment will:


 


12.1.1      Increase
the number of shares reserved for Options under the Plan;


 


12.1.2      Modify
the requirements as to eligibility for participation in the Plan to the extent
such modification requires stockholder approval in order for the Plan to
satisfy the requirements of Sections 162(m) and 422 of the Code;


 


12.1.3      Modify
the Plan in any other way if such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section 422 of the Code
or to comply


 

















 


with
the requirements of Rule 16b-3 or Nasdaq or other applicable securities
exchange listing requirements;


 


12.1.4     Decrease
the minimum exercise price set forth in paragraph 6.2; or


 


12.1.5     Remove
the limitation provided in Section 7.


 


12.2         Compliance.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide under the provisions of the
Code and the regulations promulgated thereunder relating to ISOs and/or to
bring the Plan and/or ISOs granted under it into compliance therewith.


 


12.3         Consent.
Rights and obligations under any Option granted before amendment of the Plan
shall not be altered or impaired by any amendment of the Plan unless (a) the
Company requests the consent of the person to whom the Option was granted and (b) such
person consents in writing.


 


13.           TERMINATION
OR SUSPENSION OF THE PLAN.


 


13.1         Termination.
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on midnight, May 31, 2012. No Options
may be granted under the Plan while the Plan is suspended or after it is
terminated.


 


13.2         Rights
and Obligations. Any Options granted
while the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the holder of the Options.


 


14.           EFFECTIVE
DATE OF PLAN. The Plan shall become effective as determined by the Board, but
no Options granted under the Plan shall be exercisable unless and until the
Plan has been approved by the stockholders of the Company.