Exhibit 10.3


 


FACET BIOTECH CORPORATION


 


2008 EQUITY INCENTIVE PLAN


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Establishment, Purpose and Term of Plan

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Establishment

  	
  1

  
	
   

  	
  1.2

  	
  Purpose

  	
  1

  
	
   

  	
  1.3

  	
  Term of Plan

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions and Construction

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  	
  1

  
	
   

  	
  2.2

  	
  Construction

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Administration by the Committee

  	
  9

  
	
   

  	
  3.2

  	
  Authority of Officers

  	
  9

  
	
   

  	
  3.3

  	
  Administration with Respect to Insiders

  	
  9

  
	
   

  	
  3.4

  	
  Committee Complying with Section 162(m)

  	
  9

  
	
   

  	
  3.5

  	
  Powers of the Committee

  	
  10

  
	
   

  	
  3.6

  	
  Option or SAR Repricing

  	
  11

  
	
   

  	
  3.7

  	
  Indemnification

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Shares Subject to Plan

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Maximum Number of Shares Issuable

  	
  11

  
	
   

  	
  4.2

  	
  Annual Increase in Maximum Number of Shares Issuable

  	
  11

  
	
   

  	
  4.3

  	
  Share Counting

  	
  12

  
	
   

  	
  4.4

  	
  Adjustments for Changes in Capital Structure

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Eligibility, Participation and Award Limitations

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Persons Eligible for Awards

  	
  13

  
	
   

  	
  5.2

  	
  Participation in the Plan

  	
  13

  
	
   

  	
  5.3

  	
  Incentive Stock Option Limitations

  	
  13

  
	
   

  	
  5.4

  	
  Other Award Limits

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Stock Options

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Exercise Price

  	
  14

  
	
   

  	
  6.2

  	
  Exercisability and Term of Options

  	
  15

  
	
   

  	
  6.3

  	
  Payment of Exercise Price

  	
  15

  
	
   

  	
  6.4

  	
  Effect of Termination of Service

  	
  16

  
	
   

  	
  6.5

  	
  Transferability of Options

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Stock Appreciation Rights

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Types of SARs Authorized

  	
  17

  



 


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TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Exercise Price

  	
  17

  
	
   

  	
  7.3

  	
  Exercisability and Term of SARs

  	
  17

  
	
   

  	
  7.4

  	
  Exercise of SARs

  	
  18

  
	
   

  	
  7.5

  	
  Deemed Exercise of SARs

  	
  18

  
	
   

  	
  7.6

  	
  Effect of Termination of Service

  	
  18

  
	
   

  	
  7.7

  	
  Transferability of SARs

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Restricted Stock Awards

  	
  19

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Types of Restricted Stock Awards Authorized

  	
  19

  
	
   

  	
  8.2

  	
  Purchase Price

  	
  19

  
	
   

  	
  8.3

  	
  Purchase Period

  	
  19

  
	
   

  	
  8.4

  	
  Payment of Purchase Price

  	
  19

  
	
   

  	
  8.5

  	
  Vesting and Restrictions on Transfer

  	
  19

  
	
   

  	
  8.6

  	
  Voting Rights; Dividends and Distributions

  	
  20

  
	
   

  	
  8.7

  	
  Effect of Termination of Service

  	
  20

  
	
   

  	
  8.8

  	
  Nontransferability of Restricted Stock Award Rights

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Restricted Stock Unit Awards

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Grant of Restricted Stock Unit Awards

  	
  21

  
	
   

  	
  9.2

  	
  Purchase Price

  	
  21

  
	
   

  	
  9.3

  	
  Vesting

  	
  21

  
	
   

  	
  9.4

  	
  Voting Rights, Dividend Equivalent Rights and
  Distributions

  	
  21

  
	
   

  	
  9.5

  	
  Effect of Termination of Service

  	
  22

  
	
   

  	
  9.6

  	
  Settlement of Restricted Stock Unit Awards

  	
  22

  
	
   

  	
  9.7

  	
  Nontransferability of Restricted Stock Unit Awards

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Performance Awards

  	
  23

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Types of Performance Awards Authorized

  	
  23

  
	
   

  	
  10.2

  	
  Initial Value of Performance Shares and Performance
  Units

  	
  23

  
	
   

  	
  10.3

  	
  Establishment of Performance Period, Performance
  Goals and Performance Award Formula

  	
  23

  
	
   

  	
  10.4

  	
  Measurement of Performance Goals

  	
  23

  
	
   

  	
  10.5

  	
  Settlement of Performance Awards

  	
  25

  
	
   

  	
  10.6

  	
  Voting Rights; Dividend Equivalent Rights and
  Distributions

  	
  27

  
	
   

  	
  10.7

  	
  Effect of Termination of Service

  	
  27

  
	
   

  	
  10.8

  	
  Nontransferability of Performance Awards

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Cash-Based Awards and Other Stock-Based Awards

  	
  28

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Grant of Cash-Based Awards

  	
  28

  
	
   

  	
  11.2

  	
  Grant of Other Stock-Based Awards

  	
  28

  
	
   

  	
  11.3

  	
  Value of Cash-Based and Other Stock-Based Awards

  	
  28

  



 


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  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  Payment or Settlement of Cash-Based Awards and Other
  Stock-Based Awards

  	
  29

  
	
   

  	
  11.5

  	
  Voting Rights; Dividend Equivalent Rights and
  Distributions

  	
  29

  
	
   

  	
  11.6

  	
  Effect of Termination of Service

  	
  29

  
	
   

  	
  11.7

  	
  Nontransferability of Cash-Based Awards and Other
  Stock-Based Awards

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Nonemployee Director Awards

  	
  30

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Standard Forms of Award Agreement

  	
  30

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Award Agreements

  	
  30

  
	
   

  	
  13.2

  	
  Authority to Vary Terms

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Change in Control

  	
  30

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Effect of Change in Control on Awards

  	
  30

  
	
   

  	
  14.2

  	
  Effect of Change in Control on Nonemployee Director
  Awards

  	
  32

  
	
   

  	
  14.3

  	
  Federal Excise Tax Under Section 4999 of the
  Code

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Compliance with Securities Law

  	
  32

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Compliance with Section 409A

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Awards Subject to Section 409A

  	
  33

  
	
   

  	
  16.2

  	
  Deferral and/or Distribution Elections

  	
  33

  
	
   

  	
  16.3

  	
  Subsequent Elections

  	
  34

  
	
   

  	
  16.4

  	
  Payment of Section 409A Deferred Compensation

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Tax Withholding

  	
  36

  
	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Tax Withholding in General

  	
  36

  
	
   

  	
  17.2

  	
  Withholding in Shares

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Amendment or Termination of Plan

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Miscellaneous Provisions

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  19.1

  	
  Repurchase Rights

  	
  37

  
	
   

  	
  19.2

  	
  Forfeiture Events

  	
  37

  
	
   

  	
  19.3

  	
  Provision of Information

  	
  37

  
	
   

  	
  19.4

  	
  Rights as Employee, Consultant or Director

  	
  37

  
	
   

  	
  19.5

  	
  Rights as a Stockholder

  	
  38

  
	
   

  	
  19.6

  	
  Delivery of Title to Shares

  	
  38

  
	
   

  	
  19.7

  	
  Fractional Shares

  	
  38

  
	
   

  	
  19.8

  	
  Retirement and Welfare Plans

  	
  38

  
	
   

  	
  19.9

  	
  Beneficiary Designation

  	
  38

  
	
   

  	
  19.10

  	
  Severability

  	
  38

  



 


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TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  19.11

  	
  No Constraint on Corporate Action

  	
  39

  
	
   

  	
  19.12

  	
  Unfunded Obligation

  	
  39

  
	
   

  	
  19.13

  	
  Choice of Law

  	
  39

  



 


iv

















 


Facet Biotech Corporation


2008 Equity Incentive Plan


 


1.                                       ESTABLISHMENT, PURPOSE AND TERM
OF PLAN.


 


1.1                                 Establishment. The
Facet Biotech Corporation 2008 Equity Incentive Plan (the “Plan”) is hereby established effective as of [             ],
2008 (the “Effective Date”).


 


1.2                                 Purpose. The purpose of the
Plan is to advance the interests of the Participating Company Group and its
stockholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such
persons to contribute to the growth and profitability of the Participating
Company Group. The Plan seeks to achieve this purpose by providing for Awards
in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase
Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares,
Performance Units, Cash-Based and Other Stock-Based Awards and Nonemployee
Director Awards.


 


1.3                                 Term of Plan. The Plan shall continue in effect until its
termination by the Committee; provided, however, that all Awards shall be
granted, if at all, within ten (10) years from the Effective Date.


 


2.                                       DEFINITIONS AND CONSTRUCTION.


 


2.1                                 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:


 


(a)                                  “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company directly
or indirectly through one or more intermediary entities. For this purpose, the
term “control” (including the term “controlled by”) means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of the relevant entity, whether through the ownership
of voting securities, by contract or otherwise; or shall have such other
meaning assigned such term for the purposes of registration on Form S-8
under the Securities Act.


 


(b)                                 “Award” means any Option,
Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock
Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based
Award, Other Stock-Based Award or Nonemployee Director Award granted under the
Plan.


 


(c)                                  “Award Agreement” means a
written or electronic agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the
Participant.


 

















 


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


 


(e)                                  “Cash-Based Award” means an
Award denominated in cash and granted pursuant to Section 11.


 


(f)                                    “Cause” means, unless such term or an equivalent
term is otherwise defined with respect to an Award by the Participant’s Award
Agreement or by a written contract of employment or service, any of the
following: (i) the Participant’s theft, dishonesty, willful misconduct,
breach of fiduciary duty for personal profit, or falsification of any
Participating Company documents or records; (ii) the Participant’s
material failure to abide by a Participating Company’s code of conduct or other
policies (including, without limitation, policies relating to confidentiality
and reasonable workplace conduct); (iii) the Participant’s unauthorized
use, misappropriation, destruction or diversion of any tangible or intangible
asset or corporate opportunity of a Participating Company (including, without
limitation, the Participant’s improper use or disclosure of a Participating
Company’s confidential or proprietary information); (iv) any intentional
act by the Participant which has a material detrimental effect on a
Participating Company’s reputation or business; (v) the Participant’s
repeated failure or inability to perform any reasonable assigned duties after
written notice from a Participating Company of, and a reasonable opportunity to
cure, such failure or inability; (vi) any material breach by the
Participant of any employment, service, non-disclosure, non-competition,
non-solicitation or other similar agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vii) the Participant’s conviction (including any plea of
guilty or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Participant’s ability
to perform his or her duties with a Participating Company.


 


(g)                                 “Change in Control” means,
unless such term or an equivalent term is otherwise defined with respect to an
Award by the Participant’s Award Agreement or by a written contract of employment
or service, the occurrence of any of the following:


 


(i)                                     any
“person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the total Fair Market
Value or total combined voting power of the Company’s then-outstanding
securities entitled to vote generally in the election of Directors; provided,
however, that a Change in Control shall not be deemed to have occurred if such
degree of beneficial ownership results from any of the following: (A) an
acquisition by any person who on the Effective Date is the beneficial owner of
more than fifty percent (50%) of such voting power, (B) any acquisition
directly from the Company, including, without limitation, pursuant to or in
connection with a public offering of securities, (C) any acquisition by
the Company, (D) any acquisition by a trustee or other fiduciary under an
employee benefit plan of a Participating Company or (E) any acquisition by
an entity owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the voting securities
of the Company; or


 


(ii)                                  an
Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”) in which the stockholders of the
Company


 


2

















 


immediately before the
Transaction do not retain immediately after the Transaction direct or indirect
beneficial ownership of more than fifty percent (50%) of the total combined
voting power of the outstanding securities entitled to vote generally in the
election of Directors or, in the case of an Ownership Change Event described in
Section 2.1(dd)(iii), the entity to which the assets of the Company were
transferred (the “Transferee”), as the case may be; or


 


(iii)                               a liquidation or
dissolution of the Company;


 


provided, however, that a Change in Control shall be deemed not to
include a transaction described in subsections (i) or (ii) of this Section 2.1(g) in
which a majority of the members of the board of directors of the continuing,
surviving or successor entity, or parent thereof, immediately after such
transaction is comprised of Incumbent Directors. For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation, an
interest resulting from ownership of the voting securities of one or more corporations
or other business entities which own the Company or the Transferee, as the case
may be, either directly or through one or more subsidiary corporations or other
business entities. The Committee shall determine whether multiple sales or
exchanges of the voting securities of the Company or multiple Ownership Change
Events are related, and its determination shall be final, binding and
conclusive.


 


(h)                                 “Code” means the Internal Revenue Code of 1986, as amended, and
any applicable regulations or administrative guidelines promulgated thereunder.


 


(i)                                     “Committee” means the Compensation Committee and such other committee
or subcommittee of the Board, if any, duly appointed to administer the Plan and
having such powers in each instance as shall be specified by the Board. If, at
any time, there is no committee of the Board then authorized or properly
constituted to administer the Plan, the Board shall exercise all of the powers
of the Committee granted herein, and, in any event, the Board may in its
discretion exercise any or all of such powers.


 


(j)                                     “Company” means Facet Biotech Corporation, a Delaware corporation,
or any successor corporation thereto.


 


(k)                                  “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person
pursuant to the Plan in reliance on registration on Form S-8 under the
Securities Act.


 


(l)                                     “Covered Employee” means, at any time the Plan is subject to Section 162(m),
any Employee who is or may reasonably be expected to become a “covered employee”
as defined in Section 162(m), or any successor statute, and who is
designated, either as an individual Employee or a member of a class of
Employees, by the Committee no later than (i) the date that is ninety (90)
days after the beginning of the Performance Period, or (ii) the date on
which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered
Employee” under this Plan for such applicable Performance Period.


 


3














 


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


 


(n)                                 “Disability” means the
permanent and total disability of the Participant, within the meaning of
Section 22(e)(3) of the Code.


 


(o)                                 “Dividend Equivalent Right”
means the right of a Participant, granted at the discretion of the Committee or
as otherwise provided by the Plan, to receive a credit for the account of such
Participant in an amount equal to the cash dividends paid on one share of Stock
for each share of Stock represented by an Award held by such Participant.


 


(p)                                 “Employee” means any person
treated as an employee (including an Officer or a member of the Board who is
also treated as an employee) in the records of a Participating Company and,
with respect to any Incentive Stock Option granted to such person, who is an
employee for purposes of Section 422 of the Code; provided, however, that
neither service as a member of the Board nor payment of a director’s fee shall
be sufficient to constitute employment for purposes of the Plan. The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as the case may be. For
purposes of an individual’s rights, if any, under the terms of the Plan as of
the time of the Company’s determination of whether or not the individual is an
Employee, all such determinations by the Company shall be final, binding and
conclusive as to such rights, if any, notwithstanding that the Company or any
court of law or governmental agency subsequently makes a contrary determination
as to such individual’s status as an Employee.


 


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


 


(r)                                    “Fair Market Value” means, as
of any date, the value of a share of Stock or other property as determined by
the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:


 


(i)                                     Except
as otherwise determined by the Committee, if, on such date, the Stock is listed
or quoted on a national or regional securities exchange or quotation system,
the Fair Market Value of a share of Stock shall be the closing price of a share
of Stock as quoted on the national or regional securities exchange or quotation
system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable. If the relevant date does not fall on a
day on which the Stock has traded on such securities exchange or quotation
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded or quoted prior to the relevant
date, or such other appropriate day as shall be determined by the Committee, in
its discretion.


 


(ii)                                  Notwithstanding
the foregoing, the Committee may, in its discretion, determine the Fair Market
Value on the basis of the opening, closing, or average of the high and low sale
prices of a share of Stock on such date or the preceding trading day, the
actual sale price of a share of Stock received by a Participant, any other
reasonable basis using


 


4

















 


actual transactions in
the Stock as reported on a national or regional securities exchange or
quotation system, or on any other basis consistent with the requirements of
Section 409A. The Committee may also determine the Fair Market Value upon the
average selling price of the Stock during a specified period that is within
thirty (30) days before or thirty (30) days after such date, provided that,
with respect to the grant of an Option or SAR, the commitment to grant such
Award based on such valuation method must be irrevocable before the beginning
of the specified period. The Committee may vary its method of determination of
the Fair Market Value as provided in this Section for different purposes under
the Plan to the extent consistent with the requirements of Section 409A.


 


(iii)                               If, on such date, the
Stock is not listed or quoted on a national or regional securities exchange or
quotation system, the Fair Market Value of a share of Stock shall be as
determined by the Committee in good faith without regard to any restriction
other than a restriction which, by its terms, will never lapse, and in a manner
consistent with the requirements of Section 409A.


 


(s)           “Full Value Award” means any
Award settled in Stock, other than (i) an Option, (ii) a Stock
Appreciation Right, (iii) a Restricted Stock Purchase Right or an Other
Stock-Based Award under which the Company will receive monetary consideration
equal to the Fair Market Value (determined on the effective date of grant) of
the shares subject to such Award, or (iv) a Nonemployee Director Award which is
any of the foregoing types of Awards.


 


(t)            “Incentive Stock Option”
means an Option intended to be (as set forth in the Award Agreement) and which
qualifies as an incentive stock option within the meaning of
Section 422(b) of the Code.


 


(u)           “Incumbent Director” means a
director who either (i) is a member of the Board as of the Effective Date,
or (ii) is elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination, but who was not elected or nominated in
connection with an actual or threatened proxy contest relating to the election
of directors of the Company.


 


(v)           “Insider”
means an Officer, Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.


 


(w)          “Net-Exercise” means a procedure by which the Participant
will be issued a number of shares of Stock upon the exercise of an Option
determined in accordance with the following formula:


 


	
  N = 

  	
  X*((A-B)/A), where

  
	
   

  	
  “N” = the number of
  shares of Stock to be issued to the Participant upon exercise of the Option
  (rounded down to the nearest whole number);

  
	
   

  	
  “X” = the total number
  of shares with respect to which the Participant has elected to exercise the Option;

  
	
   

  	
  “A” = the Fair Market
  Value of one (1) share of Stock determined on the exercise date; and

  



 


5

















 


“B” =
the exercise price per share (as defined in the Participant’s Award Agreement)


 


(x)                                   “Nonemployee Director” means a
Director who is not an Employee.


 


(y)           “Nonemployee Director
Award” means a Nonstatutory Stock Option, Stock Appreciation
Right, Restricted Stock Award or Restricted Stock Unit Award granted to a
Nonemployee Director pursuant to Section 12 of the Plan.


 


(z)                                   “Nonstatutory Stock Option”
means an Option not intended to be (as set forth in the Award Agreement) an
incentive stock option within the meaning of Section 422(b) of the Code.


 


(aa)                            “Officer” means any person
designated by the Board as an officer of the Company.


 


(bb)                          “Option” means an Incentive
Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.


 


(cc)                            “Other Stock-Based Award”
means an Award denominated in shares of Stock and granted pursuant to
Section 11.


 


(dd)                          “Ownership Change Event”
means the occurrence of any of the following with respect to the Company:  (i) the direct or indirect sale or
exchange in a single or series of related transactions by the stockholders of
the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation in which the Company is a party;
or (iii) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange or transfer to one or more
subsidiaries of the Company).


 


(ee)                            “Parent Corporation” means
any present or future “parent corporation” of the Company, as defined in
Section 424(e) of the Code.


 


(ff)                                “Participant” means any
eligible person who has been granted one or more Awards.


 


(gg)                          “Participating Company” means
the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.


 


(hh)                          “Participating Company Group”
means, at any point in time, the Company and all other entities collectively
which are then Participating Companies.


 


(ii)                                  “Performance Award” means an
Award of Performance Shares or Performance Units.


 


(jj)                                  “Performance Award Formula”
means, for any Performance Award, a formula or table established by the
Committee pursuant to Section 10.3 which provides the basis for computing
the value of a Performance Award at one or more threshold levels of


 


6

















 


attainment of the
applicable Performance Goal(s) measured as of the end of the applicable
Performance Period.


 


(kk)                            “Performance-Based Compensation” means
compensation under an Award that satisfies the requirements of Section 162(m)
for certain performance-based compensation paid to Covered Employees.


 


(ll)                                  “Performance Goal” means a
performance goal established by the Committee pursuant to Section 10.3.


 


(mm)                      “Performance Period” means a
period established by the Committee pursuant to Section 10.3 at the end of
which one or more Performance Goals are to be measured.


 


(nn)                          “Performance Share” means a
right granted to a Participant pursuant to Section 10 to receive a payment
equal to the value of a Performance Share, as determined by the Committee,
based on performance.


 


(oo)                          “Performance Unit” means a
right granted to a Participant pursuant to Section 10 to receive a payment
equal to the value of a Performance Unit, as determined by the Committee, based
upon performance.


 


(pp)                          “Restricted Stock Award”
means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase
Right.


 


(qq)                          “Restricted Stock Bonus”
means Stock granted to a Participant pursuant to Section 8 or
Section 12.


 


(rr)                                “Restricted Stock Purchase Right”
means a right to purchase Stock granted to a Participant pursuant to
Section 8 or Section 12.


 


(ss)                            “Restricted Stock
Unit”
means a right granted to a Participant pursuant to Section 9 or
Section 12 to receive a share of Stock on a date determined in accordance
with the provisions of such Sections, as applicable, and the Participant’s
Award Agreement.


 


(tt)                                “Rule 16b-3”
means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.


 


(uu)                          “SAR” or “Stock Appreciation Right” means a right granted
to a Participant pursuant to Section 7 or Section 12 to receive
payment, for each share of Stock subject to such Award, of an amount equal to
the excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the Award over the exercise price.


 


(vv)                          “Section 162(m)”
means Section 162(m) of the Code.


 


(ww)                      “Section 409A” means Section 409A of the Code.


 


7

















 


(xx)                              “Section 409A Deferred Compensation”
means compensation provided pursuant to an Award that constitutes deferred
compensation subject to and not exempted from the requirements of Section 409A.


 


(yy)                          “Securities Act” means the
Securities Act of 1933, as amended.


 


(zz)                              “Service” means a Participant’s
employment or service with the Participating Company Group, whether in the
capacity of an Employee, a Director or a Consultant. Unless otherwise provided
by the Committee, a Participant’s Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders such Service or a change in the Participating Company for which the
Participant renders such Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service
shall not be deemed to have terminated if the Participant takes any military
leave, sick leave, or other bona fide leave of absence approved by the Company.
However, unless otherwise provided by the Committee, if any such leave taken by
a Participant exceeds ninety (90) days, then on the ninety-first (91st) day
following the commencement of such leave the Participant’s Service shall be deemed
to have terminated, unless the Participant’s right to return to Service is
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, an unpaid leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant’s Award Agreement. A Participant’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the business entity for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated
and the effective date of such termination.


 


(aaa)                      “Stock” means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.4.


 


(bbb)                   “Subsidiary
Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.


 


(ccc)                      “Ten Percent Owner” means a Participant who, at
the time an Option is granted to the Participant, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company (other than an Affiliate) within the meaning
of Section 422(b)(6) of the Code.


 


(ddd)                   “Trading Compliance Policy”
means the written policy of the Company pertaining to the purchase, sale,
transfer or other disposition of the Company’s equity securities by Directors,
Officers, Employees or other service providers who may possess material,
nonpublic information regarding the Company or its securities.


 


(eee)                      “Vesting Conditions” mean those conditions
established in accordance with the Plan prior to the satisfaction of which
shares subject to an Award remain subject to forfeiture or a repurchase option
in favor of the Company exercisable for the Participant’s monetary purchase
price, if any, for such shares upon the Participant’s termination of Service.


 


8

















 


2.2                                 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise.


 


3.                                       ADMINISTRATION.


 


3.1                                 Administration by the Committee. The Plan shall be
administered by the Committee. All questions of interpretation of the Plan, of
any Award Agreement or of any other form of agreement or other document
employed by the Company in the administration of the Plan or of any Award shall
be determined by the Committee, and such determinations shall be final, binding
and conclusive upon all persons having an interest in the Plan or such Award,
unless fraudulent or made in bad faith. Any and all actions, decisions and
determinations taken or made by the Committee in the exercise of its discretion
pursuant to the Plan or Award Agreement or other agreement thereunder (other
than determining questions of interpretation pursuant to the preceding
sentence) shall be final, binding and conclusive upon all persons having an
interest therein. All expenses incurred in connection in the administration of
the Plan shall be paid by the Company.


 


3.2                                 Authority of Officers. Any Officer shall have the authority
to act on behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election. The Board or
Committee may, in its discretion, delegate to a committee comprised of one or
more Officers the authority to grant one or more Awards, without further
approval of the Board or the Committee, to any Employee, other than a person
who, at the time of such grant, is an Insider or a Covered Person; provided,
however, that (a) no Employee may be granted pursuant to such delegation
one or more Awards in any fiscal year of the Company for more            
than Forty Thousand (           )
(40,000) shares of Stock, (b) the exercise price per share of each such
Award which is an Option or SAR shall be not less than the Fair Market Value
per share of the Stock on the effective date of grant (or, if the Stock has not
traded on such date, on the last day preceding the effective date of grant on
which the Stock was traded), (c) each such Award shall be subject to the
terms and conditions of the appropriate standard form of Award Agreement
approved by the Board or the Committee and shall conform to the provisions of
the Plan and (d) each such Award shall conform to guidelines as shall be
established from time to time by resolution of the Board or the Committee.


 


3.3                                 Administration with Respect to Insiders. With
respect to participation by Insiders in the Plan, at any time that any class of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.


 


3.4                                 Committee Complying with Section 162(m). If
the Company is a “publicly held corporation” within the meaning of
Section 162(m), the Board may establish a Committee of “outside directors”
within the meaning of Section 162(m) to approve the grant of any Award
intended to result in the payment of Performance-Based Compensation.


 


9

















 


3.5                                 Powers of the Committee. In
addition to any other powers set forth in the Plan and subject to the
provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:


 


(a)                                  to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock, units or monetary value to be
subject to each Award;


 


(b)                                 to
determine the type of Award granted;


 


(c)                                  to
determine the Fair Market Value of shares of Stock or other property;


 


(d)                                 to
determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of
shares pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any
tax withholding obligation arising in connection with any Award, including by
the withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability or vesting of any Award or any shares acquired
pursuant thereto, (v) the Performance Measures, Performance Period,
Performance Award Formula and Performance Goals applicable to any Award and the
extent to which such Performance Goals have been attained, (vi) the time
of the expiration of any Award, (vii) the effect of the Participant’s
termination of Service on any of the foregoing, and (viii) all other
terms, conditions and restrictions applicable to any Award or shares acquired
pursuant thereto not inconsistent with the terms of the Plan;


 


(e)                                  to
determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;


 


(f)                                    to
approve one or more forms of Award Agreement;


 


(g)                                 to
amend, modify, extend, cancel or renew any Award or to waive any restrictions
or conditions applicable to any Award or any shares acquired pursuant thereto;


 


(h)                                 to
accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;


 


(i)                                     to
prescribe, amend or rescind rules, guidelines and policies relating to the
Plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards; and


 


(j)                                     to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take


 


10

















 


such other actions with
respect to the Plan or any Award as the Committee may deem advisable to the
extent not inconsistent with the provisions of the Plan or applicable law.


 


3.6                                 Option or SAR Repricing. Without the affirmative vote of
holders of a majority of the shares of Stock cast in person or by proxy at a
meeting of the stockholders of the Company at which a quorum representing a
majority of all outstanding shares of Stock is present or represented by proxy,
the Board shall not approve a program providing for either (a) the cancellation
of outstanding Options or SARs having exercise prices per share greater than
the then Fair Market Value of a share of Stock (“Underwater Awards”) and the grant in substitution
therefore of new Options or SARs having a lower exercise price, Full Value
Awards or payments in cash, or (b) the amendment of outstanding Underwater
Awards to reduce the exercise price thereof. This Section shall not be
construed to apply to “issuing or assuming a stock option in a transaction to
which Section 424(a) applies,” within the meaning of Section 424 of the Code or
to an adjustment pursuant to Section 4.4.


 


3.7                                 Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or the Committee or as
officers or employees of the Participating Company Group, members of the Board
or the Committee and any officers or employees of the Participating Company
Group to whom authority to act for the Board, the Committee or the Company is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys’ fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for
gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.


 


4.                                       SHARES SUBJECT TO PLAN.


 


4.1                                 Maximum Number of Shares Issuable. Subject to adjustment as
provided in Sections 4.2, 4.3 and 4.4, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be equal to Three
Million Five Hundred Thousand (3,500,000) and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof.


 


4.2                                 Annual Increase in Maximum
Number of Shares Issuable. Subject
to adjustment as provided in Section 4.4, the maximum aggregate number
of shares of Stock that may be issued under the Plan as set forth in
Section 4.1 shall be cumulatively increased on January 1, 2009 and on
each subsequent January 1 through and including January 1, 2013, by a
number of shares (the “Annual Increase”) equal to the
smaller of (a) four percent (4%) of the number of shares of Stock issued
and outstanding on the immediately preceding December 31 or (b) an
amount determined by the Board.


 


11














 


4.3                                 Share Counting. If an outstanding Award for
any reason expires or is terminated or canceled without having been exercised
or settled in full, or if shares of Stock acquired pursuant to an Award subject
to forfeiture or repurchase are forfeited or repurchased by the Company for an
amount not greater than the Participant’s purchase price, the shares of Stock
allocable to the terminated portion of such Award or such forfeited or
repurchased shares of Stock shall again be available for issuance under the Plan.
Shares of Stock shall not be deemed to have been issued pursuant to the Plan (a) with
respect to any portion of an Award that is settled in cash or (b) to the
extent such shares are withheld or reacquired by the Company in satisfaction of
tax withholding obligations pursuant to Section 17.2. Upon payment in
shares of Stock pursuant to the exercise of an SAR, the number of shares
available for issuance under the Plan shall be reduced only by the number of
shares actually issued in such payment. If the exercise price of an Option is
paid by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant, or by means of a Net-Exercise, the number of
shares available for issuance under the Plan shall be reduced by the net number
of shares for which the Option is exercised.


 


4.4                                 Adjustments for Changes in Capital Structure. Subject
to any required action by the stockholders of the Company and the requirements
of Section 409A and 424 of the Code to the extent applicable, in the event
of any change in the Stock effected without receipt of consideration by the
Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or similar change in the capital structure of the
Company, or in the event of payment of a dividend or distribution to the
stockholders of the Company in a form other than Stock (excepting normal cash
dividends) that has a material effect on the Fair Market Value of shares of
Stock, appropriate and proportionate adjustments shall be made in the number
and kind of shares subject to the Plan and to any outstanding Awards, in the
Award limits set forth in Section 5.3 and in the exercise or purchase
price per share under any outstanding Award in order to prevent dilution or
enlargement of Participants’ rights under the Plan. For purposes of the
foregoing, conversion of any convertible securities of the Company shall not be
treated as “effected without receipt of consideration by the Company.”  If a majority of the shares which are of the
same class as the shares that are subject to outstanding Awards are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event) shares of another corporation (the “New Shares”), the
Committee may unilaterally amend the outstanding Awards to provide that such
Awards are for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise or purchase price per share of, the
outstanding Awards shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion. Any fractional share resulting
from an adjustment pursuant to this Section shall be rounded down to the
nearest whole number, and in no event may the exercise or purchase price under
any Award be decreased to an amount less than the par value, if any, of the
stock subject to such Award. The Committee in its discretion, may also make
such adjustments in the terms of any Award to reflect, or related to, such
changes in the capital structure of the Company or distributions as it deems
appropriate, including modification of Performance Goals, Performance Award
Formulas and Performance Periods. The adjustments determined by the Committee
pursuant to this Section shall be final, binding and conclusive.


 


12

















 


The
Committee may, without affecting the number of shares of Stock reserved or
available hereunder, authorize the issuance or assumption of benefits under
this Plan in connection with any merger, consolidation, acquisition of property
or stock, or reorganization upon such terms and conditions as it may deem
appropriate, subject to compliance with Section 409A and any other
applicable provisions of the Code.


 


5.                                       ELIGIBILITY, PARTICIPATION AND
AWARD LIMITATIONS.


 


5.1                                 Persons Eligible for Awards. Awards, other than Nonemployee
Director Awards, may be granted only to Employees, Consultants and Directors. Nonemployee
Director Awards may be granted only to persons who, at the time of grant, are
Nonemployee Directors.


 


5.2                                 Participation in the Plan. Subject
to Section 3.2 above, Awards are granted solely at the discretion of the
Committee. Eligible persons may be granted more than one Award. However,
eligibility in accordance with this Section shall not entitle any person
to be granted an Award, or, having been granted an Award, to be granted an
additional Award.


 


5.3                                 Incentive Stock Option Limitations.


 


(a)                                  Maximum Number of Shares Issuable Pursuant to
Incentive Stock Options. Subject to adjustment as provided in Section 4.4,
the maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to the exercise of Incentive Stock Options shall not exceed Three
Million Five Hundred Thousand (3,500,000), cumulatively increased on January 1,
2009 and on each subsequent January 1, through and including January 1,
2013, by a number of shares equal to the smaller of the Annual Increase
determined under Section 4.2 or One Million (1,000,000) shares. The
maximum aggregate number of shares of Stock that may be issued under the Plan
pursuant to all Awards other than Incentive Stock Options shall be the number
of shares determined in accordance with Section 4.1, subject to adjustment
as provided in Sections 4.2, 4.3 and 4.4.


 


(b)                                 Persons Eligible. An Incentive Stock
Option may be granted only to a person who, on the effective date of grant, is
an Employee of the Company, a Parent Corporation or a Subsidiary Corporation
(each being an “ISO-Qualifying Corporation”).
Any person who is not an Employee of an ISO-Qualifying Corporation on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option.


 


(c)                                  Fair Market Value Limitation. To the
extent that options designated as Incentive Stock Options (granted under all
stock option plans of the Participating Company Group, including the Plan)
become exercisable by a Participant for the first time during any calendar year
for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a limitation different from that set forth
in this Section, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code.


 


13

















 


If an Option is treated
as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part
by reason of the limitation set forth in this Section, the Participant may
designate which portion of such Option the Participant is exercising. In the
absence of such designation, the Participant shall be deemed to have exercised
the Incentive Stock Option portion of the Option first. Upon exercise, shares
issued pursuant to each such portion shall be separately identified.


 


5.4                                 Other Award Limits.


 


(a)                                  Aggregate Limit on Full Value Awards.
The maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise or settlement of Full Value
Awards shall not exceed fifty percent (50%) of the maximum aggregate number of
shares of Stock that may be issued under the Plan determined in accordance with
Section 4.


 


(b)                                 Section 162(m) Award Limits. Subject
to adjustment as provided in Section 4.4, no Employee shall be granted
within any fiscal year of the Company one or more Awards which in the aggregate
are for more than One Million (1,000,000) shares or, if applicable, which could
result in such Employee receiving more than Two Million Five Hundred Thousand
dollars ($2,500,000) for each full fiscal year of the Company contained in the
Performance Period for such Award.


 


(c)                                  Nonemployee Director Award Limits. Subject
to adjustment as provided in Section 4.4, no Nonemployee Director may be
granted within any fiscal year of the Company one or more Nonemployee Director
Awards for more than [30,000] shares; provided, however, that the foregoing
annual limit shall be increased by one or more of the following additions, as
applicable: (i) an additional [10,000] shares in the fiscal year in which
the Nonemployee Director is first appointed or elected to the Board as a
Nonemployee Director, (ii) an additional [10,000] shares in any fiscal
year in which the Nonemployee Director is serving as the Chairman or Lead
Director of the Board, (iii) an additional [5,000] shares in any fiscal
year for each committee of the Board on which the Nonemployee Director is then
serving as chairman of the committee, and (iv) an additional [2,500]
shares in any fiscal year for each committee of the Board on which the
Nonemployee Director is then serving other than as chairman of the committee.


 


6.                                       STOCK OPTIONS.


 


Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Committee shall from time to time establish. Award Agreements evidencing
Options may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:


 


6.1                                 Exercise Price. The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share shall be not less than the Fair Market Value of a
share of Stock on the effective date of grant of the Option and (b) no
Incentive Stock Option granted to a Ten Percent Owner shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option. Notwithstanding
the foregoing, an Option


 


14

















 


(whether an Incentive
Stock Option or a Nonstatutory Stock Option) may be granted with an exercise
price lower than the minimum exercise price set forth above if such Option is
granted pursuant to an assumption or substitution for another option in a
manner qualifying under the provisions of Section 424(a) of the Code.


 


6.2                                 Exercisability and Term of Options. Options shall be
exercisable at such time or times, or upon such event or events, and subject to
such terms, conditions, performance criteria and restrictions as shall be
determined by the Committee and set forth in the Award Agreement evidencing
such Option; provided, however, that (a) no Option shall be exercisable
after the expiration of ten (10) years after the effective date of grant
of such Option and (b) no Incentive Stock Option granted to a Ten Percent
Owner shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option. Subject to the foregoing, unless
otherwise specified by the Committee in the grant of an Option, each Option
shall terminate ten (10) years after the effective date of grant of the
Option, unless earlier terminated in accordance with its provisions.


 


6.3                                 Payment of Exercise Price.


 


(a)                                  Forms of Consideration Authorized. Except
as otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check or in cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of shares of Stock owned by the Participant
having a Fair Market Value not less than the exercise price, (iii) by
delivery of a properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation,
through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a “Cashless Exercise”),
(iv) by delivery of a properly executed notice electing a Net-Exercise, (v) by
such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (vi) by any combination
thereof. The Committee may at any time or from time to time grant Options which
do not permit all of the foregoing forms of consideration to be used in payment
of the exercise price or which otherwise restrict one or more forms of
consideration.


 


(b)                                 Limitations on Forms of Consideration.


 


(i)                                     Tender of Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company, or attestation to the ownership,
of shares of Stock to the extent such tender or attestation would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company’s stock. Unless otherwise provided by the Committee, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Participant for more than six (6) months (or such other period, if any, as
the Committee may permit) and not used for another Option exercise by
attestation during such period, or were not acquired, directly or indirectly,
from the Company.


 


15

















 


(ii)                                  Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company’s sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.


 


6.4                                 Effect of Termination of Service.


 


(a)                                  Option Exercisability. Subject to
earlier termination of the Option as otherwise provided herein and unless
otherwise provided by the Committee, an Option shall terminate immediately upon
the Participant’s termination of Service to the extent that it is then unvested
and shall be exercisable after the Participant’s termination of Service to the
extent it is then vested only during the applicable time period determined in
accordance with this Section and thereafter shall terminate.


 


(i)                                     Disability. If the Participant’s Service terminates because
of the Disability of the Participant, the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant (or the Participant’s guardian
or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service terminated, but in any
event no later than the date of expiration of the Option’s term as set forth in
the Award Agreement evidencing such Option (the “Option Expiration Date”).


 


(ii)                                  Death. If the Participant’s Service terminates because of
the death of the Participant, the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other
person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months
after the date on which the Participant’s Service terminated, but in any event
no later than the Option Expiration Date. The Participant’s Service shall be
deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant’s termination of Service.


 


(iii)                               Termination for Cause. Notwithstanding any other provision
of the Plan to the contrary, if the Participant’s Service is terminated for
Cause or if, following the Participant’s termination of Service and during any
period in which the Option otherwise would remain exercisable, the Participant
engages in any act that would constitute Cause, the Option shall terminate in
its entirety and cease to be exercisable immediately upon such termination of
Service or act.


 


(iv)                              Other Termination of Service. If the Participant’s Service
terminates for any reason, except Disability, death or Cause, the Option, to
the extent unexercised and exercisable for vested shares on the date on which
the Participant’s Service terminated, may be exercised by the Participant at
any time prior to the expiration of three (3) months after the date on
which the Participant’s Service terminated, but in any event no later than the
Option Expiration Date.


 


16

















 


(b)                                 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, other than termination of Service for Cause, if the exercise of
an Option within the applicable time periods set forth in Section 6.4(a) is
prevented by the provisions of Section 15 below, the Option shall remain
exercisable until the later of (i) thirty (30) days after the date such
exercise first would no longer be prevented by such provisions or (ii) the
end of the applicable time period under Section 6.4(a), but in any event
no later than the Option Expiration Date.


 


6.5                                 Transferability of Options. During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. An Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. Notwithstanding the foregoing, to the extent
permitted by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such Option, a Nonstatutory Stock Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 under the Securities
Act.


 


7.                                       STOCK APPRECIATION RIGHTS.


 


Stock Appreciation Rights shall be evidenced by Award
Agreements specifying the number of shares of Stock subject to the Award, in
such form as the Committee shall from time to time establish. Award Agreements
evidencing SARs may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:


 


7.1                                 Types of SARs Authorized. SARs may be granted in tandem with
all or any portion of a related Option (a “Tandem SAR”)
or may be granted independently of any Option (a “Freestanding SAR”). A Tandem SAR may only be
granted concurrently with the grant of the related Option.


 


7.2                                 Exercise Price. The exercise price for each SAR shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price
per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a
share of Stock on the effective date of grant of the SAR.


 


7.3                                 Exercisability and Term of SARs.


 


(a)                                  Tandem SARs. Tandem SARs shall be
exercisable only at the time and to the extent, and only to the extent, that
the related Option is exercisable, subject to such provisions as the Committee
may specify where the Tandem SAR is granted with respect to less than the full
number of shares of Stock subject to the related Option. The Committee may, in
its discretion, provide in any Award Agreement evidencing a Tandem SAR that
such SAR may not be exercised without the advance approval of the Company and,
if such approval is not given, then the Option shall nevertheless remain
exercisable in accordance with its terms. A Tandem SAR shall terminate and
cease to be exercisable no later than the date on which the related Option
expires or is terminated or canceled. Upon the exercise of a Tandem SAR with


 


17

















 


respect to some or all of
the shares subject to such SAR, the related Option shall be canceled
automatically as to the number of shares with respect to which the Tandem SAR
was exercised. Upon the exercise of an Option related to a Tandem SAR as to
some or all of the shares subject to such Option, the related Tandem SAR shall
be canceled automatically as to the number of shares with respect to which the
related Option was exercised.


 


(b)                                 Freestanding SARs. Freestanding SARs
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Committee and set forth in the Award Agreement
evidencing such SAR; provided, however, that no Freestanding SAR shall be
exercisable after the expiration of ten (10) years after the effective
date of grant of such SAR.


 


7.4                                 Exercise of SARs. Upon the exercise (or deemed exercise
pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s
legal representative or other person who acquired the right to exercise the SAR
by reason of the Participant’s death) shall be entitled to receive payment of
an amount for each share with respect to which the SAR is exercised equal to
the excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump
sum upon the date of exercise of the SAR and (b) in the case of a
Freestanding SAR, in cash, shares of Stock, or any combination thereof as
determined by the Committee, in a lump sum upon the date of exercise of the SAR.
When payment is to be made in shares of Stock, the number of shares to be
issued shall be determined on the basis of the Fair Market Value of a share of
Stock on the date of exercise of the SAR. For purposes of Section 7, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant or as otherwise provided in Section 7.5.


 


7.5                                 Deemed Exercise of SARs. If, on the date on which an SAR
would otherwise terminate or expire, the SAR by its terms remains exercisable
immediately prior to such termination or expiration and, if so exercised, would
result in a payment to the holder of such SAR, then any portion of such SAR
which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.


 


7.6                                 Effect of Termination of Service. Subject to earlier
termination of the SAR as otherwise provided herein and unless otherwise
provided by the Committee, an SAR shall be exercisable after a Participant’s
termination of Service only to the extent and during the applicable time period
determined in accordance with Section 6.4 (treating the SAR as if it were
an Option) and thereafter shall terminate.


 


7.7                                 Transferability of SARs. During the lifetime of the
Participant, an SAR shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. An SAR shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Award, a Tandem SAR related to a Nonstatutory Stock Option or a
Freestanding SAR shall be assignable or transferable subject to


 


18

















 


the applicable
limitations, if any, described in the General Instructions to Form S-8
under the Securities Act.


 


8.                                       RESTRICTED STOCK AWARDS.


 


Restricted Stock Awards shall be evidenced by Award
Agreements specifying whether the Award is a Restricted Stock Bonus or a
Restricted Stock Purchase Right and the number of shares of Stock subject to
the Award, in such form as the Committee shall from time to time establish. Award
Agreements evidencing Restricted Stock Awards may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:


 


8.1                                 Types of Restricted Stock
Awards Authorized. Restricted Stock Awards may be granted in the form of
either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted
Stock Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 10.4. If either the grant of or
satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to
be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth
in Sections 10.3 through 10.5(a).


 


8.2                                 Purchase Price. The
purchase price for shares of Stock issuable under each Restricted Stock
Purchase Right shall be established by the Committee in its discretion. No
monetary payment (other than applicable tax withholding) shall be required as a
condition of receiving shares of Stock pursuant to a Restricted Stock Bonus,
the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
shares of Stock subject to a Restricted Stock Award.


 


8.3                                 Purchase Period. A
Restricted Stock Purchase Right shall be exercisable within a period
established by the Committee, which shall in no event exceed thirty (30) days
from the effective date of the grant of the Restricted Stock Purchase Right.


 


8.4                                 Payment of Purchase Price. Except as otherwise provided
below, payment of the purchase price for the number of shares of Stock being
purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in
cash, by check or in cash equivalent, (b) by such other consideration as
may be approved by the Committee from time to time to the extent permitted by
applicable law, or (c) by any combination thereof.


 


8.5                                 Vesting and Restrictions on Transfer. Subject to Section 5.4(b), Shares issued pursuant to
any Restricted Stock Award may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 10.4, as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award. During
any period in which shares acquired pursuant to a Restricted


 


19

















 


Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event or as provided in Section 8.8. The Committee, in
its discretion, may provide in any Award Agreement evidencing a Restricted
Stock Award that, if the satisfaction of Vesting Conditions with respect to any
shares subject to such Restricted Stock Award would otherwise occur on a day on
which the sale of such shares would violate the provisions of the Trading
Compliance Policy, then satisfaction of the Vesting Conditions automatically
shall be determined on the next trading day on which the sale of such shares
would not violate the Trading Compliance Policy. Upon request by the Company,
each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.


 


8.6                                 Voting Rights; Dividends and Distributions. Except as
provided in this Section, Section 8.5 and any Award Agreement, during any
period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, the Participant shall have all of the rights of
a stockholder of the Company holding shares of Stock, including the right to
vote such shares and to receive all dividends and other distributions paid with
respect to such shares. However, in the event of a dividend or distribution
paid in shares of Stock or other property or any other adjustment made upon a
change in the capital structure of the Company as described in Section 4.4,
any and all new, substituted or additional securities or other property (other
than normal cash dividends) to which the Participant is entitled by reason of
the Participant’s Restricted Stock Award shall be immediately subject to the
same Vesting Conditions as the shares subject to the Restricted Stock Award
with respect to which such dividends or distributions were paid or adjustments
were made.


 


8.7                                 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award
Agreement evidencing a Restricted Stock Award, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the
Participant’s death or disability), then (a) the Company shall have the
option to repurchase for the purchase price paid by the Participant any shares
acquired by the Participant pursuant to a Restricted Stock Purchase Right which
remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service and (b) the Participant shall forfeit to the
Company any shares acquired by the Participant pursuant to a Restricted Stock
Bonus which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. The Company shall have the right to assign
at any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company.


 


8.8                                 Nontransferability of Restricted Stock Award Rights. Rights
to acquire shares of Stock pursuant to a Restricted Stock Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or the laws of
descent and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.


 


20














 


9.                                       RESTRICTED STOCK UNIT
AWARDS.


 


Restricted Stock Unit Awards shall be evidenced by
Award Agreements specifying the number of Restricted Stock Units subject to the
Award, in such form as the Committee shall from time to time establish. Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:


 


9.1                                 Grant of Restricted Stock Unit Awards. Restricted
Stock Unit Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 10.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such
Award is to be contingent upon the attainment of one or more Performance Goals,
the Committee shall follow procedures substantially equivalent to those set
forth in Sections 10.3 through 10.5(a).


 


9.2                                 Purchase Price. No monetary payment (other
than applicable tax withholding, if any) shall be required as a condition of
receiving a Restricted Stock Unit Award, the consideration for which shall be
services actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant
shall furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock issued upon settlement of the Restricted Stock
Unit Award.


 


9.3                                 Vesting. Restricted Stock Unit Awards may
(but need not) be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award. The Committee, in its
discretion, may provide in any Award Agreement evidencing a Restricted Stock
Unit Award that, if the satisfaction of Vesting Conditions with respect to any
shares subject to the Award would otherwise occur on a day on which the sale of
such shares would violate the provisions of the Trading Compliance Policy, then
the satisfaction of the Vesting Conditions automatically shall be determined on
the first to occur of (a) the next trading day on which the sale of such shares
would not violate the Trading Compliance Policy or (b) the later of (i) last
day of the calendar year in which the original vesting date occurred or (ii)
the last day of the Company’s taxable year in which the original vesting date
occurred.


 


9.4                                 Voting Rights, Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect
to shares of Stock represented by Restricted Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However,
the Committee, in its discretion, may provide in the Award Agreement evidencing
any Restricted Stock Unit Award that the Participant shall be entitled to
Dividend Equivalent Rights with respect to the payment of cash dividends on
Stock during the period beginning on the date such Award is granted and ending,
with respect to each share subject to the Award, on the earlier of the date the
Award is settled or the date on which it is terminated. Such Dividend
Equivalent


 


21

















 


Rights, if any, shall be
paid by crediting the Participant with additional whole Restricted Stock Units
as of the date of payment of such cash dividends on Stock. The number of
additional Restricted Stock Units (rounded to the nearest whole number) to be
so credited shall be determined by dividing (a) the amount of cash
dividends paid on such date with respect to the number of shares of Stock
represented by the Restricted Stock Units previously credited to the
Participant by (b) the Fair Market Value per share of Stock on such date. Such
additional Restricted Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time as the
Restricted Stock Units originally subject to the Restricted Stock Unit Award. In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.4, appropriate adjustments shall be
made in the Participant’s Restricted Stock Unit Award so that it represents the
right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant would be entitled by reason of the shares of Stock issuable upon
settlement of the Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Vesting Conditions
as are applicable to the Award.


 


9.5                                 Effect of Termination of Service. Unless
otherwise provided by the Committee and set forth in the Award Agreement
evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates
for any reason, whether voluntary or involuntary (including the Participant’s
death or disability), then the Participant shall forfeit to the Company any
Restricted Stock Units pursuant to the Award which remain subject to Vesting
Conditions as of the date of the Participant’s termination of Service.


 


9.6                                 Settlement of Restricted Stock Unit Awards. The
Company shall issue to a Participant on the date on which Restricted Stock
Units subject to the Participant’s Restricted Stock Unit Award vest or on such
other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or
additional securities or other property pursuant to an adjustment described in
Section 9.4) for each Restricted Stock Unit then becoming vested or
otherwise to be settled on such date, subject to the withholding of applicable
taxes, if any. If permitted by the Committee, the Participant may elect,
consistent with the requirements of Section 409A, to defer receipt of all
or any portion of the shares of Stock or other property otherwise issuable to
the Participant pursuant to this Section, and such deferred issuance date(s)
and amount(s) elected by the Participant shall be set forth in the Award
Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may
provide for settlement of any Restricted Stock Unit Award by payment to the
Participant in cash of an amount equal to the Fair Market Value on the payment
date of the shares of Stock or other property otherwise issuable to the
Participant pursuant to this Section.


 


9.7                                 Nontransferability of Restricted Stock Unit Awards. The
right to receive shares pursuant to a Restricted Stock Unit Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Restricted Stock Unit
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.


 


22

















 


10.                                 PERFORMANCE AWARDS.


 


Performance Awards shall be evidenced by Award
Agreements in such form as the Committee shall from time to time establish. Award
Agreements evidencing Performance Awards may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:


 


10.1                           Types of Performance Awards Authorized. Performance Awards
may be granted in the form of either Performance Shares or Performance Units. Each
Award Agreement evidencing a Performance Award shall specify the number of
Performance Shares or Performance Units subject thereto, the Performance Award
Formula, the Performance Goal(s) and Performance Period applicable to the
Award, and the other terms, conditions and restrictions of the Award.


 


10.2                           Initial Value of Performance Shares and Performance Units. Unless
otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial monetary value equal to the Fair Market
Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.4, on the effective date of grant of the Performance Share, and
each Performance Unit shall have an initial monetary value established by the
Committee at the time of grant. The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.


 


10.3                           Establishment of Performance Period, Performance Goals and Performance
Award Formula. In granting each Performance Award, the Committee
shall establish in writing the applicable Performance Period (subject to
Section 5.4(b)), Performance Award Formula and one or more Performance Goals
which, when measured at the end of the Performance Period, shall determine on
the basis of the Performance Award Formula the final value of the Performance
Award to be paid to the Participant. Unless otherwise permitted in compliance
with the requirements under Section 162(m) with respect to each
Performance Award intended to result in the payment of Performance-Based
Compensation, the Committee shall establish the Performance Goal(s) and
Performance Award Formula applicable to each Performance Award no later than the
earlier of (a) the date ninety (90) days after the commencement of the
applicable Performance Period or (b) the date on which 25% of the
Performance Period has elapsed, and, in any event, at a time when the outcome
of the Performance Goals remains substantially uncertain. Once established, the
Performance Goals and Performance Award Formula applicable to a Covered
Employee shall not be changed during the Performance Period. The Company shall
notify each Participant granted a Performance Award of the terms of such Award,
including the Performance Period, Performance Goal(s) and Performance Award
Formula.


 


10.4                           Measurement of Performance Goals. Performance Goals shall be
established by the Committee on the basis of targets to be attained (“Performance Targets”) with
respect to one or more measures of business or financial performance (each, a “Performance Measure”),
subject to the following:


 


23

















 


(a)                                  Performance Measures. Performance
Measures shall have the same meanings as used in the Company’s financial
statements, or, if such terms are not used in the Company’s financial
statements, they shall have the meaning applied pursuant to generally accepted
accounting principles, or as used generally in the Company’s industry. Performance
Measures shall be calculated with respect to the Company and each Subsidiary
Corporation consolidated therewith for financial reporting purposes or such
division or other business unit as may be selected by the Committee. For
purposes of the Plan, the Performance Measures applicable to a Performance
Award shall be calculated in accordance with generally accepted accounting
principles, if applicable, but prior to the accrual or payment of any
Performance Award for the same Performance Period and excluding the effect
(whether positive or negative) of any change in accounting standards or any
extraordinary, unusual or nonrecurring item, as determined by the Committee,
occurring after the establishment of the Performance Goals applicable to the
Performance Award. Each such adjustment, if any, shall be made solely for the
purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or
enlargement of the Participant’s rights with respect to a Performance Award. Performance
Measures may be one or more of the following, as determined by the Committee:


 


(i)               revenue;


 


(ii)              sales;


 


(iii)             expenses;


 


(iv)             operating
income;


 


(v)              gross
margin;


 


(vi)             operating
margin;


 


(vii)            earnings
before any one or more of: stock-based compensation expense, interest, taxes,
depreciation and amortization;


 


(viii)           pre-tax
profit;


 


(ix)             net
operating income;


 


(x)              net
income;


 


(xi)             economic
value added;


 


(xii)            free
cash flow;


 


(xiii)           operating
cash flow;


 


(xiv)           balance
of cash, cash equivalents and marketable securities;


 


(xv)            stock
price;


 


24

















 


(xvi)                                earnings
per share;


 


(xvii)                             return
on stockholder equity;


 


(xviii)                          return
on capital;


 


(xix)                                  return
on assets;


 


(xx)                                     return
on investment;


 


(xxi)                                 employee
satisfaction;


 


(xxii)                              employee
retention;


 


(xxiii)                          market
share;


 


(xxiv)                          customer
satisfaction;


 


(xxv)                              product
development;


 


(xxvi)                           product
regulatory approvals;


 


(xxvii)                        regulatory
filings;


 


(xxviii)                     research
and development expenses;


 


(xxix)                           completion
of an identified special project; and


 


(xxx)                              completion
of a joint venture or other corporate transaction.


 


(b)                                 Performance Targets. Performance
Targets may include a minimum, maximum, target level and intermediate levels of
performance, with the final value of a Performance Award determined under the
applicable Performance Award Formula by the level attained during the
applicable Performance Period. A Performance Target may be stated as an
absolute value or as a value determined relative to an index, budget or other
standard selected by the Committee.


 


10.5                           Settlement of Performance Awards.


 


(a)                                  Determination of Final Value. As
soon as practicable following the completion of the Performance Period applicable
to a Performance Award, the Committee shall certify in writing the extent to
which the applicable Performance Goals have been attained and the resulting
final value of the Award earned by the Participant and to be paid upon its
settlement in accordance with the applicable Performance Award Formula.


 


(b)                                 Discretionary Adjustment of Award
Formula. In its discretion, the Committee may, either at the
time it grants a Performance Award or at any time thereafter, provide for the
positive or negative adjustment of the Performance Award Formula applicable to
a Performance Award granted to any Participant who is not a Covered Employee to
reflect such


 


25

















 


Participant’s individual
performance in his or her position with the Company or such other factors as
the Committee may determine. If permitted under a Covered Employee’s Award
Agreement, the Committee shall have the discretion, on the basis of such
criteria as may be established by the Committee, to reduce some or all of the
value of the Performance Award that would otherwise be paid to the Covered
Employee upon its settlement notwithstanding the attainment of any Performance
Goal and the resulting value of the Performance Award determined in accordance
with the Performance Award Formula. No such reduction may result in an increase
in the amount payable upon settlement of another Participant’s Performance
Award that is intended to result in Performance-Based Compensation.


 


(c)                                  Effect of Leaves of Absence. Unless
otherwise required by law or a Participant’s Award Agreement, payment of the
final value, if any, of a Performance Award held by a Participant who has taken
in excess of thirty (30) days in unpaid leaves of absence during a Performance
Period shall be prorated on the basis of the number of days of the Participant’s
Service during the Performance Period during which the Participant was not on
an unpaid leave of absence.


 


(d)                                 Notice to Participants. As soon as
practicable following the Committee’s determination and certification in
accordance with Sections 10.5(a) and (b), the Company shall notify each
Participant of the determination of the Committee.


 


(e)                                  Payment in Settlement of Performance Awards. As
soon as practicable following the Committee’s determination and certification
in accordance with Sections 10.5(a) and (b), but in any event within the
Short-Term Deferral Period described in Section 16.1 (except as otherwise
provided below or consistent with the requirements of Section 409A),
payment shall be made to each eligible Participant (or such Participant’s legal
representative or other person who acquired the right to receive such payment
by reason of the Participant’s death) of the final value of the Participant’s
Performance Award. Payment of such amount shall be made in cash, shares of
Stock, or a combination thereof as determined by the Committee. Unless
otherwise provided in the Award Agreement evidencing a Performance Award,
payment shall be made in a lump sum. If permitted by the Committee, the Participant
may elect, consistent with the requirements of Section 409A, to defer
receipt of all or any portion of the payment to be made to Participant pursuant
to this Section, and such deferred payment date(s) elected by the Participant
shall be set forth in the Award Agreement. If any payment is to be made on a
deferred basis, the Committee may, but shall not be obligated to, provide for
the payment during the deferral period of Dividend Equivalent Rights or
interest.


 


(f)                                    Provisions Applicable to Payment in Shares. If
payment is to be made in shares of Stock, the number of such shares shall be
determined by dividing the final value of the Performance Award by the Fair
Market Value of a share of Stock determined by the method specified in the
Award Agreement. Shares of Stock issued in payment of any Performance Award may
be fully vested and freely transferable shares or may be shares of Stock
subject to Vesting Conditions as provided in Section 8.5. Any shares
subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 8.5 through
8.8 above.


 


26














 


10.6                           Voting Rights; Dividend Equivalent Rights and Distributions. Participants
shall have no voting rights with respect to shares of Stock represented by
Performance Share Awards until the date of the issuance of such shares, if any
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share
Award that the Participant shall be entitled to Dividend Equivalent Rights with
respect to the payment of cash dividends on Stock during the period beginning
on the date the Award is granted and ending, with respect to each share subject
to the Award, on the earlier of the date on which the Performance Shares are
settled or the date on which they are forfeited. Such Dividend Equivalent
Rights, if any, shall be credited to the Participant in the form of additional
whole Performance Shares as of the date of payment of such cash dividends on
Stock. The number of additional Performance Shares (rounded to the nearest
whole number) to be so credited shall be determined by dividing (a) the
amount of cash dividends paid on the dividend payment date with respect to the
number of shares of Stock represented by the Performance Shares previously
credited to the Participant by (b) the Fair Market Value per share of
Stock on such date. Dividend Equivalent Rights may be paid currently or may be
accumulated and paid to the extent that Performance Shares become nonforfeitable,
as determined by the Committee. Settlement of Dividend Equivalent Rights may be
made in cash, shares of Stock, or a combination thereof as determined by the
Committee, and may be paid on the same basis as settlement of the related
Performance Share as provided in Section 10.5. Dividend Equivalent Rights
shall not be paid with respect to Performance Units. In the event of a dividend
or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.4, appropriate adjustments shall be made in the
Participant’s Performance Share Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities
or other property (other than normal cash dividends) to which the Participant
would be entitled by reason of the shares of Stock issuable upon settlement of
the Performance Share Award, and all such new, substituted or additional
securities or other property shall be immediately subject to the same
Performance Goals as are applicable to the Award.


 


10.7                           Effect of Termination of Service. Unless otherwise provided
by the Committee and set forth in the Award Agreement evidencing a Performance
Award, the effect of a Participant’s termination of Service on the Performance
Award shall be as follows:


 


(a)                                  Death or Disability. If
the Participant’s Service terminates because of the death or Disability of the
Participant before the completion of the Performance Period applicable to the
Performance Award, the final value of the Participant’s Performance Award shall
be determined by the extent to which the applicable Performance Goals have been
attained with respect to the entire Performance Period and shall be prorated
based on the number of months of the Participant’s Service during the
Performance Period. Payment shall be made following the end of the Performance
Period in any manner permitted by Section 10.5.


 


(b)                                 Other Termination of Service. If
the Participant’s Service terminates for any reason except death or Disability
before the completion of the Performance Period applicable to the Performance
Award, such Award shall be forfeited in its entirety; provided, however, that
in the event of an involuntary termination of the Participant’s Service, the
Committee, in its discretion, may waive the automatic forfeiture of all or any
portion of any


 


27

















 


such Award (e.g., by
determining the final value of the Performance Award in the manner provided by Section 10.7(a))
and provide for payment following the end of the Performance Period in any
manner permitted by Section 10.5.


 


10.8                           Nontransferability of Performance Awards. Prior to
settlement in accordance with the provisions of the Plan, no Performance Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution. All rights with respect to a Performance
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.


 


11.                                 CASH-BASED AWARDS AND OTHER
STOCK-BASED AWARDS.


 


Cash-Based Awards
and Other Stock-Based Awards shall be evidenced by Award Agreements in such
form as the Committee shall from time to time establish. Award Agreements
evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all
or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:


 


11.1                           Grant of Cash-Based Awards. Subject to the
provisions of the Plan, the Committee, at any time and from time to time, may
grant Cash-Based Awards to Participants in such amounts and upon such terms and
conditions, including the achievement of performance criteria, as the Committee
may determine.


 


11.2                           Grant of Other Stock-Based Awards. The
Committee may grant other types of equity-based or equity-related Awards not
otherwise described by the terms of this Plan (including the grant or offer for
sale of unrestricted securities, stock-equivalent units, stock appreciation
units, securities or debentures convertible into common stock or other forms
determined by the Committee) in such amounts and subject to such terms and
conditions as the Committee shall determine. Such Awards may involve the
transfer of actual shares of Stock to Participants, or payment in cash or
otherwise of amounts based on the value of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.


 


11.3                           Value of Cash-Based and Other Stock-Based Awards.
Each Cash-Based Award shall specify a monetary payment amount or payment range
as determined by the Committee. Each Other Stock-Based Award shall be expressed
in terms of shares of Stock or units based on such shares of Stock, as determined
by the Committee. The Committee may require the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including,
without limitation, Performance Goals as described in Section 10.4, as
shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. If the Committee exercises its discretion to establish
performance criteria, the final value of Cash-Based Awards or Other Stock-Based
Awards that will be paid to the Participant will depend on the extent to which
the performance criteria are met. The establishment of performance criteria
with respect to the grant or vesting of any Cash-Based Award or Other
Stock-Based Award intended to result in Performance-Based Compensation shall follow


 


28

















 


procedures substantially
equivalent to those applicable to Performance Awards set forth in Section 10.


 


11.4                           Payment or Settlement of Cash-Based Awards and Other
Stock-Based Awards. Payment or settlement, if any, with respect to a
Cash-Based Award or an Other Stock-Based Award shall be made in accordance with
the terms of the Award, in cash, shares of Stock or other securities or any
combination thereof as the Committee determines. The determination and
certification of the final value with respect to any Cash-Based Award or Other
Stock-Based Award intended to result in Performance-Based Compensation shall
comply with the requirements applicable to Performance Awards set forth in Section 10.
To the extent applicable, payment or settlement with respect to each Cash-Based
Award and Other Stock-Based Award shall be made in compliance with the
requirements of Section 409A.


 


11.5                           Voting Rights; Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect
to shares of Stock represented by Other Stock-Based Awards until the date of
the issuance of such shares of Stock (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company), if any, in settlement of such Award. However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Other Stock-Based
Award that the Participant shall be entitled to Dividend Equivalent Rights with
respect to the payment of cash dividends on Stock during the period beginning
on the date such Award is granted and ending, with respect to each share
subject to the Award, on the earlier of the date the Award is settled or the
date on which it is terminated. Such Dividend Equivalent Rights, if any, shall
be paid in accordance with the provisions set forth in Section 9.4. Dividend
Equivalent Rights shall not be granted with respect to Cash-Based Awards. In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.4, appropriate adjustments shall be
made in the Participant’s Other Stock-Based Award so that it represents the
right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant would be entitled by reason of the shares of Stock issuable upon
settlement of such Award, and all such new, substituted or additional
securities or other property shall be immediately subject to the same Vesting
Conditions and performance criteria, if any, as are applicable to the Award.


 


11.6                           Effect of Termination of Service. Each
Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall
set forth the extent to which the Participant shall have the right to retain
such Award following termination of the Participant’s Service. Such provisions
shall be determined in the discretion of the Committee, need not be uniform
among all Cash-Based Awards or Other Stock-Based Awards, and may reflect
distinctions based on the reasons for termination, subject to the requirements
of Section 409A, if applicable.


 


11.7                           Nontransferability of Cash-Based Awards and Other
Stock-Based Awards. Prior to the payment or settlement of a
Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution. The


 


29

















 


Committee may impose such
additional restrictions on any shares of Stock issued in settlement of
Cash-Based Awards and Other Stock-Based Awards as it may deem advisable,
including, without limitation, minimum holding period requirements,
restrictions under applicable federal securities laws, under the requirements
of any stock exchange or market upon which such shares of Stock are then listed
and/or traded, or under any state securities laws applicable to such shares of
Stock.


 


12.                                 NONEMPLOYEE DIRECTOR AWARDS.


 


From time to time, the Board or the Committee shall
set the amount(s) and type(s) of Nonemployee Director Awards that
shall be granted to all Nonemployee Directors on a periodic, nondiscriminatory
basis pursuant to the Plan, as well as the additional amount(s) and type(s) of
Nonemployee Director Awards, if any, to be awarded, also on a periodic,
nondiscriminatory basis, in consideration of one or more of the following: (a) the
initial election or appointment of an individual to the Board as a Nonemployee
Director, (b) a Nonemployee Director’s service as Chairman or Lead
Director of the Board, (c) a Nonemployee Director’s service as the
chairman of a committee of the Board, and (d) a Nonemployee Director’s
service other than as the chairman of a committee of the Board. The terms and
conditions of each Nonemployee Director Award shall comply with the applicable
provisions of the Plan. Subject to the foregoing, the Board or the Committee
shall grant Nonemployee Director Awards having such terms and conditions as it
shall from time to time determine.


 


13.                                 STANDARD FORMS OF AWARD AGREEMENT.


 


13.1                           Award Agreements. Each
Award shall comply with and be subject to the terms and conditions set forth in
the appropriate form of Award Agreement approved by the Committee and as
amended from time to time. No Award or purported Award shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award
Agreement, which execution may be evidenced by electronic means. Any Award
Agreement may consist of an appropriate form of Notice of Grant and a form of
Agreement incorporated therein by reference, or such other form or forms,
including electronic media, as the Committee may approve from time to time.


 


13.2                           Authority to Vary Terms. The
Committee shall have the authority from time to time to vary the terms of any
standard form of Award Agreement either in connection with the grant or
amendment of an individual Award or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Award Agreement are
not inconsistent with the terms of the Plan.


 


14.                                 CHANGE IN CONTROL.


 


14.1                           Effect of Change in Control on Awards. Subject to the
requirements and limitations of Section 409A, if applicable, the Committee
may provide for any one or more of the following:


 


(a)                                  Accelerated Vesting. In its
discretion, the Committee may provide in the grant of any Award or at any other
time may take such action as it deems appropriate to


 


30

















 


provide for acceleration
of the exercisability, vesting and/or settlement in connection with a Change in
Control of each or any outstanding Award or portion thereof and shares acquired
pursuant thereto upon such conditions, including termination of the Participant’s
Service prior to, upon, or following such Change in Control, and to such extent
as the Committee shall determine.


 


(b)                                 Assumption, Continuation or Substitution. In
the event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the case
may be (the “Acquiror”),
may, without the consent of any Participant, either assume or continue the
Company’s rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each
or any such outstanding Award or portion thereof a substantially equivalent
award with respect to the Acquiror’s stock, as applicable. For purposes of this
Section, if so determined by the Committee in its discretion, an Award
denominated in shares of Stock shall be deemed assumed if, following the Change
in Control, the Award confers the right to receive, subject to the terms and
conditions of the Plan and the applicable Award Agreement, for each share of
Stock subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled; provided, however, that if such
consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received
upon the exercise or settlement of the Award, for each share of Stock subject
to the Award, to consist solely of common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock
pursuant to the Change in Control. Any Award or portion thereof which is
neither assumed or continued by the Acquiror in connection with the Change in
Control nor exercised or settled as of the time of consummation of the Change
in Control shall terminate and cease to be outstanding effective as of the time
of consummation of the Change in Control.


 


(c)                                  Cash-Out of Outstanding Stock-Based Awards. The
Committee may, in its discretion and without the consent of any Participant,
determine that, upon the occurrence of a Change in Control, each or any Award
denominated in shares of Stock or portion thereof outstanding immediately prior
to the Change in Control and not previously exercised or settled shall be
canceled in exchange for a payment with respect to each vested share (and each
unvested share, if so determined by the Committee) of Stock subject to such
canceled Award in (i) cash, (ii) stock of the Company or of a
corporation or other business entity a party to the Change in Control, or (iii) other
property which, in any such case, shall be in an amount having a Fair Market
Value equal to the Fair Market Value of the consideration to be paid per share
of Stock in the Change in Control, reduced (but not below zero) by the exercise
or purchase price per share, if any, under such Award. In the event such
determination is made by the Committee, an Award having an exercise or purchase
price per share equal to or greater than the Fair Market Value of the
consideration to be paid per share of Stock in the Change in Control may be
canceled without payment of consideration to the holder thereof. Payment
pursuant to this Section (reduced by applicable withholding taxes, if any)
shall be made to Participants in respect of the vested portions of their
canceled Awards as soon as practicable following the date of the Change in
Control and in respect of the unvested portions of their canceled Awards in
accordance with the vesting schedules applicable to such Awards.


 


31














 


14.2                           Effect of Change in Control on Nonemployee Director Awards. Subject
to the requirements and limitations of Section 409A, if applicable, in the
event of a Change in Control, each outstanding Nonemployee Director Award shall
become immediately exercisable and vested in full and, except to the extent
assumed, continued or substituted for pursuant to Section 14.1(b), shall
be settled effective immediately prior to the time of consummation of the
Change in Control.


 


14.3                           Federal Excise Tax Under Section 4999 of the Code.


 


(a)                                  Excess Parachute Payment. In the
event that any acceleration of vesting pursuant to an Award and any other
payment or benefit received or to be received by a Participant would subject
the Participant to any excise tax pursuant to Section 4999 of the Code due
to the characterization of such acceleration of vesting, payment or benefit as
an “excess parachute payment” under Section 280G of the Code, the
Participant may elect to reduce the amount of any acceleration of vesting
called for under the Award in order to avoid such characterization.


 


(b)                                 Determination by Independent Accountants. To
aid the Participant in making any election called for under Section 14.3(a),
no later than the date of the occurrence of any event that might reasonably be
anticipated to result in an “excess parachute payment” to the Participant as
described in Section 14.3(a), the Company shall request a determination in
writing by independent public accountants selected by the Company (the “Accountants”). As soon as practicable
thereafter, the Accountants shall determine and report to the Company and the
Participant the amount of such acceleration of vesting, payments and benefits
which would produce the greatest after-tax benefit to the Participant. For the
purposes of such determination, the Accountants may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Participant shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make their required determination. The Company shall bear all fees and expenses
the Accountants may reasonably charge in connection with their services
contemplated by this Section.


 


15.                                 COMPLIANCE WITH SECURITIES LAW.


 


The grant of Awards and the issuance of shares of
Stock pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities
and the requirements of any stock exchange or market system upon which the
Stock may then be listed. In addition, no Award may be exercised or shares
issued pursuant to an Award unless (a) a registration statement under the
Securities Act shall at the time of such exercise or issuance be in effect with
respect to the shares issuable pursuant to the Award, or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the
Award may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority,
if any, deemed by the Company’s legal counsel to be necessary to the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a condition to
issuance of any Stock, the


 


32

















 


Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.


 


16.                                 COMPLIANCE
WITH SECTION 409A.


 


16.1                           Awards Subject to Section 409A. The Company intends
that Awards granted pursuant to the Plan shall either be exempt from or comply
with Section 409A, and the Plan shall be so construed. The provisions of
this Section 16 shall apply to any Award or portion thereof that
constitutes or provides for payment of Section 409A Deferred Compensation.
Such Awards may include, without limitation:


 


(a)                                  A
Nonstatutory Stock Option or SAR that includes any feature for the deferral of
compensation other than the deferral of recognition of income until the later
of (i) the exercise or disposition of the Award or (ii) the time the
stock acquired pursuant to the exercise of the Award first becomes
substantially vested.


 


(b)                                 Any
Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other
Stock-Based Award that either (i) provides by its terms for settlement of
all or any portion of the Award at a time or upon an event that will or may
occur later than the end of the Short-Term Deferral Period (as defined below)
or (ii) permits the Participant granted the Award to elect one or more
dates or events upon which the Award will be settled after the end of the
Short-Term Deferral Period.


 


Subject
to the provisions of Section 409A, the term “Short-Term
Deferral Period” means the 21⁄2
month period ending on the later of (i) the 15th day of the third month
following the end of the Participant’s taxable year in which the right to
payment under applicable portion of the Award is no longer subject to a
substantial risk of forfeiture or (ii) the 15th day of the third month
following the end of the Company’s taxable year in which the right to payment
under the applicable portion of the Award is no longer subject to a substantial
risk of forfeiture. For this purpose, the term “substantial risk of forfeiture”
shall have the meaning provided by Section 409A.


 


16.2                           Deferral and/or Distribution Elections. Except as otherwise
permitted or required by Section 409A, the following rules shall
apply to any compensation deferral and/or payment elections (each, an “Election”) that may be permitted or
required by the Committee pursuant to an Award providing Section 409A
Deferred Compensation:


 


(a)                                  Elections
must be in writing and specify the amount of the payment in settlement of an
Award being deferred, as well as the time and form of payment as permitted by
this Plan.


 


(b)                                 Elections
shall be made by the end of the Participant’s taxable year prior to the year in
which services commence for which an Award may be granted to such Participant.


 


(c)                                  Elections
shall continue in effect until a written revocation or change in Election is
received by the Company, except that a written revocation or change in


 


33

















 


Election must be received
by the Company prior to the last day for making the Election determined in
accordance with paragraph (b) above or as permitted by Section 16.3.


 


16.3                           Subsequent Elections. Except
as otherwise permitted or required by Section 409A, any Award providing Section 409A
Deferred Compensation which permits a subsequent Election to delay the payment
or change the form of payment in settlement of such Award shall comply with the
following requirements:


 


(a)                                  No
subsequent Election may take effect until at least twelve (12) months after the
date on which the subsequent Election is made.


 


(b)                                 Each
subsequent Election related to a payment in settlement of an Award not
described in Section 16.4(a)(ii), 16.4(a)(iii) or 16.4(a)(vi) must
result in a delay of the payment for a period of not less than five (5) years
from the date on which such payment would otherwise have been made.


 


(c)                                  No
subsequent Election related to a payment pursuant to Section 16.4(a)(iv) shall
be made less than twelve (12) months before the date on which such payment
would otherwise have been made.


 


(d)                                 Subsequent
Elections shall continue in effect until a written revocation or change in the
subsequent Election is received by the Company, except that a written revocation
or change in a subsequent Election must be received by the Company prior to the
last day for making the subsequent Election determined in accordance the
preceding paragraphs of this Section 16.3.


 


16.4                           Payment of Section 409A Deferred Compensation.


 


(a)                                  Permissible Payments. Except as
otherwise permitted or required by Section 409A, an Award providing Section 409A
Deferred Compensation must provide for payment in settlement of the Award only
upon one or more of the following:


 


(i)                                     The
Participant’s “separation from service” (as such term is defined by Section 409A);


 


(ii)                                  The
Participant’s becoming “disabled” (as such term is defined by Section 409A);


 


(iii)                               The Participant’s death;


 


(iv)                              A
time or fixed schedule that is either (i) specified by the Committee upon
the grant of an Award and set forth in the Award Agreement evidencing such
Award or (ii) specified by the Participant in an Election complying with
the requirements of Section 16.2 or 16.3, as applicable;


 


(v)                                 A
change in the ownership or effective control or the Company or in the ownership
of a substantial portion of the assets of the Company determined in accordance
with Section 409A; or


 


34

















 


(vi)                              The
occurrence of an “unforeseeable emergency” (as such term is defined by Section 409A).


 


(b)                                 Required Delay in Payment to Specified Employee
Pursuant to Separation from Service. Notwithstanding any
provision of the Plan or an Award Agreement to the contrary, except as
otherwise permitted by Section 409A, no payment pursuant to Section 16.4(a)(i) in
settlement of an Award providing for Section 409A Deferred Compensation
may be made to a Participant who is a “specified employee” (as such term is
defined by Section 409A) as of the date of the Participant’s separation
from service before the date (the “Delayed
Payment Date”) that is six (6) months after the
date of such Participant’s separation from service, or, if earlier, the date of
the Participant’s death. All such amounts that would, but for this paragraph,
become payable prior to the Delayed Payment Date shall be accumulated and paid
on the Delayed Payment Date.


 


(c)                                  Payment Upon Disability. All
distributions payable by reason of a Participant becoming disabled shall be
paid in a lump sum or in periodic installments as established by the
Participant’s Election. If the Participant has made no Election with respect to
distributions upon becoming disabled, all such distributions shall be paid in a
lump sum upon the determination that the Participant has become disabled.


 


(d)                                 Payment Upon Death. If a Participant
dies before complete distribution of amounts payable upon settlement of an
Award subject to Section 409A, such undistributed amounts shall be
distributed to his or her beneficiary under the distribution method for death
established by the Participant’s Election upon receipt by the Committee of
satisfactory notice and confirmation of the Participant’s death. If the
Participant has made no Election with respect to distributions upon death, all
such distributions shall be paid in a lump sum upon receipt by the Committee of
satisfactory notice and confirmation of the Participant’s death.


 


(e)                                  Payment Upon Change in Control. Notwithstanding
any provision of the Plan or an Award Agreement to the contrary, to the extent
that any amount constituting Section 409A Deferred Compensation would
become payable under this Plan by reason of a Change in Control, such amount
shall become payable only if the event constituting a Change in Control would
also constitute a change in ownership or effective control of the Company or a
change in the ownership of a substantial portion of the assets of the Company
within the meaning of Section 409A.


 


(f)                                    Payment Upon Unforeseeable Emergency. The
Committee shall have the authority to provide in the Award Agreement evidencing
any Award providing for Section 409A Deferred Compensation for payment in
settlement of all or a portion of such Award in the event that a Participant
establishes, to the satisfaction of the Committee, the occurrence of an
unforeseeable emergency. In such event, the amount(s) distributed with
respect to such unforeseeable emergency cannot exceed the amounts reasonably
necessary to satisfy the emergency need plus amounts necessary to pay taxes
reasonably anticipated as a result of such distribution(s), after taking into
account the extent to which such emergency need is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship) or by cessation of deferrals under the
Award. All distributions with respect to


 


35

















 


an unforeseeable
emergency shall be made in a lump sum as soon as practicable following the
Committee’s determination that an unforeseeable emergency has occurred. The
Committee’s decision with respect to whether an unforeseeable emergency has
occurred and the manner in which, if at all, the payment in settlement of an
Award shall be altered or modified, shall be final, conclusive, and not subject
to approval or appeal.


 


(g)                                 Prohibition of Acceleration of Payments. Notwithstanding
any provision of the Plan or an Award Agreement to the contrary, this Plan does
not permit the acceleration of the time or schedule of any payment under an
Award providing Section 409A Deferred Compensation, except as permitted by
Section 409A.


 


17.                                 TAX WITHHOLDING.


 


17.1                           Tax Withholding in General. The Company shall have the right
to deduct from any and all payments made under the Plan, or to require the
Participant, through payroll withholding, cash payment or otherwise, to make
adequate provision for, the federal, state, local and foreign taxes (including
social insurance), if any, required by law to be withheld by any Participating
Company with respect to an Award or the shares acquired pursuant thereto. The
Company shall have no obligation to deliver shares of Stock, to release shares
of Stock from an escrow established pursuant to an Award Agreement, or to make
any payment in cash under the Plan until the Participating Company Group’s tax
withholding obligations have been satisfied by the Participant.


 


17.2                           Withholding in Shares. The Company shall have the right, but
not the obligation, to deduct from the shares of Stock issuable to a
Participant upon the exercise or settlement of an Award, or to accept from the
Participant the tender of, a number of whole shares of Stock having a Fair
Market Value, as determined by the Company, equal to all or any part of the tax
withholding obligations of any Participating Company. The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.


 


18.                                 AMENDMENT OR TERMINATION OF PLAN.


 


The Committee may amend, suspend or terminate the Plan
at any time. However, without the approval of the Company’s stockholders, there
shall be (a) no increase in the maximum aggregate number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.4), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan
that would require approval of the Company’s stockholders under any applicable
law, regulation or rule, including the rules of any stock exchange or
quotation system upon which the Stock may then be listed or quoted. No
amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Committee. Except as
provided by the next sentence, no amendment, suspension or termination of the
Plan may adversely affect any then outstanding Award without the consent of the
Participant. Notwithstanding any other provision of the Plan to the contrary,
the Committee may, in its sole and absolute discretion and without the consent
of any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming the Plan or such


 


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Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to, Section 409A.


 


19.                                 MISCELLANEOUS PROVISIONS.


 


19.1                           Repurchase Rights. Shares
issued under the Plan may be subject to one or more repurchase options, or
other conditions and restrictions as determined by the Committee in its
discretion at the time the Award is granted. The Company shall have the right
to assign at any time any repurchase right it may have, whether or not such
right is then exercisable, to one or more persons as may be selected by the
Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares
of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement
on such certificates of appropriate legends evidencing any such transfer
restrictions.


 


19.2                           Forfeiture Events.


 


(a)                                  The
Committee may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service.


 


(b)                                 If
the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, any Participant who
knowingly or through gross negligence engaged in the misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company
for (i) the amount of any payment in settlement of an Award received by
such Participant during the twelve- (12-) month period following the first
public issuance or filing with the United States Securities and Exchange
Commission (whichever first occurred) of the financial document embodying such
financial reporting requirement, and (ii) any profits realized by such
Participant from the sale of securities of the Company during such twelve-
(12-) month period.


 


19.3                           Provision of Information. Each Participant shall be given
access to information concerning the Company equivalent to that information
generally made available to the Company’s common stockholders.


 


19.4                           Rights as Employee, Consultant or Director. No person, even
though eligible pursuant to Section 5, shall have a right to be selected
as a Participant, or, having been so selected, to be selected again as a
Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director
or interfere with or limit in any way any right of a Participating Company to
terminate the Participant’s Service at any time. To the extent that an Employee
of a Participating Company


 


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other than the Company
receives an Award under the Plan, that Award shall in no event be understood or
interpreted to mean that the Company is the Employee’s employer or that the
Employee has an employment relationship with the Company.


 


19.5                           Rights as a Stockholder. A Participant shall have no rights
as a stockholder with respect to any shares covered by an Award until the date
of the issuance of such shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.4 or another provision of the Plan.


 


19.6                           Delivery of Title to Shares. Subject to any governing rules or
regulations, the Company shall issue or cause to be issued the shares of Stock
acquired pursuant to an Award and shall deliver such shares to or for the
benefit of the Participant by means of one or more of the following: (a) by
delivering to the Participant evidence of book entry shares of Stock credited
to the account of the Participant, (b) by depositing such shares of Stock
for the benefit of the Participant with any broker with which the Participant
has an account relationship, or (c) by delivering such shares of Stock to
the Participant in certificate form.


 


19.7                           Fractional Shares. The Company shall not be
required to issue fractional shares upon the exercise or settlement of any
Award.


 


19.8                           Retirement and Welfare Plans. Neither Awards made under this
Plan nor shares of Stock or cash paid pursuant to such Awards may be included
as “compensation” for purposes of computing the benefits payable to any
Participant under any Participating Company’s retirement plans (both qualified
and non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a
Participant’s benefit.


 


19.9                           Beneficiary Designation. Subject to local laws and
procedures, each Participant may file with the Company a written designation of
a beneficiary who is to receive any benefit under the Plan to which the
Participant is entitled in the event of such Participant’s death before he or
she receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime. If a married Participant
designates a beneficiary other than the Participant’s spouse, the effectiveness
of such designation may be subject to the consent of the Participant’s spouse. If
a Participant dies without an effective designation of a beneficiary who is
living at the time of the Participant’s death, the Company will pay any
remaining unpaid benefits to the Participant’s legal representative.


 


19.10                     Severability.
If any one or more of the provisions (or any part thereof) of this Plan shall
be held invalid, illegal or unenforceable in any respect, such provision shall
be modified so as to make it valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions (or any part thereof)
of the Plan shall not in any way be affected or impaired thereby.


 


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19.11                     No
Constraint on Corporate Action. Nothing in this Plan shall be
construed to: (a) limit, impair, or otherwise affect the Company’s or
another Participating Company’s right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or
transfer all or any part of its business or assets; or (b) limit the right
or power of the Company or another Participating Company to take any action
which such entity deems to be necessary or appropriate.


 


19.12                     Unfunded
Obligation. Participants shall have the status of general unsecured
creditors of the Company. Any amounts payable to Participants pursuant to the
Plan shall be considered unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any
special accounts with respect to such obligations. The Company shall retain at
all times beneficial ownership of any investments, including trust investments,
which the Company may make to fulfill its payment obligations hereunder. Any
investments or the creation or maintenance of any trust or any Participant
account shall not create or constitute a trust or fiduciary relationship
between the Committee or any Participating Company and a Participant, or
otherwise create any vested or beneficial interest in any Participant or the
Participant’s creditors in any assets of any Participating Company. The
Participants shall have no claim against any Participating Company for any
changes in the value of any assets which may be invested or reinvested by the
Company with respect to the Plan.


 


19.13                     Choice of
Law. Except to the extent governed by applicable federal law, the
validity, interpretation, construction and performance of the Plan and each
Award Agreement shall be governed by the laws of the State of California,
without regard to its conflict of law rules.


 


IN
WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the Facet Biotech Corporation 2008 Equity Incentive Plan
as duly adopted by the Board on                  ,
2008.


 


 


	
   

  	
   

  
	
   

  	
  Secretary

  



 


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