Unassociated Document


    EXHIBIT 10.3

    
       

      COMBIMATRIX
        CORPORATION

       

      2006
        STOCK INCENTIVE PLAN

       

      ARTICLE
        ONE


       

      GENERAL
        PROVISIONS

       

      I. PURPOSE
        OF THE PLAN

       

      This
        CombiMatrix Corporation 2006 Stock Incentive Plan is intended to promote
        the
        interests of CombiMatrix Corporation, a Delaware corporation, by providing
        eligible persons in the Corporation's Service with the opportunity to acquire
        a
        proprietary interest, or otherwise increase their proprietary interest, in
        the
        Corporation as an incentive for them to remain in such Service.

       

      Capitalized
        terms shall have the meanings assigned to such terms in the attached
        Appendix.

       

      II. STRUCTURE
        OF THE PLAN

       

      A. The
        Plan
        shall be divided into three separate equity incentive programs: 

       

      ­ the
        Discretionary Option/Stock Appreciation Right Grant Program under which eligible
        persons may, at the discretion of the Plan Administrator, be granted options
        to
        purchase shares of Common Stock, 

       

      ­ the
        Stock
        Issuance Program under which eligible persons may, at the discretion of the
        Plan
        Administrator, be issued shares of Common Stock directly, either through
        the
        immediate purchase of such shares or as a bonus for services rendered the
        Corporation (or any Parent or Subsidiary), 

       

      ­ the
        Automatic Option Grant Program under which eligible non-employee Board members
        shall automatically receive option grants at designated intervals over their
        period of continued Board Service, and 

       

      B. The
        provisions of Articles One and Five shall apply to all equity incentive programs
        under the Plan and shall govern the interests of all persons under the
        Plan.

       

      III. ADMINISTRATION
        OF THE PLAN

       

      A. The
        Committee shall have sole and exclusive authority to administer the
        Discretionary Option Grant and Stock Issuance Programs with respect to Section
        16 Insiders. Administration of the Discretionary Option Grant and Stock Issuance
        Programs with respect to all other persons eligible to participate in those
        programs may, at the Board's discretion, be vested in the Committee, or the
        Board may retain the power to administer those programs with respect to all
        such
        persons. Other than with respect to Section 16 Insiders, the Board may also
        appoint an Executive Officer Committee to administer the Discretionary Option
        Program and Stock Issuance Program, subject to the applicable limitations
        and
        requirements of the Delaware Corporate Law. However, any discretionary option
        grants or stock issuances to members of the Committee must be authorized
        and
        approved by a disinterested majority of the Board.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      B. Members
        of the Committee or, if applicable, the Executive Officer Committee, shall
        serve
        for such period of time as the Board may determine and may be removed by
        the
        Board at any time.

       

      C. The
        Plan
        Administrator shall, within the scope of its administrative functions under
        the
        Plan, have full power and authority (subject to the provisions of the Plan)
        to
        establish such rules and regulations as it may deem appropriate for proper
        administration of the Discretionary Option Grant and Stock Issuance Programs
        and
        to make such determinations under, and issue such interpretations of, the
        provisions of those programs and any outstanding options or stock issuances
        thereunder as it may deem necessary or advisable. Decisions of the Plan
        Administrator within the scope of its administrative functions under the
        Plan
        shall be final and binding on all parties who have an interest in the
        Discretionary Option Grant and Stock Issuance Programs under its jurisdiction
        or
        any stock option or stock issuance thereunder.

       

      D. Service
        on the Committee shall constitute Service as a Board member, and members
        of each
        such committee shall accordingly be entitled to full indemnification and
        reimbursement as Board members for their service on such committee. No member
        of
        the Committee or, if applicable, the Executive Officer Committee, shall be
        liable for any act or omission made in good faith with respect to the Plan
        or
        any option grants or stock issuances under the Plan. 

       

      E. Administration
        of the Automatic Option Grant Program shall be self-executing in accordance
        with
        the terms of those programs, and no Plan Administrator shall exercise any
        discretionary functions with respect to any option grants or stock issuances
        made under those programs. 

       

      IV. ELIGIBILITY

       

      A. The
        persons eligible to participate in the Discretionary Option Grant and Stock
        Issuance Programs are as follows: 

       

      
        	 	
                (i)

              	
                Employees,
                  

              


      

       

      
        	 	
                (ii)

              	
                non-employee
                  members of the Board or the board of directors of any Parent or
                  Subsidiary, and 

              


      

       

      
        	 	
                (iii)

              	
                consultants
                  and other independent advisors who provide services to the Corporation
                  (or
                  any Parent or Subsidiary). 

              


      

       

      B. The
        Plan
        Administrator shall, within the scope of its administrative jurisdiction
        under
        the Plan, have full authority to determine, (i) with respect to the option
        grants under the Discretionary Option Grant Program, which eligible persons
        are
        to receive such grants, the time or times when those grants are to be made,
        the
        number of shares to be covered by each such grant, the status of the granted
        option as either an Incentive Option or a Non-Statutory Option, if, and the
        extent to which, each option is to be exercisable at a different time or
        times
        than those times set forth in Section I.B.1. of Article Two of the Plan,
        the vesting schedule (if any) applicable to the option shares and the maximum
        term for which the option is to remain outstanding and (ii) with respect
        to
        stock issuances under the Stock Issuance Program, which eligible persons
        are to
        receive such issuances, the time or times when the issuances are to be made,
        the
        number of shares to be issued to each Participant, the vesting schedule (if
        any)
        applicable to the issued shares and the consideration for such shares.



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      C. The
        Plan
        Administrator shall have the absolute discretion either to grant options
        in
        accordance with the Discretionary Option/Stock Appreciation Right Grant Program
        or to effect stock issuances in accordance with the Stock Issuance
        Program.

       

      D. The
        individuals who shall be eligible to participate in the Automatic Option
        Grant
        Program shall be limited to (i) those individuals who first become non-employee
        Board members after the Plan Effective Date, whether through appointment
        by the
        Board or election by the Corporation's stockholders, and (ii) those individuals
        who continue to serve as non-employee Board members on the first business
        day in
        each calendar year following the Plan Effective Date and during the term
        of the
        Plan, including any individuals who first became non-employee Board members
        prior to such Plan Effective Date. A non-employee Board member who has
        previously been in the employ of the Corporation (or any Parent or Subsidiary)
        shall not be eligible to receive an option grant under the Automatic Option
        Grant Program at the time he or she first becomes a non-employee Board member,
        but shall be eligible to receive periodic option grants under the Automatic
        Option Grant Program while he or she continues to serve as a non-employee
        Board
        member.

       

      V. STOCK
        SUBJECT TO THE PLAN 

       

      A. The
        stock
        issuable under the Plan shall be shares of authorized but unissued or reacquired
        Common Stock, including shares repurchased by the Corporation on the open
        market. The number of shares of Common Stock initially reserved for issuance
        over the term of the Plan shall not exceed 8,100,000 shares of Common Stock.
        For
        purposes of clarification, the shares of Common Stock subject to the Assumed
        Options are not included in the 8,100,000 share of Common Stock reserved
        hereunder for issuance pursuant to this paragraph, though the shares of Common
        Stock subject to the Assumed Options may become available for grant under
        this
        Plan to the extent provided in Article One, Section V.D. below. 

       

      B. The
        number of shares of Common Stock available for issuance under the Plan shall
        automatically increase on the first trading day of January each calendar
        year
        during the term of the Plan, beginning with calendar year 2007, by an amount
        equal to three percent (3%) of the total number of shares of Common Stock
        outstanding on the last trading day in December of the immediately preceding
        calendar year. The maximum aggregate number of shares of Common Stock that
        may
        be issued under the Plan (as adjusted for all such annual increases) through
        Incentive Options shall be 30,000,000 shares of Common Stock.

       

      C. At
        such
        time as stock option or stock appreciation rights granted under the Plan
        may
        qualify as performance-based compensation under Code Section 162(m), no one
        person participating in the Plan may receive stock options or separately
        exercisable stock appreciation rights for more than 2,000,000 shares of Common
        Stock in the aggregate per calendar year. At such time as direct stock issuances
        or share right awards granted under the Plan may qualify as performance-based
        compensation under Code Section 162(m), no one person participating in the
        Plan
        may receive direct stock issuances or share right awards for more than 2,000,000
        shares of Common Stock in the aggregate per calendar year. In addition, the
        maximum dollar value payable to any one Participant with respect to awards
        granted under Article Five, Section VIII.B. is $5,000,000 per calendar
        year.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      D. Shares
        of
        Common Stock subject to outstanding options, Assumed Options or stock
        appreciation rights shall be available for subsequent issuance under the
        Plan to
        the extent such shares are not issued pursuant to such options, Assumed Options
        or stock appreciation rights prior to the expiration, termination or
        cancellation of such options, Assumed Options or stock appreciation rights
        for
        any reason. Shares of Common Stock subject to outstanding share right awards
        shall be available for subsequent issuance under the Plan to the extent those
        share right awards expire, terminate or are cancelled for any reason prior
        to
        the issuance of all shares of Common Stock subject to such share right awards.
        Unvested shares issued under the Plan and subsequently cancelled, forfeited
        or
        repurchased by the Corporation, at a price per share not greater than the
        original issue price paid per share, pursuant to the Corporation’s repurchase
        rights under the Plan shall be added back to the number of shares of Common
        Stock reserved for issuance under the Plan. In addition, (i) should no shares
        of
        Common Stock be delivered upon the exercise of a stock appreciation right
        or
        (ii) should the exercise price of an option under the Plan or an Assumed
        Option
        be paid with shares of Common Stock (either shares previously held by the
        individual exercising the option or shares deducted from the option) or (iii)
        should shares of Common Stock otherwise issuable under the Plan or pursuant
        to
        or an Assumed Option be withheld by the Corporation in satisfaction of the
        withholding taxes incurred in connection with the exercise of an option,
        an
        Assumed Option or stock appreciation right or in connection with a stock
        issuance (including a share right award) under the Plan, then the number
        of
        shares of Common Stock available for issuance under the Plan shall be reduced
        by
        the net number of shares issued to the holder of the award, and not by the
        gross
        number of shares of Common Stock for which the option, Assumed Option or
        stock
        appreciation right is exercised or which vest or are issued pursuant to the
        stock issuance (including a share right award). 

       

      E. If
        any
        change is made to the Common Stock by reason of any stock split, stock dividend,
        recapitalization, merger, reorganization, combination of shares, exchange
        of
        shares or other change affecting the outstanding Common Stock as a class
        without
        the Corporation's receipt of consideration, appropriate adjustments shall
        be
        made by the Plan Administrator to (i) the maximum number, type and/or class
        of
        securities issuable under the Plan, (ii) the maximum number, type and/or
        class
        of securities for which any one person may be granted (x) stock options and
        separately exercisable stock appreciation rights and (y) direct stock issuances
        and share right awards under the Plan per calendar year, (iii) the number,
        type
        and/or class of securities for which grants are subsequently to be made under
        the Automatic Option Grant Program to new and continuing non-employee Board
        members, (iv) the number, type and/or class of securities and the exercise
        price
        per share in effect under each outstanding option and stock appreciation
        right
        under the Plan, (v) the number, kind and/or class of securities under each
        share
        right award, and (vi) the maximum number, type and/or class of securities
        by
        which the share reserve is to increase automatically each calendar year pursuant
        to the provisions of Section V.B. of this Article One. Such adjustments to
        the
        outstanding awards are to be effected in a manner which shall preclude the
        enlargement or dilution of rights and benefits under such options. The
        adjustments determined by the Plan Administrator shall be final, binding
        and
        conclusive.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        TWO


       

      DISCRETIONARY
        OPTION/STOCK APPRECIATION RIGHT GRANT PROGRAM

       

      I. OPTION
        TERMS

       

      Each
        option shall be evidenced by one or more documents in the form approved by
        the
        Plan Administrator; provided, however, that each such document shall comply
        with
        the terms specified below. Each document evidencing an Incentive Option shall,
        in addition, be subject to the provisions of the Plan applicable to such
        options. 

       

      A. EXERCISE
        PRICE.

       

      1. The
        exercise price per share shall be fixed by the Plan Administrator but shall
        not
        be less than one hundred percent (100%) of the Fair Market Value per share
        of
        Common Stock on the option grant date. 

       

      2. The
        exercise price shall become immediately due upon exercise of the option and
        shall, subject to the provisions of the documents evidencing the option,
        be
        payable in one or more of the forms specified below: 

       

      (i) cash
        or
        check made payable to the Corporation, or

       

      (ii) shares
        of
        Common Stock held for the requisite period necessary to avoid a charge to
        the
        Corporation's earnings for financial reporting purposes and valued at Fair
        Market Value on the Exercise Date (including the cancellation of shares of
        Common Stock subject to the option), or 

       

      (iii) to
        the
        extent the option is exercised for vested shares, through a special sale
        and
        remittance procedure pursuant to which the Optionee shall concurrently provide
        irrevocable instructions to (a) a Corporation-designated brokerage firm to
        effect the immediate sale of the purchased shares and remit to the Corporation,
        out of the sale proceeds available on the settlement date, sufficient funds
        to
        cover the aggregate exercise price payable for the purchased shares plus
        all
        applicable Federal, state and local income and employment taxes required
        to be
        withheld by the Corporation by reason of such exercise and (b) the Corporation
        to deliver the certificates for the purchased shares directly to such brokerage
        firm in order to complete the sale, or

       

      (iv) Any
        other
        form of legal consideration, as determined by the Plan Administrator and
        specifically included in the stock option agreement.

       

      Except
        to
        the extent such sale and remittance procedure is utilized, payment of the
        exercise price for the purchased shares must be made on the Exercise Date.
        


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      B. EXERCISE
        AND TERM OF OPTIONS. 

       

      1. Each
        option shall vest and be exercisable at such time or times, during such period
        and for such number of shares as shall be determined by the Plan Administrator
        and set forth in the documents evidencing the option. 

       

      2. Notwithstanding
        any other provision of the Plan, no option shall have a term in excess of
        ten
        (10) years measured from the option grant date.

       

      C. EFFECT
        OF
        TERMINATION OF SERVICE. 

       

      1. The
        following provisions shall govern the exercise of any options held by the
        Optionee at the time of cessation of Service or death: 

       

      (i) Termination
        of Service.
        Subject
        to earlier termination of the option as otherwise provided in the Plan and
        unless otherwise specifically provided by the Plan Administrator with respect
        to
        an option and set forth in the award agreement (either at grant or by amendment
        at a later time), an option shall remain exercisable, to the extent vested,
        after a Optionee’s termination of Service only during the applicable time period
        determined in accordance with this Section and thereafter shall terminate
        and no
        longer be exercisable: 

       

      (A) Death
        or
        Permanent Disability. If the Optionee’s Service terminates because of the death
        or Permanent Disability of the Optionee, the option, to the extent unexercised,
        vested and exercisable on the date on which the Optionee’s Service terminated,
        may be exercised by the Optionee (or the Optionee’s legal representative or
        estate, as applicable) at any time prior to the expiration of twelve (12)
        months
        (or such other period of time as determined by the Plan Administrator, in
        its
        discretion) after the date on which the Optionee’s Service terminated, but in
        any event only with respect to the unexercised and vested portion of the
        option
        and not after the maximum term of the option.

       

      (B) Termination
        for Misconduct. Notwithstanding any other provision of the Plan to the contrary,
        if the Optionee’s Service is terminated for Misconduct or should the Optionee
        otherwise engage in Misconduct while holding one or more outstanding options,
        then all such options shall terminate immediately and cease to be outstanding.
        

       

      (C) Other
        Termination of Service. If the Optionee’s Service terminates for any reason,
        except Permanent Disability, death or Misconduct, the option, to the extent
        unexercised, vested and exercisable by the Optionee on the date on which
        the
        Optionee’s Service terminated, may be exercised by the Optionee at any time
        prior to the expiration of ninety (90) days (or such longer or shorter period
        of
        time as determined by the Plan Administrator, in its discretion) after the
        date
        on which the Optionee’s Service terminated, but in any event only with respect
        to the unexercised and vested portion of the option and not the maximum term
        of
        the option.

       

      (ii) Any
        option held by the Optionee at the time of death and exercisable in whole
        or in
        part at that time may be subsequently exercised by the personal representative
        of the Optionee's estate or by the person or persons to whom the option is
        transferred pursuant to the Optionee's will or the laws of descent and
        distribution or by the Optionee's designated beneficiary or beneficiaries
        of
        that option. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (iii) During
        the applicable post-Service exercise period, the option may not be exercised
        in
        the aggregate for more than the number of vested shares for which the option
        is
        exercisable on the date of the Optionee's cessation of Service. Upon the
        expiration of the applicable exercise period or (if earlier) upon the expiration
        of the option term, the option shall terminate and cease to be outstanding
        for
        any vested shares for which the option has not been exercised. However, the
        option shall, immediately upon the Optionee's cessation of Service, terminate
        and cease to be outstanding to the extent the option is not otherwise at
        that
        time exercisable for vested shares. 

       

      2. The
        Plan
        Administrator shall have complete discretion, exercisable either at the time
        an
        option is granted or at any time while the option remains outstanding, to:
        

       

      (i) extend
        the period of time for which the option is to remain exercisable following
        the
        Optionee's cessation of Service from the limited exercise period otherwise
        in
        effect for that option to such greater period of time as the Plan Administrator
        shall deem appropriate, but in no event beyond the expiration of the option
        term
        and in no event to such extent to make the option subject to Section 409A
        (unless given the prior consent of the Optionee), and/or 

       

      (ii) permit
        the option to be exercised, during the applicable post-Service exercise period,
        not only with respect to the number of vested shares of Common Stock for
        which
        such option is exercisable at the time of the Optionee's cessation of Service
        but also with respect to one or more additional installments in which the
        Optionee would have vested had the Optionee continued in Service.

       

      D. STOCKHOLDER
        RIGHTS. The holder of an option shall have no stockholder rights with respect
        to
        the shares subject to the option until such person shall have exercised the
        option, paid the exercise price and become a holder of record of the purchased
        shares.

      


      E. REPURCHASE
        RIGHTS. 
        The Plan
        Administrator shall have the discretion to grant options which are exercisable
        for unvested shares of Common Stock. Should the Optionee cease Service while
        holding such unvested shares, the Corporation shall have the right, but not
        the
        obligation, to repurchase any or all of those unvested shares at a price
        per
        share equal to the lower
        of (i)
        the exercise price paid per share or (ii) the Fair Market Value per share
        of
        Common Stock at the time of the Optionee’s cessation of Service. The terms upon
        which such repurchase right shall be exercisable (including the period and
        procedure for exercise and the appropriate vesting schedule for the purchased
        shares) shall be established by the Plan Administrator and set forth in the
        document evidencing such repurchase right.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      F. LIMITED
        TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive
        Options shall be exercisable only by the Optionee and shall not be assignable
        or
        transferable other than by will or the laws of descent and distribution
        following the Optionee's death. Non-Statutory Options shall be subject to
        the
        same limitation, except as otherwise determined by the Plan Administrator,
        including an assignment to the Optionee’s Immediate Family. To the extent that a
        Non-Statutory Option is assigned, the assigned portion may only be exercised
        by
        the person or persons who acquire a proprietary interest in the option pursuant
        to the assignment. The terms applicable to the assigned portion shall be
        the
        same as those in effect for the option immediately prior to such assignment
        and
        shall be set forth in such documents issued to the assignee as the Plan
        Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee
        may also designate one or more persons as the beneficiary or beneficiaries
        of
        his or her outstanding options under this Article Two, and those options
        shall,
        in accordance with such designation, automatically be transferred to such
        beneficiary or beneficiaries upon the Optionee's death while holding those
        options. Such beneficiary or beneficiaries shall take the transferred options
        subject to all the terms and conditions of the applicable agreement evidencing
        each such transferred option, including (without limitation) the limited
        time
        period during which the option may be exercised following the Optionee's
        death.


       

      II. INCENTIVE
        OPTIONS

       

      The
        terms
        specified below shall be applicable to all Incentive Options. Except as modified
        by the provisions of this Section II, all the provisions of Articles One
        and Two
        shall be applicable to Incentive Options. Options which are specifically
        designated as Non-Statutory Options when issued under the Plan shall not
        be
        subject to the terms of this Section II. 

       

      A. ELIGIBILITY.
        Incentive Options may only be granted to Employees. 

       

      B. EXERCISE
        PRICE. The exercise price per share shall not be less than one hundred percent
        (100%) of the Fair Market Value per share of Common Stock on the option grant
        date.

       

      C. DOLLAR
        LIMITATION. The aggregate Fair Market Value of the shares of Common Stock
        (determined as of the respective date or dates of grant) for which one or
        more
        options granted to any Employee under the Plan (or any other option plan
        of the
        Corporation or any Parent or Subsidiary) may for the first time become
        exercisable as Incentive Options during any one calendar year shall not exceed
        the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
        holds two (2) or more such options which become exercisable for the first
        time
        in the same calendar year, the foregoing limitation on the exercisability
        of
        such options as Incentive Options shall be applied on the basis of the order
        in
        which such options are granted. To the extent that the options exceed this
        limit, the excess amount shall be considered Non-Statutory Options.

       

      D. FAILURE
        TO QUALIFY AS INCENTIVE OPTION. To the extent that any option governed by
        this
        Plan does not qualify as an Incentive Option, by reason of the dollar limitation
        described in Section II.C of this Article Two or for any other reason, such
        option shall be exercisable as a Non-Statutory Option under the Federal tax
        laws.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      E. 10%
        STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a
        10%
        Stockholder, then the exercise price per share shall not be less than one
        hundred ten percent (110%) of the Fair Market Value per share of Common Stock
        on
        the option grant date, and the option term shall not exceed five (5) years
        measured from the option grant date. 


       

      III. STOCK
        APPRECIATION RIGHT TERMS

       

      The
        Plan
        Administrator may grant stock appreciation rights either in conjunction with
        all
        or part of any option or without regard to any option, in each case upon
        such
        terms and conditions as the Plan Administrator may establish in its sole
        discretion, not inconsistent with the provisions of the Plan. Each stock
        appreciation right shall be evidenced by one or more documents in the form
        approved by the Plan Administrator; provided,
        however, that each such document shall comply with the terms specified
        below.

       

      A. RIGHT
        TO
        PAYMENT.

       

      1. Each
        stock appreciation right shall confer on the Participant to whom it is granted
        a
        right to receive, upon exercise thereof, the excess of (A) the Fair Market
        Value
        of one share of Common Stock on the date of exercise over (B) the per share
        strike price of the stock appreciation right.

       

      2. The
        Plan
        Administrator shall determine the method of settlement, form of consideration
        payable in settlement and method by or forms in which shares of Common Stock
        will be delivered or deemed to be delivered to Participants.

       

      3. The
        strike price per share shall be fixed by the Plan Administrator but shall
        not be
        less than one hundred percent (100%) of the Fair Market Value per share of
        Common Stock on the stock appreciation right grant date. 

       

      B. EXERCISE
        AND TERM OF STOCK APPRECIATION RIGHTS. 
        Each
        stock appreciation right shall be exercisable at such time or times, during
        such
        period and for such number of shares as shall be determined by the Plan
        Administrator and set forth in the documents evidencing the stock appreciation
        right. However, no stock appreciation right shall have a term in excess of
        ten
        (10) years measured from the stock appreciation right grant date.

       

      C. EFFECT
        OF
        TERMINATION OF SERVICE.

       

      1. The
        following provisions shall govern the exercise of any stock appreciation
        rights
        held by the Participant at the time of cessation of Service or
        death:

       

      (i) Any
        stock
        appreciation right outstanding at the time of the Participant’s cessation of
        Service for any reason shall remain exercisable for such period of time
        thereafter as shall be determined by the Plan Administrator and set forth
        in the
        documents evidencing the stock appreciation right, but no such stock
        appreciation right shall be exercisable after the expiration of the stock
        appreciation right term.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (ii) Any
        stock
        appreciation right held by the Participant at the time of death and exercisable
        in whole or in part at that time may be subsequently exercised by the personal
        representative of the Participant’s estate or by the person or persons to whom
        the stock appreciation right is transferred pursuant to the Participant’s will
        or the laws of inheritance or by the Participant’s designated beneficiary or
        beneficiaries of that stock appreciation right.

       

      (iii) Should
        the Participant’s Service be terminated for Misconduct or should the Participant
        otherwise engage in Misconduct while holding one or more outstanding stock
        appreciation rights under this Article Two, then all those stock appreciation
        rights shall terminate immediately and cease to be outstanding.

       

      (iv) During
        the applicable post-Service exercise period, the stock appreciation right
        may
        not be exercised in the aggregate for more than the number of vested shares
        for
        which the stock appreciation right is exercisable on the date of the
        Participant’s cessation of Service. Upon the expiration of the applicable
        exercise period or (if earlier) upon the expiration of the stock appreciation
        right term, the stock appreciation right shall terminate and cease to be
        outstanding for any vested shares for which the stock appreciation right
        has not
        been exercised. However, the stock appreciation right shall, immediately
        upon
        the Participant’s cessation of Service, terminate and cease to be outstanding to
        the extent the stock appreciation right is not otherwise at that time
        exercisable for vested shares.

       

      2. The
        Plan
        Administrator shall have complete discretion, exercisable either at the time
        an
        stock appreciation right is granted or at any time while the stock appreciation
        right remains outstanding, to:

       

      (i) extend
        the period of time for which the stock appreciation right is to remain
        exercisable following the Participant’s cessation of Service from the limited
        exercise period otherwise in effect for that stock appreciation right to
        such
        greater period of time as the Plan Administrator shall deem appropriate,
        but in
        no event beyond the expiration of the stock appreciation right term,
        and/or

       

      (ii) permit
        the stock appreciation right to be exercised, during the applicable post-Service
        exercise period, not only with respect to the number of vested shares of
        Common
        Stock for which such stock appreciation right is exercisable at the time
        of the
        Participant’s cessation of Service but also with respect to one or more
        additional installments in which the Participant would have vested had the
        Participant continued in Service.

       

      D. STOCKHOLDER
        RIGHTS. The holder of an stock appreciation right shall have no stockholder
        rights with respect to the shares subject to the stock appreciation right
        until
        such person shall have exercised the stock appreciation right, received shares
        of common stock in connection with such exercise and become a holder of record
        of the purchased shares.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      E. LIMITED
        TRANSFERABILITY OF STOCK APPRECIATION RIGHTS. During the lifetime of the
        Participant, stock appreciation rights shall be exercisable only by the
        Participant and shall not be assignable or transferable other than by will
        or
        the laws of inheritance following the Participant’s death, except that the Plan
        Administrator may structure one or more stock appreciation rights under the
        Discretionary Option/Stock Appreciation Right Grant Program so that each
        such
        stock appreciation right may be assigned in whole or in part during the
        Participant’s lifetime to one or more members of the Participant’s family or to
        a trust established exclusively for one or more such family members or to
        Participant’s former spouse, to the extent such assignment is in connection with
        the Participant’s estate plan or pursuant to a domestic relations order. The
        assigned portion may only be exercised by the person or persons who acquire
        a
        proprietary interest in the stock appreciation right pursuant to the assignment.
        The terms applicable to the assigned portion shall be the same as those in
        effect for the stock appreciation right immediately prior to such assignment
        and
        shall be set forth in such documents issued to the assignee as the Plan
        Administrator may deem appropriate. Notwithstanding the foregoing, the
        Participant may also designate one or more persons as the beneficiary or
        beneficiaries of his or her outstanding stock appreciation rights under this
        Article Two, and those stock appreciation rights shall, in accordance with
        such
        designation, automatically be transferred to such beneficiary or beneficiaries
        upon the Participant’s death while holding those stock appreciation rights. Such
        beneficiary or beneficiaries shall take the transferred stock appreciation
        rights subject to all the terms and conditions of the applicable agreement
        evidencing each such transferred stock appreciation right, including (without
        limitation) the limited time period during which the stock appreciation right
        may be exercised following the Participant’s death.

       

      IV. CHANGE
        IN CONTROL/HOSTILE TAKE-OVER 

      


      A. Except
        as
        otherwise provided in this Section IV, none of the outstanding options or
        stock
        appreciation rights under the Discretionary Option/Stock Appreciation Right
        Grant Program shall vest in whole or in part on an accelerated basis upon
        the
        occurrence of a Change in Control, and those options and stock appreciation
        rights may be assumed, continued or substituted for by any successor corporation
        in the Change in Control. 

       

      B. Except
        as
        otherwise provided in this Section IV, none of the outstanding repurchase
        rights
        under the Discretionary Option/Stock Appreciation Right Grant Program shall
        terminate on an accelerated basis upon the occurrence of a Change in Control,
        and those rights shall be assignable to any successor corporation in the
        Change
        in Control. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      C. Unless
        an
        option or stock appreciation right is assumed, continued or substituted for
        by
        the successor corporation (or parent thereof) or otherwise continued in full
        force and effect pursuant to the terms of the Change in Control transaction,
        if
        a Change in Control occurs while the Optionee remains in Service, the shares
        of
        Common Stock at the time subject to each outstanding option or stock
        appreciation right held by such Optionee but not otherwise vested shall
        automatically accelerate so that each such option or stock appreciation right
        shall, immediately prior to the effective date of the Change in Control,
        vest
        and become exercisable for all the shares of Common Stock at the time subject
        to
        such option or stock appreciation right and may be exercised for any or all
        of
        those shares as fully vested shares of Common Stock. The Corporation shall
        provide each holder of an option or a stock appreciation right that is
        accelerated in accordance with this paragraph at least five (5) business
        days
        notice of the vesting acceleration. Immediately following the consummation
        of
        the Change in Control, each option or stock appreciation right shall terminate
        and cease to be outstanding, except to the extent assumed or substituted
        for by
        the successor corporation (or parent thereof) or otherwise continued in full
        force and effect pursuant to the express terms of the Change in Control
        transaction.

       

      D. The
        Plan
        Administrator shall have the discretionary authority to structure one or
        more
        options or stock appreciation rights grants under the Discretionary Option/Stock
        Appreciation Right Grant Program so that the vesting and exercisability of
        each
        option or stock appreciation right shall automatically accelerate in whole
        or in
        part, either (i) immediately prior to the effective date of that Change in
        Control or Hostile Takeover, and become exercisable for all the shares of
        Common
        Stock at the time or (ii) upon an event occurring after the Change in Control
        or
        Hostile Takeover (including a termination of employment). In addition, the
        Plan
        Administrator may structure one or more of the Corporation’s repurchase rights
        so that those rights shall immediately terminate, in whole or in part, with
        respect to any shares held by the Participant (and the shares subject to
        those
        terminated repurchase rights shall accordingly vest in full ) either (i)
        immediately prior to the effective date of that Change in Control or Hostile
        Takeover, or (ii) upon an event occurring after the Change in Control or
        Hostile
        Takeover (including a termination of employment). 


       

      E. Each
        option which is assumed or substituted for in connection with a Change in
        Control or otherwise continued in effect shall be appropriately adjusted,
        immediately after such Change in Control, to apply to the number and class
        of
        securities which would have been issuable to the Optionee in consummation
        of
        such Change in Control had the option been exercised immediately prior to
        such
        Change in Control. Appropriate adjustments to reflect such Change in Control
        shall also be made to (i) the exercise price payable per share under each
        outstanding option, provided the aggregate exercise price payable for such
        securities shall remain the same, (ii) the maximum number, type and/or class
        of
        securities available for issuance over the remaining term of the Plan, (iii)
        the
        maximum number, type and/or class of securities by which the share reserve
        is to
        increase each calendar year pursuant to the automatic share increase provisions
        of the Plan and (iv) the maximum number, type and/or class of securities
        for
        which any one person may be granted options, separately exercisable stock
        appreciation rights and direct stock issuances or share right awards under
        the
        Plan per calendar year. To the extent the actual holders of the Corporation's
        outstanding Common Stock receive cash consideration for their Common Stock
        in
        consummation of the Change in Control transaction, the successor corporation
        may, in connection with the assumption of the outstanding options under the
        Discretionary Option Grant Program, substitute one or more shares of its
        own
        common stock (or those of its parent) with a fair market value equivalent
        to the
        cash consideration paid per share of Common Stock in such Change in Control
        transaction.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      F. Unless
        otherwise determined by the Plan Administrator and expressly set forth in
        the
        documents evidencing the option, each option outstanding under the Discretionary
        Option/Stock Appreciation Right Grant Program at the time of a Hostile Take-Over
        but not otherwise exercisable for all the shares of Common Stock subject
        to such
        option at that time shall, immediately prior to the effective date of a Hostile
        Take-Over, automatically vest and become exercisable for all the shares of
        Common Stock at that time subject to such options on an accelerated basis
        and
        may be exercised for any or all of such shares as fully vested shares of
        Common
        Stock. In addition, all of the Corporation's repurchase rights under the
        Discretionary Option/Stock Appreciation Right Grant Program shall terminate
        automatically upon the consummation of such Hostile Take-Over, and the shares
        subject to those terminated rights shall thereupon immediately vest in full,
        except to the extent such accelerated vesting is precluded by limitations
        imposed by the Plan Administrator at the time the repurchase right is issued.
        Each option so accelerated shall remain exercisable for fully vested shares
        of
        Common Stock until the expiration or sooner termination of the option
        term.

       

      G. The
        portion of any Incentive Option accelerated in connection with a Change in
        Control or Hostile Take-Over shall remain exercisable as an Incentive Option
        only to the extent the applicable One Hundred Thousand Dollar ($100,000)
        limitation is not exceeded. To the extent such dollar limitation is exceeded,
        the excess accelerated portion of such option shall be exercisable as a
        Non-Statutory Option under the Federal tax laws. 

       

      H. The
        grant
        of options under the Discretionary Option/Stock Appreciation Right Grant
        Program
        shall in no way affect the right of the Corporation to adjust, reclassify,
        reorganize or otherwise change its capital or business structure or to merge,
        consolidate, dissolve, liquidate or sell or transfer all or any part of its
        business or assets. 

       

      V. CANCELLATION
        AND REGRANT OF OPTIONS

       

      The
        Plan
        Administrator shall have the authority to effect, at any time and from time
        to
        time, with the consent of the affected option holders, the cancellation of
        any
        or all outstanding options under the Discretionary Option/Stock Appreciation
        Right Grant Program (including outstanding options incorporated from the
        Predecessor Plans) and to grant (i) in substitution new options or stock
        appreciation rights covering the same or a different number of shares of
        Common
        Stock but with an exercise price per share calculated based upon the Fair
        Market
        Value per share of Common Stock on the new grant date; (ii) stock issuances
        (including share right awards); (iii) cash; or (iv) other
        property.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

      ARTICLE
        THREE


       

      STOCK
        ISSUANCE PROGRAM

       

      I. STOCK
        ISSUANCE TERMS

       

      Shares
        of
        Common Stock may be issued under the Stock Issuance Program through direct
        and
        immediate issuances without any intervening option grants. Each such stock
        issuance shall be evidenced by a Stock Issuance Agreement which complies
        with
        the terms specified below. Shares of Common Stock may also be issued under
        the
        Stock Issuance Program pursuant to share right awards which entitle the
        recipients to receive those shares upon the attainment of designated performance
        goals. 

       

      A. PURCHASE
        PRICE.

       

      1. The
        purchase price per share shall be fixed by the Plan Administrator, but shall
        not
        be less than any legal limit required under state law.

       

      2. Shares
        of
        Common Stock may be issued under the Stock Issuance Program for any of the
        following items of consideration which the Plan Administrator may deem
        appropriate in each individual instance:

       

      (i) cash
        or
        check made payable to the Corporation for one hundred percent of the Fair
        Market
        Value of the shares of Common Stock to be purchased, 

       

      (ii) past
        services rendered to the Corporation (or any Parent or Subsidiary),

       

      (iii) services
        to be rendered to the Corporation (or any Parent or Subsidiary) during the
        vesting period, or

       

      (iv) any
        other
        form of legal consideration that may be acceptable to the Plan
        Administrator.

       

      B. VESTING
        PROVISIONS.

       

      1. Shares
        of
        Common Stock issued under the Stock Issuance Program may, in the discretion
        of
        the Plan Administrator, be fully and immediately vested upon issuance or
        may
        vest in one or more installments over the Participant's period of Service
        or
        upon attainment of specified performance objectives. The elements of the
        vesting
        schedule applicable to any unvested shares of Common Stock issued under the
        Stock Issuance Program shall be determined by the Plan Administrator and
        incorporated into the Stock Issuance Agreement. Shares of Common Stock may
        also
        be issued under the Stock Issuance Program pursuant to share right awards
        which
        entitle the recipients to receive those shares upon the attainment of designated
        performance goals or in one or more installments over the Participant's period
        of Service. Upon the attainment of such performance goals or Service period,
        fully vested shares of Common Stock shall be issued in satisfaction of those
        share right awards.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2. Any
        new,
        substituted or additional securities or other property (including money paid
        other than as a regular cash dividend) which the Participant may have the
        right
        to receive with respect to the Participant's unvested shares of Common Stock
        by
        reason of any stock dividend, stock split, recapitalization, combination
        of
        shares, exchange of shares or other change affecting the outstanding Common
        Stock as a class without the Corporation's receipt of consideration shall
        be
        issued subject to (i) the same vesting requirements applicable to the
        Participant's unvested shares of Common Stock and (ii) such escrow arrangements
        as the Plan Administrator shall deem appropriate. 

       

      3. The
        Participant shall have full stockholder rights with respect to any shares
        of
        Common Stock issued to the Participant under the Stock Issuance Program,
        whether
        or not the Participant's interest in those shares is vested. Accordingly,
        the
        Participant shall have the right to vote such shares and to receive any regular
        cash dividends paid on such shares. 

       

      4. Should
        the Participant cease to remain in Service while holding one or more unvested
        shares of Common Stock issued under the Stock Issuance Program or should
        the
        performance objectives not be attained with respect to one or more such unvested
        shares of Common Stock, then those shares shall be immediately surrendered
        to
        the Corporation for cancellation, and the Participant shall have no further
        stockholder rights with respect to those shares. To the extent the surrendered
        shares were previously issued to the Participant for consideration paid in
        cash
        or cash equivalent (including the Participant’s purchase-money indebtedness),
        the Corporation shall repay to the Participant the lower
        of
        (i)
        the cash consideration paid for the surrendered shares or (ii) the Fair Market
        Value of those shares at the time of cancellation.

       

      5. The
        Plan
        Administrator may in its discretion waive the surrender and cancellation
        of one
        or more unvested shares of Common Stock which would otherwise occur upon
        the
        cessation of the Participant's Service or the non-attainment of the performance
        objectives applicable to those shares. Such waiver shall result in the immediate
        vesting of the Participant's interest in the shares of Common Stock as to
        which
        the waiver applies. Such waiver may be effected at any time, whether before
        or
        after the Participant's cessation of Service or the attainment or non-attainment
        of the applicable performance objectives. 

       

      6. Outstanding
        share right awards under the Stock Issuance Program shall automatically
        terminate, and no shares of Common Stock shall actually be issued in
        satisfaction of those awards, if the performance goals or Service requirements
        established for such awards are not attained. The Plan Administrator, however,
        shall have the discretionary authority to issue shares of Common Stock under
        one
        or more outstanding share right awards as to which the designated performance
        goals or Service requirements have not been attained. 

       

      II. CHANGE
        IN CONTROL/HOSTILE TAKE-OVER


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      A. Except
        as
        otherwise provided in this Section II, none of the outstanding repurchase
        rights
        under the Stock Issuance Program shall terminate on an accelerated basis
        upon
        the occurrence of a Change in Control, and those rights shall be assignable
        to
        any successor corporation in the Change in Control. Except as otherwise provided
        in this Section II, none of the outstanding share right awards under the
        Stock
        Issuance Program shall vest in whole or in part on an accelerated basis upon
        the
        occurrence of a Change in Control, and those share right awards may be assumed,
        continued or substituted for by any successor corporation in the Change in
        Control. 

       

      B. To
        the
        extent that the outstanding repurchase rights under the Stock Issuance Program
        are not assigned to any successor corporation in the Change in Control and
        are
        not continued by the Corporation, such outstanding repurchase rights under
        the
        Stock Issuance Program shall terminate immediately prior to and contingent
        upon
        the occurrence of the Change in Control.

       

      C. Unless
        a
        share right award is assumed or substituted for by the successor corporation
        (or
        parent thereof) or otherwise continued in full force and effect pursuant
        to the
        terms of the Change in Control transaction, if a Change in Control occurs
        while
        the Participant remains in Service, the shares of Common Stock at the time
        subject to each a share right award held by such Participant but not otherwise
        vested shall automatically accelerate so that each such Participant shall,
        immediately prior to the effective date of the Change in Control, vest for
        all
        the shares of Common Stock at the time subject to such share right award
        and
        such fully vested shares of Common Stock shall be delivered to the Participant
        immediately prior to and contingent upon the Change in Control. The Corporation
        shall provide each holder of a share right award that is accelerated in
        accordance with this paragraph at least five (5) business days notice of
        the
        vesting acceleration. Immediately following the consummation of the Change
        in
        Control, each option or stock appreciation right shall terminate and cease
        to be
        outstanding, except to the extent assumed or substituted for by the successor
        corporation (or parent thereof) or otherwise continued in full force and
        effect
        pursuant to the express terms of the Change in Control transaction.

       

      D. To
        the
        extent a share right award is not assumed, continued or substituted for by
        the
        successor corporation (or parent thereof) or otherwise continued in full
        force
        and effect pursuant to the terms of the Change in Control transaction, then
        such
        share right award shall become fully vested and shares of Common Stock
        deliverable under the share right award shall be delivered immediately prior
        to
        and contingent upon the Change in Control. The Corporation shall provide
        each
        holder of a share right award that is accelerated in accordance with this
        paragraph at least five (5) business days notice of the vesting
        acceleration.

       

      E. Immediately
        following the consummation of the Change in Control, all outstanding share
        right
        awards under the Stock Issuance Program shall terminate and cease to be
        outstanding, except to the extent assumed, continued or substituted for by
        the
        successor corporation (or parent thereof) or otherwise continued in full
        force
        and effect pursuant to the terms of the Change in Control
        transaction.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      F. All
        of
        the Corporation's outstanding repurchase rights under the Stock Issuance
        Program
        shall terminate automatically, and all the shares of Common Stock subject
        to
        those terminated rights shall immediately vest in full, in the event of any
        Hostile Take-Over, except to the extent such accelerated vesting is precluded
        by
        other limitations imposed in the Stock Issuance Agreement. All the shares
        of
        Common Stock subject to outstanding share right awards shall immediately
        vest in
        full, in the event of any Hostile Take-Over, except to the extent such
        accelerated vesting is precluded by other limitations imposed in the Share
        Right
        Award Agreement.

       

      


      G. The
        Plan
        Administrator may, in its discretion, structure one or more of the Corporation’s
        repurchase rights so that those rights shall immediately terminate, in whole
        or
        in part, with respect to any shares held by the Participant (and the shares
        subject to those terminated repurchase rights shall accordingly vest in full)
        either (i) immediately prior to the effective date of that Change in Control
        or
        Hostile Takeover, or (ii) upon an event occurring after the Change in Control
        or
        Hostile Takeover (including a termination of a Participant’s Service). In
        addition, the Plan Administrator shall have the discretionary authority to
        structure one or more share right awards grants under the Stock Issuance
        Program
        so that the vesting of each share right shall automatically accelerate in
        whole
        or in part, either (i) immediately prior to the effective date of that Change
        in
        Control or Hostile Takeover, or (ii) upon an event occurring after the Change
        in
        Control or Hostile Takeover (including a termination of employment).


       

      H. Each
        share right award which is assumed or substituted for in connection with
        a
        Change in Control or otherwise continued in effect shall be appropriately
        adjusted, immediately after such Change in Control, to convert the number
        and
        class of securities which would have been issuable to the Participant in
        consummation of such Change in Control had the shares of Common Stock subject
        to
        the share right award been issued immediately prior to such Change in Control
        to
        the type and amount of consideration received by the holders of Common Stock
        in
        the Change in Control. To the extent the actual holders of the Corporation’s
        outstanding Common Stock receive cash consideration for their Common Stock
        in
        consummation of the Change in Control, the successor corporation may, in
        connection with the assumption or substitution of the outstanding share right
        awards under the Stock Issuance Program, substitute one or more shares of
        its
        own common stock or that of any parent or publicly traded Subsidiary, with
        a
        fair market value equivalent to the cash consideration paid per share of
        Common
        Stock in such Change in Control transaction.

       

      III. SHARE
        ESCROW/LEGENDS

       

      Unvested
        shares may, in the Plan Administrator's discretion, be held in escrow by
        the
        Corporation until the Participant's interest in such shares vests or may
        be
        issued directly to the Participant with restrictive legends on the certificates
        evidencing those unvested shares.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        FOUR


       

      AUTOMATIC
        OPTION GRANT PROGRAM

       

      I. OPTION
        TERMS

       

      A. GRANT
        DATES. Option grants shall be made on the dates specified below: 

       

      1. Each
        individual who is first elected or appointed as a non-employee Board member
        at
        any time on or after the Plan Effective Date shall automatically be granted,
        on
        the date of such initial election or appointment, a Non-Statutory Option
        to
        purchase 30,000 shares of Common Stock, provided that individual has not
        previously been in the employ of the Corporation or any Parent or
        Subsidiary.

       

      2. On
        the
        first business day in each calendar year following the Plan Effective Date
        and
        during the term of the Plan, each non-employee Board member then in office,
        shall automatically be granted a Non-Statutory Option to purchase 30,000
        shares
        of Common Stock, provided such individual has served as a non-employee Board
        member for at least six (6) months. There shall be no limit on the number
        of
        such option grants any one non-employee Board member may receive over his
        or her
        period of Service on the Board, and non-employee Board members who have
        previously been in the employ of the Corporation (or any Parent or Subsidiary)
        or who joined the Board prior to the Plan Effective Date shall be eligible
        to
        receive one or more such annual option grants over their period of continued
        Board Service. 

       

      B. EXERCISE
        PRICE. 

       

      1. The
        exercise price per share shall be equal to one hundred percent (100%) of
        the
        Fair Market Value per share of Common Stock on the option grant date.


       

      2. The
        exercise price shall be payable in one or more of the alternative forms
        authorized under the Discretionary Option Grant Program. Except to the extent
        the sale and remittance procedure specified thereunder is utilized, payment
        of
        the exercise price for the purchased shares must be made on the Exercise
        Date.


       

      C. OPTION
        TERM. Each option shall have a maximum term of ten (10) years measured from
        the
        option grant date. 

       

      D. EXERCISE
        AND VESTING OF OPTIONS. 

       

      Each
        option granted pursuant to this Automatic Option Grant Program shall become
        exercisable in a series of four (4) equal quarterly installments upon the
        Optionee's completion of each three (3) months of continuous Service as a
        Board
        member over the 12-month period measured from the option grant date.



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      E. LIMITED
        TRANSFERABILITY OF OPTIONS. Each option under this Article Four may be assigned
        in whole or in part during the Optionee's lifetime to one or more members
        of the
        Optionee's Immediate Family or to a trust established exclusively for the
        Optionee or one or more Members of the Optionee's Immediate Family or to
        Optionee's former spouse, to the extent such assignment is in connection
        with
        the Optionee's estate plan or pursuant to domestic relations order. The assigned
        portion may only be exercised by the person or persons who acquire a proprietary
        interest in the option pursuant to the assignment. The terms applicable to
        the
        assigned portion shall be the same as those in effect for the option immediately
        prior to such assignment and shall be set forth in such documents issued
        to the
        assignee as the Plan Administrator may deem appropriate. The Optionee may
        also
        designate one or more persons as the beneficiary or beneficiaries of his
        or her
        outstanding options under this Article Four, and those options shall, in
        accordance with such designation, automatically be transferred to such
        beneficiary or beneficiaries upon the Optionee's death while holding those
        options. Such beneficiary or beneficiaries shall take the transferred options
        subject to all the terms and conditions of the applicable agreement evidencing
        each such transferred option, including (without limitation) the limited
        time
        period during which the option may be exercised following the Optionee's
        death.

       

      F. TERMINATION
        OF BOARD SERVICE. The following provisions shall govern the exercise of any
        options held by the Optionee at the time the Optionee ceases to serve as
        a Board
        member for any reason: 

       

      (i) The
        Optionee (or, in the event of Optionee's death, the personal representative
        of
        the Optionee's estate or the person or persons to whom the option is transferred
        pursuant to the Optionee's will or the laws of descent and distribution or
        the
        designated beneficiary or beneficiaries of such option) shall have a six
        (6)-month period following the date of such cessation of Board Service in
        which
        to exercise each such option. 

       

      (ii) During
        the six (6)-month post-Service exercise period, the option may not be exercised
        in the aggregate for more than the number of vested shares of Common Stock
        for
        which the option is exercisable at the time of the Optionee's cessation of
        Board
        Service.

       

      (iii) In
        no
        event shall the option remain exercisable after the expiration of the option
        term. Upon the expiration of the six (6)-month post-Service exercise period
        or
        (if earlier) upon the expiration of the option term, the option shall terminate
        and cease to be outstanding for any shares for which the option has not been
        exercised. However, the option shall, immediately upon the Optionee's cessation
        of Board Service for any reason, terminate and cease to be outstanding to
        the
        extent the option is not otherwise at that time exercisable. 

       

      II. CHANGE
        IN CONTROL/ HOSTILE TAKE-OVER 

       

      A. In
        the
        event of any Change in Control while the Optionee remains a Board member,
        the
        shares of Common Stock at the time subject to each outstanding option held
        by
        such Optionee under the Automatic Option Grant Program but not otherwise
        vested
        shall automatically accelerate so that each such option shall, immediately
        prior
        to the effective date of the Change in Control, vest and become exercisable
        for
        all the shares of Common Stock at the time subject to such option and may
        be
        exercised for any or all of those shares as fully vested shares of Common
        Stock.
        Immediately following the consummation of the Change in Control, each automatic
        option grant shall terminate and cease to be outstanding, except to the extent
        assumed by the successor corporation (or parent thereof) or otherwise continued
        in full force and effect pursuant to the express terms of the Change in Control
        transaction. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      B. In
        the
        event of a Hostile Take-Over while the Optionee remains a Board member, the
        shares of Common Stock at the time subject to each option outstanding under
        the
        Automatic Option Grant Program but not otherwise vested shall automatically
        accelerate so that each such option shall, immediately prior to the effective
        date of the Hostile Take-Over, vest and become exercisable for all the shares
        of
        Common Stock at the time subject to such option and may be exercised for
        any or
        all of those shares as fully vested shares of Common Stock. Each such option
        shall remain exercisable for such fully-vested option shares until the
        expiration or sooner termination of the option term or the surrender of the
        option in connection with that Hostile Take-Over. 

       

      C. All
        outstanding repurchase rights under the Automatic Option Grant Program shall
        automatically terminate, and the shares of Common Stock subject to those
        terminated rights shall immediately vest in full, in the event of any Change
        in
        Control or Hostile Take-Over.

       

      D. Upon
        the
        occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day
        period in which to surrender to the Corporation each of his or her outstanding
        automatic option grants. The Optionee shall in return be entitled to a cash
        payment from the Corporation in an amount equal to the excess of (i) the
        Take-Over Price of the shares of Common Stock at the time subject to each
        surrendered option (whether or not the Optionee is otherwise at the time
        vested
        in those shares) over (ii) the aggregate exercise price payable for such
        shares.
        Such cash payment shall be paid within five (5) days following the surrender
        of
        the option to the Corporation. The Plan Administrator shall, at the time
        the
        option with such limited stock appreciation right is granted under the Automatic
        Option Grant Program, pre-approve any subsequent exercise of that right in
        accordance with the terms of this Paragraph D. Accordingly, no further approval
        of the Plan Administrator or the Board shall be required at the time of the
        actual option surrender and cash payment. 

       

      E. Each
        option which is assumed in connection with a Change in Control or otherwise
        continued in full force and effect shall be appropriately adjusted, immediately
        after such Change in Control, to apply to the number and class of securities
        which would have been issuable to the Optionee in consummation of such Change
        in
        Control had the option been exercised immediately prior to such Change in
        Control. Appropriate adjustments shall also be made to the exercise price
        payable per share under each outstanding option, provided the aggregate exercise
        price payable for such securities shall remain the same. To the extent the
        actual holders of the Corporation's outstanding Common Stock receive cash
        consideration for their Common Stock in consummation of the Change in Control
        transaction, the successor corporation may, in connection with the assumption
        of
        the outstanding options under the Automatic Option Grant Program, substitute
        one
        or more shares of its own common stock with a fair market value equivalent
        to
        the cash consideration paid per share of Common Stock in such Change in Control
        transaction.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      F. The
        grant
        of options under the Automatic Option Grant Program shall in no way affect
        the
        right of the Corporation to adjust, reclassify, reorganize or otherwise change
        its capital or business structure or to merge, consolidate, dissolve, liquidate
        or sell or transfer all or any part of its business or assets. 

       

      III. REMAINING
        TERMS 

       

      The
        remaining terms of each option granted under the Automatic Option Grant Program
        shall be the same as the terms in effect for option grants made under the
        Discretionary Option Grant Program.

       

      ARTICLE
        FIVE


       

      MISCELLANEOUS

       

      I. NO
        FRACTIONAL SHARES

       

      No
        fractional shares of Common Stock shall be issued or delivered pursuant to
        the
        Plan, and the Plan Administrator shall determine whether cash shall be paid
        in
        lieu of any fractional shares or whether such fractional shares or any rights
        thereto shall be canceled, terminated or otherwise eliminated.

       

      
        	
                II.

              	
                TAX
                  WITHHOLDING 

              


      

       

      A. The
        Corporation’s obligation to deliver shares of Common Stock upon a stock
        issuance, or the exercise of options or stock appreciation rights or the
        issuance or vesting of such shares under the Plan shall be subject to the
        satisfaction of all applicable income and employment tax withholding
        requirements. The Corporation shall also make appropriate arrangements to
        satisfy all applicable foreign tax withholding requirements which may be
        imposed
        in connection with the grant or exercise of options or stock appreciation
        rights
        under the Plan or the issuance or vesting of shares of Common Stock under
        the
        Plan.

       

      B. The
        Plan
        Administrator may, in its discretion, provide in the respective award agreement
        that (i) the Corporation, in its discretion, may determine that shares of
        Common
        Stock from the award be withheld by the Corporation in satisfaction of all
        or
        part of the Withholding Taxes which may become payable in connection with
        the an
        award granted under the Plan (pursuant to Article Five Section II.B.1.) and
        (ii)
        any or all Optionees or Participants under the Plan (other than the non-employee
        Board members) with the right to use shares of Common Stock in satisfaction
        of
        all or part of the Withholding Taxes to which such individuals may become
        subject in connection with the grant or exercise of their options or stock
        appreciation rights or the issuance or vesting of their shares. Such right
        to an
        individual may be provided to any such holder in either or both of the following
        formats:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1. Stock
        Withholding:
        The
        election to have the Corporation withhold, from the shares of Common Stock
        otherwise issuable upon the exercise of options or stock appreciation rights
        or
        the issuance or the vesting of such shares, a portion of those shares with
        an
        aggregate Fair Market Value equal to the percentage of the Withholding Taxes
        (not to exceed one hundred percent (100%) of the minimum Withholding Taxes
        required be law) designated by the holder.

       

      2.  Stock
        Delivery:
        The
        election to deliver to the Corporation, at the time the option or stock
        appreciation right is granted or exercised or the shares are issued or vest,
        one
        or more shares of Common Stock previously acquired by such holder (other
        than in
        connection with the option or stock appreciation right exercise or share
        vesting
        triggering the Withholding Taxes) with an aggregate Fair Market Value equal
        to
        the percentage of the Withholding Taxes (not to exceed one hundred percent
        (100%) of the minimum Withholding Taxes required be law) designated by the
        holder.

       

      III. EFFECTIVE
        DATE AND TERM OF THE PLAN

       

      A. The
        Plan
        shall become effective immediately upon the Plan Effective Date. Options
        may be
        granted under the Discretionary Option/Stock Appreciation Right Grant Program
        at
        any time on or after the Plan Effective Date, and the initial option grants
        under the Automatic Option Grant Program shall be made on the Plan Effective
        Date to any non-employee Board members eligible for such grants at that time.
        However, no options granted under the Plan may be exercised, and no shares
        shall
        be issued under the Plan, until the Plan is approved by the Corporation's
        stockholders. If such stockholder approval is not obtained within twelve
        (12)
        months after the Plan Effective Date, then all options previously granted
        under
        this Plan shall terminate and cease to be outstanding, and no further options
        shall be granted and no shares shall be issued under the Plan. 

       

      B. The
        Plan
        shall terminate upon the earliest of (i) the tenth anniversary of the Plan
        Effective Date, (ii) the tenth anniversary of the approval of the Plan by
        the Corporation's stockholders, (iii) the date on which all shares available
        for
        issuance under the Plan shall have been issued as fully-vested shares or
        (iv)
        the termination of all outstanding awards in connection with a Change in
        Control. Upon such Plan termination, all option grants and unvested stock
        issuances outstanding at that time shall thereafter continue to have force
        and
        effect in accordance with the provisions of the documents evidencing such
        grants
        or issuances. 

       

      IV. AMENDMENT
        OF THE PLAN 

       

      A. The
        Board
        shall have complete and exclusive power and authority to amend or modify
        the
        Plan or any outstanding award granted under the Plan in any or all respects.
        However, no such amendment or modification shall adversely affect the rights
        and
        obligations with respect to stock options, stock appreciation rights or unvested
        stock issuances at the time outstanding, including share right awards, under
        the
        Plan unless the Optionee or the Participant consents to such amendment or
        modification. Notwithstanding the foregoing, any amendment to either increase
        the number of shares that may be issued under the Plan or the Persons eligible
        to receive awards under the Plan shall require stockholder approval. In
        addition, certain amendments may require stockholder approval pursuant to
        applicable laws or regulations. 

       

      B. Options
        to purchase shares of Common Stock may be granted under the Discretionary
        Option/Stock Appreciation Right Grant Program and shares of Common Stock
        may be
        issued under the Stock Issuance Program that are in each instance in excess
        of
        the number of shares then available for issuance under the Plan, provided
        any
        excess shares actually issued under those programs shall be held in escrow
        until
        there is obtained stockholder approval of an amendment sufficiently increasing
        the number of shares of Common Stock available for issuance under the Plan.
        If
        such stockholder approval is not obtained within twelve (12) months after
        the
        date the first such excess issuances are made, then (i) any unexercised options
        granted on the basis of such excess shares shall terminate and cease to be
        outstanding and (ii) the Corporation shall promptly refund to the Optionees
        and
        the Participants the exercise or purchase price paid for any excess shares
        issued under the Plan and held in escrow, together with interest (at the
        short
        term applicable federal rate) for the period the shares were held in escrow,
        and
        such shares shall thereupon be automatically cancelled and cease to be
        outstanding. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      V. USE
        OF PROCEEDS

       

      Any
        cash
        proceeds received by the Corporation from the sale of shares of Common Stock
        under the Plan shall be used for general corporate purposes. 

       

      VI. REGULATORY
        APPROVALS

       

      A. The
        implementation of the Plan, the granting of any stock option under the Plan
        and
        the issuance of any shares of Common Stock (i) upon the exercise of any granted
        option or (ii) under the Stock Issuance Program shall be subject to the
        Corporation's procurement of all approvals and permits required by regulatory
        authorities having jurisdiction over the Plan, the stock options granted
        under
        it and the shares of Common Stock issued pursuant to it. 

       

      B. No
        shares
        of Common Stock or other assets shall be issued or delivered under the Plan
        unless and until there shall have been compliance with all applicable
        requirements of Federal and state securities laws, including the filing and
        effectiveness of the Form S-8 registration statement for the shares of Common
        Stock issuable under the Plan, and all applicable listing requirements of
        any
        stock exchange (or the Nasdaq National Market, if applicable) on which Common
        Stock is then listed for trading. 

       

      VII. NO
        EMPLOYMENT/SERVICE RIGHTS

       

      Nothing
        in the Plan shall confer upon any Optionee or Participant any right to continue
        in Service for any period of specific duration or interfere with or otherwise
        restrict in any way the rights of the Corporation (or any Parent or Subsidiary
        employing or retaining such person) or of any Optionee or Participant, which
        rights are hereby expressly reserved by each, to terminate such person's
        Service
        at any time for any reason, with or without cause.

       

      VIII. SECTION
        162(M)

       

      A. STOCK
        OPTIONS AND STOCK APPRECIATION RIGHTS.

       

      It
        is the
        intent of the Corporation that any options or stock appreciation rights granted
        under the Plan to a "covered employee" (as that term is defined in
        Section 162(m) of the Code) with an exercise price of not less than the
        Fair Market Value per share of Common Stock on the date of grant shall qualify
        as "qualified performance-based compensation" (within the meaning of Treas.
        Reg.
§ 1.162-27(e)) to the extent that options or stock appreciation rights
        granted under the Plan may qualify as "qualified performance-based compensation"
        and the Plan shall be interpreted consistently with such intent. In furtherance
        of the foregoing, if and to the extent that the Corporation intends that
        an
        option or a stock appreciation right granted under the Plan to any covered
        employee shall qualify as qualified performance-based compensation, all
        decisions regarding the grant of such option or stock appreciation right
        shall
        be made only by members of the Committee who qualify as "outside directors"
        within the meaning of Treas. Reg. § 1.162-27(e)(3).


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      B. PERFORMANCE
        AWARDS.

       

      The
        Plan
        Administrator shall also have the discretionary authority, consistent with
        Code
        Section 162(m), to structure (i) cash bonuses, (ii) stock options, (iii)
        stock
        appreciation rights and (iv) stock issuances, including share right awards,
        so
        that (x) the cash bonuses are only payable, (y) the shares of Common Stock
        received upon exercise of the stock option or stock appreciation right and
        (z)
        the shares of Common Stock subject to such stock issuances shall only vest
        or be
        issuable upon the achievement of certain pre-established objective corporate
        performance goals based on one or more of the following criteria:
        (1) earnings per share; (2) revenues or margins; (3) cash flow;
        (4) operating margin; (5) return on net assets, investment, capital,
        or equity; (6) direct contribution; (7) net income; pretax earnings;
        (8) earnings before interest and taxes; earnings before interest, taxes,
        depreciation and amortization; earnings after interest expense and before
        extraordinary or special items; operating income; income before interest
        income
        or expense, unusual items and income taxes, local, state or federal and
        excluding budgeted and actual bonuses which might be paid under any ongoing
        bonus plans of the Company; (9) working capital; (10) management of
        fixed costs or variable costs; (11) identification or consummation of
        investment opportunities or completion of specified projects in accordance
        with
        corporate business plans, including strategic mergers, acquisitions or
        divestitures; (12) total shareholder return; and (13) debt reduction.
        In addition, such performance goals may be based upon the attainment of
        specified levels of the Corporation’s performance under one or more of the
        measures described above relative to the performance of other entities and
        may
        also be based on the performance of any of the Corporation’s business units or
        divisions or any Parent or Subsidiary. Performance goals may include a minimum
        threshold level of performance below which no award will be earned, levels
        of
        performance at which specified portions of an award will be earned and a
        maximum
        level of performance at which an award will be fully earned. In furtherance
        of
        the foregoing, if and to the extent that the Corporation intends that an
        award
        granted under the Plan pursuant to this paragraph to any covered employee
        shall
        qualify as qualified performance-based compensation, all decisions regarding
        the
        grant of such award shall be made only by members of the Committee who qualify
        as "outside directors" within the meaning of Treas. Reg.
§ 1.162-27(e)(3).



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      APPENDIX

       

      The
        following definitions shall be in effect under the Plan: 

       

      A. ASSUMED
        OPTIONS shall mean the stock options assumed by the Corporation from Acacia
        Research that were exercisable for Acacia Research - CombiMatrix stock and
        which
        include, but are not limited to, the options outstanding as of the date of
        the
        Transaction that were granted under the Acacia Research Corporation 2002
        CombiMatrix Stock Incentive Plan, the CombiMatrix Corporation 1998 Stock
        Option
        Plan, the CombiMatrix Corporation 2000 Stock Awards Plan and the Acacia Research
        Corporation 1996 Stock Option Plan.

       

      B. AUTOMATIC
        OPTION GRANT PROGRAM shall mean the automatic option grant program in effect
        under Article Four of the Plan. 

       

      C. BOARD
        shall mean the Corporation's Board of Directors. 

       

      D. CERTIFICATE
        OF INCORPORATION shall mean the Certificate of Incorporation of CombiMatrix
        Corporation filed with the Delaware Secretary of State on the Plan Effective
        Date and all subsequent amendments, supplements, modifications and replacements
        thereof.

       

      E. CHANGE
        IN
        CONTROL shall mean a change in ownership or control of the Corporation effected
        through any of the following transactions: 

       

      (i) a
        stockholder-approved merger or consolidation in which securities possessing
        more
        than fifty percent (50%) of the total combined voting power of the Corporation's
        outstanding securities are transferred to a person or persons different from
        the
        persons holding those securities immediately prior to such transaction, or
        

       

      (ii) a
        sale,
        transfer or other disposition of all or substantially all of the Corporation's
        assets to an entity which is not a Subsidiary of the Corporation, or


       

      (iii) the
        acquisition, directly or indirectly by any person or related group of persons
        (other than the Corporation or a person that directly or indirectly controls,
        is
        controlled by, or is under common control with, the Corporation), of beneficial
        ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
        possessing more than fifty percent (50%) of the total combined voting power
        of
        the Corporation's outstanding securities pursuant to a tender or exchange
        offer
        made directly to the Corporation's stockholders.

       

      F. CODE
        shall mean the Internal Revenue Code of 1986, as amended. 

       

      G. COMMITTEE
        shall mean the committee of two (2) or more non-employee Board members appointed
        by the Board to administer the Discretionary Option/Stock Appreciation Right
        Grant Program with respect to Section 16 Insiders.

       

      H. COMMON
        STOCK shall mean the Corporation's Common Stock (as defined in the Certificate
        of Incorporation). 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      I. CORPORATION
        shall mean CombiMatrix Corporation, a Delaware corporation, and any corporate
        successor to all or substantially all of the assets or voting stock of
        CombiMatrix Corporation, which shall by appropriate action adopt the Plan.
        

       

      J. DISCRETIONARY
        OPTION/STOCK APPRECIATION RIGHT GRANT PROGRAM shall mean the Discretionary
        Option/Stock Appreciation Right Grant Program in effect under Article Two
        of the
        Plan.

       

      K. EMPLOYEE
        shall mean an individual who is in the employ of the Corporation (or any
        Parent
        or Subsidiary), subject to the control and direction of the employer entity
        as
        to both the work to be performed and the manner and method of performance.
        

       

      L. EXECUTIVE
        OFFICER COMMITTEE shall
        mean the committee comprised of two (2) or more executive officers of the
        Corporation appointed by the Board to administer the Discretionary Option/Stock
        Appreciation Right Grant Program and Stock Issuance Program with respect
        to
        persons other than Section 16 Insiders, but subject to the applicable
        limitations and requirements of the Delaware Corporate Law.

       

      M. EXERCISE
        DATE shall mean the date on which the Corporation shall have received written
        notice of the option exercise. 

       

      N. FAIR
        MARKET VALUE per share of Common Stock on any relevant date shall be determined
        in accordance with the following provisions:

       

      (i) If
        the
        Common Stock is at the time traded on the Nasdaq National Market, then the
        Fair
        Market Value shall be the closing selling price per share of Common Stock
        on the
        date in question, as such price is reported on the Nasdaq National Market.
        If
        there is no closing selling price for the Common Stock on the date in question,
        then the Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

       

      (ii) If
        the
        Common Stock is at the time listed on any Stock Exchange, then the Fair Market
        Value shall be the closing selling price per share of Common Stock on the
        date
        in question on the Stock Exchange determined by the Plan Administrator to
        be the
        primary market for the Common Stock, as such price is officially quoted in
        the
        composite tape of transactions on such exchange. If there is no closing selling
        price for the Common Stock on the date in question, then the Fair Market
        Value
        shall be the closing selling price on the last preceding date for which such
        quotation exists.

       

      (iii) If
        the
        Common Stock is at the time not traded on the Nasdaq National Market or listed
        on any Stock Exchange, but is regularly traded in any over-the-counter market,
        then the Fair Market Value shall be the average of the bid and asked prices
        per
        share of Common Stock in such over-the-counter market on the date in question.
        If there are no bid and asked prices on the date in question, then the Fair
        Market Value shall be the average of the bid and asked prices in such
        over-the-counter market on the last preceding date for which such prices
        exist.



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (iv) If
        the
        Common Stock is at the time not traded as described in (i), (ii) or (iii)
        above,
        then the Fair Market Value of a share of Common Stock shall be determined
        by the
        Plan Administrator, after taking into account such factors as it deems
        appropriate.

       

      O. HOSTILE
        TAKE-OVER shall mean either of the following events effecting a change in
        control or ownership of the Corporation: 

       

      (i) the
        acquisition, directly or indirectly, by any person or related group of persons
        (other than the Corporation or a person that directly or indirectly controls,
        is
        controlled by, or is under common control with, the Corporation) of beneficial
        ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
        possessing more than fifty percent (50%) of the total combined voting power
        of
        the Corporation's outstanding securities pursuant to a tender or exchange
        offer
        made directly to the Corporation's stockholders which the Board does not
        recommend such stockholders to accept, or 

       

      (ii) a
        change
        in the composition of the Board over a period of thirty-six (36) consecutive
        months or less such that a majority of the Board members ceases, by reason
        of
        one or more contested elections for Board membership, to be comprised of
        individuals who either (A) have been Board members continuously since the
        beginning of such period or (B) have been elected or nominated for election
        as
        Board members during such period by at least a majority of the Board members
        described in clause (A) who were still in office at the time the Board approved
        such election or nomination. 

       

      P. IMMEDIATE
        FAMILY shall mean any child, stepchild, grandchild, parent, stepparent,
        grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
        daughter-in-law, brother-in-law, or sister-in-law and shall include adoptive
        relationships.

       

      Q. INCENTIVE
        OPTION shall mean an option which satisfies the requirements of Code Section
        422. 

       

      R. MISCONDUCT
        shall, with respect to any Participant, have the meaning specified in the
        Participant’s award agreement. In the absence of any definition in the award
        agreement, “Misconduct” shall have the equivalent meaning or the same meaning as
“misconduct” or “cause” set forth in any employment, consulting or other
        agreement for the performance of services between the Participant and the
        Corporation or, in the absence of any such agreement or any such definition
        in
        such agreement, such term shall mean the commission of any act of fraud,
        embezzlement or dishonesty by the Optionee or Participant, any unauthorized
        use
        or disclosure by such person of confidential information or trade secrets
        of the
        Corporation (or any Parent or Subsidiary), or any other intentional misconduct
        by such person adversely affecting the business or affairs of the Corporation
        (or any Parent or Subsidiary)in a material manner. The foregoing definition
        shall not be deemed to be inclusive of all the acts or omissions which the
        Corporation (or any Parent or Subsidiary) may consider as grounds for the
        dismissal or discharge of any Optionee, Participant or other person in the
        Service of the Corporation (or any Parent or Subsidiary). 

       

      S. 1934
        ACT
        shall mean the Securities Exchange Act of 1934, as amended. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      T. NON-STATUTORY
        OPTION shall mean an option not intended to satisfy the requirements of Code
        Section 422. 

       

      U. OPTIONEE
        shall mean any person to whom an option is granted under the Discretionary
        Option Grant Program, the Automatic Option Grant Program.

       

      V. PARENT
        shall mean any corporation (other than the Corporation) in an unbroken chain
        of
        corporations ending with the Corporation, provided each corporation in the
        unbroken chain (other than the Corporation) owns, at the time of the
        determination, stock possessing fifty percent (50%) or more of the total
        combined voting power of all classes of stock in one of the other corporations
        in such chain. 

       

      W. PARTICIPANT
        shall mean any person who is issued shares of Common Stock under the Stock
        Issuance Program. 

       

      X. PERMANENT
        DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee
        or
        the Participant to engage in any substantial gainful activity by reason of
        any
        medically determinable physical or mental impairment which can be expected
        to
        result in death or to be of continuous duration of twelve (12) months or
        more.
        However, solely for purposes of the Automatic Option Grant Program, Permanent
        Disability or Permanently Disabled shall mean the inability of the non-employee
        Board member to perform his or her usual duties as a Board member by reason
        of
        any medically determinable physical or mental impairment expected to result
        in
        death or to be of continuous duration of twelve (12) months or more.


       

      Y. PLAN
        shall mean the Corporation's 2006 Stock Incentive Plan, as set forth in this
        document. 

       

      Z. PLAN
        ADMINISTRATOR shall mean the particular body, whether the Committee or the
        Board, which is authorized to administer the Discretionary Option Grant and
        Stock Issuance Programs with respect to one or more classes of eligible persons,
        to the extent such entity is carrying out its administrative functions under
        those programs with respect to the persons under its jurisdiction. 

       

      AA. PLAN
        EFFECTIVE DATE shall mean the date on which the Plan is approved by the
        stockholders of the Corporation.

       

      BB. SECTION
        16 INSIDER shall mean an officer or director of the Corporation subject to
        the
        short-swing profit liabilities of Section 16 of the 1934 Act. 

       

      CC. SERVICE
        shall mean the performance of services for the Corporation (or any Parent
        or
        Subsidiary) by a person in the capacity of an Employee, a non-employee member
        of
        the board of directors or a consultant or independent advisor, except to
        the
        extent otherwise specifically provided in the documents evidencing the option
        grant or stock issuance. 

       

      DD. STOCK
        EXCHANGE shall mean either the, Nasdaq National Market, the American Stock
        Exchange or the New York Stock Exchange. 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EE. STOCK
        ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation
        and
        the Participant at the time of issuance of shares of Common Stock under the
        Stock Issuance Program. 

       

      FF. STOCK
        ISSUANCE PROGRAM shall mean the stock issuance program in effect under Article
        Three of the Plan.

       

      GG. SUBSIDIARY
        shall mean any corporation (other than the Corporation) in an unbroken chain
        of
        corporations beginning with the Corporation, provided each corporation (other
        than the last corporation) in the unbroken chain owns, at the time of the
        determination, stock possessing fifty percent (50%) or more of the total
        combined voting power of all classes of stock in one of the other corporations
        in such chain. 

       

      HH. TAKE-OVER
        PRICE shall mean the greater of (i) the Fair Market Value per share of Common
        Stock on the date the option is surrendered to the Corporation in connection
        with a Hostile Take-Over or, if applicable, (ii) the highest reported price
        per
        share of Common Stock paid by the tender offeror in effecting the Hostile
        Take-Over through the acquisition of such Common Stock. However, if the
        surrendered option is an Incentive Option, the Take-Over Price shall not
        exceed
        the price per share described in clause (i) above. 

       

      II. 10%
        STOCKHOLDER shall mean the owner of stock (as determined under Code Section
        424(d)) possessing more than ten percent (10%) of the total combined voting
        power of all classes of stock of the Corporation (or any Parent or
        Subsidiary).

       

      JJ. WITHHOLDING
        TAXES shall mean the minimum Federal, state and local income and employment
        withholding taxes to which the holder of options or unvested shares of Common
        Stock may become subject in connection with the exercise of those options
        or the
        vesting of those shares.