exv10w1






Exhibit 10.1




PENWEST PHARMACEUTICALS CO.




2005 STOCK INCENTIVE PLAN1





	1.	 	Purpose





     The purpose of this 2005 Stock Incentive Plan (the “Plan”) of Penwest Pharmaceuticals Co., a
Washington corporation (the “Company”), is to advance the interests of the Company’s shareholders
by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make
important contributions to the Company and by providing such persons with equity ownership
opportunities and performance-based incentives that are intended to align their interests with
those of the Company’s shareholders. Except where the context otherwise requires, the term
“Company” shall include any of the Company’s present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the “Code”) and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has a controlling
interest, as determined by the Board of Directors of the Company (the “Board”).




	2.	 	Eligibility





     All of the Company’s employees, officers, directors, consultants and advisors are eligible to
receive options, stock appreciation rights, restricted stock, restricted stock units and other
stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the
Plan is deemed a “Participant”.




	3.	 	Administration and Delegation





     (a) Administration by Board of Directors. The Plan will be administered by the Board.
The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may
correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in
the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be
the sole and final judge of such expediency. All decisions by the Board shall be made in the
Board’s sole discretion and shall be final and binding on all persons having or claiming any
interest in the Plan or in any Award. No director or person acting pursuant to the authority
delegated by the Board shall be liable for any action or determination relating to or under the
Plan made in good faith.





 




			
	1	 	Reflects amendments to the plan approved by the
Company’s Board of Directors on September 7, 2006 and amendments to the plan
approved by the Company’s Board of Directors on April 24, 2008 and the
Company’s shareholders on June 11, 2008.




 









 










     (b) Appointment of Committees. To the extent permitted by applicable law, the Board
may delegate any or all of its powers under the Plan to one or more committees or subcommittees of
the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a
Committee of the Board to the extent that the Board’s powers or authority under the Plan have been
delegated to such Committee.



     (c) Delegation to Officers. To the extent permitted by applicable law, the Board may
delegate to one or more officers of the Company the power to grant Awards to employees or officers
of the Company or any of its present or future subsidiary corporations and to exercise such other
powers under the Plan as the Board may determine, provided that the Board shall fix the terms of
the Awards to be granted by such officers (including the exercise price of such Awards, which may
include a formula by which the exercise price will be determined) and the maximum number of shares
subject to Awards that the officers may grant; provided further, however, that no officer shall be
authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the
Company (as defined by Rule 16a-1 under the Exchange Act).




	4.	 	Stock Available for Awards





     (a) Number of Shares. Subject to adjustment under Section 9, Awards may be made under
the Plan for up to 4,150,000 shares of common stock, $0.001 par value per share, of the Company
(the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without
having been fully exercised or is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such Award being repurchased by the Company at the original issuance
price pursuant to a contractual repurchase right) or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the grant of Awards
under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined),
to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.



     (b) Sub-limits. Subject to adjustment under Section 9, the following sub-limits on
the number of shares subject to Awards shall apply:



          (1) Section 162(m) Per-Participant Limit. The maximum number of shares of Common
Stock with respect to which Awards may be granted to any Participant under the Plan in any calendar
year shall be 500,000 per calendar year. For purposes of the foregoing limit, the combination of
an Option in tandem with an SAR (as each is hereafter defined) shall be treated as a single Award.
The per-Participant limit described in this Section 4(b)(1) shall be construed and applied
consistently with Section 162(m) of the Code or any successor provision thereto, and the
regulations thereunder (“Section 162(m)”).




          (2) Limit on Awards that Vest Based Upon the Passage of Time Alone. The maximum
number of shares of Common Stock with respect to which Restricted Stock Awards




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and Other Stock Unit Awards (as defined in Section 8) that either require no purchase by the
Participant or vest on the basis of the passage of time alone may be granted shall be 1,500,000.





	5.	 	Stock Options





     (a) General. The Board may grant options to purchase Common Stock (each, an “Option”)
and determine the number of shares of Common Stock to be covered by each Option, the exercise price
of each Option and the conditions and limitations applicable to the exercise of each Option,
including conditions relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as
hereinafter defined) shall be designated a “Nonstatutory Stock Option”.



     (b) Incentive Stock Options. An Option that the Board intends to be an “incentive
stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be
granted to employees of Penwest Pharmaceuticals Co., any of Penwest Pharmaceutical Co.’s present or
future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any
other entities the employees of which are eligible to receive Incentive Stock Options under the
Code, and shall be subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any other party, if an
Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive
Stock Option or for any action taken by the Board pursuant to Section 10(f), including without
limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.



     (c) Exercise Price. The Board shall establish the exercise price at the time each
Option is granted and specify such exercise price in the applicable option agreement; provided,
however, that the exercise price shall be not less than 100% of the Fair Market Value (as defined
in Section 5(h)(3) below) at the time the Option is granted.



     (d) Duration of Options. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Board may specify in the applicable option agreement; provided,
however, that no Option will be granted for a term in excess of 10 years.



     (e) Limitation on Repricing. Unless such action is approved by the Company’s
shareholders: (1) no outstanding Option granted under the Plan may be amended to provide an
exercise price per share that is lower than the then-current exercise price per share of such
outstanding Option (other than adjustments pursuant to Section 9) and (2) the Board may not cancel
any outstanding Option (whether or not granted under the Plan) and grant in substitution therefor
new Awards under the Plan covering the same or a different number of shares of Common Stock and
having an exercise price per share lower than the then-current exercise price per share of the
cancelled Option.



     (f) No Reload Rights. No Option granted under the Plan shall contain any provision
entitling the optionee to the automatic grant of additional Options in connection with any exercise
of the original Option.



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     (g) Exercise of Option. Options may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of notice (including
electronic notice) approved by the Board together with payment in full as specified in Section 5(h)
for the number of shares for which the Option is exercised. Shares of Common Stock subject to the
Option will be delivered by the Company following exercise either as soon as practicable or,
subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s
obligation to be evidenced by an instrument providing for future delivery of the deferred shares at
the time or times specified by the Board).



     (h) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:



          (1) in cash, by wire transfer to the Company, by bank transfer to the Company or by check,
payable to the order of the Company;




          (2) if provided by the Board in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient
funds to pay the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the
exercise price and any required tax withholding;




          (3) if provided by the Board and for so long as the Common Stock is registered under the
Securities Exchange Act of 1934 (the “Exchange Act”), by delivery of shares of Common Stock owned
by the Participant valued at their fair market value as determined by (or in a manner approved by)
the Board (“Fair Market Value”), provided (i) such method of payment is then permitted under
applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the
Participant for such minimum period of time, if any, as may be established by the Board in its
discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements;




          (4) to the extent permitted by applicable law and by the Board, by (i) delivery of a
promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment
of such other lawful consideration as the Board may determine; or




          (5) by any combination of the above permitted forms of payment.




     (i) Substitute Options. In connection with a merger or consolidation of an entity
with the Company or the acquisition by the Company of property or stock of an entity, the Board may
grant Options in substitution for any options or other stock or stock-based awards granted by such
entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options contained in the other
sections of this Section 5 or in Section 2.



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	6.	 	Stock Appreciation Rights





     (a) General. A Stock Appreciation Right, or SAR, is an Award entitling the holder,
upon exercise, to receive an amount in Common Stock determined by reference to appreciation, from
and after the date of grant, in the fair market value of a share of Common Stock. The date as of
which such appreciation or other measure is determined shall be the exercise date.



     (b) Grants. Stock Appreciation Rights may be granted in tandem with, or independently
of, Options granted under the Plan.



          (1) Tandem Awards. When Stock Appreciation Rights are expressly granted in tandem
with Options, (i) the Stock Appreciation Right will be exercisable only at such time or times, and
to the extent, that the related Option is exercisable (except to the extent designated by the Board
in connection with a Reorganization Event) and will be exercisable in accordance with the procedure
required for exercise of the related Option; (ii) the Stock Appreciation Right will terminate and
no longer be exercisable upon the termination or exercise of the related Option, except to the
extent designated by the Board in connection with a Reorganization Event and except that a Stock
Appreciation Right granted with respect to less than the full number of shares covered by an Option
will not be reduced until the number of shares as to which the related Option has been exercised or
has terminated exceeds the number of shares not covered by the Stock Appreciation Right; (iii) the
Option will terminate and no longer be exercisable upon the exercise of the related Stock
Appreciation Right; and (iv) the Stock Appreciation Right will be transferable only with the
related Option.




          (2) Independent SARs. A Stock Appreciation Right not expressly granted in tandem with
an Option will become exercisable at such time or times, and on such conditions, as the Board may
specify in the SAR Award.




     (c) Exercise. Stock Appreciation Rights may be exercised by delivery to the Company
of a written notice of exercise signed by the proper person or by any other form of notice
(including electronic notice) approved by the Board, together with any other documents required by
the Board.



     (d) Duration of SARs. Each SAR shall be exercisable at such times and subject to such
terms and conditions as the Board may specify in the applicable agreement; provided, however, that
no SAR will be granted for a term in excess of 10 years.



     (e) Limitation on Repricing. Unless such action is approved by the Company’s
shareholders: (1) no outstanding SAR granted under the Plan may be amended to provide an exercise
price per share that is lower than the then-current exercise price per share of such outstanding
SAR (other than adjustments pursuant to Section 9) and (2) the Board may not cancel any outstanding
SAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the
Plan covering the same or a different number of shares of Common Stock and having an exercise price
per share lower than the then-current exercise price per share of the cancelled SAR.



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	7.	 	Restricted Stock; Restricted Stock Units





     (a) General. The Board may grant Awards entitling recipients to acquire shares of
Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price (or to require forfeiture of such
shares if issued at no cost) from the recipient in the event that conditions specified by the Board
in the applicable Award are not satisfied prior to the end of the applicable restriction period or
periods established by the Board for such Award. Instead of granting Awards for Restricted Stock,
the Board may grant Awards entitling the recipient to receive shares of Common Stock to be
delivered at the time such shares of Common Stock vest (“Restricted Stock Units”) (Restricted Stock
and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).



     (b) Terms and Conditions. The Board shall determine the terms and conditions of a
Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue
price, if any.



     (c) Stock Certificates. Any stock certificates issued in respect of a Restricted
Stock Award shall be registered in the name of the Participant and, if determined by the Board,
deposited by the Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the Company (or such
designee) shall deliver the certificates no longer subject to such restrictions to the Participant
or if the Participant has died, to the beneficiary designated, in a manner determined by the Board,
by a Participant to receive amounts due or exercise rights of the Participant in the event of the
Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by
a Participant, “Designated Beneficiary” shall mean the Participant’s estate.




	8.	 	Other Stock-Based Awards





     Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part
by reference to, or are otherwise based on, shares of Common Stock or other property, may be
granted hereunder to Participants (“Other Stock Unit Awards”), including without limitation Awards
entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other
Stock Unit Awards shall also be available as a form of payment in the settlement of other Awards
granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise
entitled. Other Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board
shall determine. Subject to the provisions of the Plan, the Board shall determine the conditions
of each Other Stock Unit Awards, including any purchase price applicable thereto.




	9.	 	Adjustments for Changes in Common Stock and Certain Other Events





     (a) Changes in Capitalization. In the event of any stock split, reverse stock split,
stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or
other



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similar change in capitalization or event, or any distribution to holders of Common Stock
other than an ordinary cash dividend, (i) the number and class of securities available under this
Plan, (ii) the sub-limits set forth in Section 4(b), (iii) the number and class of securities and
exercise price per share of each outstanding Option, (iv) the share- and per-share provisions of
each Stock Appreciation Right, (v) the repurchase price per share subject to each outstanding
Restricted Stock Award and (vi) the share- and per-share-related provisions of each outstanding
Other Stock Unit Award, shall be appropriately adjusted by the Company (or substituted Awards may
be made, if applicable) to the extent determined by the Board.



     (b) Reorganization Events.



          (1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation
of the Company with or into another entity as a result of which all of the Common Stock of the
Company is converted into or exchanged for the right to receive cash, securities or other property
or is cancelled, (b) any exchange of all of the Common Stock of the Company for cash, securities or
other property pursuant to a share exchange transaction or (c) any liquidation or dissolution of
the Company.




          (2) Consequences of a Reorganization Event on Awards Other than Restricted Stock
Awards. In connection with a Reorganization Event, the Board shall take any one or more of the
following actions as to all or any outstanding Awards on such terms as the Board determines: (i)
provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by
the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a
Participant, provide that the Participant’s unexercised Options or other unexercised Awards shall
become exercisable in full and will terminate immediately prior to the consummation of such
Reorganization Event unless exercised by the Participant within a specified period following the
date of such notice, (iii) provide that outstanding Awards shall become realizable or deliverable,
or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such
Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders
of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in
the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to a
Participant equal to (A) the Acquisition Price times the number of shares of Common Stock subject
to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the
Acquisition Price) minus (B) the aggregate exercise price of all such outstanding Options or other
Awards, in exchange for the termination of such Options or other Awards, (v) provide that, in
connection with a liquidation or dissolution of the Company, Awards shall convert into the right to
receive liquidation proceeds (if applicable, net of the exercise price thereof) and (vi) any
combination of the foregoing.




          For purposes of clause (i) above, an Option shall be considered assumed if, following
consummation of the Reorganization Event, the Option confers the right to purchase, for each share
of Common Stock subject to the Option immediately prior to the consummation of the Reorganization
Event, the consideration (whether cash, securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share of Common




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Stock held immediately prior to the consummation of the Reorganization Event (and if holders
were offered a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if the consideration
received as a result of the Reorganization Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to be received upon the exercise
of Options to consist solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration
received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.




          (3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the
occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the
repurchase and other rights of the Company under each outstanding Restricted Stock Award shall
inure to the benefit of the Company’s successor and shall apply to the cash, securities or other
property which the Common Stock was converted into or exchanged for pursuant to such Reorganization
Event in the same manner and to the same extent as they applied to the Common Stock subject to such
Restricted Stock Award. Upon the occurrence of a Reorganization Event involving the liquidation or
dissolution of the Company, except to the extent specifically provided to the contrary in the
instrument evidencing any Restricted Stock Award or any other agreement between a Participant and
the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall
automatically be deemed terminated or satisfied.





	10.	 	General Provisions Applicable to Awards





     (a) Transferability of Awards. Except as the Board may otherwise determine or provide
in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by
the person to whom they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution or, other than in the case of an Incentive Stock Option,
pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.



     (b) Documentation. Each Award shall be evidenced in such form (written, electronic or
otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition
to those set forth in the Plan.



     (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be
made alone or in addition or in relation to any other Award. The terms of each Award need not be
identical, and the Board need not treat Participants uniformly.



     (d) Termination of Status. The Board shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other change in the employment or
other status of a Participant and the extent to which, and the period during which, the
Participant,



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or the Participant’s legal representative, conservator, guardian or Designated Beneficiary,
may exercise rights under the Award.



     (e) Withholding. Each Participant shall pay to the Company, or make provision
satisfactory to the Company for payment of, any taxes required by law to be withheld in connection
with an Award to such Participant. Except as the Board may otherwise provide in an Award, for so
long as the Common Stock is registered under the Exchange Act, Participants may satisfy such tax
obligations in whole or in part by delivery of shares of Common Stock, including shares retained
from the Award creating the tax obligation, valued at their Fair Market Value; provided, however,
except as otherwise provided by the Board, that the total tax withholding where stock is being used
to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding
obligations (based on minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable income). Shares
surrendered to satisfy tax withholding requirements cannot be subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.



     (f) Amendment of Award. Except as otherwise provided in Section 5(e), the Board may
amend, modify or terminate any outstanding Award, including but not limited to, substituting
therefor another Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that
the Participant’s consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and adversely affect the
Participant.



     (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any
shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously
delivered under the Plan until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market rules and regulations,
and (iii) the Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements of any applicable
laws, rules or regulations.



     (h) Acceleration. The Board may at any time provide that any Award shall become
immediately exercisable in full or in part, free of some or all restrictions or conditions, or
otherwise realizable in full or in part, as the case may be.



     (i) Performance Conditions.



          (1) This Section 10(i) shall be administered by a Committee approved by the Board, all of the
members of which are “outside directors” as defined by Section 162(m) (the “Section 162(m)
Committee”).




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          (2) Notwithstanding any other provision of the Plan, if the Section 162(m) Committee
determines, at the time a Restricted Stock Award or Other Stock Unit Award is granted to a
Participant, that such Participant is, or may be as of the end of the tax year in which the Company
would claim a tax deduction in connection with such Award, a Covered Employee (as defined in
Section 162(m)), then the Section 162(m) Committee may provide that this Section 10(i) is
applicable to such Award.




          (3) If a Restricted Stock Award or Other Stock Unit Award is subject to this Section 10(i),
then the lapsing of restrictions thereon and the distribution of cash or Shares pursuant thereto,
as applicable, shall be subject to the achievement of one or more objective performance goals
established by the Section 162(m) Committee, which shall be based on the relative or absolute
attainment of specified levels of one or any combination of the following: (a) earnings per share,
(b) return on average equity or average assets with respect to a pre-determined peer group, (c)
earnings, (d) earnings growth, (e) revenues, (f) expenses, (g) stock price, (h) market share, (i)
return on sales, assets, equity or investment, (j) regulatory compliance, (k) achievement of
balance sheet or income statement objectives, (l) total shareholder return, (m) net operating
profit after tax, (n) pre-tax or after-tax income, (o) cash flow, (p) achievement of research,
development, clinical or regulatory milestones, (q) product sales and (r) business development
activities, and may be absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated. Such performance goals may be adjusted to
exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of
discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the
writedown of any asset, and (v) charges for restructuring and rationalization programs. Such
performance goals: (i) may vary by Participant and may be different for different Awards; (ii) may
be particular to a Participant or the department, branch, line of business, subsidiary or other
unit in which the Participant works and may cover such period as may be specified by the Section
162(m) Committee; and (iii) shall be set by the Section 162(m) Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section 162(m).




          (4) Notwithstanding any provision of the Plan, with respect to any Restricted Stock Award or
Other Stock Unit Award that is subject to this Section 10(i), the Section 162(m) Committee may
adjust downwards, but not upwards, the cash or number of Shares payable pursuant to such Award, and
the Section 162(m) Committee may not waive the achievement of the applicable performance goals
except in the case of the death or disability of the Participant.




          (5) The Section 162(m) Committee shall have the power to impose such other restrictions on
Awards subject to this Section 10(i) as it may deem necessary or appropriate to ensure that such
Awards satisfy all requirements for “performance-based compensation” within the meaning of Section
162(m)(4)(C) of the Code, or any successor provision thereto.





	11.	 	Miscellaneous





     (a) No Right To Employment or Other Status. No person shall have any claim or right
to be granted an Award, and the grant of an Award shall not be construed as giving a Participant
the



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right to continued employment or any other relationship with the Company. The Company
expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a
Participant free from any liability or claim under the Plan, except as expressly provided in the
applicable Award.



     (b) No Rights As Shareholder. Subject to the provisions of the applicable Award, no
Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any
shares of Common Stock to be distributed with respect to an Award until becoming the record holder
of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the number of shares
subject to such Option are adjusted as of the date of the distribution of the dividend (rather than
as of the record date for such dividend), then an optionee who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled to receive, on the
distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such
Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of
business on the record date for such stock dividend.



     (c) Effective Date and Term of Plan. The Plan shall become effective on the date on
which it is adopted by the Board, but no Award may be granted unless and until the Plan has been
approved by the Company’s shareholders. No Awards shall be granted under the Plan after the
completion of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board
or (ii) the date the Plan was approved by the Company’s shareholders, but Awards previously granted
may extend beyond that date.



     (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time; provided that, to the extent determined by the Board, no amendment
requiring shareholder approval under any applicable legal, regulatory or listing requirement shall
become effective until such shareholder approval is obtained. No Award shall be made that is
conditioned upon shareholder approval of any amendment to the Plan.



     (e) Provisions for Foreign Participants. The Board may modify Awards or Options
granted to Participants who are foreign nationals or employed outside the United States or
establish subplans or procedures under the Plan to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.



     (f) Compliance With Code Section 409A. No Award shall provide for deferral of
compensation that does not comply with Section 409A of the Code, unless the Board, at the time of
grant, specifically provides that the Award is not intended to comply with Section 409A of the
Code.



     (g) Governing Law. The provisions of the Plan and all Awards made hereunder shall be
governed by and interpreted in accordance with the laws of the State of Washington excluding
choice-of-law principles of the law of such state that would require the application of the laws of
a jurisdiction other than such state.




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