**EXHIBIT 10.1**

 

**GENAERA CORPORATION**

 

**2004 STOCK-BASED INCENTIVE COMPENSATION PLAN**

 

 

The purpose of the Plan is to assist the Company, its Subsidiaries and Affiliates in attracting and retaining valued Employees, Consultants and Directorsby offering them a greater stake in the Company’s success and a closer identification with it, and to encourage ownership of the Company’s stock by such Employees, Consultants and Directors. 

 

 

2.1 “*Affiliate*” means any entity other than the Subsidiaries in which the Company has a substantial direct or indirect equity interest,as determined by the Board. 

 

2.2 “*Award*” meansan award of Deferred Stock, Restricted Stock or Options under the Plan. 

 

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

 

2.4 “*Cause*” means the Participant’s (i) willful misconduct with respect to the business and affairs of the Company or any Subsidiary or Affiliate thereof; (ii) gross neglect of duties or failureto act which materially and adversely affects the business or affairs of the Company or any Subsidiary or Affiliate thereof; (iii) commission of an act involving embezzlement or fraud or conviction for any felony; or (iv) the breach of an employmentor consulting agreement with the Company or any Subsidiary or Affiliate thereof. The Committee shall have the sole discretion to determine whether “Cause” as set forth in (i), (ii), (iii) or (iv) above exists, and its determination shallbe final. 

 

2.5 “*Change of Control*” meansoccurrence of any of the following: 

 

(a) Any“*person*” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Companyrepresenting 40% or more of the voting power of the then outstanding securities of the Company; 

 

(b) During any period of two consecutive calendar years there is a change of 25% or more in the composition of the Board in office at the beginning of theperiod except for changes approved by at least two-thirds of the Directors then in office who were Directors at the beginning of the period; 

 

(c) The shareholders of the Company approve an agreement providing for (A) the merger or consolidation of the Company with another corporation where theshareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to 50% or more of all votes (without consideration of therights of any class of stock to elect Directors by a separate class vote) to which all shareholders of the corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors, or where the members ofthe Board, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or consolidation, or(B) the sale or other disposition of all or substantially all the assets of the Company, or a liquidation, dissolution or statutory exchange of the Company; or 

(d) Any person has commenced, or announced an intention to commence, a tender offer or exchange offer for40% or more of the voting power of the then-outstanding securities of the Company. 

 

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

 

2.7 “*Common Stock*” means the common stock of the Company, par value $.002 per share, or such other class or kind of shares or othersecurities resulting from the application of Section 9. 

 

2.8“*Company*” means Genaera Corporation, a Delaware corporation, or any successor corporation. 

 

2.9 “*Committee*” means the committee designated by the Board to administer the Plan under Section 4. The Committee shall have at least twomembers, each of whom shall be a member of the Board, a Non-Employee Director and an Outside Director. 

 

2.10 “*Consultant*” means a consultant or advisor to the Company, its Subsidiaries or Affiliates who is not an Employee. 

 

2.11 “*Deferred Stock*” means an Award made under Section 6 ofthe Plan to receive Common Stock at the end of a specified Deferral Period. 

 

2.12 “*Deferral Period*” means the period during which the receipt of a Deferred Stock Award under Section 6 of the Plan will be deferred. 

 

2.13 “*Director*” means a member of the Board. 

 

2.14 “*Disability*” means disabled within the meaning of section 22(e)(3) of the Code. 

 

2.15 “*Employee*” means an officer or other employee of theCompany, a Subsidiary or an Affiliate including a director who is such an employee. 

 

2.16 “*Fair Market Value*” means, on any given date (i) if shares of Common Stock are then listed on a national stock exchange, the closing sales price per share of Common Stock on the exchange for thelast preceding date on which there was a sale of shares of Common Stock on such exchange, as determined by the Committee, (ii) if shares of Common Stock are then listed on the Nasdaq National Market or the Nasdaq SmallCap Market, the closing salesprice (or the closing bid price if no sales were reported) per share of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap Market, as applicable, for the last preceding date on which there was a sale of shares of Common Stock on theNasdaq National Market or the Nasdaq SmallCap Market, as applicable, as determined by the Committee, (iii) if shares of Common Stock are not then listed on a national stock exchange, the Nasdaq National Market or the Nasdaq Small Cap Market but arethen traded on an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock in such over-the-counter market for the last preceding date on which there was a sale of such shares of Common Stock in suchmarket, as determined by the Committee, or (iv) if shares of Common Stock are not then listed on a national stock exchange or traded on an over-the-counter market, or if the Committee determines that the value as determined pursuant to Section (i),(ii) or (iii) above does not reflect fair market value, the Committee shall determine fair market value after taking into account such factors that it deems appropriate. 

 

2.17 “*Holder*” means a Participant to whom an Award is made. 

 

2.18 “*Incentive Stock Option*” means an Option intended tomeet the requirements of an incentive stock option as defined in section 422 of the Code and designated as an Incentive Stock Option. 

 

2.19 “*1934 Act*” means the Securities Exchange Act of 1934, as amended. 

 

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2.20 “*Non-Employee Director*” means a member of the Board who meets the definition of a“non-employee director” under Rule 16b-3(b)(3) promulgated by the Securities and Exchange Commission under the 1934 Act. 

 

2.21 “*Non-Qualified Option*” means an Option not intended to be an Incentive Stock Option, and designated as a Non-Qualified Option.

 

2.22 “*Option*” means any stock option grantedfrom time to time under Section 8 of the Plan. 

 

2.23“*Outside Director*” means a member of the Board who meets the definition of an “outside director” under Treasury Regulation § 1.162-27(e)(3)(i). 

 

2.24 “*Participant*” means a Consultant, Director or Employee. 

 

2.25 “*Performance Goal*” means a goal that must be met by theend of a period specified by the Committee (but that is substantially uncertain to be met before the grant of an Award) based upon: (i) the price of Common Stock, (ii) the market share of the Company, its Subsidiaries or Affiliates (or any businessunit thereof), (iii) sales by the Company, its Subsidiaries or Affiliates (or any business unit thereof), (iv) earnings per share of Common Stock, (v) return on shareholder equity of the Company, (vi) costs of the Company, its Subsidiaries orAffiliates (or any business unit thereof), (vii) cash flow of the Company, its Subsidiaries or Affiliates (or any business unit thereof), (viii) return on total assets of the Company, its Subsidiaries or Affiliates (or any business unit thereof),(ix) return on invested capital of the Company, its Subsidiaries or Affiliates (or any business unit thereof), (x) return on net assets of the Company, its Subsidiaries or Affiliates (or any business unit thereof), (xi) operating income of theCompany, its Subsidiaries or Affiliates (or any business unit thereof), (xii) net income of the Company, its Subsidiaries or Affiliates (or any business unit thereof), (xiii) the achievement of certain developmental or commercial milestones achievedby the Company or its products or (xiv) any other goal the Committee deems appropriate. 

 

2.26 “*Person*” means any individual, partnership, corporation, company, limited liability company, association, trust, joint venture, unincorporated organization, entity or division, or any government,governmental department or agency or political subdivision thereof. 

 

2.27 “*Plan*” means the Genaera Corporation 2004 Stock-Based Incentive Compensation Plan herein set forth, as amended from time to time. 

 

2.28 “*Restricted Stock*” means Common Stock awarded by the Committee under Section 7 of the Plan. 

 

2.29 “*Restriction Period*” means the period during whichRestricted Stock awarded under Section 7 of the Plan is subject to forfeiture. 

 

2.30 “*Retirement*” means retirement from the active employment of the Company, a Subsidiary or an Affiliate pursuant to the relevant provisions of the applicable pension plan of such entity or asotherwise determined by the Board. 

 

2.31“*Subsidiary*” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company (or any subsequent parent of the Company) if each of the corporations other than the last corporation in theunbroken chain owns stock possession 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

 

2.32 “*Ten Percent Shareholder*” means a Person who on any given date owns, either directly or indirectly (taking into account theattribution rules contained in section 424(d) of the Code), stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a Subsidiary. 

 

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**3.****Eligibility**
 

Any Participant is eligible to receive an Award. 

 
**4.****Administration and Implementation of Plan**
 

4.1 The Plan shall be administered by the Committee, which shall have full power to interpret and administer the Plan and full authority to act inselecting the Participants to whom Awards will be granted, in determining the type and amount of Awards to be granted to each such Participant, the terms and conditions of Awards granted under the Plan and the terms of grant instruments which willbe entered into with Holders. Notwithstanding the foregoing, the Board may designate one or more of its members or officers of the Company to serve as a secondary committee and delegate to the secondary committee authority to grant Awards toeligible individuals who are not subject to the requirements of Rule 16b-3 under the 1934 Act or section 162(m) of the Code. The secondary committee shall have the same authority with respect to selecting the individuals to whom such Awards aregranted and establishing the terms and conditions of such Awards as the Committee has under the terms of the Plan. 

 

4.2 The Committee’s powers shall include, but not be limited to, the power to determine whether, to what extent and under what circumstances anOption may be exchanged for cash, Restricted Stock, Deferred Stock or some combination thereof; to determine whether, to what extent and under what circumstances an Award is made and operates on a tandem basis with other Awards made hereunder; todetermine whether, to what extent and under what circumstances Common Stock or cash payable with respect to an Award shall be deferred, either automatically or at the election of the Holder (including the power to add deemed earnings to any suchdeferral); to grant Awards (other than Incentive Stock Options) that are transferable by the Holder; and to determine the effect, if any, of a change in control of the Company upon outstanding Awards. 

 

4.3 The Committee shall have the power to adopt regulations for carrying outthe Plan and to make changes in such regulations as it shall, from time to time, deem advisable. The Committee shall have the power unilaterally and without approval of a Holder to amend an existing Award in order to carry out the purposes of thePlan so long as such an amendment does not take away any benefit granted to a Holder by the Award and as long as the amended Award comports with the terms of the Plan. Any interpretation by the Committee of the terms and provisions of the Plan andthe administration thereof, and all action taken by the Committee, shall be final and binding on Holders. 

 

4.4 The Committee may condition the grant of any Award or the lapse of any Deferral or Restriction Period (or any combination thereof) upon theHolder’s achievement of a Performance Goal that is established by the Committee before the grant of the Award. The Committee shall have discretion to determine the specific targets with respect to each Performance Goal. Before granting an Awardor permitting the lapse of any Deferral or Restriction Period subject to this Section, the Committee shall certify that an individual has satisfied the applicable Performance Goal. 

 
**5.****Shares of Stock Subject to the Plan**
 

5.1 Subject to adjustment as provided in Section 9, the total number of shares of Common Stock available for Awards under the Plan shall be 4,500,000shares. 

 

5.2 The maximum number of shares of Common Stocksubject to Awards that may be granted to any Participant shall not exceed 500,000 during any calendar year (the “Individual Limit”). 

 

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Subject to Section 5.3, Section 9 and Section 12.7, any Award that is canceled or repriced by the Committee shall countagainst the Individual Limit. Notwithstanding the foregoing, the Individual Limit may be adjusted to reflect the effect on Awards of any transaction or event described in Section 9. 

 

5.3 Any shares issued by the Company through the assumption or substitution of outstanding grants from an acquired companyshall not (i) reduce the shares available for Awards under the Plan, or (ii) be counted against the Individual Limit. Any shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any sharessubject to any Award granted hereunder are forfeited or such Award otherwise terminates without the issuance of such shares or the payment of other consideration in lieu of such shares, the shares subject to such Award, to the extent of any suchforfeiture or termination, shall again be available for Awards under the Plan. 

 
**6.****Deferred Stock**
 

An Award of Deferred Stock is an agreement by the Company to deliver to the recipient a specified number of shares of Common Stock at the end of aspecified deferral period or periods. Such an Award shall be subject to the following terms and conditions: 

 

6.1 Deferred Stock Awards shall be evidenced by Deferred Stock grant instruments. Such grant instruments shall conform to the requirements of the Plan andmay contain such other provisions as the Committee shall deem advisable. 

 

6.2 Upon determination of the number of shares of Deferred Stock to be awarded to a Holder, the Committee shall direct that the same be credited to the Holder’s account on the books of the Company but thatissuance and delivery of the same shall be deferred until the date or dates provided in Section 6.5 hereof. Prior to issuance and delivery hereunder the Holder shall have no rights as a stockholder with respect to any shares of Deferred Stockcredited to the Holder’s account. 

 

6.3 Subject to theprovisions of Section 6.4 concerning Deferred Stock Awards that are subject to the achievement of Performance Goals, amounts equal to any dividends declared during the Deferral Period with respect to the number of shares covered by a Deferred StockAward will be paid to the Holder currently, or deferred and deemed to be reinvested in additional Deferred Stock, or otherwise reinvested on such terms as are determined at the time of the Award by the Committee, in its sole discretion, andspecified in the Deferred Stock grant instrument. 

 

6.4 TheCommittee may condition the grant of an Award of Deferred Stock or the expiration of the Deferral Period upon the Holder’s achievement of one or more Performance Goal(s) specified in the Deferred Stock grant instrument. Unless otherwisespecified in a Deferred Stock grant instrument, if the Holder fails to achieve the specified Performance Goal(s), the Committee shall not grant the Deferred Stock Award to the Holder, or the Holder shall forfeit the Award and no Common Stock shallbe transferred to him pursuant to the Deferred Stock Award. Dividends paid during the Deferral Period on Deferred Stock subject to a Performance Goal shall be reinvested in additional Deferred Stock and the expiration of the Deferral Period for suchDeferred Stock shall be subject to the Performance Goal(s) previously established by the Committee. 

 

6.5 The Deferred Stock grant instrument shall specify the duration of the Deferral Period, taking into account termination of employment or service onaccount of death, Disability, Retirement or other cause. The Deferral Period may consist of one or more installments. At the end of the Deferral Period or any installment thereof the shares of Deferred Stock applicable to such installment creditedto the account of a Holder shall be issued and delivered to the Holder (or, where appropriate, the Holder’s legal representative) in accordance with the terms of the Deferred Stock grant instrument. The Committee may, in its sole discretion,accelerate the delivery of all or any part of a Deferred Stock Award or waive the deferral limitations for all or any part of a Deferred Stock Award. 

 

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**7.****Restricted Stock**
 

An Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to the Participant, which shares are subject toforfeiture upon the happening of specified events. Such an Award shall be subject to the following terms and conditions: 

 

7.1 Restricted Stock shall be evidenced by Restricted Stock grant instruments. Such grant instruments shall conform to the requirements of the Plan andmay contain such other provisions as the Committee shall deem advisable. 

 

7.2 Upon determination of the number of shares of Restricted Stock to be granted to the Holder, the Committee shall direct that a certificate or certificates representing the number of shares of Common Stock be issuedto the Holder with the Holder designated as the registered owner. The certificate(s) representing such shares shall be legended as to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and deposited by the Holder,together with a stock power endorsed in blank, with the Company, to be held in escrow during the Restriction Period. 

 

7.3 During the Restriction Period the Holder shall have the right to vote the shares of Restricted Stock. Subject to the provisions of Section 7.4concerning Restricted Stock Awards that are subject to the achievement of Performance Goals, amounts equal to any dividends declared during the Restriction Period with respect to the number of shares covered by a Restricted Stock Award will be paidto the Holder currently, or deferred and deemed to be reinvested in additional Restricted Stock, or otherwise reinvested on such terms as are determined at the time of the Award by the Committee, in its sole discretion, and specified in theRestricted Stock grant instrument. 

 

7.4 The Committee maycondition the grant of an Award of Restricted Stock or the expiration of the Restriction Period upon the Holder’s achievement of one or more Performance Goal(s) specified in the Restricted Stock grant instrument. Unless otherwise specified in aRestricted Stock grant instrument, if the Holder fails to achieve the specified Performance Goal(s), the Committee shall not grant the Restricted Stock to the Holder, or the Holder shall forfeit the Award of Restricted Stock and the Common Stockshall be forfeited to the Company. Dividends paid during the Restriction Period on Restricted Stock subject to a Performance Goal shall be reinvested in additional Restricted Stock and the expiration of the Restriction Period for such RestrictedStock shall be subject to the Performance Goal(s) previously established by the Committee. 

 

7.5 The Restricted Stock grant instrument shall specify the duration of the Restriction Period and the performance, employment or other conditions (including termination of employment or service on account of death,Disability, Retirement or other cause) under which the Restricted Stock may be forfeited to the Company. At the end of the Restriction Period the restrictions imposed hereunder shall lapse with respect to the number of shares of Restricted Stock asdetermined by the Committee, and the legend shall be removed and such number of shares delivered to the Holder (or, where appropriate, the Holder’s legal representative). The Committee may, in its sole discretion, modify or accelerate thevesting and delivery of shares of Restricted Stock. 

 
**8.****Options**
 

Options give a Participant the right to purchase a specified number of shares of Common Stock from the Company for a specified time period at a fixedprice. Options may be either Incentive Stock Options or Non-Qualified Stock Options. The grant of Options shall be subject to the following terms and conditions: 

 

8.1 *Option Grants*: Options shall be evidenced by Option grant instruments. Such grant instruments shall conform tothe requirements of the Plan, and may contain such other provisions as the Committee shall deem advisable. 

 

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8.2 *Specific Option Grants to Directors*: Each Director who is not an employee of the Company shallreceive an Option to purchase 20,000 shares of Common Stock upon his or her initial election to the Board, and the shares of Common Stock underlying such Options shall vest one-quarter (1/4) per year that such Director remains a Director for fouryears beginning on the first anniversary of the grant. Beginning at the 2004 annual meeting of the stockholders of the Company and at each annual meeting of the stockholders of the Company held thereafter while the Plan is in effect, each Directorcontinuing as such after such meeting who is not an employee of the Company shall receive an Option to purchase 20,000 shares of Common Stock, and the shares of Common Stock underlying such Options shall vest one-quarter (1/4) per year that suchDirector remains a Director for four years beginning on the first anniversary of the grant; provided, however, that in the event a Director resigns from the Board other than for Cause prior to such four-year anniversary, the vesting of such Optionshall accelerate so that such Option becomes immediately exercisable with respect to one-forty-eighth (1/48) of the shares of Common Stock underlying such Option for each full month that has elapsed between the date of the grant of such Option andthe date of such resignation. Notwithstanding anything to the contrary in the Plan, the price per share at which Common Stock may be purchased upon the exercise of an Option granted pursuant to this Section 8.2 shall be not less than the Fair MarketValue of a share of Common Stock on the date of grant. 

 

8.3*Option Price*: The price per share at which Common Stock may be purchased upon exercise of an Option shall be determined by the Committee, but, in the case of grants of Incentive Stock Options, shall be not less than the Fair Market Value of ashare of Common Stock on the date of grant. In the case of any Incentive Stock Option granted to a Ten Percent Shareholder, the option price per share shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date ofgrant. The option price per share for Non-Qualified Options may not be less than the Fair Market Value of a share of Common Stock on the date of grant. 

 

8.4 *Term of Options*: The Option grant instruments shall specify when an Option may be exercisable and the terms and conditions applicable thereto.The term of an Option shall in no event be greater than ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder and ten years in the case of all other Incentive Stock Options). The Committee may, in itssole discretion, accelerate the time at which an Option vests. The Committee may, in its sole discretion, extend the period of exercise for Options that have vested. 

 

8.5 *Incentive Stock Options*: Each provision of the Plan and each Option grant instrument relating to an IncentiveStock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in section 422 of the Code, and any provisions of the Option grant instrument thereof that cannot be so construed shall be disregarded.In no event may a Holder be granted an Incentive Stock Option which does not comply with such grant and vesting limitations as may be prescribed by section 422(b) of the Code. Incentive Stock Options may only be granted to Employees; provided,however, that they may not be granted to employees of Affiliates. Without limiting the foregoing, the aggregate Fair Market Value (determined as of the time the Option is granted) of the Common Stock with respect to which an Incentive Stock Optionmay first become exercisable by a Participant in any one calendar year under the Plan shall not exceed $100,000. 

 

8.6 *Restrictions on Transferability of Incentive Stock Options*: No Incentive Stock Option shall be transferable otherwise than by will or the lawsof descent and distribution and, during the lifetime of the Holder, shall be exercisable only by the Holder. Upon the death of a Holder, the Person to whom the rights have passed by will or by the laws of descent and distribution may exercise anIncentive Stock Option only in accordance with this Section 8. 

 

8.7 *Payment of Option Price*: The option price of the shares of Common Stock upon the exercise of an Option shall be paid: (i) in full in cash at the time of the exercise, (ii) with the consent of the Committee, in whole or in part inCommon Stock held by the Holder for at least six months valued at 

 

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Fair Market Value on the date of exercise, or (iii) by such other method as the Committee may approve, including paymentthrough a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. With the consent of the Committee, payment upon the exercise of a Non-Qualified Option may be made in whole or in part by Restricted Stock whichhas been held by the Holder for at least six months (based on the fair market value of the Restricted Stock on the date the Option is exercised, as determined by the Committee). In such case the Common Stock to which the Option relates shall besubject to the same forfeiture restrictions originally imposed on the Restricted Stock exchanged therefor. 

 

8.8 *Termination by Death*: Unless otherwise provided in an Option grant instrument, if a Holder’s employment or service by the Company, aSubsidiary or Affiliate terminates by reason of death, any Option granted to such Holder may thereafter be exercised (to the extent such Option was exercisable at the time of death) by, where appropriate, the Holder’s transferee or by theHolder’s legal representative, for a period of 12 months from the date of death or until the expiration of the stated term of the Option, whichever period is shorter. 

 

8.9 *Termination by Reason of Disability*: Unless otherwise provided in an Option grant instrument, if a Holder’semployment or service by the Company, a Subsidiary or Affiliate terminates by reason of Disability, any unexercised Option granted to the Holder may thereafter be exercised by the Holder (or, where appropriate, the Holder’s transferee or legalrepresentative), to the extent it was exercisable at the time of termination, for a period of 12 months from the date of such termination of employment or service or until the expiration of the stated term of the Option, whichever period is shorter.

 

8.10 *Termination by Reason of Retirement*: Unlessotherwise provided in an Option grant instrument, if a Holder’s employment by or service with the Company, a Subsidiary or Affiliate terminates by reason of Retirement, any unexercised Option granted to the Holder may thereafter be exercised bythe Holder (or, where appropriate, the Holder’s transferee or legal representative), to the extent it was exercisable at the time of termination, for a period of 90 days from the date of such termination of employment or service or until theexpiration of the stated term of the Option, whichever period is shorter. 

 

8.11 *Termination Not for Cause*: Unless otherwise provided in an Option grant instrument, if a Holder’s employment by or service with the Company, a Subsidiary or Affiliate is terminated by the Company, theSubsidiary or Affiliate not for Cause, any unexercised Option granted to the Holder may thereafter be exercised by the Holder (or, where appropriate, the Holder’s transferee or legal representative), to the extent it was exercisable at the timeof termination, for a period of 90 days from the date of such termination of employment or service or until the expiration of the stated term of the Option, whichever period is shorter. 

 

8.12 *Termination for Cause*: Unless otherwise provided in an Option grant instrument, if a Holder’s employment orservice with the Company, a Subsidiary or Affiliate is terminated by the Company, the Subsidiary or Affiliate for Cause, all unexercised Options awarded to the Holder shall terminate on the date of such termination. 

 

8.13 *Termination for Other Reason*: Unless otherwise provided in anOption grant instrument, if a Holder’s employment or service with the Company, a Subsidiary or Affiliate terminates for any reason not specified in this Section 8 (including voluntary termination), any unexercised Option granted to the Holdermay thereafter be exercised by the Holder (or, where appropriate, the Holder’s transferee or legal representative), to the extent it was exercisable at the time of termination, for a period of 90 days from the date of such termination ofemployment or service or until the expiration of the stated term of the Option, whichever period is shorter. 

 

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8.14 *Continuation of Service*: Notwithstanding anything to the contrary in this Section 8, aHolder’s cessation of service as an Employee, Director or Consultant other than for Cause shall not be treated as a termination under this Section 8 if the Holder continues without interruption to serve thereafter in a material manner in one(or more) of such other capacities, as determined by the Committee in its sole discretion. 

 
**9.****Changes in Capitalization; Change of Control**
 

9.1 In the event of a reorganization, recapitalization, stock split, spin-off, split-off, split-up, stock dividend, issuance of stock rights, combinationof shares, merger, consolidation or any other change in the corporate structure of the Company affecting Common Stock, or any distribution to stockholders of the Company other than a cash dividend, the Board shall make appropriate adjustment in thenumber and kind of shares authorized by the Plan and any other adjustments to outstanding Awards as it determines appropriate. No fractional shares of Common Stock shall be issued pursuant to such an adjustment. The Fair Market Value of anyfractional shares resulting from adjustments pursuant to this Section shall, where appropriate, be paid in cash to the Holder. 

 

9.2 Upon a Change of Control and unless the Committee determines otherwise, the Committee shall fully vest all Awards made under the Plan. In addition,upon a Change of Control, the Committee may, at its discretion (i) cancel any outstanding Awards in exchange for a cash payment of an amount equal to the difference between the then Fair Market Value of the Award less the option or base price of theAward, (ii) after having given the Award Holder a chance to exercise any outstanding Options, terminate any or all of the Award Holder’s unexercised Options, or (iii) where the Company is not the surviving corporation, cause the survivingcorporation to assume or replace all outstanding Awards with comparable awards. 

 

9.3 The judgment of the Committee with respect to any matter referred to in this Section 9 shall be conclusive and binding upon each Holder without the need for any amendment to the Plan. 

 
**10.****Effective Date, Termination and Amendment**
 

The Plan shall become effective on March 22, 2004, subject to shareholder approval. Options granted under the Plan prior to such shareholder approvalshall expressly not be exercisable prior to such approval. The Plan shall remain in full force and effect until the earlier of ten years from the date of its adoption by the Board, or the date it is terminated by the Board. The Board shall have thepower to amend, suspend or terminate the Plan at any time, provided that no such amendment shall be made without shareholder approval which shall (i) increase (except as provided in Section 9) the total number of shares available for issuancepursuant to the Plan; (ii) change the class of Participants eligible to be Holders; (iii) modify the Individual Limit (except as provided Section 9) or the categories of Performance Goals set forth in Section 4.4; or (iv) change the provisions ofthis Section 10. Termination of the Plan pursuant to this Section 10 shall not affect Awards outstanding under the Plan at the time of termination. 

 
**11.****Transferability**
 

Except as provided in Section 8.6 and this Section 11, Awards may not be pledged, assigned or transferred for any reason during the Holder’slifetime, and any attempt to do so shall be void and the relevant Award shall be forfeited. The Committee may grant Awards (except Incentive Stock Options) that are transferable by the Holder during his lifetime, but such Awards shall betransferable only to the extent specifically provided in the grant instrument entered into with the Holder. The transferee of the Holder shall, in all cases, be subject to the provisions of the grant instrument between the Company and the Holder.

 

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**12.****General Provisions**
 

12.1 Nothing contained in the Plan, or any Award granted pursuant to the Plan, shall confer upon any Employee or Consultant any right with respect tocontinuance of employment or service by the Company, a Subsidiary or Affiliate, nor interfere in any way with the right of the Company, a Subsidiary or Affiliate to terminate the employment or service of any Employee or Consultant at any time.

 

12.2 Nothing contained in the Plan, and no action takenpursuant to the provisions of the Plan, shall create or shall be construed to create a trust of any kind, or a fiduciary relationship between the Company or its Subsidiaries, or their officers or the Committee, on the one hand, and any Participant,the Company, its Subsidiaries or any other Person or entity, on the other. 

 

12.3 For purposes of this Plan, neither (i) transfer of employment between the Company and its Subsidiaries and Affiliates nor (ii) transfer of status from Employee to Consultant shall be deemed termination ofemployment. 

 

12.4 Holders shall be responsible to makeappropriate provision for all taxes required to be withheld in connection with any Award, the exercise thereof and the transfer of shares of Common Stock pursuant to this Plan. Such responsibility shall extend to all applicable Federal, state, localor foreign withholding taxes. In the case of the payment of Awards in the form of Common Stock, or the exercise of Options, the Company shall have the right to retain the number of shares of Common Stock whose Fair Market Value equals the amount tobe withheld in satisfaction of the applicable withholding taxes. Grant instruments evidencing such Awards shall contain appropriate provisions to effect withholding in this manner. 

 

12.5 Without amending the Plan, Awards may be granted to Participants who are foreign nationals or employed outside theUnited States or both, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan. 

 

12.6 To the extent that Federal laws (such as the 1934 Act, the Code or theEmployee Retirement Income Security Act of 1974) do not otherwise control, the Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware and construed accordingly. 

 

12.7 The Committee may amend any outstanding Awards to the extent it deemsappropriate; provided, however, except as provided in Section 9, no Award may be repriced, replaced, regranted through cancellation, or modified without shareholder approval if the effect would be to reduce the exercise price for the sharesunderlying the Award. The Committee may amend Awards without the consent of the Holder, except in the case of amendments adverse to the Holder, in which case the Holder’s consent is required to any such amendment. 

 

12.8 All shares of Common Stock purchased upon the exercise of an Option orissued pursuant to an Award of Deferred Stock or Restricted Stock shall be subject to restrictions on transfer pursuant to applicable securities laws and such other agreements as the Committee shall deem appropriate and shall bear a legendsubjecting such shares to those restrictions on transfer in accordance with the applicable Award. The certificates shall also bear a legend referring to any restrictions on transfer arising hereunder or under any other applicable law, regulation,rule or agreement. 

 

12.9 The Plan and each Award under the Planshall be subject to the requirement that if at any time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock purchased upon the exercise of an Option or issued pursuant to an Award ofDeferred Stock or Restricted Stock upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government regulatory body or (iii) an agreement by the recipient of an Award with respect to the disposition ofsuch shares is necessary or desirable as a condition of, or in connection with, the Plan or the granting of such Award or the issue or purchase of such shares thereunder, the Award may not be consummated in whole or in part until such listing,registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee. 

 

*Adopted by the Board of Directors on March 22, 2004*

 

*Approved by Stockholders on May 11, 2004*

 

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