Exhibit 10.43


 


SUNESIS PHARMACEUTICALS, INC.


2006 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN


 


ADOPTED BY THE BOARD OF DIRECTORS
ON NOVEMBER 29, 2005


 


EFFECTIVE AS OF JANUARY 1,
2006


 


ARTICLE 1

PURPOSE


 


1.1                                 General.


 


(a)                                  Eligible
Stock Award Recipients. Only Eligible Participants may receive Awards
under the Plan.


 


(b)                                 General
Purpose. The purpose of the Plan is to promote the success and enhance the
value of Sunesis Pharmaceuticals, Inc. (the “Company”)
by linking the personal interests of Eligible Participants to those of Company
stockholders and by providing such individuals with an incentive for
outstanding performance to generate superior returns to Company stockholders. The
Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of Eligible Participants upon
whose judgment, interest, and special effort the successful conduct of the
Company’s operation will be largely dependent.


 


ARTICLE 2

DEFINITIONS AND CONSTRUCTION


 


2.1                                 Definitions. The following words
and phrases shall have the following meanings:


 


(a)                                  “Award” means an
Option, a Restricted Stock award, a Stock Appreciation Right award, a
Performance Share award, a Dividend Equivalents award,  a Stock Payment award, or a Restricted Stock
Unit award granted to an Eligible Participant pursuant to the Plan.


 


(b)                                 “Award Agreement”
means any written agreement, contract, or other instrument or document
evidencing an Award.


 


(c)                                  “Board” means the
Board of Directors of the Company.


 


(d)                                 “Cause” includes one
or more of the following: (i) the commission of an act of fraud,
embezzlement or dishonesty by a Participant that has a material adverse impact
on the Company or any successor or parent or Subsidiary thereof; (ii) a
conviction of, or plea of “guilty” or “no contest” to, a felony by a
Participant; (iii) any unauthorized use or disclosure by a Participant of
confidential information or trade secrets of the Company or any successor or
parent or Subsidiary thereof that has a material adverse impact on any such
entity or (iv) any other intentional misconduct by a Participant that has
a material adverse impact on the Company or any successor or parent


 

















 


or Subsidiary thereof. However, if the term or concept
of “Cause” has been defined in an agreement between a Participant and the
Company or any successor or parent or Subsidiary thereof, then “Cause” shall
have the definition set forth in such agreement. The foregoing definition shall
not in any way preclude or restrict the right of the Company or any successor
or parent or Subsidiary thereof to discharge or dismiss any Participant in the
service of such entity for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of this Plan, to constitute grounds
for termination for Cause.


 


(e)                                  “Change of Control”
means and includes each of the following:


 


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


 


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


 


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


 


Notwithstanding the foregoing, the following event
shall not constitute an “acquisition” by any person or group for purposes of
this subsection (e): an acquisition of the Company’s securities by the
Company that causes the Company’s voting securities beneficially owned by a
person or group to represent 50% or more of the combined voting power of the
Company’s then outstanding voting securities; provided,
however, that if a person or group shall become the beneficial owner
of 50% or more of the combined voting power of the Company’s then outstanding
voting securities by reason of share acquisitions by the Company as described
above and shall, after such share acquisitions by the Company, become the
beneficial owner of any additional voting securities of the Company, then such
acquisition shall constitute a Change of Control; or


 


(2)                                  during
any period of two consecutive years, individuals who, at the beginning of such
period, constitute the Board together with any new director(s) (other than a
director designated by a person who shall have entered into an agreement with
the Company to effect a transaction described in clauses (1) or (3) of
this subsection (e)) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or


 


(3)                                  the
consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of
(x) a merger, consolidation, reorganization, or business combination or
(y) a sale or other disposition


 


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of all or substantially all of the Company’s assets or (z) the
acquisition of assets or stock of another entity, in each case other than a
transaction:


 


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


 


(B)                                after
which no person or group beneficially owns voting securities representing 50%
or more of the combined voting power of the Successor Entity; provided, however, that no person or group
shall be treated for purposes of this clause (B) as beneficially
owning 50% or more of combined voting power of the Successor Entity solely as a
result of the voting power held in the Company prior to the consummation of the
transaction; or


 


(4)                                  the
Company’s stockholders approve a liquidation or dissolution of the Company.


 


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


 


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


 


(g)                                 “Committee” means the Board
or a committee of the Board described in Article 11.


 


(h)                                 “Director” means a member of the
Board.


 


(i)                                     “Disability” means, for purposes of the Plan, that the Participant
qualifies to receive long-term disability payments under the Company’s
long-term disability insurance program, as it may be amended from time to
time.


 


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


 


(k)                                  “Eligible Participant” means any
Employee who has not previously been an Employee or Director of the Company or
a Subsidiary, or is commencing employment with the Company or a Subsidiary
following a bona fide period of non-employment by the Company or a Subsidiary,
if he or she is granted an Award in connection with his or her commencement of
employment with the Company or a Subsidiary and such grant is an inducement
material to his or her entering into employment with the Company or a
Subsidiary. The Board may in its discretion adopt procedures from time to
time to ensure that an Employee is eligible to participate in the Plan prior to
the granting of any Awards to such Employee under the Plan


 


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(including, without limitation, a requirement, that
each such Employee certify to the Company prior to the receipt of an Award
under the Plan that he or she has not been previously employed by the Company
or a Subsidiary, or if previously employed, has had a bona fide period of
non-employment, and that the grant of Awards under the Plan is an inducement
material to his or her agreement to enter into employment with the Company or a
Subsidiary).


 


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


 


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


 


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


 


(1)                                  If
the Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the date of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable;


 


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


 


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


 


(o)                                 “Good Reason” means a
Participant’s voluntary resignation following any one or more of the following
that is effected without the Participant’s written consent: (i) a change
in his or her position following the Change of Control that materially reduces
his or her duties or responsibilities, (ii) a reduction in his or her base
salary following a Change of Control, unless the base salaries of all similarly
situated individuals are similarly reduced, or (iii) a relocation of such Participant’s
place of employment following a Change of Control by more than fifty (50) miles
from such Participant’s place of employment prior to a Change of Control. However,
if the term or concept of “Good Reason” has been defined in an agreement
between a Participant and the Company or any successor or parent or Subsidiary
thereof, then “Good Reason” shall have the definition set forth in such
agreement.


 


(p)                                 “Incentive Stock Option”
means an Option that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto. Incentive Stock Options may not
be granted under the Plan.


 


(q)                                 “Independent Director”
means a Director who is not an Employee of the Company and who qualifies as “independent”
within the meaning of NASD Rule 4200(a)(15), if the Company’s securities
are traded on the Nasdaq National Market, or the requirements of any other
established stock exchange on which the Company’s securities are traded, as
such rules or


 


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requirements may be amended from time to time.


 


(r)                                    “NASD” means the National Association
of Securities Dealers, Inc.


 


(s)                                  “Non-Qualified Stock Option”
means an Option that is not intended to be an Incentive Stock Option.


 


(t)                                    “Option” means a right
granted to a Participant pursuant to Article 5 of the Plan to purchase a
specified number of shares of Stock at a specified price during specified time
periods. An Option must be a Non-Qualified Stock Option.


 


(u)                                 “Participant” means an
Eligible Participant who has been granted an Award pursuant to the Plan.


 


(v)                                 “Performance Share” means a right
granted to a Participant pursuant to Article 8, to receive cash, Stock, or
other Awards, the payment of which is contingent upon achieving certain
performance goals established by the Committee.


 


(w)                               “Plan” means this
Sunesis Pharmaceuticals, Inc. 2006 Employment Commencement Incentive Plan,
as it may be amended from time to time.


 


(x)                                   “Restricted Stock”
means Stock awarded to a Participant pursuant to Article 6 that is subject
to certain restrictions and to risk of forfeiture.


 


(y)                                 “Restricted Stock Unit”
means a right to receive a specified number of shares of Stock during specified
time periods pursuant to Article 8.


 


(z)                                   “Stock” means the
common stock of the Company and such other securities of the Company that may be
substituted for Stock pursuant to Article 10.


 


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


 


(bb)                          “Stock Payment” means (a) a
payment in the form of shares of Stock, or (b) an option or other
right to purchase shares of Stock, as part of any bonus, deferred
compensation or other arrangement, made in lieu of all or any portion of the
compensation, granted pursuant to Article 8.


 


(cc)                            “Subsidiary” means any
corporation or other entity of which a majority of the outstanding voting stock
or voting power is beneficially owned directly or indirectly by the Company.


 


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ARTICLE 3

SHARES SUBJECT TO THE PLAN


 


3.1                                 Number of Shares.


 


(a)                                  Subject
to Article 10, the aggregate number of shares of Stock which may be
issued or transferred pursuant to Awards under the Plan shall be 200,000
shares.


 


The payment of Dividend Equivalents in conjunction with any outstanding
Awards shall not be counted against the shares available for issuance under the
Plan.


 


(b)                                 To
the extent that an Award terminates, expires, or lapses for any reason, any
shares of Stock subject to the Award shall again be available for the grant of
an Award pursuant to the Plan. Additionally, any shares of Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by
the Company or any Subsidiary shall not be counted against shares of Stock
available for grant pursuant to the Plan.


 


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


 


ARTICLE 4

ELIGIBILITY AND PARTICIPATION


 


4.1                                 Eligibility.


 


(a)                                  General.
Awards may be granted only to Eligible Participants. All Options granted
under the Plan shall be Non-Qualified Stock Options.


 


(b)                                 Foreign
Participants. In order to assure the viability of Awards granted to
Participants employed in foreign countries, the Committee may provide for
such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of, the Plan as it may consider necessary or
appropriate for such purposes without thereby affecting the terms of the Plan
as in effect for any other purpose; provided,
however, that no such supplements, amendments, restatements, or
alternative versions shall increase the share limitations contained in Sections
3.1 of the Plan.


 


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


 


ARTICLE 5

STOCK OPTIONS


 


5.1                                 General. Options may be
granted to Eligible Participants on the following terms and conditions:


 


(a)                                  Exercise
Price. The exercise price per share of Stock subject to an Option


 


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shall be determined by the Committee and set forth in
the Award Agreement; provided
that the exercise price for any Option shall not be less than Fair Market Value
of a share of Stock on the date of grant.


 


(b)                                 Time
And Conditions Of Exercise. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part; provided, that the term of any Option
granted under the Plan shall not exceed ten years; and provided, further, that such Option shall
be exercisable for not less than one year after the date of the Participant’s
death. The Committee shall also determine the performance or other conditions,
if any, that must be satisfied before all or part of an Option may be
exercised.


 


(c)                                  Payment.
The Committee shall determine the methods by which the exercise price of an
Option may be paid, the form of payment, including, without
limitation, cash, promissory note bearing interest at no less than such rate as
shall then preclude the imputation of interest under the Code, shares of Stock
held for longer than six months having a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or exercised
portion thereof, or other property acceptable to the Committee (including
through the delivery of a notice that the Participant has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of the
Option exercise price; provided,
that payment of such proceeds is then made to the Company upon settlement of
such sale), and the methods by which shares of Stock shall be delivered or
deemed to be delivered to Participants. Notwithstanding any other provision of
the Plan to the contrary, no Participant who is a member of the Board or an “executive
officer” of the Company within the meaning of Section 13(k) of the
Exchange Act shall be permitted to pay the exercise price of an Option in any
method which would violate Section 13(k).


 


(d)                                 Evidence
Of Grant. All Options shall be evidenced by a written Award Agreement between
the Company and the Participant. The Award Agreement shall include such
additional provisions as may be specified by the Committee.


 


ARTICLE 6

RESTRICTED STOCK AWARDS


 


6.1                                 Grant of Restricted Stock. Restricted
Stock may be awarded to any Eligible Participant in such amounts and
subject to such terms and conditions as determined by the Committee. All Awards
of Restricted Stock shall be evidenced by a written Restricted Stock Award
Agreement.


 


6.2                                 Issuance and Restrictions. Restricted
Stock shall be subject to such restrictions on transferability and other
restrictions as the Committee may impose (including, without limitation,
limitations on the right to vote Restricted Stock or the right to receive
dividends on the Restricted Stock). These restrictions may lapse
separately or in combination at such times, pursuant to such circumstances, in
such installments, or otherwise, as the Committee determines at the time of the
grant of the Award or thereafter.


 


6.3                                 Forfeiture. Except as otherwise
determined by the Committee at the time of the


 


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grant of the Award or thereafter, upon termination of
employment or service during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide
in any Restricted Stock Award Agreement that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part in
the event of terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock.


 


6.4                                 Certificates For Restricted Stock.
Restricted Stock granted pursuant to the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing shares of
Restricted Stock are registered in the name of the Participant, certificates
must bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company may, at its
discretion, retain physical possession of the certificate until such time as
all applicable restrictions lapse.


 


ARTICLE 7


 


STOCK
APPRECIATION RIGHTS


 


7.1                                 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any Eligible Participant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and
simultaneously with the grant of an Option, (b) with respect to a
previously granted Option, or (c) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose and shall be evidenced
by an Award Agreement.


 


                                                7.2                                 Coupled Stock Appreciation Rights.


 


(a)                                  A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and shall be exercisable
only when and to the extent the related Option is exercisable.


 


(b)                                 A CSAR may be granted to a Participant
for no more than the number of shares subject to the simultaneously or
previously granted Option to which it is coupled.


 


(c)                                  A CSAR shall entitle the Participant (or
other person entitled to exercise the Option pursuant to the Plan) to surrender
to the Company unexercised a portion of the Option to which the CSAR relates
(to the extent then exercisable pursuant to its terms) and to receive from the
Company in exchange therefor an amount determined by multiplying the difference
obtained by subtracting the Option exercise price from the Fair Market Value of
a share of Stock on the date of exercise of the CSAR by the number of shares of
Stock with respect to which the CSAR shall have been exercised, subject to any
limitations the Committee may impose.


 


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7.3                                 Independent Stock Appreciation Rights.


 


(a)                                  An
Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and
shall have a term set by the Committee. An ISAR shall be exercisable in such
installments as the Committee may determine. An ISAR shall cover such
number of shares of Stock as the Committee may determine. The exercise
price per share of Stock subject to each ISAR shall be set by the Committee; provided, however, that, the Committee in its sole and
absolute discretion may provide that the ISAR may be exercised
subsequent to a termination of employment or service, as applicable, or
following a Change of Control, or because of the Participant’s retirement,
death or Disability, or otherwise.


 


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


 


                                                7.4                                 Payment and Limitations on Exercise.


 


(a)                                  Payment of the amounts determined under Section 7.2(c) and
7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as
of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee.


 


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


 


 


 


ARTICLE 8

OTHER TYPES OF AWARDS


 


8.1                                 Performance
Share Awards. Any Eligible Participant selected by the Committee may be
granted one or more Performance Share awards which may be denominated in a
number of shares of Stock or in a dollar value of shares of Stock and which may be
linked to any one or more specific performance criteria determined appropriate
by the Committee, in each case on a specified date or dates or over any period
or periods determined by the Committee. In making such determinations, the
Committee shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular Participant.


 


8.2                                 Dividend
Equivalents. Any Eligible Participant selected by the Committee may be
granted Dividend Equivalents based on the dividends declared on the shares of
Stock that are subject to any Award, to be credited as of dividend payment
dates, during the period between the date the Award is granted and the date the
Award is exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional shares of


 


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Stock by such formula and at such time and subject to
such limitations as may be determined by the Committee.


 


8.3                                 Stock
Payments. Any Eligible Participant selected by the Committee may receive
Stock Payments in the manner determined from time to time by the Committee. The
number of shares shall be determined by the Committee and may be based
upon specific performance criteria determined appropriate by the Committee,
determined on the date such Stock Payment is made or on any date thereafter.


 


8.4                                 Restricted Stock
Units. Any Eligible Participant selected by the Committee may be
granted an award of Restricted Stock Units in the manner determined from time to
time by the Committee. The number of Restricted Stock Units shall be determined
by the Committee and may be linked to the Performance Criteria or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Stock underlying a Restricted Stock Unit award will not be
issued until the Restricted Stock Unit award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Participant awarded Restricted Stock Units shall have no rights as
a Company stockholder with respect to such Restricted Stock Units until such
time as the Restricted Stock Units have vested and the Stock underlying the
Restricted Stock Units has been issued.


 


8.5                                 Term.
The term of any Award of Performance Shares, Dividend Equivalents, Stock
Payments or Restricted Stock Units shall be set by the Committee in its
discretion.


 


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


 


8.7                                 Exercise
Upon Termination of Employment or Service. An Award of Performance Shares,
Dividend Equivalents, Restricted Stock Units and Stock Payments shall only
be  exercisable or payable while the
Participant is an Employee or Director of the Company or a Subsidiary; provided, however, that the Committee in its sole and
absolute discretion may provide that an Award of Performance Shares,
Dividend Equivalents, Stock Payments or Restricted Stock Units may be
exercised or paid subsequent to a termination of employment or service, as
applicable, or following a Change of Control, or because of the Participant’s
retirement, death or Disability, or otherwise.


 


8.8                                 Form of
Payment. Payments with respect to any Awards granted under this Article 8
shall be made in cash, in Stock or a combination of both, as determined by the Committee.


 


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


 


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ARTICLE 9

PROVISIONS APPLICABLE TO AWARDS


 


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


 


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


 


9.3                                 Limits on Transfer. No right or
interest of a Participant in any Award may be pledged, encumbered, or hypothecated
to or in favor of any party other than the Company or a Subsidiary, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company or a Subsidiary. No Award shall be assigned,
transferred, or otherwise disposed of by a Participant other than by will or
the laws of descent and distribution.


 


9.4                                 Beneficiaries. Notwithstanding Section 9.3,
a Participant may, in the manner determined by the Committee, designate a
beneficiary to exercise the rights of the Participant and to receive any
distribution with respect to any Award upon the Participant’s death. A
beneficiary, legal guardian, legal representative, or other person claiming any
rights pursuant to the Plan is subject to all terms and conditions of the Plan
and any Award Agreement applicable to the Participant, except to the extent the
Plan and Award Agreement otherwise provide, and to any additional restrictions
deemed necessary or appropriate by the Committee. If the Participant is married
and resides in a community property state, a designation of a person other than
the Participant’s spouse as his beneficiary with respect to more than 50% of
the Participant’s interest in the Award shall not be effective without the
prior written consent of the Participant’s spouse. If no beneficiary has been
designated or survives the Participant, payment shall be made to the person
entitled thereto pursuant to the Participant’s will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be
changed or revoked by a Participant at any time provided the change or
revocation is filed with the Committee.


 


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


 


11

















 


reasonable covenants, agreements, and representations
as the Board, in its discretion, deems advisable in order to comply with any
such laws, regulations, or requirements. The Committee shall have the right to
require any Participant to comply with
any timing or other restrictions with respect to the settlement or exercise of
any Award, including a window-period limitation, as may be imposed in the
discretion of the Committee.


 


ARTICLE 10

CHANGES IN CAPITAL STRUCTURE


 


10.1                           Adjustments. In the event of any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation, spin-off, recapitalization or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change
affecting the shares of Stock or the share price of the Stock, the Committee
shall make such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change with respect to (i) the
aggregate number and type of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Sections
3.1); (ii) the terms and conditions of any outstanding Awards (including,
without limitation, any applicable performance targets or criteria with respect
thereto); and (iii) the grant or exercise price per share for any
outstanding Awards under the Plan.


 


10.2                           Effect of a Change of Control When Awards Are
Not Assumed. If a Change of Control occurs and a Participant’s
Awards are not assumed by the surviving or successor entity or its parent or
Subsidiary and such successor does not substitute substantially similar awards
for those outstanding under the Plan, such Awards shall become fully
exercisable and/or payable as applicable, and all forfeiture restrictions on
such Awards shall lapse. Upon, or in anticipation of, a Change of Control, the
Committee may cause any and all Awards outstanding hereunder to terminate
at a specific time in the future and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine. The Committee shall have sole discretion
to determine whether an Award has been assumed by the surviving or successor
entity or its parent or Subsidiary or whether such successor has substituted
substantially similar awards for those outstanding under the Plan in connection
with a Change of Control.


 


10.3                           Effect
of Change of Control When Awards Are
Assumed; Termination Following Change of Control.


 


(a)                                  In
the event of a Change of Control where a Participant’s Awards are assumed by
the surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
then fifty percent (50%) of such Participant’s unvested Awards shall become
fully exercisable and/or payable as applicable, and all forfeiture restrictions
on such Awards shall lapse, immediately prior to such Change of Control.


 


(b)                                 In
the event of a Change of Control where a Participant’s Awards are assumed by
the surviving or successor entity or its parent or Subsidiary or such successor
substitutes substantially similar awards for those outstanding under the Plan,
if within twelve (12) months following such Change of Control (i) the
Participant’s employment or service with


 


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the
surviving or successor entity or its parent or Subsidiary is terminated without
Cause or (ii) such Participant voluntarily terminates such Participant’s
employment or service with Good Reason, then such Participant’s remaining
unvested Awards (including any substituted awards) shall become fully
exercisable and/or payable as applicable, and all forfeiture restrictions on
such Awards (including any substituted awards) shall lapse, on the date of
termination. Such Awards (including any substituted awards) shall remain
exercisable, as applicable, until the earlier of the expiration date of the
Award or three (3) months following such Participant’s cessation of
employment or service.


 


10.4                           Outstanding Awards – Certain Mergers.
Subject to any required action by the stockholders of the Company, in the event
that the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Stock receive securities of another corporation), each Award outstanding on the
date of such merger or consolidation shall pertain to and apply to the
securities that a holder of the number of shares of Stock subject to such Award
would have received in such merger or consolidation.


 


10.5                           Outstanding Awards – Other Changes.
In the event of any other change in the capitalization of the Company or
corporate change other than those specifically referred to in this Article 10,
the Committee may, in its absolute discretion, make such adjustments in the
number and class of shares subject to Awards outstanding on the date on
which such change occurs and in the per share grant or exercise price of each
Award as the Committee may consider appropriate to prevent dilution or
enlargement of rights.


 


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


 


ARTICLE 11

ADMINISTRATION


 


11.1                           Committee. Unless and until the
Board delegates administration to the Committee as set forth below, the Plan
shall be administered by the Board, which shall, in such event, constitute the “Committee”
for the purposes of the Plan. Any action taken by the Board in connection with
the administration of the Plan shall not be deemed approved by the Board unless
such actions are approved by a majority of the Independent Directors. The Board
may delegate administration of the Plan to the Committee, and the term “Committee”
shall apply to any person or persons to whom such authority has been delegated;
provided, however, that such Committee be comprised of a majority of or solely
two or more Independent Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a


 


13

















 


subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in the Plan to the Board
shall thereafter be to the Committee or subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board.


 


The Board may abolish
the Committee at any time and revest in the Board the administration of the
Plan. Any action taken by the Board in connection with the administration of
the Plan shall continue to not be deemed approved by the Board unless such
actions are approved by a majority of the Independent Directors. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board. Vacancies
in the Committee may only be filled by the Board.


 


11.2                           Action by the Committee. A
majority of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority 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 any officer or other employee of the Company or any
Subsidiary, the Company’s independent certified public accountants, or any executive
compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.


 


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


 


(a)                                  Adopt
procedures from time to time in the Committee’s discretion to ensure that an
Employee is eligible to participate in the Plan prior to the granting of any
Awards to such Employee under the Plan (including, without limitation, a requirement,
if any, that each such Employee certify to the Company prior to the receipt of
an Award under the Plan that he or she has not been previously employed by the
Company or a Subsidiary, or if previously employed, has had a bona fide period
of non-employment, and that the grant of Awards under the Plan is an inducement
material to his or her agreement to enter into employment with the Company or a
Subsidiary);


 


(b)                                 Designate
Participants to receive Awards;


 


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


 


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


 


(e)                                  Determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
reload provision, any restrictions or limitations on the Award, any schedule for
lapse of forfeiture restrictions or restrictions on the exercisability of an
Award, and accelerations or waivers thereof, any provisions related to
non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 12

EFFECTIVE AND EXPIRATION DATE


 


12.1                           Effective Date. The Plan is
effective as of the date of its adoption by the Board (the “Effective Date”).


 


12.2                           Expiration Date. The Plan will
expire on, and no Award may be granted pursuant to the Plan after December 31,
2015 (the “Expiration Date”).
Any Awards that are outstanding on the Expiration Date shall remain in force
according to the terms of the Plan and the applicable Award Agreement. Each
Award Agreement shall provide that it will expire on the tenth anniversary of
the date of grant of the Award to which it relates.


 


ARTICLE 13

AMENDMENT, MODIFICATION, AND TERMINATION


 


13.1                           Amendment, Modification, and Termination.
With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Plan; provided, however, that to the extent
necessary and desirable to comply with any applicable law, regulation, or stock
exchange rule, the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.


 


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


 


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ARTICLE 14

GENERAL PROVISIONS


 


14.1                           No Rights to Awards. No
Participant, employee, or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons uniformly.


 


14.2                           No Stockholders Rights. No Award
gives the Participant any of the rights of a stockholder of the Company unless
and until shares of Stock are in fact issued to such person in connection with
such Award.


 


14.3                           Withholding. The Company or any
Subsidiary shall have the authority and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, local and foreign taxes (including the Participant’s FICA
obligation) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of the Plan. The Committee may in
its discretion and in satisfaction of the foregoing requirement allow a
Participant to elect to have the Company withhold shares of Stock otherwise
issuable under an Award (or allow the return of shares of Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of the Plan, the number of shares of Stock which may be
withheld with respect to the issuance, vesting, exercise or payment of any
Award (or which may be repurchased from the Participant of such Award
within six months after such shares of Stock were acquired by the Participant
from the Company) in order to satisfy the Participant’s federal, state, local
and foreign income and payroll tax liabilities with respect to the issuance,
vesting, exercise or payment of the Award shall be limited to the number of
shares which have a Fair Market Value on the date of withholding or repurchase
equal to the aggregate amount of such liabilities based on the minimum
statutory withholding rates for federal, state, local and foreign income tax
and payroll tax purposes that are applicable to such supplemental taxable
income.


 


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


 


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


 


14.6                           Indemnification. To the extent
allowable pursuant to applicable law, each member of the Committee or of the
Board shall be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably
incurred by such member in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or
she may be involved by reason of any action or failure to act pursuant to
the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her;
provided, he or she gives the Company an opportunity, at its own
expense, to handle and defend


 


16

















 


the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled pursuant to the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.


 


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


 


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


 


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


 


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


 


14.11                     Limitations
Applicable to Section 16 Persons. Notwithstanding any other provision
of the Plan, the Plan, and any Award granted or awarded to any Participant who
is then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.


 


14.12                     Government And Other Regulations. The
obligation of the Company to make payment of awards in Stock or otherwise shall
be subject to all applicable laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be
under no obligation to register pursuant to the Securities Act of 1933, as
amended, any of the shares of Stock paid pursuant to the Plan. If the shares
paid pursuant to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act of 1933, as amended, the Company may restrict
the transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.


 


14.13                     Governing Law. The Plan and all
Award Agreements shall be construed in accordance with and governed by the laws
of the State of Delaware.


 


14.14                     SECTION 409A OF THE CODE. In
the event any provision of the Plan, or the application thereof, is or becomes
inconsistent with Section 409A of the Code and any regulations promulgated
thereunder, such provision shall be void or unenforceable or in the sole


 


17

















 


discretion of the Committee shall be deemed amended to
comply with Section 409A and any regulations promulgated thereunder. The
other provisions of the Plan shall remain in full force and effect.


 


ARTICLE 15

GENERAL PROVISIONS


 


15.1                           STOCKHOLDER APPROVAL NOT REQUIRED. It is expressly intended that approval of the
Company’s stockholders not be required as a condition of the effectiveness of
the Plan, and the Plan’s provisions shall be interpreted in a manner consistent
with such intent for all purposes. Specifically, Rule 4350(i) promulgated
by the NASD generally requires stockholder approval for stock option plans or
other equity compensation arrangements adopted by companies whose securities
are listed on the Nasdaq National Market pursuant to which stock awards or
stock may be acquired by officers, directors, employees, or consultants of
such companies. NASD Rule 4350(i)(1)(A)(iv) provides an exception to
this requirement for issuances of securities to a person not previously an
employee or director of the issuer, or following a bona fide period of
non-employment, as an inducement material to the individual’s entering into
employment with the issuer; provided, such
issuances are approved by either the issuer’s compensation committee comprised
of a majority of independent directors or a majority of the issuer’s
independent directors.  Awards under the
Plan may only be made to Eligible Participants who have not previously
been an Employee or director of the Company or a Subsidiary, or following a
bona fide period of non-employment by the Company or a Subsidiary, as an
inducement material to the Eligible Participant’s entering into employment with
the Company or a Subsidiary. Awards under the Plan will be approved by (i) the
Company’s Compensation Committee comprised of a majority of the Company’s
Independent Directors or (ii) a majority of the Company’s Independent
Directors. Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the
issuance of Awards and the shares of Common Stock issuable upon exercise or
vesting of such Awards pursuant to the Plan are not subject to the approval of
the Company’s stockholders.


 


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