Exhibit 10.3


 


AVANT
IMMUNOTHERAPEUTICS, INC.


 


2008 STOCK OPTION AND INCENTIVE PLAN


 


SECTION 1. GENERAL
PURPOSE OF THE PLAN; DEFINITIONS


 


The name of the plan is the AVANT Immunotherapeutics,
Inc. 2008 Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan
is to encourage and enable the officers, employees, Non-Employee Directors and
other key persons (including consultants and prospective employees) of AVANT
Immunotherapeutics, Inc. (the “Company”) and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company’s
welfare will assure a closer identification of their interests with those of
the Company and its stockholders, thereby stimulating their efforts on the
Company’s behalf and strengthening their desire to remain with the Company.


 


The following terms shall be defined as set forth
below:


 


“Act” means the
Securities Act of 1933, as amended, and the rules and regulations thereunder.


 


“Administrator” means either the
Board or the compensation committee of the Board or a similar committee
performing the functions of the compensation committee and which is comprised
of not less than two Non-Employee Directors who are independent.


 


“Award” or “Awards,” except where referring to a
particular category of grant under the Plan, shall include Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock
Awards, Restricted Stock Awards, Unrestricted Stock Awards, Cash-Based Awards,
Performance Share Awards and Dividend Equivalent Rights.


 


“Award Agreement” means a written
or electronic agreement setting forth the terms and provisions applicable to an
Award granted under the Plan. Each Award Agreement is subject to the terms and
conditions of the Plan.


 


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


 


“Cash-Based Award” means an Award
entitling the recipient to receive a cash-denominated payment.


 


“Change of Control” is defined in
Section 20.


 


“Code” means the
Internal Revenue Code of 1986, as amended, and any successor Code, and related
rules, regulations and interpretations.


 


“Covered Employee”
means an employee who is a “Covered Employee” within the meaning of
Section 162(m) of the Code.


 

















 


“Deferred Stock Award”
means an Award of phantom stock units to a grantee.


 


“Dividend Equivalent Right”
means an Award entitling the grantee to receive credits based on cash dividends
that would have been paid on the shares of Stock specified in the Dividend
Equivalent Right (or other award to which it relates) if such shares had been
issued to and held by the grantee.


 


“Effective Date”
means the date on which the Plan is approved by stockholders as set forth in
Section 22.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.


 


“Fair Market Value”
of the Stock on any given date means the fair market value of the Stock determined
in good faith by the Administrator; provided, however, that if the Stock is
admitted to quotation on the National Association of Securities Dealers
Automated Quotation System (“NASDAQ”), NASDAQ Capital Market or another
national securities exchange, the determination shall be made by reference to
market quotations. If there are no market quotations for such date, the
determination shall be made by reference to the last date preceding such date
for which there are market quotations.


 


“Incentive Stock Option”
means any Stock Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.


 


 “Non-Employee Director”
means a member of the Board who is not also an employee of the Company or any
Subsidiary.


 


“Non-Qualified Stock Option”
means any Stock Option that is not an Incentive Stock Option.


 


“Option” or “Stock Option” means any option to
purchase shares of Stock granted pursuant to Section 5.


 


“Performance-Based Award” means
any Restricted Stock Award, Deferred Stock Award, Performance Share Award or
Cash-Based Award granted to a Covered Employee that is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code and the regulations promulgated
thereunder.


 


“Performance Criteria” means the
performance criteria used in performance goals governing Performance-based
Awards granted to Covered Employees which may include any or all of the
following:  (i) the Company’s return on
equity, assets, capital or investment, (ii) pre-tax or after-tax profit levels
of the Company or any Subsidiary, a division, an operating unit or a business
segment of the Company, or any combination of the foregoing; (iii) cash flow,
funds from operations, year-end cash and equivalents balance or similar
measure; (iv) total shareholder return; (v) changes in the market price of the
Stock; (vi) sales or market share; (vii) earnings per share; (viii)
partnerships, collaborations, joint ventures, alliances and similar
arrangements involving the Company; (ix) mergers, acquisitions and business
combinations of or by the Company; or (x) the Company’s rights to intellectual
property and scientific discoveries.


 


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“Performance Cycle”
means 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 Criteria will be measured for the purpose of determining a
grantee’s right to and the payment of a Restricted Stock Award, Deferred Stock
Award, Performance Share Award or Cash-Based Award.


 


“Performance Goals”
means, for a Performance Cycle, the specific goals established in writing by
the Administrator for a Performance Cycle based upon the Performance Criteria.


 


“Performance Share Award” means an Award entitling the recipient to
acquire shares of Stock upon the attainment of specified Performance Goals.


 


“Restricted Stock Award”
means an Award entitling the recipient to acquire, at such purchase price
(which may be zero) as determined by the Administrator, shares of Stock subject
to such restrictions and conditions as the Administrator may determine at the
time of grant.


 


“Sale Event” shall mean (i) the
sale of all or substantially all of the assets of the Company on a consolidated
basis to an unrelated person or entity, (ii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for securities of the successor entity and the holders of the Company’s
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the successor entity immediately
upon completion of such transaction, or (iii) the sale of all of the Stock of
the Company to an unrelated person or entity.


 


“Sale Price”
means the value as determined by the Administrator of the consideration
payable, or otherwise to be received by stockholders, per share of Stock
pursuant to a Sale Event.


 


“Section 409A” means Section 409A
of the Code and the regulations and other guidance promulgated thereunder.


 


“Stock” means the
Common Stock, par value $.01 per share, of the Company, subject to adjustments
pursuant to Section 3.


 


“Stock Appreciation Right”
means an Award entitling the recipient to receive shares of Stock having a
value equal to the excess of the Fair Market Value of the Stock on the date of
exercise over the exercise price of the Stock Appreciation Right multiplied by
the number of shares of Stock with respect to which the Stock Appreciation
Right shall have been exercised.


 


“Subsidiary” means
any corporation or other entity (other than the Company) in which the Company
has at least a 50 percent interest, either directly or indirectly.


 


“Ten Percent Owner” means an
employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10 percent of the combined voting power
of all classes of stock of the Company or any parent or subsidiary corporation.


 


“Unrestricted Stock Award”
means an Award of shares of Stock free of any restrictions.


 


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SECTION 2. ADMINISTRATION
OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS


 


(a)                                  Administration
of Plan. The Plan shall be administered by the Administrator.


 


(b)                                 Powers
of Administrator. The Administrator shall have the power and authority to
grant Awards consistent with the terms of the Plan, including the power and
authority:


 


(i)                                     to
select the individuals to whom Awards may from time to time be granted;


 


(ii)                                  to
determine the time or times of grant, and the extent, if any, of Incentive
Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards,
Cash-Based Awards, Performance Share Awards and Dividend Equivalent Rights, or
any combination of the foregoing, granted to any one or more grantees;


 


(iii)                               to determine the number
of shares of Stock to be covered by any Award;


 


(iv)                              to
determine and modify from time to time the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which
terms and conditions may differ among individual Awards and grantees, and to
approve the form of written instruments evidencing the Awards;


 


(v)                                 to
accelerate at any time the exercisability or vesting of all or any portion of
any Award;


 


(vi)                              subject
to the provisions of Section 5(a)(ii), to extend at any time the period in
which Stock Options may be exercised; and


 


(vii)                           at any time to adopt, alter
and repeal such rules, guidelines and practices for administration of the Plan
and for its own acts and proceedings as it shall deem advisable; to interpret
the terms and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection with
the Plan; and to otherwise supervise the administration of the Plan.


 


All decisions and interpretations of the Administrator
shall be binding on all persons, including the Company and Plan grantees.


 


(c)                                  Delegation
of Authority to Grant Options. Subject to applicable law, the
Administrator, in its discretion, may delegate to the Chief Executive Officer
of the Company all or part of the Administrator’s authority and duties with
respect to the granting of Options, to individuals who are (i) not subject to
the reporting and other provisions of Section 16 of the Exchange Act and
(ii) not Covered Employees. Any such delegation by the Administrator shall
include a limitation as to the amount of Options that may be granted during the
period of the delegation and shall contain guidelines as to the determination
of the exercise price and the vesting criteria. The Administrator may revoke or
amend the terms of a delegation at any time 


 


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but such action
shall not invalidate any prior actions of the Administrator’s delegate or
delegates that were consistent with the terms of the Plan.


 


(d)                                 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, without limitation, the term of an Award, the provisions applicable in
the event employment or service terminates, and the Company’s authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.


 


(e)                                  Indemnification.
Neither the Board nor the Administrator, nor any member of either or any
delegate thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan,
and the members of the Board and the Administrator (and any delegate thereof)
shall be entitled in all cases to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys’ fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under the Company’s articles or bylaws
or any directors’ and officers’ liability insurance coverage which may be in
effect from time to time and/or any indemnification agreement between such
individual and the Company.


 


SECTION 3. STOCK
ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION


 


(a)                                  Stock
Issuable. The maximum number of shares of Stock reserved and available for
issuance under the Plan shall be 18,000,000 shares, subject to adjustment as
provided in Section 3(b); provided that not more than 4,500,000 shares
shall be issued in the form of Unrestricted Stock Awards, Restricted Stock
Awards, Deferred Stock Awards or Performance Share Awards. For purposes of this
limitation, the shares of Stock underlying the Awards granted under the Plan that
are forfeited, canceled or otherwise terminated (other than by exercise) shall
be added back to the shares of Stock available for issuance under the Plan. Subject
to such overall limitations, shares of Stock may be issued up to such maximum
number pursuant to any type or types of Award; provided, however, that Stock
Options or Stock Appreciation Rights with respect to no more than 4,00,000
shares of Stock may be granted to any one individual grantee during any one
calendar year period. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.


 


(b)                                 Changes
in Stock. Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company’s capital
stock, the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the
Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such
shares of Stock or other securities, or, if, as a result of any merger or
consolidation, sale of all or substantially all of the assets of the Company,
the outstanding shares of Stock are converted into or exchanged for securities
of the Company or any successor entity (or a parent or subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, including the
maximum number of shares that may be issued in the form of Unrestricted Stock
Awards, Restricted Stock Awards, Deferred 


 


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Stock Awards or
Performance Share Awards, (ii) the number of Stock Options or Stock
Appreciation Rights that can be granted to any one individual grantee and the
maximum number of shares that may be granted under a Performance-Based Award,
(iii) the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, (iv) the repurchase price, if any, per share
subject to each outstanding Restricted Stock Award, and (v) the price for each
share subject to any then outstanding Stock Options and Stock Appreciation
Rights under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of Stock Options and Stock Appreciation
Rights) as to which such Stock Options and Stock Appreciation Rights remain
exercisable. The Administrator shall also make equitable or proportionate
adjustments in the number of shares subject to outstanding Awards and the
exercise price and the terms of outstanding Awards to take into consideration
cash dividends paid other than in the ordinary course or any other extraordinary
corporate event. The adjustment by the Administrator shall be final, binding
and conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Administrator in its discretion may
make a cash payment in lieu of fractional shares.


 


(c)                                  Mergers
and Other Transactions. Upon the effective time of the Sale Event, the Plan
and all outstanding Awards granted hereunder shall terminate, unless provision
is made in connection with the Sale Event in the sole discretion of the parties
thereto for the assumption or continuation of Awards theretofore granted by the
successor entity, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the
number and kind of shares and, if appropriate, the per share exercise prices,
as such parties shall agree (after taking into account any acceleration
hereunder). In the event of such termination, (i) the Company shall have the
option (in its sole discretion) to make or provide for a cash payment to the
grantees holding Options and Stock Appreciation Rights, in exchange for the
cancellation thereof, in an amount equal to the difference between (A) the Sale
Price multiplied by the number of shares of Stock subject to outstanding
Options and Stock Appreciation Rights (to the extent then exercisable (after
taking into account any acceleration hereunder) at prices not in excess of the
Sale Price) and (B) the aggregate exercise price of all such outstanding
Options and Stock Appreciation Rights; or (ii) each grantee shall be permitted,
within a specified period of time prior to the consummation of the Sale Event
as determined by the Administrator, to exercise all outstanding Options and
Stock Appreciation Rights held by such grantee.


 


(d)                                 Substitute
Awards. The Administrator may grant Awards under the Plan in substitution
for stock and stock based awards held by employees, directors or other key
persons of another corporation in connection with the merger or consolidation
of the employing corporation with the Company or a Subsidiary or the
acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Administrator may direct that the substitute awards
be granted on such terms and conditions as the Administrator considers
appropriate in the circumstances. Any substitute Awards granted under the Plan
shall not count against the share limitation set forth in Section 3(a).


 


SECTION 4. ELIGIBILITY


 


Grantees under the Plan will be such full or part-time
officers and other employees, Non-Employee Directors and key persons (including
consultants and prospective employees) of the 


 


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Company and its Subsidiaries as are selected from time
to time by the Administrator in its sole discretion.


 


SECTION 5. STOCK
OPTIONS


 


Any Stock Option granted under the Plan shall be in
such form as the Administrator may from time to time approve.


 


Stock Options granted under the Plan may be either
Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options
may be granted only to employees of the Company or any Subsidiary that is a “subsidiary
corporation” within the meaning of Section 424(f) of the Code. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
be deemed a Non-Qualified Stock Option.


 


Stock
Options granted pursuant to this Section 5 shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable.


 


(a)                                  Exercise
Price. The exercise price per share for the Stock covered by a Stock Option
granted pursuant to this Section 5 shall be determined by the
Administrator at the time of grant but shall not be less than 100 percent of
the Fair Market Value on the date of grant. In the case of an Incentive Stock
Option that is granted to a Ten Percent Owner, the option price of such
Incentive Stock Option shall be not less than 110 percent of the Fair Market
Value on the grant date.


 


(b)                                 Option
Term. The term of each Stock Option shall be fixed by the Administrator,
but no Stock Option shall be exercisable more than ten years after the date the
Stock Option is granted. In the case of an Incentive Stock Option that is
granted to a Ten Percent Owner, the term of such Stock Option shall be no more
than five years from the date of grant.


 


(c)                                  Exercisability;
Rights of a Stockholder. Stock Options shall become exercisable at such
time or times, whether or not in installments, as shall be determined by the
Administrator at or after the grant date. The Administrator may at any time
accelerate the exercisability of all or any portion of any Stock Option. An
optionee shall have the rights of a stockholder only as to shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.


 


(d)                                 Method
of Exercise. Stock Options may be exercised in whole or in part, by giving
written notice of exercise to the Company, specifying the number of shares to
be purchased. Payment of the purchase price may be made by one or more of the
following methods to the extent provided in the Option Award Agreement:


 


(i)                                     In
cash, by certified or bank check or other instrument acceptable to the
Administrator;


 


(ii)                                  Through
the delivery (or attestation to the ownership) of shares of Stock that have
been purchased by the optionee on the open market or that are beneficially
owned by the optionee and are not then subject to restrictions under any Company
plan. Such surrendered shares shall be valued at Fair Market Value on the
exercise date. To the extent required to avoid 


 


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variable
accounting treatment under FAS 123R or other applicable accounting rules, such
surrendered shares shall have been owned by the optionee for at least six
months; or


 


(iii)                               By the optionee
delivering to the Company a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company cash or
a check payable and acceptable to the Company for the purchase price; provided
that in the event the optionee chooses to pay the purchase price as so
provided, the optionee and the broker shall comply with such procedures and
enter into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment procedure.


 


Payment
instruments will be received subject to collection. The transfer to the
optionee on the records of the Company or of the transfer agent of the shares
of Stock to be purchased pursuant to the exercise of a Stock Option will be
contingent upon receipt from the optionee (or a purchaser acting in his stead
in accordance with the provisions of the Stock Option) by the Company of the
full purchase price for such shares and the fulfillment of any other
requirements contained in the Option Award Agreement or applicable provisions
of laws (including the satisfaction of any withholding taxes that the Company
is obligated to withhold with respect to the optionee). In the event an
optionee chooses to pay the purchase price by previously-owned shares of Stock
through the attestation method, the number of shares of Stock transferred to
the optionee upon the exercise of the Stock Option shall be net of the number
of attested shares. In the event that the Company establishes, for itself or
using the services of a third party, an automated system for the exercise of
Stock Options, such as a system using an internet website or interactive voice
response, then the paperless exercise of Stock Options may be permitted through
the use of such an automated system.


 


(iv)                              Annual
Limit on Incentive Stock Options. To the extent required for “incentive
stock option” treatment under Section 422 of the Code, the aggregate Fair
Market Value (determined as of the time of grant) of the shares of Stock with
respect to which Incentive Stock Options granted under this Plan and any other
plan of the Company or its parent and subsidiary corporations become exercisable
for the first time by an optionee during any calendar year shall not exceed
$100,000. To the extent that any Stock Option exceeds this limit, it shall
constitute a Non-Qualified Stock Option.


 


SECTION 6. STOCK
APPRECIATION RIGHTS


 


(a)                                  Exercise
Price of Stock Appreciation Rights. The exercise price of a Stock
Appreciation Right shall not be less than 100 percent of the Fair Market Value
of the Stock on the date of grant.


 


(b)                                 Grant
and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be
granted by the Administrator independently of any Stock Option granted pursuant
to Section 5 of the Plan.


 


(c)                                  Terms
and Conditions of Stock Appreciation Rights. Stock Appreciation Rights
shall be subject to such terms and conditions as shall be determined from time
to time by the Administrator.


 


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SECTION 7. RESTRICTED
STOCK AWARDS


 


(a)                                  Nature
of Restricted Stock Awards. The Administrator shall determine the
restrictions and conditions applicable to each Restricted Stock Award at the
time of grant. Conditions may be based on continuing employment (or other
service relationship) and/or achievement of pre-established performance goals
and objectives. The grant of a Restricted Stock Award is contingent on the
grantee executing the Restricted Stock Award Agreement. The terms and
conditions of each such Award Agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and grantees.


 


(b)                                 Rights
as a Stockholder. Upon execution of the Restricted Stock Award Agreement
and payment of any applicable purchase price, a grantee shall have the rights
of a stockholder with respect to the voting of the Restricted Stock, subject to
such conditions contained in the Restricted Stock Award Agreement. Unless the
Administrator shall otherwise determine, (i) uncertificated Restricted Stock
shall be accompanied by a notation on the records of the Company or the
transfer agent to the effect that they are subject to forfeiture until such
Restricted Stock are vested as provided in Section 7(d) below, and (ii)
certificated Restricted Stock shall remain in the possession of the Company
until such Restricted Stock is vested as provided in Section 7(d) below,
and the grantee shall be required, as a condition of the grant, to deliver to
the Company such instruments of transfer as the Administrator may prescribe.


 


(c)                                  Restrictions.
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of except as specifically provided herein or in the
Restricted Stock Award Agreement. Except as may otherwise be provided by the
Administrator either in the Award Agreement or, subject to Section 18 below, in
writing after the Award Agreement is issued if a grantee’s employment (or other
service relationship) with the Company and its Subsidiaries terminates for any
reason, any Restricted Stock that has not vested at the time of termination
shall automatically and without any requirement of notice to such grantee from
or other action by or on behalf of, the Company be deemed to have been
reacquired by the Company at its original purchase price (if any) from such
grantee or such grantee’s legal representative simultaneously with such
termination of employment (or other service relationship), and thereafter shall
cease to represent any ownership of the Company by the grantee or rights of the
grantee as a stockholder. Following such deemed reacquisition of unvested
Restricted Stock that are represented by physical certificates, a grantee shall
surrender such certificates to the Company upon request without consideration.


 


(d)                                 Vesting
of Restricted Stock. The Administrator at the time of grant shall specify
the date or dates and/or the attainment of pre-established performance goals,
objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company’s right of repurchase or forfeiture shall
lapse. Notwithstanding the foregoing, in the event that any such Restricted
Stock granted to employees shall have a performance-based goal, the restriction
period with respect to such shares shall not be less than one year, and in the
event any such Restricted Stock granted to employees shall have a time-based
restriction, the total restriction period with respect to such shares shall not
be less than three years; provided, however, that Restricted Stock with a
time-based restriction may become vested incrementally over such three-year
period. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have 


 


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lapsed shall no
longer be Restricted Stock and shall be deemed “vested.”  Except as may otherwise be provided by the
Administrator either in the Award Agreement or, subject to Section 18
below, in writing after the Award Agreement is issued, a grantee’s rights in
any shares of Restricted Stock that have not vested shall automatically terminate
upon the grantee’s termination of employment (or other service relationship)
with the Company and its Subsidiaries and such shares shall be subject to the
provisions of Section 7(c) above.


 


SECTION 8. DEFERRED
STOCK AWARDS


 


(a)                                  Nature
of Deferred Stock Awards. The Administrator shall determine the
restrictions and conditions applicable to each Deferred Stock Award at the time
of grant. Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the grantee
executing the Deferred Stock Award Agreement. The terms and conditions of each
such Award Agreement shall be determined by the Administrator, and such terms
and conditions may differ among individual Awards and grantees. Notwithstanding
the foregoing, in the event that any such Deferred Stock Award granted to
employees shall have a performance-based goal, the restriction period with
respect to such Award shall not be less than one year, and in the event any
such Deferred Stock Award granted to employees shall have a time-based
restriction, the total restriction period with respect to such Award shall not
be less than three years; provided, however, that any Deferred Stock Award with
a time-based restriction may become vested incrementally over such three-year
period. At the end of the deferral period, the Deferred Stock Award, to the
extent vested, shall be settled in the form of shares of Stock. To the extent that
a Deferred Stock Award is subject to Section 409A, it may contain such
additional terms and conditions as the Administrator shall determine in its
sole discretion in order for such Award to comply with the requirements of
Section 409A.


 


(b)                                 Election
to Receive Deferred Stock Awards in Lieu of Compensation. The Administrator
may, in its sole discretion, permit a grantee to elect to receive a portion of
future cash compensation otherwise due to such grantee in the form of a
Deferred Stock Award. Any such election shall be made in writing and shall be
delivered to the Company no later than the date specified by the Administrator
and in accordance with Section 409A and such other rules and procedures
established by the Administrator. Any such future cash compensation that the
grantee elects to defer shall be converted to a fixed number of phantom stock
units based on the Fair Market Value of Stock on the date the compensation
would otherwise have been paid to the grantee if such payment had not been
deferred as provided herein. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the
Administrator deems appropriate.


 


(c)                                  Rights
as a Stockholder. A grantee shall have the rights as a stockholder only as
to shares of Stock acquired by the grantee upon settlement of a Deferred Stock
Award; provided, however, that the grantee may be credited with Dividend
Equivalent Rights with respect to the phantom stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Administrator
may determine.


 


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(d)                                 Termination.
Except as may otherwise be provided by the Administrator either in the Award
Agreement or, subject to Section 18 below, in writing after the Award
Agreement is issued, a grantee’s right in all Deferred Stock Awards that have
not vested shall automatically terminate upon the grantee’s termination of
employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.


 


SECTION 9. UNRESTRICTED
STOCK AWARDS


 


Grant or Sale of Unrestricted Stock.
The Administrator may, in its sole discretion, grant (or sell at par value or
such higher purchase price determined by the Administrator) an Unrestricted
Stock Award under the Plan. Unrestricted Stock Awards may be granted in respect
of past services or other valid consideration, or in lieu of cash compensation
due to such grantee.


 


SECTION 10. CASH-BASED
AWARDS


 


Grant of Cash-Based Awards. The
Administrator may, in its sole discretion, grant Cash-Based Awards to any
grantee in such number or amount and upon such terms, and subject to such
conditions, as the Administrator shall determine at the time of grant. The
Administrator shall determine the maximum duration of the Cash-Based Award, the
amount of cash to which the Cash-Based Award pertains, the conditions upon
which the Cash-Based Award shall become vested or payable, and such other
provisions as the Administrator shall determine. Each Cash-Based Award shall
specify a cash-denominated payment amount, formula or payment ranges as
determined by the Administrator. Payment, if any, with respect to a Cash-Based
Award shall be made in accordance with the terms of the Award and may be made
in cash or in shares of Stock, as the Administrator determines.


 


SECTION 11. PERFORMANCE
SHARE AWARDS


 


(a)                                  Nature
of Performance Share Awards. The Administrator may, in its sole discretion,
grant Performance Share Awards independent of, or in connection with, the
granting of any other Award under the Plan. The Administrator shall determine
whether and to whom Performance Share Awards shall be granted, the Performance
Goals, the periods during which performance is to be measured, and such other
limitations and conditions as the Administrator shall determine.


 


(b)                                 Rights
as a Stockholder. A grantee receiving a Performance Share Award shall have
the rights of a stockholder only as to shares actually received by the grantee
under the Plan and not with respect to shares subject to the Award but not
actually received by the grantee. A grantee shall be entitled to receive shares
of Stock under a Performance Share Award only upon satisfaction of all
conditions specified in the Performance Share Award agreement (or in a
performance plan adopted by the Administrator).


 


(c)                                  Termination.
Except as may otherwise be provided by the Administrator either in the Award
agreement or, subject to Section 18 below, in writing after the Award
agreement is issued, a grantee’s rights in all Performance Share Awards shall
automatically terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.


 


11

















 


SECTION 12. PERFORMANCE-BASED
AWARDS TO COVERED EMPLOYEES


 


(a)                                  Performance-Based
Awards. Any employee or other key person providing services to the Company
and who is selected by the Administrator may be granted one or more
Performance-Based Awards in the form of a Restricted Stock Award, Deferred
Stock Award, Performance Share Awards or Cash-Based Award payable upon the
attainment of Performance Goals that are established by the Administrator and
relate to one or more of the Performance Criteria, in each case on a specified
date or dates or over any period or periods determined by the Administrator. The
Administrator shall define in an objective fashion the manner of calculating
the Performance Criteria it selects to use for any Performance Period. 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 division, business unit, or an individual. The
Administrator, in its discretion, may adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of an individual (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event or development, (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 (iii) in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions provided however, that the Administrator may not exercise such
discretion in a manner that would increase the Performance-Based Award granted
to a Covered Employee. Each Performance-Based Award shall comply with the
provisions set forth below.


 


(b)                                 Grant
of Performance-Based Awards. With respect to each Performance-Based Award
granted to a Covered Employee, the Administrator shall select, within the first
90 days of a Performance Cycle (or, if shorter, within the maximum period
allowed under Section 162(m) of the Code) the Performance Criteria for
such grant, and the Performance Goals with respect to each Performance
Criterion (including a threshold level of performance below which no amount
will become payable with respect to such Award). Each Performance-Based Award
will specify the amount payable, or the formula for determining the amount
payable, upon achievement of the various applicable performance targets. The
Performance Criteria established by the Administrator may be (but need not be)
different for each Performance Cycle and different Performance Goals may be
applicable to Performance-Based Awards to different Covered Employees.


 


(c)                                  Payment
of Performance-Based Awards. Following the completion of a Performance
Cycle, the Administrator shall meet to review and certify in writing whether,
and to what extent, the Performance Goals for the Performance Cycle have been
achieved and, if so, to also calculate and certify in writing the amount of the
Performance-Based Awards earned for the Performance Cycle. The Administrator
shall then determine the actual size of each Covered Employee’s
Performance-Based Award, and, in doing so, may reduce or eliminate the amount
of the Performance-Based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.


 


(d)                                 Maximum
Award Payable. The maximum Performance-Based Award payable to any one
Covered Employee under the Plan for a Performance Cycle is 3,000,000 Shares
(subject to adjustment as provided in Section 3(b) hereof).


 


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SECTION 13. DIVIDEND
EQUIVALENT RIGHTS


 


(a)                                  Dividend
Equivalent Rights. A Dividend Equivalent Right may be granted hereunder to
any grantee as a component of a Deferred Stock Award, Restricted Stock Award or
Performance Share Award or as a freestanding award. The terms and conditions of
Dividend Equivalent Rights shall be specified in the Award Agreement. Dividend
equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock,
which may thereafter accrue additional equivalents. Any such reinvestment shall
be at Fair Market Value on the date of reinvestment or such other price as may
then apply under a dividend reinvestment plan sponsored by the Company, if any.
Dividend Equivalent Rights may be settled in cash or shares of Stock or a
combination thereof, in a single installment or installments. A Dividend
Equivalent Right granted as a component of a Deferred Stock Award, Restricted
Stock Award or Performance Share Award may provide that such Dividend
Equivalent Right shall be settled upon settlement or payment of, or lapse of
restrictions on, such other Award, and that such Dividend Equivalent Right
shall expire or be forfeited or annulled under the same conditions as such
other Award. A Dividend Equivalent Right granted as a component of a Deferred
Stock Award, Restricted Stock Award or Performance Share Award may also contain
terms and conditions different from such other Award.


 


(b)                                 Interest
Equivalents. Any Award under this Plan that is settled in whole or in part
in cash on a deferred basis may provide in the grant for interest equivalents
to be credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be specified
by the grant.


 


(c)                                  Termination.
Except as may otherwise be provided by the Administrator either in the Award
Agreement or, subject to Section 18 below, in writing after the Award
Agreement is issued, a grantee’s rights in all Dividend Equivalent Rights or
interest equivalents granted as a component of a Deferred Stock Award,
Restricted Stock Award or Performance Share Award that has not vested shall
automatically terminate upon the grantee’s termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.


 


SECTION 14. TRANSFERABILITY
OF AWARDS


 


(a)                                  Transferability.
Except as provided in Section 14(b) below, during a grantee’s lifetime,
his or her Awards shall be exercisable only by the grantee, or by the grantee’s
legal representative or guardian in the event of the grantee’s incapacity. No
Awards shall be sold, assigned, transferred or otherwise encumbered or disposed
of by a grantee other than by will or by the laws of descent and distribution. No
Awards shall be subject, in whole or in part, to attachment, execution, or levy
of any kind, and any purported transfer in violation hereof shall be null and
void.


 


(b)                                 Administrator
Action. Notwithstanding Section 14(a), the Administrator, in its
discretion, may provide either in the Award Agreement regarding a given Award
or by subsequent written approval that the grantee (who is an employee or
director) may transfer his or her Awards (other than any Incentive Stock
Options) to his or her immediate family members, to trusts for the benefit of
such family members, or to partnerships in which such family members 


 


13

















 


are the only
partners, provided that the transferee agrees in writing with the Company to be
bound by all of the terms and conditions of this Plan and the applicable Award.


 


(c)                                  Family
Member. For purposes of Section 14(b), “family member” shall mean a
grantee’s 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 grantee’s household (other than
a tenant of the grantee), a trust in which these persons (or the grantee) have
more than 50 percent of the beneficial interest, a foundation in which these
persons (or the grantee) control the management of assets, and any other entity
in which these persons (or the grantee) own more than 50 percent of the voting
interests.


 


(d)                                 Designation
of Beneficiary. Each grantee to whom an Award has been made under the Plan
may designate a beneficiary or beneficiaries to exercise any Award or receive
any payment under any Award payable on or after the grantee’s death. Any such
designation shall be on a form provided for that purpose by the Administrator
and shall not be effective until received by the Administrator. If no
beneficiary has been designated by a deceased grantee, or if the designated
beneficiaries have predeceased the grantee, the beneficiary shall be the
grantee’s estate.


 


SECTION 15. TAX
WITHHOLDING


 


(a)                                  Payment
by Grantee. Each grantee shall, no later than the date as of which the
value of an Award or of any Stock or other amounts received thereunder first
becomes includable in the gross income of the grantee for Federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any
kind required by law to be withheld by the Company with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the grantee. The Company’s obligation to deliver evidence of book entry (or
stock certificates) to any grantee is subject to and conditioned on tax
withholding obligations being satisfied by the grantee.


 


(b)                                 Payment
in Stock. Subject to approval by the Administrator, a grantee may elect to
have the Company’s minimum required tax withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Stock
to be issued pursuant to any Award a number of shares with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy
the withholding amount due.


 


SECTION 16. SECTION
409A AWARDS.


 


To the extent that any Award is determined to
constitute “nonqualified deferred compensation” within the meaning of Section
409A (a “409A Award”), the Award shall be subject to such additional rules and
requirements as specified by the Administrator from time to time in order to
comply with Section 409A. In this regard, if any amount under a 409A Award is
payable upon a “separation from service” (within the meaning of Section 409A)
to a grantee who is then considered a “specified employee” (within the meaning
of Section 409A), then no such 


 


14

















 


payment shall be made prior to the date that is the
earlier of (i) six months and one day after the grantee’s separation from service,
or (ii) the grantee’s death, but only to the extent such delay is necessary to
prevent such payment from being subject to interest, penalties and/or
additional tax imposed pursuant to Section 409A. Further, the settlement of any
such Award may not be accelerated except to the extent permitted by Section
409A.


 


SECTION 17. TRANSFER,
LEAVE OF ABSENCE, ETC.


 


For purposes of the Plan, the following events shall
not be deemed a termination of employment:


 


(a)                                  a
transfer to the employment of the Company from a Subsidiary or from the Company
to a Subsidiary, or from one Subsidiary to another; or


 


(b)                                 an
approved leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the employee’s right to re-employment is guaranteed
either by a statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Administrator otherwise so provides in
writing.


 


SECTION 18. AMENDMENTS
AND TERMINATION


 


The Board may, at any time, amend or discontinue the
Plan and the Administrator may, at any time, amend or cancel any outstanding
Award for the purpose of satisfying changes in law or for any other lawful
purpose, but no such action shall (a) adversely affect rights under any
outstanding Award without the holder’s consent or (b) except as provided in
Section 3(b) or 3(c), without the prior approval of the Company’s stockholders,
reduce the exercise price of or otherwise reprice, including through
replacement grants, any outstanding Stock Option or Stock Appreciation Right. To
the extent required under the rules of any securities exchange or market system
on which the Stock is listed, to the extent determined by the Administrator to
be required by the Code to ensure that Incentive Stock Options granted under
the Plan are qualified under Section 422 of the Code or to ensure that
compensation earned under Awards qualifies as performance-based compensation under
Section 162(m) of the Code, Plan amendments shall be subject to approval
by the Company stockholders entitled to vote at a meeting of stockholders. Nothing
in this Section 18 shall limit the Administrator’s authority to take any
action permitted pursuant to Section 3(c).


 


SECTION 19. STATUS OF
PLAN


 


With respect to the portion of any Award that has not
been exercised and any payments in cash, Stock or other consideration not
received by a grantee, a grantee shall have no rights greater than those of a
general creditor of the Company unless the Administrator shall otherwise
expressly determine in connection with any Award or Awards. In its sole
discretion, the Administrator may authorize the creation of trusts or other
arrangements to meet the Company’s obligations to deliver Stock or make
payments with respect to Awards hereunder, provided that the existence of such
trusts or other arrangements is consistent with the foregoing sentence.


 


15

















 


SECTION 20. CHANGE OF
CONTROL PROVISIONS


 


Upon the occurrence of a Change of Control as defined
in this Section 20:


 


(a)                                  Except
as otherwise provided in the applicable Award agreement, each outstanding Stock
Option, Stock Appreciation Right and Dividend Equivalent Right shall
automatically become fully exercisable.


 


(b)                                 Except
as otherwise provided in the applicable Award Agreement, conditions and
restrictions on each outstanding Restricted Stock Award, Deferred Stock Award
and Performance Share Award which relate solely to the passage of time and
continued employment will be removed. Performance or other conditions (other
than conditions and restrictions relating solely to the passage of time and
continued employment) will continue to apply unless otherwise provided in the
applicable Award Agreement.


 


(c)                                  “Change of Control” shall mean the
occurrence of any one of the following events:


 


(i)                                     any
“Person,” as such term is used in
Sections 13(d) and 14(d) of the Act (other than the Company, any of its
Subsidiaries, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any of
its Subsidiaries), together with all “affiliates” and “associates” (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall become the
“beneficial owner” (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 25 percent or
more of the combined voting power of the Company’s then outstanding securities
having the right to vote in an election of the Company’s Board of Directors (“Voting
Securities”) (in such case other than as a result of an acquisition of
securities directly from the Company); or


 


(ii)                                  persons
who, as of the Effective Date, constitute the Company’s Board of Directors (the
“Incumbent Directors”) cease for any reason, including, without limitation, as
a result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board, provided that any person becoming
a director of the Company subsequent to the Effective Date shall be considered an
Incumbent Director if such person’s election was approved by or such person was
nominated for election by either (A) a vote of at least a majority of the
Incumbent Directors or (B) a vote of at least a majority of the Incumbent
Directors who are members of a nominating committee comprised, in the majority,
of Incumbent Directors; but provided further, that any such person whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of members of the Board of Directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the
Board, including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, shall not be considered an
Incumbent Director; or


 


(iii)                               the consummation of (A)
any consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term
is defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate more than 


 


16

















 


50 percent of the
voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), (B)
any sale, lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company; or


 


(iv)                              the
shareholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company.


 


Notwithstanding the foregoing, a “Change of Control”
shall not be deemed to have occurred for purposes of the foregoing clause (i)
solely as the result of an acquisition of securities by the Company which, by
reducing the number of shares of Voting Securities outstanding, increases the
proportionate number of shares of Voting Securities beneficially owned by any
person to 25 percent or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any
person referred to in this sentence shall thereafter become the beneficial
owner of any additional shares of Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction or as a result of an
acquisition of securities directly from the Company), then a “Change of Control” shall be deemed to have
occurred for purposes of the foregoing clause (i).


 


SECTION 21. GENERAL
PROVISIONS


 


(a)                                  No
Distribution. The Administrator may require each person acquiring Stock
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to distribution thereof.


 


(b)                                 Delivery
of Stock Certificates. Stock certificates to grantees under this Plan shall
be deemed delivered for all purposes when the Company or a stock transfer agent
of the Company shall have mailed such certificates in the United States mail,
addressed to the grantee, at the grantee’s last known address on file with the
Company. Uncertificated Stock shall be deemed delivered for all purposes when
the Company or a Stock transfer agent of the Company shall have given to the
grantee by electronic mail (with proof of receipt) or by United States mail,
addressed to the grantee, at the grantee’s last known address on file with the
Company, notice of issuance and recorded the issuance in its records (which may
include electronic “book entry” records). 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 Administrator has determined, with advice of counsel (to
the extent the Administrator deems such advice necessary or advisable), 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,
quoted or traded. All Stock certificates delivered pursuant to the Plan shall
be 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 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 an individual make such reasonable covenants,
agreements, and representations as the Administrator, in its discretion, deems
necessary or advisable in order to comply with any 


 


17

















 


such laws,
regulations, or requirements. The Administrator shall have the right to require
any individual 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.


 


(c)                                  Stockholder
Rights. Until Stock is deemed delivered in accordance with Section 21(b),
no right to vote or receive dividends or any other rights of a stockholder will
exist with respect to shares of Stock to be issued in connection with an Award,
notwithstanding the exercise of a Stock Option or any other action by the
grantee with respect to an Award.


 


(d)                                 Other
Compensation Arrangements; No Employment Rights. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements, including trusts, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.


 


(e)                                  Trading
Policy Restrictions. Option exercises and other Awards under the Plan shall
be subject to such Company’s insider trading policy and procedures, as in
effect from time to time.


 


(f)                                    Forfeiture
of Awards under Sarbanes-Oxley Act. If the Company is required to prepare
an accounting restatement due to the material noncompliance of the Company, as
a result of misconduct, with any financial reporting requirement under the
securities laws, then any grantee who is one of the individuals subject to
automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall
reimburse the Company for the amount of any Award received by such individual
under the Plan during the 12-month period following the first public issuance
or filing with the United States Securities and Exchange Commission, as the case
may be, of the financial document embodying such financial reporting
requirement.


 


SECTION 22. EFFECTIVE
DATE OF PLAN


 


This Plan shall become effective upon approval by the
holders of a majority of the votes cast at a meeting of stockholders at which a
quorum is present. No grants of Stock Options and other Awards may be made
hereunder after the tenth anniversary of the Effective Date and no grants of
Incentive Stock Options may be made hereunder after the tenth anniversary of
the date the Plan is approved by the Board.


 


SECTION 23. GOVERNING
LAW


 


This Plan and all Awards and actions taken thereunder
shall be governed by, and construed in accordance with, the laws of the State
of Delaware, applied without regard to conflict of law principles.


 


18