Exhibit 10.1





Exhibit 10.1




ONCOGENEX PHARMACEUTICALS, INC.




2010 PERFORMANCE INCENTIVE PLAN




This 2010 PERFORMANCE INCENTIVE PLAN (the “Plan”) established by OncoGenex Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), was adopted by its Board of Directors on March 24,
2010 (the “Effective Date”) and approved by the Company’s stockholders at the 2010 Annual Meeting
of Stockholders (the “Approved Date”). The amendment and restatement of the Plan was approved by
the Board and the Compensation Committee of the Board on March 22, 2011 to be effective on the date
of the 2011 Annual Meeting of Stockholders assuming the Plan is approved by the Company’s
stockholders at such meeting. The Plan was amended on November 1, 2011 by action of the Board.



ARTICLE 1




PURPOSES OF THE PLAN




1.1 Purposes. The purposes of the Plan are (a) to enhance the ability of the Company and its
Affiliated Companies to attract and retain the services of officers, qualified employees, directors
and outside consultants and service providers to the Company, upon whose judgment, initiative and
efforts the successful conduct and development of the Company’s businesses largely depends, and (b)
to provide additional incentives to such persons to devote their utmost effort and skill to the
advancement and betterment of the Company, by providing them an opportunity to participate in the
ownership of the Company and thereby have an interest in the success and increased value of the
Company that coincides with the financial interests of the Company’s stockholders.



ARTICLE 2




DEFINITIONS




For purposes of this Plan, in addition to other capitalized terms defined herein, the
following terms shall have the meanings indicated:



2.1 Administrator. “Administrator” means the Board, subject to the Board’s authority to
delegate responsibility for any matter to the Committee or to the Chief Executive Officer of the
Company as set forth in Section 8.1 of the Plan.



2.2 Affiliated Company. “Affiliated Company” means any “parent corporation” or “subsidiary
corporation” of the Company, whether now existing or hereafter created or acquired, as those terms
are defined in Sections 424(e) and 424(f) of the Code, respectively.



2.3 Award. “Award” means an Option, Restricted Share or Restricted Stock Unit issued to a
Participant under the Plan.



2.4 Award Agreement. “Award Agreement” means an Option Agreement or Stock Purchase Agreement
issued to a Participant pursuant to the Plan.



2.5 Board. “Board” means the Board of Directors of the Company.


 


 









 





2.6 Cause. “Cause” means, with respect to the termination of a Participant’s employment,
termination of such employment by the Company for any of the following reasons:




(a) The continued refusal or omission by the Participant to perform any material duties
required of him by the Company if such duties are consistent with duties customary for the
position held with the Company;




(b) Any material act or omission by the Participant involving malfeasance or gross
negligence in the performance of Participant’s duties to, or material deviation from any of
the policies or directives of, the Company;




(c) Conduct on the part of Participant which constitutes the breach of any statutory or
common law duty of loyalty to the Company; or




(d) Any illegal act by Participant which materially and adversely affects the business
of the Company or any felony committed by Participant, as evidenced by conviction thereof,
provided that the Company may suspend Participant with pay while any allegation of such
illegal or felonious act is investigated.



2.7 Change in Control. “Change in Control” shall mean the occurrence of any of the following
events:




(a) The acquisition, directly or indirectly, in one transaction or a series of related
transactions, by any person or group (within the meaning of Section 13(d)(3) of the Exchange
Act) of the beneficial ownership of securities of the Company possessing more than fifty
percent (50%) of the total combined voting power of all outstanding securities of the
Company;




(b) A merger or consolidation of the Company with any other entity, whether or not the
Company is the surviving entity in such transaction, except for a transaction in which the
holders of the outstanding voting securities of the Company immediately prior to such merger
or consolidation hold as a result of holding Company securities prior to such transaction,
in the aggregate, securities possessing more than fifty percent (50%) of the total combined
voting power of all outstanding voting securities of the Company or of the surviving entity
(or the parent of the surviving entity) immediately after such merger or consolidation;




(c) The sale, transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; or




(d) The approval by the stockholders of a plan or proposal for the liquidation or
dissolution of the Company.




2.8 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.


 


2









 





2.9 Committee. “Committee” means a committee of two or more members of the Board appointed to
administer the Plan, as set forth in Section 8.1 hereof.



2.10 Common Stock. “Common Stock” means the Common Stock of the Company, $0.001 par value,
subject to adjustment pursuant to Section 4.2 hereof.



2.11 Consultant. “Consultant” means any consultant or advisor if: (i) the consultant or
advisor renders bona fide services to the Company or any Affiliated Company; (ii) the services
rendered by the consultant or advisor are not in connection with the offer or sale of securities in
a capital-raising transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities; and (iii) the consultant or advisor is a natural person who has
contracted directly with the Company or any Affiliated Company to render such services.



2.12 Disability. “Disability” means permanent and total disability as defined in Section
22(e)(3) of the Code. The Administrator’s determination of a Disability or the absence thereof
shall be conclusive and binding on all interested parties.



2.13 DRO. “DRO” means a domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder.



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



2.15 Effective Date. “Effective Date” means the date on which the Plan is adopted by the
Board, as set forth on the first page hereof.




2.16 Exchange Act. “Exchange Act” means the Securities and Exchange Act of 1934, as amended.



2.17 Exercise Price. “Exercise Price” means the purchase price per share of Common Stock
payable upon exercise of an Option.



2.18 Fair Market Value. “Fair Market Value” on any given date means the value of one share of
Common Stock, determined as follows:




(a) If the Common Stock is then listed or admitted to trading on a Nasdaq market system
or a stock exchange which reports closing sale prices, the Fair Market Value shall be the
closing sale price on the date of valuation on such Nasdaq market system or principal stock
exchange on which the Common Stock is then listed or admitted to trading, or, if no closing
sale price is reported on such day, then the Fair Market Value shall be the closing sale
price of the Common Stock on such Nasdaq market system or such exchange on the next
preceding day for which a closing sale price is reported.




(b) If the Common Stock is not then listed or admitted to trading on a Nasdaq market
system or a stock exchange which reports closing sale prices, the Fair Market Value shall be
the average of the closing bid and asked prices of the Common Stock in the over-the-counter
market on the date of valuation.


 


3









 






(c) If neither clause (a) nor (b) of this Section 2.18 is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator in good faith
using any reasonable method of valuation, which determination shall be conclusive and
binding on all interested parties.



2.19 FINRA Dealer. “FINRA Dealer” means a broker-dealer that is a member of the Financial
Industry Regulatory Authority, Inc.



2.20 Incentive Option. “Incentive Option” means any Option so designated by the Administrator
and intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.



2.21 Incentive Option Agreement. “Incentive Option Agreement” means an Option Agreement with
respect to an Incentive Option.



2.22 Nonqualified Option. “Nonqualified Option” means any Option that is not an Incentive
Option. To the extent that any Option designated as an Incentive Option fails in whole or in part
to qualify as an Incentive Option, including, without limitation, for failure to meet the
limitations applicable to a 10% Stockholder or because it exceeds the annual limit provided for in
Section 5.6 below, it shall to that extent constitute a Nonqualified Option.



2.23 Nonqualified Option Agreement. “Nonqualified Option Agreement” means an Option Agreement
with respect to a Nonqualified Option.




2.24 Option. “Option” means any option to purchase Common Stock granted pursuant to the Plan.



2.25 Option Agreement. “Option Agreement” means the written agreement entered into between
the Company and the Optionee with respect to an Option granted under the Plan.




2.26 Optionee. “Optionee” means a Participant who holds an Option.



2.27 Participant. “Participant” means an individual or entity that holds an Award under the
Plan.




2.28 Purchase Price. “Purchase Price” means the purchase price per Restricted Share.



2.29 Restricted Shares. “Restricted Shares” means shares of Common Stock issued pursuant to
Article 6 hereof, subject to any restrictions and conditions as are established pursuant to such
Article 6.



2.30 Restricted Stock Unit. “Restricted Stock Unit” means an award made pursuant to Article 7
hereof, subject to any restrictions and conditions as are established pursuant to such Article 7.


 


4









 





2.31 Rule 16b-3 Covered Person. “Rule 16b-3 Covered Person” means any key Employee or member
of the Board designated by the Administrator with respect to which any transaction involving Common
Stock may be eligible for the exemption from Section 16(b) of the Exchange Act set forth in Rule
16b-3.



2.32 Section 162(m) Covered Employee. “Section 162(m) Covered Employee” means (i) an employee
of the Company if, as of the close of the taxable year, such employee is the Principal Executive
Officer of the Company (or an individual acting in such a capacity) and the three (3) officers of
the Company (other than the Principal Financial Officer and the Principal Executive Officer) for
whom total compensation is required to be reported to stockholders under the Exchange Act by reason
of such individuals being among the three (3) highest compensated officers for the relevant taxable
year and (ii) any other key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a future fiscal year
may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code.



2.33 Service Provider. “Service Provider” means a Consultant, Employee, member of the Board
or other natural person the Administrator authorizes to become a Participant in the Plan and who
provides services to (i) the Company, (ii) an Affiliated Company, or (iii) any other business
venture designated by the Administrator in which the Company (or any entity that is a successor to
the Company) or an Affiliated Company has a significant ownership interest.



2.34 Stock Purchase Agreement. “Stock Purchase Agreement” means the written agreement entered
into between the Company and a Participant with respect to the purchase of Restricted Shares under
the Plan.



2.35 10% Stockholder. “10% Stockholder” means a person who, as of a relevant date, owns or is
deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code)
stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or of an Affiliated Company.



ARTICLE 3




ELIGIBILITY




3.1 Incentive Options. Only Employees of the Company or of an Affiliated Company (including
officers of the Company and members of the Board if they are Employees of the Company or of an
Affiliated Company) are eligible to receive Incentive Options under the Plan.



3.2 Nonqualified Options and Restricted Shares. Employees of the Company or of an Affiliated
Company, officers of the Company and members of the Board (whether or not employed by the Company
or an Affiliated Company), and Service Providers are eligible to receive Nonqualified Options or
acquire Restricted Shares.



3.3 Section 162(m) Limitation for Options. The aggregate number of shares of Common Stock
with respect to which Options may be granted to any Employee shall not exceed 1,050,000 shares of
Common Stock during any calendar year. Notwithstanding the foregoing, in connection with his or her
initial service to the Company, the aggregate number of shares of Common Stock with respect to
which Options may be granted to any Employee shall not exceed 1,050,000 shares of Common Stock
during the calendar year which includes such individual’s initial service to the Company. Any
shares subject to an Option granted during a calendar year to an Employee that can no longer under
any circumstances be exercised or purchased for any reason under the Plan shall continue to count
against the applicable limitations set forth above for such Employee during such calendar year.


 


5









 





ARTICLE 4




GRANTING OF AWARDS




4.1 Shares Subject to the Plan. The shares of stock available as a basis for Awards shall be
Common Stock. Such shares may be issued from either previously authorized but unissued shares or
treasury shares, subject to adjustment as to the number and kind of shares pursuant to Section 4.2
hereof. Subject to the foregoing, a total of 1,050,000 shares of Common Stock may be issued under
the Plan. Notwithstanding the limitation described in the preceding sentence, if an option granted
pursuant to an equity compensation plan of the Company other than the Plan is outstanding as of the
Approved
Date and such option subsequently terminates or expires in accordance with its terms, the
shares of Common Stock underlying such option which remain unexercised and unissued at the time of
such termination or expiration, shall become available for grant or issuance under the Plan,
subject to adjustment pursuant to Section 4.2 hereof. In no event will there be available greater
than 1,050,000 shares of Common Stock for purposes of the issuance of Incentive Options under the
Plan, subject to adjustment pursuant to Section 4.2 hereof.



(a) Cancelled or Forfeited Awards other than Restricted Shares. For purposes of the
limitation set forth in this Section 4.1, if all or any portion of any Award, other than Restricted
Shares, granted or offered under the Plan can no longer under any circumstances be exercised or
purchased due to the forfeiture or cancellation of all or any portion of such Award, then the
shares of Common Stock allocable to such unexercised or forfeited portions of such Award shall not
count against such limitation and shall again become available for grant or issuance under the
Plan.



(b) Non-Replenishment of Reacquired Shares; Awards other than Restricted Shares for
Reasons other than Cancellation or Forfeiture of Award. For purposes of the limitation set
forth in this Section 4.1, any shares of Common Stock subject to an Award, other than Restricted
Shares, and which are reacquired by the Company for any reason, including without limitation
pursuant to Section 11.1, other than the cancellation or forfeiture of such Award as described in
Section 4.1(a) shall count against such limitation. The Company shall hold all such shares of
Common Stock that it reacquires as treasury shares, which shall not again become available for
grant or issuance under the Plan.



(c) Replenishment of Reacquired Shares; Awards of Restricted Shares. For purposes of
the limitation set forth in this Section 4.1, any shares of Common Stock that were initially the
subject of a Stock Purchase Agreement, and which are reacquired by the Company for any reason,
including without limitation pursuant to Section 11.1, shall not count against such limitation and
shall again become available for grant or issuance under the Plan.


 


6









 





4.2 Changes in Capital Structure. In the event that the outstanding shares of Common Stock
are hereafter increased or decreased or changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of a recapitalization, stock split, reverse
stock split, combination of shares, reclassification, stock dividend, or other similar change in
the capital structure of the Company, then appropriate adjustments shall be made by the
Administrator to the aggregate number and kind of shares issuable thereafter under this Plan, the
number and kind of shares and the price per share subject to outstanding Award Agreements and the
limit on the number of shares under Sections 3.3 and 6.6, all in order to preserve, as nearly as
practical, but not to increase, the benefits to Participants.



4.3 Award Agreement. Each Award shall be evidenced by an Award Agreement. Award Agreements
evidencing Incentive Options shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code.



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



ARTICLE 5




OPTIONS




5.1 Option Agreement. Each Option granted pursuant to this Plan shall be evidenced by an
Option Agreement that shall specify the number of shares subject thereto, the Exercise Price per
share, and whether the Option is an Incentive Option or Nonqualified Option. As soon as is
practical following the grant of an Option, an Option Agreement shall be duly executed and
delivered by or on behalf of the Company to the Optionee to whom such Option was granted. Each
Option Agreement shall be in such form and contain such additional terms and conditions, not
inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem
desirable, including, without limitation, the imposition of any rights of first refusal and resale
obligations upon any shares of Common Stock acquired pursuant to an Option Agreement. Each Option
Agreement may be different from each other Option Agreement.



5.2 Exercise Price. The Exercise Price per share of Common Stock covered by each Option shall
be determined by the Administrator, subject to the following: (a) the Exercise Price of an Option
shall not be less than 100% of Fair Market Value on the date the Option is granted and (b) if the
person to whom an Incentive Option is granted is a 10% Stockholder on the date of grant, the
Exercise Price shall not be less than 110% of Fair Market Value on the date the Option is granted.
However, an Option may be granted with an Exercise Price lower than that set forth in the preceding
sentence if such Incentive Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424 of the Code.


 


7









 





5.3 Payment of Exercise Price. Payment of the Exercise Price shall be made upon exercise of
an Option and may be made, in the discretion of the Administrator, subject to any legal
restrictions, by: (a) cash; (b) check; (c) the surrender of shares of Common Stock acquired
pursuant to the exercise of an Option (provided that shares acquired pursuant to the exercise of
Options must have been held by the Optionee for the requisite period necessary to avoid a charge to
the Company’s earnings for financial reporting purposes), which surrendered shares shall be valued
at Fair Market Value as of the date of such exercise; (d) the waiver of compensation due or accrued
to the Optionee for services rendered; (e) a “same day sale” commitment from the Optionee and a
FINRA Dealer whereby the Optionee irrevocably elects to exercise the Option and to sell a portion
of the shares so purchased to pay for the Exercise Price and whereby the FINRA Dealer irrevocably
commits upon receipt of such shares to forward the Exercise Price directly to the Company; or (f)
any combination of the foregoing methods of payment or any other consideration or method of payment
as shall be permitted by applicable law, including the Sarbanes-Oxley Act of 2002, as amended.



5.4 Term and Termination of Options. The term and provisions for termination of each Option
shall be as fixed by the Administrator, but no Option may be exercisable more than ten (10) years
after the date it is granted. An Incentive Option granted to a person who is a 10% Stockholder on
the date of grant shall not be exercisable more than five (5) years after the date it is granted.



5.5 Vesting and Exercise of Options. Each Option shall vest and become exercisable in one or
more installments at such time or times and subject to such conditions, including without
limitation the achievement of specified performance goal(s) or objectives, as shall be determined
by the Administrator.



5.6 Annual Limit on Incentive Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time
of grant) of the Common Stock, with respect to which Incentive Options granted under this Plan and
any other plan of the Company or any Affiliated Company become exercisable for the first time by an
Optionee during any calendar year, shall not exceed $100,000.



5.7 Nontransferability of Options. Except as otherwise provided by the Administrator in an
Option Agreement and as permissible under applicable law, no Option shall be assignable or
transferable except by will or the laws of descent and distribution, and during the life of the
Optionee shall be exercisable only by such Optionee unless it has been disposed of with the consent
of the Administrator (which consent may be withheld in the Administrator’s sole and absolute
discretion) pursuant to a DRO. Notwithstanding the foregoing, no Option shall be assignable or
transferable in exchange for consideration.



5.8 Rights as Stockholder. An Optionee or permitted transferee of an Option shall have no
rights or privileges as a stockholder with respect to any shares covered by an Option until such
Option has been duly exercised and certificates representing shares purchased upon such exercise
have been issued to such person.


 


8









 





ARTICLE 6




RESTRICTED SHARES




6.1 Issuance and Sale of Restricted Shares. The Administrator shall have the right to grant
Restricted Shares subject to such terms, restrictions and conditions as the Administrator may
determine at the time of grant (“Restricted Share Awards”). Such conditions shall include the
Purchase Price to be paid by the grantee for such an Award, if any (but not less than the minimum
lawful amount under applicable state law). Such conditions may also include, but are not limited
to, continued employment or the achievement of specified performance goal(s) or objectives.



6.2 Stock Purchase Agreements. A Participant shall have no rights with respect to the
Restricted Shares covered by a Stock Purchase Agreement until the Participant has paid the full
Purchase Price (if applicable) to the Company in the manner set forth in Section 6.3 hereof and has
executed and delivered to the Company the Stock Purchase Agreement. Each Stock Purchase Agreement
shall be in such form, and shall set forth the Purchase Price and such other terms, conditions and
restrictions of the Restricted Shares, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable. Each Stock Purchase Agreement may be
different from each other Stock Purchase Agreement.



6.3 Payment of Purchase Price. Subject to any legal restrictions, payment of the Purchase
Price, if any, may be made, in the discretion of the Administrator, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Participant that have been held by the
Participant for the requisite period necessary to avoid a charge to the Company’s earnings for
financial reporting purposes, which surrendered shares shall be valued at Fair Market Value as of
the date of such acceptance; (d) the waiver of compensation due or accrued to the Participant for
services rendered; or (e) any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by applicable corporate law, including the
Sarbanes-Oxley Act of 2002, as amended.



6.4 Rights as a Stockholder. Upon complying with the provisions of Section 6.2 hereof, a
Participant shall have the rights of a stockholder with respect to the Restricted Shares purchased
pursuant to a Stock Purchase Agreement, including voting and dividend rights, subject to the terms,
restrictions and conditions as are set forth in such Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing Restricted Shares shall remain in
the possession of the Company until such shares have vested in accordance with the terms of the
Stock Purchase Agreement.



6.5 Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided in the Stock Purchase
Agreement. In the event of termination of a Participant’s employment, service as a director of the
Company or Service Provider status for any reason whatsoever (including death or disability), the
Stock Purchase Agreement may provide, in the discretion of the Administrator, that the Company
shall have the right, exercisable at the discretion of the Administrator, to repurchase, at the
original Purchase Price, any Restricted Shares which have not vested as of the date of termination.


 


9









 





6.6 Vesting of Restricted Shares. Subject to Section 6.5 above, the Stock Purchase Agreement
shall specify the date or dates, the performance goal(s) or objectives that must be achieved, and
any other conditions on which the Restricted Shares may vest. The Administrator may include among
such conditions the requirement that the performance of the Company or a business unit of the
Company for a specified period of one or more fiscal years equal or exceed a target determined in
advance by the Administrator. The Administrator shall determine such performance. Such target
shall be based on one or more of the criteria set forth in Appendix A. The Administrator shall
identify such target not later than the 90th day of such period. Subject to adjustment in
accordance with Section 4.2, in no event shall more than 1,050,000 Restricted Shares that are
subject to performance-based vesting conditions be granted to any Participant in a single fiscal
year of the Company, except that 1,050,000 Restricted Shares may be granted to a new Employee in
the fiscal year of the Company in which his or her service as an Employee first commences. A
Restricted Stock Agreement may provide for accelerated vesting in the event of a Change in Control,
the Participant’s death, disability or retirement or other events.



ARTICLE 7




RESTRICTED STOCK UNITS




7.1 Awards of Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an award to a
Participant covering a number of shares of Common Stock that may be settled in cash, or by issuance
of those shares of Common Stock (which may consist of Restricted Stock). All RSUs shall be made
pursuant to an Award Agreement. Subject to adjustment in accordance with Section 4.2, in no event
shall RSUs for more than 1,050,000 shares of Common Stock that are subject to performance-based
vesting conditions be granted to any Participant in a single fiscal year of the Company.



7.2 Terms of RSUs. The Administrator will determine the terms of an RSU including, without
limitation: (a) the number of shares of Common Stock subject to the RSU; (b) the time or times
during which the RSU may be settled; and (c) the consideration to be distributed on settlement, and
the effect of the Participant’s Termination on each RSU. An RSU may be awarded upon satisfaction
of such performance goals as are set out in advance in the Participant’s Award Agreement. If the
RSU is being earned upon satisfaction of performance goals or objectives, then the Administrator
will: (x) determine the nature, length and starting date of any performance period for the RSU; (y)
select from among the criteria set forth in Appendix A to be used to measure the performance,
if any; and (z) determine the number of shares of Common Stock deemed subject to the RSU.
Performance periods may overlap and participants may participate simultaneously with respect to
RSUs that are subject to different performance periods and different performance goals and other
criteria. The Administrator shall determine such performance. Such target shall be based on one
or more of the criteria set forth in Appendix A. The Administrator shall identify such target not
later than the 90th day of such period.



7.3 Form and Timing of Settlement. Payment of earned RSUs shall be made as soon as
practicable after the date(s) determined by the Administrator and set forth in the Award Agreement.
The Administrator, in its sole discretion, may settle earned RSUs in cash, shares of Common Stock,
or a combination of both. No Purchase Price shall apply to an RSU settled in shares of Common
Stock. The Administrator may also permit a Participant to defer payment under a RSU to a date or
dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the
requirements of Section 409A of the Code.


 


10









 





7.4 Termination of Participant. Except as may be set forth in the Participant’s Award
Agreement, vesting ceases on such Participant’s termination of service (unless determined otherwise
by the Administrator).



ARTICLE 8




ADMINISTRATION OF THE PLAN




8.1 Administrator. Authority to control and manage the operation and administration of the
Plan shall be vested in the Board, which may delegate such responsibilities in whole or in part to
one or more Committees. Members of the Committee may be appointed from time to time by, and shall
serve at the pleasure of, the Board. Without limiting the foregoing, the Board may limit the
composition of the Committee to those persons necessary to comply with the requirements of Section
162(m) of the Code and the regulations promulgated thereunder, and Section 16 of the Exchange Act
and Rule 16b-3 under the Exchange Act. The Board (or the Committee, as applicable) may delegate to
the Chief Executive Officer of the Company such responsibilities to administer the Plan as it shall
deem advisable and as permitted by applicable law. As used herein, the term “Administrator” means
the Board or, with respect to any matter as to which responsibility has been delegated to the
Committee or the Chief Executive Officer, the term Administrator shall mean the Committee or the
Chief Executive Officer, as the case may be.



8.2 Powers of the Administrator. In addition to any other powers or authority conferred upon
the Administrator elsewhere in the Plan or by law, the Administrator shall have full power and
authority: (a) to determine the persons to whom, and the time or times at which, Awards shall be
granted, the number of shares to be represented by each Option, the number of Restricted Shares to
be offered, and the consideration to be received by the Company upon the exercise of or sale of
such Awards; (b) to interpret the Plan; (c) to create, amend or rescind rules and regulations
relating to the Plan; (d) to determine the terms, conditions and restrictions contained in, and the
form of, Award Agreements; (e) to determine the identity or capacity of any persons who may be
entitled to exercise a Participant’s rights under any Award Agreement under the Plan; (f) to
correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any
Award Agreement; (g) to accelerate the vesting of any Award or release or waive any repurchase
rights of the Company with respect to any Award; (h) to extend the exercise date of any Award or
acceptance date of any Award; (i) to provide
for rights of first refusal and/or repurchase rights; (j) to amend outstanding Award
Agreements to provide for, among other things, any change or modification which the Administrator
could have included in the original Award Agreement or in furtherance of the powers provided for
herein; and (k) to make all other determinations necessary or advisable for the administration of
the Plan, but only to the extent not contrary to the express provisions of the Plan. Any action,
decision, interpretation or determination made in good faith by the Administrator in the exercise
of its authority conferred upon it under the Plan shall be final and binding on the Company and all
Participants. In making any determination or in taking or not taking any action under the Plan, the
Administrator may obtain and rely upon the advice of experts, including advisors to the Company.


 


11









 





8.3 Limitation on Liability. No Employee of the Company or member of the Board or Committee
shall be subject to any liability with respect to duties under the Plan unless the person acts
fraudulently or in bad faith. To the extent permitted by law, the Company shall indemnify each
member of the Board or Committee, and any Employee of the Company with duties under the Plan, who
was or is a party, or is threatened to be made a party, to any threatened, pending or completed
proceeding, whether civil, criminal, administrative or investigative, by reason of such person’s
conduct in the performance of duties under the Plan.



ARTICLE 9




CHANGE IN CONTROL




9.1 Change in Control. In order to preserve a Participant’s rights in the event of a Change
in Control of the Company:




(a) The Administrator shall have the discretion to provide in each Award Agreement the
terms and conditions that relate to (i) vesting of such Award in the event of a Change in
Control, and (ii) assumption of such Awards or issuance of comparable securities under an
incentive program in the event of a Change in Control. The aforementioned terms and
conditions may vary in each Award Agreement.




(b) If the terms of an outstanding Option Agreement provide for accelerated vesting in
the event of a Change in Control, or to the extent that an Option is vested and not yet
exercised, the Administrator in its discretion may provide, in connection with the Change in
Control transaction, for the purchase or exchange of each Option for an amount of cash or
other property having a value equal to the difference (or “spread”) between: (x) the value
of the cash or other property that the Participant would have received pursuant to the
Change in Control transaction in exchange for the shares issuable upon exercise of the
Option had the Option been exercised immediately prior to the Change in Control, and (y) the
Exercise Price of the Option.




(c) Outstanding Options shall terminate and cease to be exercisable upon consummation
of a Change in Control except to the extent that the Options are assumed by the successor
entity (or parent thereof) pursuant to the terms of the Change in Control transaction.




(d) The Administrator shall cause written notice of a proposed Change in Control
transaction to be given to Participants not less than fifteen (15) days prior to the
anticipated effective date of the proposed transaction.


 


12









 





ARTICLE 10




AMENDMENT AND TERMINATION OF THE PLAN




10.1 Amendments. Subject to applicable law, including Nasdaq stockholder approval
requirements, the Board may from time to time alter, amend, suspend or terminate the Plan in such
respects as the Board may deem advisable. No such alteration, amendment, suspension or termination
shall be made which shall substantially affect or impair the rights of any Participant under an
outstanding Award Agreement without such Participant’s consent. The Board may alter or amend the
Plan to comply with requirements under the Code relating to Incentive Options or other types of
options which give Optionees more favorable tax treatment than that applicable to Options granted
under this Plan as of the date of its adoption. Upon any such alteration or amendment, any
outstanding Option granted hereunder may, if the Administrator so determines and if permitted by
applicable law, be subject to the more favorable tax treatment afforded to an Optionee pursuant to
such terms and conditions.



10.2 Plan Termination. Unless the Plan shall theretofore have been terminated, the Plan shall
terminate on the tenth (10th) anniversary of the earlier of the Effective Date and the Approved
Date and no Awards may be granted under the Plan thereafter, but Award Agreements then outstanding
shall continue in effect in accordance with their respective terms.



ARTICLE 11




CANCELLATION & RESCISSION




11.1 Non-Competition. Unless an Option Agreement specifies otherwise, the Administrator may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid or deferred
Options at any time if the Participant is not in compliance with all applicable provisions of the
Option Agreement and the Plan or if the Participant engages in any “Adverse Activity.” For
purposes of this Section 11.1, “Adverse Activity” shall include: (i) the disclosure to anyone
outside the Company, or the use in other than the Company’s business, without prior written
authorization from the Company, of any confidential information or material relating to the
business of the Company, acquired by the Participant either during or after employment with the
Company; (ii) the failure or refusal to disclose promptly and to assign to the Company all right,
title and interest in any invention or idea, patentable or not, made or conceived by the
Participant during employment by the Company, relating in any manner to the actual or anticipated
business, research or development work of the Company; or (iii) activity that results in
termination of the Participant’s employment for Cause.



11.2 Agreement Upon Exercise. Upon exercise, payment or delivery pursuant to an Option
Agreement, the Participant shall certify in a manner acceptable to the Company that he or she is in
compliance with the terms and conditions of the Plan. In the event a Participant fails to comply
with the provisions of clauses (i) through (iii) of Section 11.1 hereof prior to, or during the six
(6) months after, any exercise, payment or delivery pursuant to an Option Agreement, such exercise,
payment or delivery may be rescinded within two years thereafter. In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain realized or payment
received as a result of the exercise, payment or delivery, in such manner and on such terms and
conditions as may be required, and the Company shall be entitled to set-off against the amount of
any such gain any amount owed to the Participant by the Company.


 


13









 





ARTICLE 12




TAX WITHHOLDING




12.1 Withholding. The Company shall have the power to withhold, or require a Participant to
remit to the Company in cash, an amount sufficient to satisfy any applicable federal, state, local
or foreign tax withholding requirements with respect to any Options exercised, any Restricted
Shares issued, or any other Award issued under the Plan. To the extent permissible under
applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon
such terms and conditions as it may deem appropriate, permit a Participant to satisfy his or her
obligation to pay any such tax, in whole or in part, in an amount determined on the basis of the
lowest rate of withholding applicable to such Participant, by (a) directing the Company to apply
shares of Common Stock to which the Participant is entitled as a result of the exercise of an Award
or as a result of the purchase of or lapse of restrictions on an Award, or (b) delivering to the
Company shares of Common Stock owned by the Participant. The shares of Common Stock so applied or
delivered in satisfaction of the Participant’s tax withholding obligation shall be valued at their
Fair Market Value as of the date of withholding based on the minimum statutory withholding rates
for income tax and payroll tax purposes that are applicable to such supplemental taxable income.



ARTICLE 13




MISCELLANEOUS




13.1 Repricings Not Permitted. Notwithstanding anything herein to the contrary, the
Administrator shall not have the authority to cause the repricing of any outstanding Options either
through an adjustment to the Exercise Price or through the cancellation of an Option and regrant of
a new Option or other Award in exchange for the cancelled Option (a “Repricing”), unless such
Repricing is approved by a majority of the Company’s stockholders entitled to vote on such matter.



13.2 Benefits Not Alienable. For so long as it is subject to any restrictions pursuant to
this Plan or an Award Agreement, no Award or interest or right therein or part thereof shall be
liable for the debts, contracts, or engagements of the Participant or his or her successors in
interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment, or any other means whether such disposition be voluntary or involuntary or
by operation of law, by judgment, levy, attachment, garnishment, or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void
and of no effect; provided, however, that nothing in this Plan shall prevent transfers by will or
the applicable laws of descent and distribution or assignments pursuant to a DRO entered by a court
of competent jurisdiction.



13.3 No Enlargement of Employee Rights. This Plan is strictly a voluntary undertaking on the
part of the Company and shall not be deemed to constitute a contract between the Company and any
Participant to be consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the Plan shall be deemed to give the right to any Participant to
be retained as an employee of the Company or any Affiliated Company or to interfere with the right
of the Company or any Affiliated Company to discharge any Participant at any time.


 


14









 





13.4 Application of Funds. The proceeds received by the Company from the sale of Common Stock
pursuant to Award Agreements, except as otherwise provided herein, will be used for general
corporate purposes.



13.5 Annual Reports. During the term of this Plan, the Company will furnish to each
Participant who does not otherwise receive such materials, copies of all reports, proxy statements
and other communications that the Company distributes generally to its stockholders.



13.6 Applicable Law. The validity, construction, interpretation and effect of this Plan and
all Award Agreements hereunder shall be governed by and determined in accordance with the laws of
the State of Washington except for matters of corporate law, in which case the provisions of the
Delaware General Corporation Law shall govern.


 


15









 





Appendix A




PERFORMANCE CRITERIA

FOR RESTRICTED SHARES AND RESTRICTED STOCK UNITS




The performance goals that may be used by the Administrator for restricted share awards shall
consist of:




	 	•	 	Net revenue and/or net revenue growth;






	 	•	 	Earnings per share and/or earnings per share growth;






	 	•	 	Earnings before income taxes and amortization and/or earnings before income taxes and
amortization growth;






	 	•	 	Operating income and/or operating income growth;






	 	•	 	Net income and/or net income growth;






	 	•	 	Total stockholder return and/or total stockholder return growth;






	 	•	 	Return on equity;






	 	•	 	Operating cash flow return on income;






	 	•	 	Adjusted operating cash flow return on income;






	 	•	 	Economic value added;






	 	•	 	Individual business objectives; and






	 	•	 	Company-specific operational metrics.






	 	•	 	appreciation in and/or maintenance of the price of the Shares of the Company;






	 	•	 	reductions in costs; cash flow or cash flow per share (before or after dividends);






	 	•	 	drug development milestones;






	 	•	 	regulatory achievements (including submitting or filing applications or other documents
with regulatory authorities, successfully executing an advisory committee meeting, or
receiving approval of any such applications or other documents and passing pre-approval
inspections and validation of manufacturing processes;






	 	•	 	initiation or completion of pre-clinical studies; clinical achievements (including
initiating clinical studies; initiating enrollment, completing enrollment or enrolling
particular numbers of subjects in clinical studies; completing phases of a clinical study
(including the treatment phase); or announcing or presenting preliminary or final data from
clinical studies; in each case, whether on particular timelines or generally);






	 	•	 	implementation, completion or attainment of measurable objectives with respect to
research (including nominating a development candidate or initiating a new full discovery
program), development, manufacturing, commercialization, development candidates, products
or projects, safety, production volume levels;




 


16









 










To the extent that an award under the Plan is designated as a “performance award,” but is not
intended to qualify as performance-based compensation under Section 162(m), the performance
criteria can include the achievement of strategic objectives as determined by the Administrator.



Notwithstanding satisfaction of any performance criteria described above, to the extent
specified at the time of grant of an award, the number of shares of Common Stock or other benefits
granted, issued, and/or vested under an award on account of satisfaction of performance criteria
may be reduced by the Administrator on the basis of such further considerations as the
Administrator in its sole discretion determines. To the extent consistent with section 162(m) of
the Code, the Administrator may adjust the results under any performance criterion to exclude any
of the following events that occurs during a performance measurement period: (a) asset write-downs,
(b) litigation, claims, judgments or settlements, (c) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, (d) accruals for
reorganization and restructuring programs and (e) any extraordinary, unusual or non-recurring
items.






 


17