exv10w1






Exhibit 10.1




VERMILLION, INC.




2010 STOCK INCENTIVE PLAN


 




Plan Document




 




1. Introduction.




     (a) Purpose. Vermillion, Inc. (the “Company”) hereby establishes this equity-based
incentive compensation plan to be known as the “Vermillion, Inc. 2010 Stock Incentive Plan” (the
“Plan”), for the following purposes: (i) to enhance the Company’s ability to attract highly
qualified personnel; (ii) to strengthen its retention capabilities; (iii) to enhance the long-term
performance and competitiveness of the Company; and (iv) to align the interests of Plan
participants with those of the Company’s stockholders. This Plan is intended to serve as the sole
source for all future equity-based awards to those eligible for Plan participation.



     (b) Effective Date. This Plan shall become effective immediately upon Board approval (the
“Effective Date”), provided that the Company’s ability to award ISOs under this Plan shall
be subject to and contingent on the Plan’s receipt of stockholder approval by a vote of a majority
of the votes cast (or by such other stockholder vote that the Committee determines to be sufficient
for the issuance of ISOs according to the Company’s governing documents and Applicable Law) at a
meeting of the Company’s stockholders that is duly held within one year after the date on which the
Board approves the Plan.



     (c) Definitions. Terms in the Plan and any Appendix that begin with an initial capital letter
have the defined meaning set forth in Appendix I or elsewhere in this Plan, in either case unless
the context of their use clearly indicates a different meaning.



     (d) Effect on Other Plans, Awards, and Arrangements. This Plan is not intended to affect and
shall not affect any stock options, equity-based compensation, or other benefits that the Company
or its Affiliates may have provided, or may separately provide in the future, pursuant to any
agreement, plan, or program that is independent of this Plan.



     (e) Appendices. Incorporated by reference and thereby part of the Plan are the definitions
set forth in Appendix I hereof.


2. Types of Awards. The Plan permits the granting of the following types of Awards
according to the Sections of the Plan listed here:




	 	 	 
	Section 5

	 	Stock Options
	Section 6

	 	Share Appreciation Rights (“SARs”)
	Section 7

	 	Restricted Shares, Restricted Share Units (“RSUs”), and
Unrestricted Shares
	Section 8

	 	Deferred Share Units (“DSUs”)
	Section 9

	 	Performance and Cash-settled Awards
	Section 10

	 	Dividend Equivalent Rights






 









 





3. Shares Available for Awards.




     (a) Generally, Subject to Section 13 below, a total of 1,322,983 Shares shall be available for
issuance under the Plan. The Shares deliverable pursuant to Awards shall be authorized but
unissued Shares, or Shares that the Company otherwise holds in treasury or in trust.



     (b) Replenishment; Counting of Shares. Any Shares reserved for Plan Awards will again be
available for future Awards if the Shares for any reason will never be issued to a Participant or
Beneficiary pursuant to an Award (for example, due to its settlement in cash rather than in Shares,
or the Award’s forfeiture, cancellation, expiration, or net settlement without the issuance of
Shares). Further, and to the extent permitted under Applicable Law, the maximum number of Shares
available for delivery under the Plan shall not be reduced by any Shares issued under the Plan
through the settlement, assumption, or substitution of outstanding awards or obligations to grant
future awards as a condition of the Company’s or an Affiliate’s acquiring another entity. On the
other hand, Shares that a Person owns and tenders in payment of all or part of the exercise price
of an Award or in satisfaction of applicable Withholding Taxes shall not increase the number of
Shares available for future issuance under the Plan.



     (c) ISO Share Reserve. The number of Shares that are available for ISO Awards shall not
exceed the total number set forth in Section 3(a) above (as adjusted pursuant to Section 13 of the
Plan, and as determined in accordance with Code Section 422).


4. Eligibility. 




     (a) General Rule. Subject to the express provisions of the Plan, the Committee shall
determine from the class of Eligible Persons those Persons to whom Awards may be granted. Each
Award shall be evidenced by an Award Agreement that sets forth its Grant Date and all other terms
and conditions of the Award, that is signed on behalf of the Company (or delivered by an authorized
agent through an electronic medium), and that, if required by the Committee, is signed by the
Eligible Person as an acceptance of the Award. The grant of an Award shall not obligate the
Company or any Affiliate to continue the employment or service of any Eligible Person, or to
provide any future Awards or other remuneration at any time thereafter.



     (b) Option and SAR Limits per Person. During the term of the Plan, no Participant may receive
Options and SARs that relate to more than 25% of the maximum number of Shares issuable under the
Plan as of its Effective Date, as such number may be adjusted pursuant to Section 13 below.



     (c) Replacement Awards. Subject to Applicable Law (including any associated stockholder
approval requirements), the Committee may, in its sole discretion and upon such terms as it deems
appropriate, require as a condition of the grant of an Award to a Participant that the Participant,
with the Participant’s consent, surrender for cancellation some or all of the Awards or other
grants that the Participant has received under this Plan or otherwise. An Award conditioned upon
such surrender may or may not be the same type of Award, may cover the same (or a lesser or
greater) number of Shares as such surrendered Award, may have other terms that are determined
without regard to the terms or conditions of such surrendered Award, and may contain any other
terms that the Committee deems appropriate. In the case of Options and SARs, these other terms may
not involve an exercise price that is lower than the exercise price of the surrendered Option or
SAR



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unless the Company’s stockholders approve the grant itself or the program under which the
grant is made pursuant to the Plan.



5. Stock Options.




     (a) Grants. Subject to the special rules for ISOs set forth in the next paragraph, the
Committee may grant Options to Eligible Persons pursuant to Award Agreements setting forth terms
and conditions that are not inconsistent with the Plan, that may be immediately exercisable or that
may become exercisable in whole or in part based on future events or conditions, that may include
vesting or other requirements for the right to exercise the Option, and that may differ for any
reason between Eligible Persons or classes of Eligible Persons, provided in all instances that:




	 	(i)	 	the exercise price for Shares subject to purchase through
exercise of an Option shall not be less than 100% of the Fair Market Value of
the underlying Shares on the Grant Date; and
	 
	 	(ii)	 	no Option shall be exercisable for a term ending more than
ten years after its Grant Date.





     (b) Special ISO Provisions. The following provisions shall control any grants of Options that
are denominated as ISOs.




	 	(i)	 	Eligibility. The Committee may grant ISOs only to
Employees (including officers who are Employees) of the Company or an
Affiliate that is a “parent corporation” or “subsidiary corporation” within
the meaning of Code Section 424.
	 
	 	(ii)	 	Documentation. Each Option that is intended to be an
ISO must be designated in the Award Agreement as an ISO, provided that any
Option designated as an ISO will be a Non-ISO to the extent the Option fails
to meet the requirements of Code Section 422. In the case of an ISO, the
Committee shall determine on the Date of Grant the acceptable methods of
paying the exercise price for Shares, and it shall be included in the
applicable Award Agreement.
	 
	 	(iii)	 	$100,000 Limit. To the extent that the aggregate
Fair Market Value of Shares with respect to which ISOs first become
exercisable by a Participant in any calendar year (under this Plan and any
other plan of the Company or any Affiliate) exceeds U.S. $100,000, such excess
Options shall be treated as Non-ISOs. For purposes of determining whether the
U.S. $100,000 limit is exceeded, the Fair Market Value of the Shares subject
to an ISO shall be determined as of the Grant Date. In reducing the number of
Options treated as ISOs to meet the U.S. $100,000 limit, the most recently
granted Options shall be reduced first. In the event that Code Section 422 is
amended to alter the limitation set forth therein, the limitation of this
paragraph shall be automatically adjusted accordingly.
	 
	 	(iv)	 	Grants to 10% Holders. In the case of an ISO granted
to an Employee who is a Ten Percent Holder on the Grant Date, the ISO’s term
shall not exceed




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	 	 	 	five years from the Grant Date, and the exercise price shall be at least
110% of the Fair Market Value of the underlying Shares on the Grant Date.
In the event that Code Section 422 is amended to alter the limitations set
forth therein, the limitation of this paragraph shall be automatically
adjusted accordingly.
	 
	 	(v)	 	Substitution of Options. In the event the Company or
an Affiliate acquires (whether by purchase, merger, or otherwise) all or
substantially all of outstanding capital stock or assets of another
corporation or in the event of any reorganization or other transaction
qualifying under Code Section 424, the Committee may, in accordance with the
provisions of that Section, substitute ISOs for ISOs previously granted under
the plan of the acquired company provided (A) the excess of the aggregate Fair
Market Value of the Shares subject to an ISO immediately after the
substitution over the aggregate exercise price of such shares is not more than
the similar excess immediately before such substitution, and (B) the new ISO
does not give additional benefits to the Participant, including any extension
of the exercise period.
	 
	 	(vi)	 	Notice of Disqualifying Dispositions. By executing
an ISO Award Agreement, each Participant agrees to notify the Company in
writing immediately after the Participant sells, transfers or otherwise
disposes of any Shares acquired through exercise of the ISO, if such
disposition occurs within the earlier of (A) two years of the Grant Date, or
(B) one year after the exercise of the ISO being exercised. Each Participant
further agrees to provide any information about a disposition of Shares as may
be requested by the Company to assist it in complying with any applicable tax
laws.





     (c) Method of Exercise. Each Option may be exercised, in whole or in part (provided that the
Company shall not be required to issue fractional shares) at any time and from time to time prior
to its expiration, but only pursuant to the terms of the applicable Award Agreement, and subject to
the times, circumstances and conditions for exercise contained in the applicable Award Agreement.
Exercise shall occur by delivery of both written notice of exercise to the secretary of the
Company, and payment of the full exercise price for the Shares being purchased. The methods of
payment that the Committee may in its discretion accept or commit to accept in an Award Agreement
include:




     (i) cash or check payable to the Company (in U.S. dollars);




     (ii) other Shares that (A) are owned by the Participant who is purchasing Shares
pursuant to an Option, (B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is being exercised, (C) are
all, at the time of such surrender, free and clear of any and all claims, pledges, liens and
encumbrances, or any restrictions which would in any manner restrict the transfer of such
shares to or by the Company (other than such restrictions as may have existed prior to an
issuance of such Shares by the Company to such Participant), and (D) are duly endorsed for
transfer to the Company;



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     (iii) a net exercise by surrendering to the Company Shares otherwise receivable upon
exercise of the Option;




     (iv) a cashless exercise program that the Committee may approve, from time to time in
its discretion, pursuant to which a Participant may elect to concurrently provide
irrevocable instructions (A) to such Participant’s broker or dealer to effect the immediate
sale of the purchased Shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the exercise price of the Option plus all
applicable taxes required to be withheld by the Company by reason of such exercise, and (B)
to the Company to deliver the certificates for the purchased Shares directly to such broker
or dealer in order to complete the sale; or




     (v) any combination of the foregoing methods of payment.


The Company shall not be required to deliver Shares pursuant to the exercise of an Option until the
Company has received sufficient funds to cover the full exercise price due and all applicable
Withholding Taxes required by reason of such exercise.



Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director
or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act
shall be permitted to make payment with respect to any Awards granted under the Plan, or continue
any extension of credit with respect to such payment with a loan from the Company or a loan
arranged by the Company in violation of Section 13(k) of the Exchange Act.




     (d) Exercise of an Unvested Option. The Committee in its sole discretion may allow a
Participant to exercise an unvested Option, in which case the Shares then issued shall be
Restricted Shares having analogous vesting restrictions to the unvested Option.



     (e) Termination of Continuous Service. The Committee may establish and set forth in the
applicable Award Agreement the terms and conditions on which an Option shall remain exercisable, if
at all, following termination of a Participant’s Continuous Service. The Committee may waive or
modify these provisions at any time. To the extent that a Participant is not entitled to exercise
an Option at the date of his or her termination of Continuous Service, or if the Participant (or
other person entitled to exercise the Option) does not exercise the Option to the extent so
entitled within the time specified in the Award Agreement or below (as applicable), the Option
shall terminate and the Shares underlying the unexercised portion of the Option shall revert to the
Plan and become available for future Awards.



     The following provisions shall apply to the extent an Award Agreement does not specify the
terms and conditions upon which an Option shall terminate when there is a termination of a
Participant’s Continuous Service:



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	Reason for terminating Continuous Service	 	 	Option Termination Date
	(I) By the Company for Cause, or what
would have been Cause if the Company had
known all of the relevant facts.

	 		Termination of the
Participant’s Continuous
Service, or when Cause first
existed if earlier.
	 
	 		 
	(II) Disability of the Participant.

	 	 	Within one year after
termination of the
Participant’s Continuous
Service.
	 
	 		 
	(III) Retirement of the Participant after
age 65 with five years or more of
Continuous Service.
	 	 	Within one year after
termination of the
Participant’s Continuous
Service.
	 
	 		 
	(IV) Death of the Participant during
Continuous Service or within 90 days
thereafter.
	 	 	Within one year after
termination of the
Participant’s Continuous
Service.
	 
	 		 
	(V) Other than due to Cause or the
Participant’s Disability, Retirement, or
Death.
	 	 	Within 90 days after
termination of the
Participant’s Continuous
Service.






     If there is a Securities and Exchange Commission blackout period (or a Committee-imposed
blackout period) that prohibits the buying or selling of Shares during any part of the ten day
period before the expiration of any Option based on the termination of a Participant’s Continuous
Service (as described above), the period for exercising the Options shall be extended until ten
days beyond when such blackout period ends. Notwithstanding any provision hereof or within an
Award Agreement, no Option shall ever be exercisable after the expiration date of its original term
as set forth in the Award Agreement.



     (f) Buyout. The Committee may at any time offer to buy out an Option, in exchange for a
payment in cash or Shares, based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made. In addition, but subject to
any stockholder approval requirement of Applicable Law as well as to any Applicable Law that would
adversely affect a Participant whose Award is cashed-out, if the Fair Market Value for Shares
subject to an Option is more than 33% below their exercise price for more than 30 consecutive
business days, the Committee may unilaterally terminate and cancel the Option either (i) by paying
the Participant, in cash or Shares, an amount not less than the Black-Scholes value of the vested
portion of the Option being cancelled, (ii) by irrevocably committing to grant, on any date the
Committee designates, a new Award other than an Option or SAR, or (iii) by irrevocably committing
to grant a new Option, on a designated date on or after such termination and cancellation of such
Option (but only if the Participant’s Continuous Service has not terminated prior to such
designated date), on substantially the same terms as the cancelled Option, provided that the per
Share exercise price for the new Option shall equal the per Share Fair Market Value of a Share on
the date the new grant occurs.


6. SARs.




     (a) Grants. The Committee may grant SARs to Eligible Persons pursuant to Award Agreements
setting forth terms and conditions that are not inconsistent with the Plan; provided that:




	 	(i)	 	the exercise price for the Shares subject to each SAR shall
not be less than 100% of the Fair Market Value of the underlying Shares on the
Grant Date;
	 
	 	(ii)	 	no SAR shall be exercisable for a term ending more than ten
years after its Grant Date; and




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	 	(iii)	 	each SAR shall, except to the extent an SAR Award Agreement
provides otherwise, be subject to the provisions of Section 5(e) relating to
the effect of a termination of Participant’s Continuous Service and Section
5(f) relating to buyouts, in each case with “SAR” being substituted for
“Option.”





     (b) Settlement. Subject to the Plan’s terms, an SAR shall entitle the Participant, upon
exercise of the SAR, to receive Shares having a Fair Market Value on the date of exercise equal to
the product of the number of Shares as to which the SAR is being exercised, and the excess of (i)
the Fair Market Value, on such date, of the Shares covered by the exercised SAR, over (ii) an
exercise price designated in the SAR Award Agreement. Notwithstanding the foregoing, an SAR Award
Agreement may limit the total settlement value that the Participant will be entitled to receive
upon the SAR’s exercise, and may provide for settlement either in cash or in any combination of
cash or Shares that the Committee may authorize pursuant to an Award Agreement. If, on the date on
which an SAR or portion thereof is to expire, the Fair Market Value exceeds the per Share exercise
price of such SAR, then the SAR shall be deemed exercised and cancelled without any payment in
settlement thereof; subject to any specific provision to the contrary within an Award Agreement.



     (c) SARs related to Options. The Committee may grant SARs either concurrently with the grant
of an Option or with respect to an outstanding Option, in which case the SAR shall extend to all or
a portion of the Shares covered by the related Option, and shall have an exercise price that is not
less than the exercise price of the related Option. An SAR shall entitle the Participant who holds
the related Option, upon exercise of the SAR and surrender of the related Option, or portion
thereof, to the extent the SAR and related Option each were previously unexercised, to receive
payment of an amount determined pursuant to Section 6(b) above. Any SAR granted in tandem with an
ISO will contain such terms as may be required to comply with the provisions of Code Section 422.



     (d) Effect on Available Shares. At each time of an exercise of an SAR that is settled in
Shares, only those Shares that are issued or delivered in settlement of the exercise shall be
counted against the number of Shares available for Awards under the Plan; provided that the number
of Shares that are issued or delivered pursuant to the exercise of an SAR shall not exceed the
number of Shares specified in the Award Agreement as being subject to the SAR Award.


7. Restricted Shares, RSUs, and Unrestricted Share Awards.




     (a) Grant. The Committee may grant Restricted Share, RSU, or Unrestricted Share Awards to
Eligible Persons, in all cases pursuant to Award Agreements setting forth terms and conditions that
are not inconsistent with the Plan. The Committee shall establish as to each Restricted Share or
RSU Award the number of Shares deliverable or subject to the Award (which number may be determined
by a written formula), and the period or periods of time (the “Restriction Period”) at the
end of which all or some restrictions specified in the Award Agreement shall lapse, and the
Participant shall receive unrestricted Shares (or cash to the extent provided in the Award
Agreement) in settlement of the Award. Such restrictions may include, without limitation,
restrictions concerning voting rights and transferability, and such restrictions may lapse
separately or in combination at such times and pursuant to such circumstances or based on such
criteria as selected by the Committee, including, without limitation, criteria based on the
Participant’s duration of employment, directorship or consultancy with the Company, individual,
group, or divisional



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performance criteria, Company performance, or other criteria selection by the Committee. The
Committee may make Restricted Share and RSU Awards with or without the requirement for payment of
cash or other consideration. In addition, the Committee may grant Awards hereunder in the form of
Unrestricted Shares which shall vest in full upon the Grant Date or such other date as the
Committee may determine or which the Committee may issue pursuant to any program under which one or
more Eligible Persons (selected by the Committee in its sole discretion) elect to pay for such
Shares or to receive Unrestricted Shares in lieu of cash bonuses that would otherwise be paid.




     (b) Vesting and Forfeiture. The Committee shall set forth, in an Award Agreement granting
Restricted Shares or RSUs, the terms and conditions under which the Participant’s interest in the
Restricted Shares or the Shares subject to RSUs will become vested and non-forfeitable. Except as
set forth in the applicable Award Agreement or as the Committee otherwise determines, upon
termination of a Participant’s Continuous Service for any reason, the Participant shall forfeit his
or her Restricted Shares and RSUs to the extent the Participant’s interest therein has not vested
on or before such termination date; provided that if a Participant purchases Restricted Shares and
forfeits them for any reason, the Company shall return the purchase price to the Participant to the
extent either set forth in an Award Agreement or required by Applicable Law.



     (c) Certificates for Restricted Shares. Unless otherwise provided in an Award Agreement, the
Company shall hold certificates representing Restricted Shares and dividends (whether in Shares or
cash) that accrue with respect to them until the restrictions lapse, and the Participant shall
provide the Company with appropriate stock powers endorsed in blank. The Participant’s failure to
provide such stock powers within ten days after a written request from the Company shall entitle
the Committee to unilaterally declare a forfeiture of all or some of the Participant’s Restricted
Shares.



     (d) Section 83(b) Elections. A Participant may make an election under Code Section 83(b) (the
“Section 83(b) Election”) with respect to Restricted Shares. A Participant who has
received RSUs may, within ten days after receiving the RSU Award, provide the Committee with a
written notice of his or her desire to make Section 83(b) Election with respect to the Shares
subject to such RSUs. The Committee may in its discretion convert the Participant’s RSUs into
Restricted Shares, on a one-for-one basis, in full satisfaction of the Participant’s RSU Award.
The Participant may then make a Section 83(b) Election with respect to those Restricted Shares;
provided that the Participant’s Section 83(b) Election will be invalid if not filed with the
Company and the appropriate U.S. tax authorities within 30 days after the Grant Date of the RSUs
replaced by the Restricted Shares.



     (e) Deferral Elections for RSUs. To the extent specifically provided in an Award Agreement, a
Participant may irrevocably elect, in accordance with Section 8 below, to defer the receipt of all
or a percentage of the Shares that would otherwise be transferred to the Participant both more than
12 months after the date of the Participant’s deferral election and upon the vesting of an RSU
Award. If the Participant makes this election, the Company shall credit the Shares subject to the
election, and any associated Shares attributable to Dividend Equivalent Rights attached to the
Award, to a DSU account established pursuant to Section 8 below on the date such Shares would
otherwise have been delivered to the Participant pursuant to this Section.



     (f) Issuance of Shares upon Vesting. As soon as practicable after vesting of a Participant’s
Restricted Shares (or of the right to receive Shares underlying RSUs), the Company shall deliver to



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the Participant, free from vesting restrictions, one Share for each surrendered and vested
Restricted Share (or deliver one Share free of the vesting restriction for each vested RSU), unless
an Award Agreement provides otherwise and subject to Section 11 regarding Withholding Taxes. No
fractional Shares shall be distributed, and cash shall be paid in lieu thereof.





	8.	 	DSUs.





     (a) Elections to Defer. The Committee may make DSU awards to Eligible Persons pursuant to
Award Agreements (regardless of whether or not there is a deferral of the Eligible Person’s
compensation), and may permit select Eligible Persons to irrevocably elect, on a form provided by
and acceptable to the Committee (the “Election Form”), to forego the receipt of cash or
other compensation (including the Shares deliverable pursuant to any RSU Award) and in lieu thereof
to have the Company credit to an internal Plan account a number of DSUs having a Fair Market Value
equal to the Shares and other compensation deferred. These credits will be made at the end of each
calendar quarter (or other period determined by the Committee) during which compensation is
deferred. Notwithstanding the foregoing sentence, a Participant’s Election Form will be
ineffective with respect to any compensation that the Participant earns before the date on which
the Election Form takes effect. For any Participant who is subject to U.S. income taxation, the
Committee shall only authorize deferral elections under this Section (i) pursuant to written
procedures, and using written Election Forms, that satisfy the requirements of Code Section 409A,
and (ii) only by Eligible Persons who are Directors, Consultants, or members of a select group of
management or highly compensated Employees (within the meaning of ERISA).



     (b) Vesting. Unless an Award Agreement expressly provides otherwise, each Participant shall
be 100% vested at all times in any Shares subject to DSUs.



     (c) Issuances of Shares. Unless an Award Agreement expressly provides otherwise, the Company
shall settle a Participant’s DSU Award, by delivering one Share for each DSU, in five substantially
equal annual installments that are issued before the last day of each of the five calendar years
that end after the date on which the Participant’s Continuous Service ends for any reason, subject
to –




     (i) the Participant’s right to elect a different form of distribution, only on a form
provided by and acceptable to the Committee, that permits the Participant to select any
combination of a lump sum and annual installments that are triggered by, and completed
within ten years following, the last day of the Participant’s Continuous Service, and




     (ii) the Company’s acceptance of the Participant’s distribution election form executed
at the time the Participant elects to defer the receipt of cash or other compensation
pursuant to Section 8(a), provided that the Participant may change a distribution election
through any subsequent election that (A) the Participant delivers to the Company at least
one year before the date on which distributions are otherwise scheduled to commence pursuant
to the Participant’s initial distribution election, and (B) defers the commencement of
distributions by at least five years from the originally scheduled distribution commencement
date.



     Fractional shares shall not be issued, and instead shall be paid out in cash.



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     (d) Emergency Withdrawals. In the event that a Participant suffers an unforeseeable emergency
within the contemplation of this Section, the Participant may apply to the Committee for an
immediate distribution of all or a portion of the Participant’s DSUs. The unforeseeable emergency
must result from a sudden and unexpected illness or accident of the Participant, the Participant’s
spouse, or a dependent (within the meaning of Code Section 152) of the Participant, casualty loss
of the Participant’s property, or other similar extraordinary and unforeseeable conditions beyond
the control of the Participant. The Committee shall, in its sole and absolute discretion,
determine whether a Participant has a qualifying unforeseeable emergency, may require independent
verification of the emergency, and may determine whether or not to provide the Participant with
cash or Shares. Examples of purposes which are not considered unforeseeable emergencies include
post-secondary school expenses or the desire to purchase a residence. In no event will a
distribution be made to the extent the unforeseeable emergency could be relieved through
reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant’s
nonessential assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant’s unforeseeable emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of the distribution. The number of Shares subject to the Participant’s DSU
Award shall be reduced by any Shares distributed to the Participant and by a number of Shares
having a Fair Market Value on the date of the distribution equal to any cash paid to the
Participant pursuant to this Section. For all DSUs granted to Participants who are U.S. taxpayers,
the term “unforeseeable emergency” shall be interpreted in accordance with Code Section 409A.



     (e) Termination of Service. For purposes of this Section, a Participant’s “Continuous
Service” shall only end when the Participant incurs a “separation from service” within the meaning
of Treasury Regulations § 1.409A-1(h). A Participant shall be considered to have experienced a
termination of Continuous Service when the facts and circumstances indicate that either (i) no
further services will be performed for the Company or any Affiliate after a certain date, or (ii)
that the level of bona fide services the Participant will perform after such date (whether as an
Employee, Director, or Consultant) are reasonably expected to permanently decrease to no more than
50% of the average level of bona fide services performed by such Participant (whether as an
Employee, Director, or Consultant) over the immediately preceding 36-month period (or full period
of services to the Company and its Affiliates if the Participant has been providing such services
for less than 36 months).




	9.	 	Performance and Cash-Settled Awards.





     (a) Performance Units. Subject to the limitations set forth in paragraph (b) hereof, the
Committee may in its discretion grant Performance Awards, including Performance Units to any
Eligible Person, including Performance Unit Awards that (i) have substantially the same financial
benefits and other terms and conditions as Options, SARs, RSUs, or DSUs, but (ii) are settled only
in cash. All Awards hereunder shall be made pursuant to Award Agreements setting forth terms and
conditions that are not inconsistent with the Plan.



     (b) Performance Compensation Awards. Subject to the limitations set forth in this Section,
the Committee may, at the time of grant of a Performance Unit, designate such Award as a
“Performance Compensation Award” (payable in cash or Shares) in order that such Award
constitutes, and has terms and conditions that are designed to qualify as, “qualified performance-



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based compensation” under Code Section 162(m). With respect to each such Performance
Compensation Award, the Committee shall establish, in writing within the time required under Code
Section 162(m), a “Performance Period,” “Performance Measure(s)”, and
“Performance Formula(e)” (each such term being defined below). Once established for a
Performance Period, the Performance Measure(s) and Performance Formula(e) shall not be amended or
otherwise modified to the extent such amendment or modification would cause the compensation
payable pursuant to the Award to fail to constitute qualified performance-based compensation under
Code Section 162(m).




     A Participant shall be eligible to receive payment in respect of a Performance Compensation
Award only to the extent that the Performance Measure(s) for such Award is achieved and the
Performance Formula(e) as applied against such Performance Measure(s) determines that all or some
portion of such Participant’s Award has been earned for the Performance Period. As soon as
practicable after the close of each Performance Period, the Committee shall review and certify in
writing whether, and to what extent, the Performance Measure(s) for the Performance Period have
been achieved and, if so, determine and certify in writing the amount of the Performance
Compensation Award to be paid to the Participant and, in so doing, may use negative discretion to
decrease, but not increase, the amount of the Award otherwise payable to the Participant based upon
such performance



     (c) Limitations on Awards. The maximum Performance Award and the maximum Performance
Compensation Award that any one Participant may receive for any one Performance Period, without
regard to time of vesting or exercisability, shall not together exceed 25% of the number of Shares
reserved under Section 3, as adjusted pursuant to Section 13 below (or, for Performance Units to be
settled in cash, U.S. $2,000,000. The Committee shall have the discretion to provide in any Award
Agreement that any amounts earned in excess of these limitations will be credited as DSUs or as
deferred cash compensation under a separate plan of the Company (provided in the latter case that
such deferred compensation either bears a reasonable rate of interest or has a value based on one
or more predetermined actual investments). Any amounts for which payment to the Participant is
deferred pursuant to the preceding sentence shall be paid to the Participant in a future year or
years not earlier than, and only to the extent that, the Participant is either not receiving
compensation in excess of these limits for a Performance Period, or is not subject to the
restrictions set forth under Code Section 162(b).



     (d) Definitions.




     (i) “Performance Formula” means, for a Performance Period, one or more
objective formulas or standards established by the Committee for purposes of
determining whether or the extent to which an Award has been earned based on the
level of performance attained or to be attained with respect to one or more
Performance Measure(s). Performance Formulae may vary from Performance Period to
Performance Period and from Participant to Participant and may be established on a
stand-alone basis, in tandem or in the alternative.




     (ii) “Performance Measure” means one or more of the following selected
by the Committee to measure Company, Affiliate, and/or business unit performance for
a Performance Period, whether in absolute or relative terms (including, without
limitation, terms relative to a peer group or index): basic, diluted, or adjusted



11









 







earnings per share; sales or revenue; earnings before interest, taxes, and
other adjustments (in total or on a per share basis); basic or adjusted net income;
returns on equity, assets, capital, revenue or similar measure; economic value
added; working capital; total stockholder return; and product development, product
market share, research, licensing, successfully completion clinical trials,
submission of applications with the U.S. Food and Drug Administration
(“FDA”) for new tests, receipt from the FDA of clearance for new tests,
commercialization of new tests, litigation, human resources, information services,
mergers, acquisitions, sales of assets of Affiliates or business units. Each such
measure shall be, to the extent applicable, determined in accordance with generally
accepted accounting principles as consistently applied by the Company (or such other
standard applied by the Committee) and, if so determined by the Committee, and in
the case of a Performance Compensation Award, to the extent permitted under Code
Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on
the disposal of a business segment, unusual or infrequently occurring events and
transactions and cumulative effects of changes in accounting principles.
Performance Measures may vary from Performance Period to Performance Period and from
Participant to Participant, and may be established on a stand-alone basis, in tandem
or in the alternative.




     (iii) “Performance Period” means one or more periods of time (of not
less than one fiscal year of the Company), as the Committee may designate, over
which the attainment of one or more Performance Measure(s) will be measured for the
purpose of determining a Participant’s rights in respect of an Award.



     (e) Deferral Elections. At any time prior to the date that is both at least six months before
the close of a Performance Period (or shorter or longer period that the Committee selects) with
respect to a Performance Award and at which time vesting or payment is substantially uncertain to
occur, the Committee may permit a Participant who is a member of a select group of management or
highly compensated employees (within the meaning of ERISA) to irrevocably elect, on a form provided
by and acceptable to the Committee, to defer the receipt of all or a percentage of the cash or
Shares that would otherwise be transferred to the Participant upon the vesting of such Award. If
the Participant makes this election, the cash or Shares subject to the election, and any associated
interest and dividends, shall be credited to an account established pursuant to Section 8 hereof on
the date such cash or Shares would otherwise have been released or issued to the Participant
pursuant to this Section.


10. Dividend Equivalent Rights. To the extent expressly provided in an Award Agreement, a
Dividend Equivalent Right shall entitle an Eligible Person who has received an Award to be credited
with dividends that the Company declares and pays (in cash, Shares, or other securities) to its
stockholders of record between the Grant Date and the settlement date of the Award. Any Dividend
Equivalent Rights arising from cash dividends shall be immediately deemed to be reinvested in
Shares having a Fair Market Value equal to such cash dividends (unless an Award Agreement provides
otherwise). The Company shall settle Dividend Equivalent Rights by issuing Shares to a Participant
to the extent they were previously credited to the Participant as Dividend Equivalent Rights and
are attributable to Shares that the Participant is either purchasing pursuant to the exercise of an
Option or SAR, or receiving as settlement of another Award. Notwithstanding the foregoing, the
Committee may in an Award Agreement or modification thereto provide for (i) an






12









 







earlier or later settlement event for Dividend Equivalent Rights, and (ii) complete or partial
settlement in cash rather than in Shares.



11. Taxes; Withholding.




     (a) General Rule. Participants are solely responsible and liable for the satisfaction of all
taxes and penalties that may arise in connection with Awards, and neither the Company, any
Affiliate, nor any of their employees, directors, or agents shall have any obligation to mitigate,
indemnify, or to otherwise hold any Participant harmless from any or all of such taxes. The
Company’s obligation to deliver Shares (or to pay cash) to Participants pursuant to Awards is at
all times subject to their prior or coincident satisfaction of all required Withholding Taxes.
Except to the extent otherwise either provided in an Award Agreement or thereafter authorized by
the Committee, the Company or any Affiliate will satisfy required Withholding Taxes that the
Participant has not otherwise arranged to settle before the due date thereof –




	 	(i)	 	first from withholding the cash otherwise payable to the
Participant pursuant to the Award;
	 
	 	(ii)	 	then by withholding and cancelling the Participant’s rights
with respect to a number of Shares that (A) would otherwise have been
delivered to the Participant pursuant to the Award, and (B) have an aggregate
Fair Market Value equal to the Withholding Taxes (such withheld Shares to be
valued on the basis of the aggregate Fair Market Value thereof on the date of
the withholding); and
	 
	 	(iii)	 	finally, withholding the cash otherwise payable to the
Participant by the Company.




The number of Shares withheld and cancelled to pay a Participant’s Withholding Taxes will be
rounded up to the nearest whole Share sufficient to satisfy such taxes, with cash being paid to the
Participant in an amount equal to the amount by which the Fair Market Value of such Shares exceeds
the Withholding Taxes.




     (b) U.S. Code Section 409A. To the extent that the Committee determines that any Award
granted under the Plan is subject to Code Section 409A, the Award Agreement evidencing such Award
shall incorporate the terms and conditions required by Code Section 409A. To the extent
applicable, the Plan and Award Agreements shall be interpreted in accordance with Code Section 409A
and Department of Treasury regulations and other interpretive guidance issued thereunder, including
without limitation any such regulations or other guidance that may be issued after the Effective
Date. Notwithstanding any provision of the Plan to the contrary, the Committee may adopt such
amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures
(including amendments, policies and procedures with retroactive effect), or take any other actions,
that the Administrator determines are necessary or appropriate (i) to exempt the Award from Code
Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to
the Award, or (ii) to comply with the requirements of Code Section 409A and related Department of
Treasury guidance and thereby avoid the application of any penalty taxes under such Section.



13









 





     (c) Unfunded Tax Status. The Plan is intended to be an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a Person pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give the Person any rights that are greater than
those of a general creditor of the Company or any Affiliate, and a Participant’s rights under the
Plan at all times constitute an unsecured claim against the general assets of the Company for the
collection of benefits as they come due. Neither the Participant nor the Participant’s
duly-authorized transferee or Beneficiaries shall have any claim against or rights in any specific
assets, Shares, or other funds of the Company.


12. Non-Transferability of Awards.




     (a) General. Except as set forth in this Section, or as otherwise approved by the Committee,
Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution. The designation of a death
Beneficiary by a Participant will not constitute a transfer. An Award may be exercised, during the
lifetime of the holder of an Award, only by such holder, by the duly-authorized legal
representative of a holder who is Disabled, or by a transferee permitted by this Section.



     (b) Limited Transferability Rights. The Committee may in its discretion provide in an Award
Agreement that an Award in the form of a Non-ISO, a Share-settled SAR, Restricted Shares, or
Performance Shares may be transferred, on such terms and conditions as the Committee deems
appropriate, either (i) by instrument to the Participant’s “Immediate Family” (as defined below),
(ii) by instrument to an inter vivos or testamentary trust (or other entity) in which the Award is
to be passed to the Participant’s designated beneficiaries, or (iii) by gift to charitable
institutions. Any transferee of the Participant’s rights shall succeed and be subject to all of
the terms of the applicable Award Agreement and the Plan. “Immediate Family” means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.



     (c) Death. In the event of the death of a Participant, any outstanding Awards issued to the
Participant shall automatically be transferred to the Participant’s Beneficiary (or, if no
Beneficiary is designated or surviving, to the person or persons to whom the Participant’s rights
under the Award pass by will or the laws of descent and distribution).




	13.	 	Change in Capital Structure; Change in Control; Etc.





     (a) Changes in Capitalization. The Committee shall equitably adjust the number of Shares
covered by each outstanding Award, and the number of Shares that have been authorized for issuance
under the Plan but as to which no Awards have yet been granted or that have been returned to the
Plan upon cancellation, forfeiture, or expiration of an Award, as well as the exercise or other
price per Share covered by each such outstanding Award, to reflect any increase or decrease in the
number of issued Shares resulting from a stock-split, reverse stock-split, stock dividend,
combination, recapitalization or reclassification of the Shares, merger, consolidation, change in
form of organization, or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company. In the event of any such transaction or event,
the Committee may provide in substitution for any or all outstanding Awards under the Plan such
alternative consideration (including cash or securities of any surviving entity) as it may in good
faith determine to be equitable under the circumstances and may require in connection therewith the



14









 




surrender of all Awards so replaced. In any case, such substitution of cash or securities
shall not require the consent of any person who is granted Awards pursuant to the Plan. Except as
expressly provided herein, or in an Award Agreement, if the Company issues for consideration shares
of stock of any class or securities convertible into shares of stock of any class, the issuance
shall not affect, and no adjustment by reason thereof shall be required to be made with respect to
the number or price of Shares subject to any Award.




     (b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company
other than as part of a Change of Control, each Award will terminate immediately prior to the
consummation of such dissolution or liquidation, subject to the ability of the Committee to
exercise any discretion authorized in the case of a Change in Control.



     (c) Change in Control. In the event of a Change in Control but subject to the terms of any
Award Agreements or employment-related agreements between the Company or any Affiliates and any
Participant, each outstanding Award shall be assumed or a substantially equivalent award shall be
substituted by the surviving or successor company or a parent or subsidiary of such successor
company (in each case, the “Successor Company”) upon consummation of the transaction.
Notwithstanding the foregoing, instead of having outstanding Awards be assumed or replaced with
equivalent awards by the Successor Company, the Committee may in its sole and absolute discretion
and authority, without obtaining the approval or consent of the Company’s stockholders or any
Participant with respect to his or her outstanding Awards, take one or more of the following
actions (with respect to any or all of the Awards, and with discretion to differentiate between
individual Participants and Awards for any reason):




     (i) accelerate the vesting of Awards so that Awards shall vest (and, to the extent
applicable, become exercisable) as to the Shares that otherwise would have been unvested and
provide that repurchase rights of the Company with respect to Shares issued pursuant to an
Award shall lapse as to the Shares subject to such repurchase right;




     (ii) arrange or otherwise provide for the payment of cash or other consideration to
Participants in exchange for the satisfaction and cancellation of outstanding Awards (with
the Committee determining the amount payable to each Participant based on the Fair Market
Value, on the date of the Change in Control, of the Award being cancelled, based on any
reasonable valuation method selected by the Committee);




     (iii) terminate all or some Awards upon the consummation of the transaction, provided
that the Committee shall provide for vesting of such Awards in full as of a date immediately
prior to consummation of the Change in Control. To the extent that an Award is not
exercised prior to consummation of a transaction in which the Award is not being assumed or
substituted, such Award shall terminate upon such consummation;




     (iv) make such other modifications, adjustments or amendments to outstanding Awards or
this Plan as the Committee deems necessary or appropriate, subject however to the terms of
Section 13 above.



15









 




14. Termination, Rescission and Recapture of Awards.




     (a) Each Award under the Plan is intended to align the Participant’s long-term interests with
those of the Company. Accordingly, unless otherwise expressly provided in an Award Agreement, the
Company may terminate any outstanding, unexercised, unexpired, unpaid, or deferred Awards
(“Termination”), rescind any exercise, payment or delivery pursuant to the Award
(“Rescission”), or recapture any Shares (whether restricted or unrestricted) or proceeds
from the Participant’s sale of Shares issued pursuant to the Award (“Recapture”), if the
Participant does not comply with the conditions of subsections (b), (c), and (e) hereof
(collectively, the “Conditions”).



     (b) The Participant shall comply with any agreement between the Participant and the Company
with regard to nondisclosure of the Company’s proprietary or confidential information or material.



     (c) The Participant shall comply with any agreement between the Participant and the Company
with regard to intellectual property (including but not limited to patents, trademarks, copyrights,
trade secrets, inventions, developments and improvements).



     (d) Upon exercise, payment, or delivery of cash or Common Stock pursuant to an Award, the
Participant shall certify on a form acceptable to the Company that he or she is in compliance with
the terms and conditions of the Plan.



     (e) If the Company determines, in its sole and absolute discretion, that (i) a Participant has
violated any of the Conditions set forth in subsection (b) or (c); (ii) during his or her
Continuous Service, or within one year after its termination for any reason, a Participant has
solicited any non-administrative employee of the Company to terminate employment with the Company;
or (y) during his or her Continuous Service, a Participant has engaged in activities which
are materially prejudicial to or in conflict with the interests of the Company, including
any breaches of fiduciary duty or the duty of loyalty, then the Company may, in its sole and
absolute discretion, impose a Termination, Rescission, and/or Recapture with respect to any or all
of the Participant’s relevant Awards, Shares, and the proceeds thereof.



     (f) Within ten days after receiving notice from the Company of any such activity described in
Section 14(e) above, the Participant shall deliver to the Company the Shares acquired pursuant to
the Award, or, if Participant has sold the Shares, the gain realized, or payment received as a
result of the rescinded exercise, payment, or delivery; provided, that if the Participant returns
Shares that the Participant purchased pursuant to the exercise of an Option (or the gains realized
from the sale of such Common Stock), the Company shall promptly refund the exercise price, without
earnings, that the Participant paid for the Shares. Any payment by the Participant to the Company
pursuant to this Section shall be made either in cash or by returning to the Company the number of
Shares that the Participant received in connection with the rescinded exercise, payment, or
delivery.



     (g) Notwithstanding the foregoing provisions of this Section, the Company has sole and
absolute discretion not to require Termination, Rescission and/or Recapture, and its determination
not to require Termination, Rescission and/or Recapture with respect to any particular act by a
particular Participant or Award shall not in any way reduce or eliminate the Company’s authority to



16









 




require Termination, Rescission and/or Recapture with respect to any other act or Participant
or Award.




     (h) All administrative and discretionary authority given to the Company under this Section
shall be exercised by the most senior human resources executive of the Company or such other person
or committee (including without limitation the Committee) as the Committee may designate from time
to time.



     (i) If any provision within this Section is determined to be unenforceable or invalid under
any Applicable Law, such provision will be applied to the maximum extent permitted by Applicable
Law, and shall automatically be deemed amended in a manner consistent with its objectives and any
limitations required under Applicable Law.


15. Recoupment of Awards. Unless otherwise specifically provided in an Award Agreement,
and to the extent permitted by Applicable Law, the Committee may in its sole and absolute
discretion, without obtaining the approval or consent of the Company’s stockholders or of any
Participant, require that any Participant reimburse the Company for all or any portion of any
Awards granted under this Plan (“Reimbursement”), or the Committee may require the
Termination or Rescission of, or the Recapture associated with, any Award, if and to the extent—




     (a) the granting, vesting, or payment of such Award was predicated upon the achievement of
certain financial results that were subsequently the subject of a material financial restatement;



     (b) in the Committee’s view the Participant either benefited from a calculation that later
proves to be materially inaccurate, or engaged in fraud or misconduct that caused or partially
caused the need for a material financial restatement by the Company or any Affiliate; and



     (c) a lower granting, vesting, or payment of such Award would have occurred based upon the
conduct described in clause (b) of this Section.


In each instance, the Committee will, to the extent practicable and allowable under Applicable
Laws, require Reimbursement, Termination or Rescission of, or Recapture relating to, any such Award
granted to a Participant; provided that the Company will not seek Reimbursement, Termination or
Rescission of, or Recapture relating to, any such Awards that were paid or vested more than three
years prior to the first date of the applicable restatement period.



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



17. Administration of the Plan. The Committee shall administer the Plan in accordance with
its terms, provided that the Board may act in lieu of the Committee on any matter. The Committee
shall hold meetings at such times and places as it may determine and shall make such rules and
regulations for the conduct of its business as it deems advisable. In the absence of a duly
appointed Committee, the Board shall function as the Committee for all purposes of the Plan.







17









 








     (a) Committee Composition. The Board shall appoint the members of the Committee. If and to
the extent permitted by Applicable Law, the Committee may authorize one or more executive officers
to make Awards to Eligible Persons other than themselves. The Board may at any time appoint
additional members to the Committee, remove and replace members of the Committee with or without
Cause, and fill vacancies on the Committee however caused.



     (b) Powers of the Committee. Subject to the provisions of the Plan, the Committee shall have
the authority, in its sole discretion:




     (i) to grant Awards and to determine Eligible Persons to whom Awards shall be granted
from time to time, and the number of Shares, units, or dollars to be covered by each Award;




     (ii) to determine, from time to time, the Fair Market Value of Shares;




     (iii) to determine, and to set forth in Award Agreements, the terms and conditions of
all Awards, including any applicable exercise or purchase price, the installments and
conditions under which an Award shall become vested (which may be based on performance),
terminated, expired, cancelled, or replaced, and the circumstances for vesting acceleration
or waiver of forfeiture restrictions, and other restrictions and limitations;




     (iv) to approve the forms of Award Agreements and all other documents, notices and
certificates in connection therewith which need not be identical either as to type of Award
or among Participants;




     (v) to construe and interpret the terms of the Plan and any Award Agreement, to
determine the meaning of their terms, and to prescribe, amend, and rescind rules and
procedures relating to the Plan and its administration;




     (vi) to the extent consistent with the purposes of the Plan and without amending the
Plan, to modify, to cancel, or to waive the Company’s rights with respect to any Awards, to
adjust or to modify Award Agreements for changes in Applicable Law, and to recognize
differences in foreign law, tax policies, or customs;




     (vii) in the event that the Company establishes, for itself or using the services of a
third party, an automated system for the documentation, granting, settlement, or exercise of
Award, such as a system using an internet website or interactive voice response, to
implement paperless documentation, granting, settlement, or exercise of Awards by a
Participant may be permitted through the use of such an automated system; and




     (viii) to make all interpretations and to take all other actions that the Committee may
consider necessary or advisable to administer the Plan or to effectuate its purposes.



     Subject to Applicable Law and the restrictions set forth in the Plan, the Committee may
delegate administrative functions to individuals who are Directors or Employees.



     (d) Local Law Adjustments and Sub-plans. To facilitate the making of any grant of an Award
under this Plan, the Committee may adopt rules and provide for such special terms for Awards to
Participants who are located within the United States, foreign nationals, or who are



18









 




employed by the Company or any Affiliate outside of the United States of America as the Committee
may consider necessary or appropriate to accommodate differences in local law, tax policy or
custom. Without limiting the foregoing, the Company is specifically authorized to adopt rules and
procedures regarding the conversion of local currency, taxes, withholding procedures and handling
of stock certificates which vary with the customs and requirements of particular countries. The
Company may adopt sub-plans and establish escrow accounts and trusts, and settle Awards in cash in
lieu of shares, as may be appropriate, required or applicable to particular locations and
countries.




     (c) Action by Committee. Unless otherwise established by the Board or in any charter of the
Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the
members present at any meeting at which a quorum is present, and acts approved in writing by all
members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each
member of the Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by an officer or other employee of the Company or any
Affiliate, the Company’s independent certified public accounts, or any executive compensation
consultant or other professional retained by the Company to assist in the administration of the
Plan.



     (d) Deference to Committee Determinations. The Committee shall have the discretion to
interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion it deems to
be appropriate in its sole discretion, and to make any findings of fact needed in the
administration of the Plan or Award Agreements. The Committee’s prior exercise of its
discretionary authority shall not obligate it to exercise its authority in a like fashion
thereafter. The Committee’s interpretation and construction of any provision of the Plan, or of
any Award or Award Agreement, and all determination the Committee makes pursuant to the Plan shall
be final, binding, and conclusive. The validity of any such interpretation, construction,
decision or finding of fact shall not be given de novo review if challenged in court, by
arbitration, or in any other forum, and shall be upheld unless clearly made in bad faith or
materially affected by fraud.



     (e) No Liability; Indemnification. Neither the Board nor any Committee member, nor any Person
acting at the direction of the Board or the Committee, shall be liable for any act, omission,
interpretation, construction or determination made in good faith with respect to the Plan, any
Award or any Award Agreement. The Company and its Affiliates shall pay or reimburse any member of
the Committee, as well as any Director, Employee, or Consultant who in good faith takes action on
behalf of the Plan, for all expenses incurred with respect to the Plan, and to the full extent
allowable under Applicable Law shall indemnify each and every one of them for any claims,
liabilities, and costs (including reasonable attorney’s fees) arising out of their good faith
performance of duties on behalf of the Plan. The Company and its Affiliates may, but shall not be
required to, obtain liability insurance for this purpose.



     (f) Expenses. The expenses of administering the Plan shall be borne jointly and severally by
the Company and its Affiliates.


18. Modification of Awards and Substitution of Options. Within the limitations of the
Plan, the Committee may modify an Award to accelerate the rate at which an Option or SAR may be
exercised, to accelerate the vesting of any Award, to extend or renew outstanding Awards, to accept
the cancellation of outstanding Awards to the extent not previously exercised, or to make any
change that the Plan would permit for a new Award. Notwithstanding the foregoing, no






19









 







modification of an outstanding Award may materially and adversely affect a Participant’s rights
thereunder unless either (a) the Participant provides written consent to the modification, or (b)
before a Change in Control, the Committee determines in good faith that the modification is not
materially adverse to the Participant.



19. Plan Amendment and Termination. The Board may amend or terminate the Plan as it shall
deem advisable; provided that no change shall be made that increases the total number of Shares
reserved for issuance pursuant to Awards (except pursuant to Section 13 above) unless such change
is authorized by the stockholders of the Company. A termination or amendment of the Plan shall not
materially and adversely affect a Participant’s vested rights under an Award previously granted to
him or her, unless either (a) the Participant consents in writing to such termination or amendment,
or (b) before a Change in Control, the Committee determines in good faith that the modification is
not materially adverse to the Participant. Notwithstanding the foregoing, the Committee may amend
the Plan to comply with changes in tax or securities laws or regulations, or in the interpretation
thereof.



20. Term of Plan. If not sooner terminated by the Board, this Plan shall terminate at the
close of business on the date ten years after its Effective Date. No Awards shall be made under
the Plan after its termination; however, termination of the Plan shall not affect the Committee’s
ability to exercise the powers granted to it hereunder with respect to Awards granted under the
Plan prior to the date of such termination.



21. Governing Law. The terms of this Plan shall be governed by the laws of the State of
California, within the United States of America, without regard to the State’s conflict of laws
rules.





	22.	 	Laws and Regulations.





     (a) General Rules. This Plan, the granting of Awards, the exercise of Options and SARs, and
the obligations of the Company hereunder (including those to pay cash or to deliver, sell or accept
the surrender of any of its Shares or other securities) shall be subject to all Applicable Law. In
the event that any Shares are not registered under any Applicable Law prior to the required
delivery of them pursuant to Awards, the Company may require, as a condition to their issuance or
delivery, that the persons to whom the Shares are to be issued or delivered make any written
representations and warranties (such as that such Shares are being acquired by the Participant for
investment for the Participant’s own account and not with a view to, for resale in connection with,
or with an intent of participating directly or indirectly in, any distribution of such Shares) that
the Committee may reasonably require, and the Committee may in its sole discretion include a legend
to such effect on the certificates representing any Shares issued or delivered pursuant to the
Plan.



     (b) Black-out Periods. Notwithstanding any contrary terms within the Plan or any Award
Agreement, the Committee shall have the absolute discretion to impose a “blackout” period on the
exercise of any Option or SAR, as well as the settlement of any Award, with respect to any or all
Participants (including those whose Continuous Service has ended) to the extent that the Committee
determines that doing so is either desirable or required in order to comply with applicable
securities laws.


23. No Stockholder Rights. Neither a Participant nor any transferee or Beneficiary
of a Participant shall have any rights as a stockholder of the Company with respect to any Shares






20









 







underlying any Award until the date of issuance of a share certificate to such Participant,
transferee, or Beneficiary for such Shares in accordance with the Company’s governing instruments
and Applicable Law. Prior to the issuance of Shares or Restricted Shares pursuant to an Award, a
Participant shall not have the right to vote or to receive dividends or any other rights as a
stockholder with respect to the Shares underlying the Award (unless otherwise provided in the Award
Agreement for Restricted Shares), notwithstanding its exercise in the case of Options and SARs. No
adjustment will be made for a dividend or other right that is determined based on a record date
prior to the date the stock certificate is issued, except as otherwise specifically provided for in
this Plan or an Award Agreement.




21









 





 





Appendix I: Definitions



 




As used in the Plan, the following terms have the meanings indicated when they begin with initial
capital letters within the Plan:




     “Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with such Person. For the purposes
of this definition, “control,” when used with respect to any Person, means the possession, direct
or indirect, of the power to direct or cause the direction of the management and policies of such
Person or the power to elect directors, whether through the ownership of voting securities, by
contract or otherwise; and the terms “affiliated,” “controlling” and “controlled” have meanings
correlative to the foregoing.



     “Applicable Law” means the legal requirements relating to the administration of
options and share-based plans under any applicable laws of the United States, any other country,
and any provincial, state, or local subdivision, any applicable stock exchange or automated
quotation system rules or regulations, as such laws, rules, regulations and requirements shall be
in place from time to time.



     “Award” means any award made pursuant to the Plan, including awards made in the form
of an Option, an SAR, a Restricted Share, a RSU, an Unrestricted Share, a DSU, a Performance Award,
or Dividend Equivalent Rights, or any combination thereof, whether alternative or cumulative.



     “Award Agreement” means any written document setting forth the terms of an Award that
has been authorized by the Committee. The Committee shall determine the form or forms of documents
to be used, and may change them from time to time for any reason.



     “Beneficiary” means the person or entity designated by the Participant, in a form
approved by the Company, to exercise the Participant’s rights with respect to an Award or receive
payment or settlement under an Award after the Participant’s death.



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



     “Cause” will have the meaning set forth in any unexpired employment agreement between
the Company and the Participant. In the absence of such an agreement, “Cause” will exist if the
Participant is terminated from employment or other service with the Company or an Affiliate for any
of the following reasons: (i) the Participant’s willful failure to substantially perform his or her
duties and responsibilities to the Company or deliberate violation of a material Company policy;
(ii) the Participant’s commission of any material act or acts of fraud, embezzlement, dishonesty,
or other willful misconduct; (iii) the Participant’s material unauthorized use or disclosure of any
proprietary information or trade secrets of the Company or any other party to whom the Participant
owes an obligation of nondisclosure as a result of his or her relationship with the Company; or
(iv) Participant’s willful and material breach of any of his or her obligations under any written
agreement or covenant with the Company. The foregoing definition does not in any way limit the
Company’s



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ability to terminate a Participant’s employment or consulting relationship at any time, and
the term “Company” will be interpreted herein to include any Affiliate or successor thereto, if
appropriate.




     “Change in Control” means any of the following:




     (i) Merger. The Company consummates a merger, or consolidation of the Company with any
other corporation unless: (A) the voting securities of the Company outstanding immediately
before the merger or consolidation would continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) at least
50% of the combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; and (B) no Person (other
than Persons who are Employees at any time more than one year before a transaction) becomes
the Beneficial Owner, directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company’s then outstanding securities.




     (ii) Sale of Assets. The stockholders of the Company approve an agreement for the sale
or disposition by the Company of all, or substantially all, of the Company’s assets.



     Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated transactions immediately
following which the record holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Committee” means the Compensation Committee of the Board or its successor, provided
that the term “Committee” means (i) with respect to any decision involving an Award intended to
satisfy the requirements of Code Section 162(m), a committee consisting of two or more Directors of
the Company who are “outside directors” within the meaning of Code Section 162(m), and (ii) with
respect to any decision relating to a Reporting Person, a committee consisting of solely of two or
more Directors who are disinterested within the meaning of Rule 16b-3.



     “Company” means Vermillion, Inc., a California corporation; provided that in the event
the Company reincorporates to another jurisdiction, all references to the term “Company” shall
refer to the Company in such new jurisdiction.



     “Company Stock” means common stock, $0.001 par value, of the Company. In the event of
a change in the capital structure of the Company affecting the common stock (as provided in Section
13), the Shares resulting from such a change in the common stock shall be deemed to be Company
Stock within the meaning of the Plan.



     “Consultant” means any person (other than an Employee or Director), including an
advisor, who is engaged by the Company or any Affiliate to render services and is compensated for
such services.



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     “Continuous Service” means a Participant’s period of service in the absence of any
interruption or termination, as an Employee, Director, or Consultant. Continuous Service shall not
be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Committee, provided that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from time to time; (iv)
changes in status from Director to advisory director or emeritus status; or (iv) transfers between
locations of the Company or between the Company and its Affiliates. Changes in status between
service as an Employee, Director, and a Consultant will not constitute an interruption of
Continuous Service if the individual continues to perform bona fide services for the Company. The
Committee shall have the discretion to determine whether and to what extent the vesting of any
Awards shall be tolled during any paid or unpaid leave of absence; provided, however, that in the
absence of such determination, vesting for all Awards shall be tolled during any such unpaid leave
(but not for a paid leave).



     “Deferred Share Units” or “DSUs” mean Awards pursuant to Section 8 of the
Plan.



     “Director” means a member of the Board, or a member of the board of directors of an
Affiliate.



     “Disabled” means a condition under which a Participant –



          (i) is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or




          (ii) is, by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, received income replacement benefits for a period of not less than three months under an
accident or health plan covering employees of the Company.




     “Dividend Equivalent Rights” means Awards pursuant to Section 10 of the Plan, which
may be attached to other Awards.



     “Effective Date” means the date on which the Board approves the Plan.



     “Eligible Person” means any Consultant, Director, or Employee and includes
non-Employees to whom an offer of employment has been or is being extended.



     “Employee” means any person whom the Company or any Affiliate classifies as an
employee (including an officer) for employment tax purposes, whether or not that classification is
correct. The payment by the Company of a director’s fee to a Director shall not be sufficient to
constitute “employment” of such Director by the Company.



     “Employer” means the Company and each Subsidiary and Affiliate that employs one or
more Participants.



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



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     “Fair Market Value” means, as of any date, the closing price of the Company Stock on
the New York Stock Exchange, the American Stock Exchange, NASDAQ or such other stock exchange as
the Company Stock is then listed for trading, as of such date (and, if none, as determined by the
Committee in good faith based on relevant facts and circumstances).



     “Grant Date” means the later of (i) the date designated as the “Grant Date” within an
Award Agreement, and (ii) date on which the Committee determines the key terms of an Award,
provided that as soon as reasonably practical thereafter the Committee both notifies the Eligible
Person of the Award and enters into an Award Agreement with the Eligible Person.



     “Incentive Stock Option” (or “ISO”) means, an Option that qualifies for
favorable income tax treatment under Code Section 422.



     “Non-ISO” means an Option not intended to qualify as an Incentive Stock Option, as
designated in the applicable Award Agreement.



     “Option” means a right to purchase Company Stock granted under the Plan, at a price
determined in accordance with the Plan.



     “Participant” means any Eligible Person who holds an outstanding Award.



     “Performance Awards” mean Awards granted pursuant to Section 9.



     “Performance Unit” means an Award granted pursuant to Section 9(a) of the Plan which
may be paid in cash, in Shares, or such combination of cash and Shares as the Committee in its sole
discretion shall determine.



     “Person” means any natural person, association, trust, business trust, cooperative,
corporation, general partnership, joint venture, joint-stock company, limited partnership, limited
liability company, real estate investment trust, regulatory body, governmental agency or
instrumentality, unincorporated organization or organizational entity.



     “Plan” means this Vermillion, Inc. 2010 Stock Incentive Plan.



     “Recapture” and “Rescission” have the meaning set forth in Section 14 of the
Plan.



     “Reimbursement” has the meaning set forth in Section 15 of the Plan.



     “Reporting Person” means an Employee, Director, or Consultant who is subject to the
reporting requirements set forth under Rule 16b-3.



     “Restricted Share” means a Share of Company Stock awarded with restrictions imposed
under Section 7.



     “Restricted Share Unit” or “RSU” means a right granted to a Participant to
receive Shares or cash upon the lapse of restrictions imposed under Section 7.



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     “Retirement” means a Participant’s termination of employment after age 65.




	 	 	“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as amended from
time to time, or any successor provision.





     “Share” means a share of Common Stock of the Company, as adjusted in accordance with
Section 13 of the Plan.



     “SAR” or “Share Appreciation Right” means a right to receive amounts awarded
under Section 6.



     “Ten Percent Holder” means a person who owns (within the meaning of Code Section 422)
stock representing more than ten percent (10%) of the combined voting power of all classes of stock
of the Company.



     “Unrestricted Shares” mean Shares (without restrictions) awarded pursuant to Section 7
of the Plan.



     “Withholding Taxes” means the aggregate minimum amount of federal, state, local and
foreign income, payroll and other taxes that the Company and any Affiliates are required to
withhold in connection with any Award.



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Vermillion, Inc.

2010 Stock Incentive Plan




 





Appendix II: ___Sub-Plan



 





     This Appendix II applies to any Awards that are made to Eligible Persons who are residents of
                     and who are or may become subject to its tax laws (i.e. income tax and/or social
security tax) as a result of Awards granted under the Vermillion, Inc. 2010 Stock Incentive Plan
(the “Plan”). Terms herein that begin with initial capital letters have the special
definition set forth in the Plan.



     This Appendix II shall be read in conjunction with the Plan and is subject to the terms and
conditions of the Plan; provided that, to the extent that the terms and conditions of the Plan
differ from or conflict with the terms of this Appendix II, the following terms of this Appendix II
shall prevail:



     1.                                         



27









 





Vermillion, Inc.




2010 Stock Incentive Plan



As approved by the Board of




Directors on                           ,




2010, and by the Company’s




stockholders on                           , 20     .





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