Exhibit 10.4


 


ACORDA THERAPEUTICS, INC.


 


2006 EMPLOYEE INCENTIVE PLAN


 


SECTION 1. 
PURPOSE


 


                The purpose of the
Acorda Therapeutics, Inc. 2006 Employee Incentive Plan (the “Plan”) is to
provide an additional incentive to directors, key employees, independent
contractors, agents and consultants of Acorda Therapeutics, Inc. (the “Company”)
and its subsidiaries, to aid in attracting and retaining directors, employees,
independent contractors, agents and consultants of outstanding ability, and to
align their interests with those of shareholders.


 


                This Plan shall
serve as the successor to the Company’s 1999 Employee Stock Option Plan, as
amended (the “Prior Plan”), and no further option grants or stock issuances
shall be made under the Prior Plan after the Effective Date, as determined
under Section 14 of this Plan (the “Effective Date”).  The adoption of this Plan as of the Effective
Date shall not affect the terms of any option or restricted stock award under
the Prior Plan that was outstanding prior to the Effective Date and all such
options and restricted stock awards shall continue to be governed by the terms
of the Prior Plan.


 


SECTION 2. 
DEFINITIONS


 


                Unless the context
clearly indicates otherwise, the following terms, when used in this Plan, shall
have the meanings set forth in this Section 2.


(a)           “Award” means
any Stock Option, Stock Appreciation Right or Restricted Stock.


(b)           “Board” shall mean the
Board of Directors of the Company.


(c)           “Cause” means
(i) willful misconduct; (ii) willful or gross neglect; (iii) failure to
materially perform one’s job duties; (iv) insubordination; (v) willful failure
to materially comply with the Company’s policies and practices; (vi) acts of
moral turpitude, theft or dishonesty; (vii) a felony conviction, or (viii) acts
that are (or could be expected to be) damaging or detrimental to the
Company.  Notwithstanding the foregoing,
if a Grantee or Participant is a party to an employment or similar agreement
with the Company (or any parent corporation or Subsidiary) and such agreement
contains a definition of “Cause” or similar term, such definition shall
constitute the definition of “Cause” under the Plan.


 


                (d)           “Code” shall
mean the Internal Revenue Code of 1986 and the rules and regulations
thereunder, as it or they may be amended from time to time.


(e)           “Committee” shall
mean the full Board, Compensation Committee of the Board or such other
committee as may be designated by the Board. If and when the Common Stock is
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the “Act”), to the extent necessary to comply with Rule 16b-3 under the
Act with respect to Option grants to officers and directors, each member of the
Committee shall be a “non-employee director” within the meaning of Rule 16b-3
and, to the extent necessary to exclude Options granted under the Plan from the
calculation of the income tax deduction limit under Section 162(m) of  the Internal Revenue Code of 1986, as amended
(the “Code”), each member of the Committee shall be an “outside director”
within the meaning of Code Section 162(m). A majority of the Committee shall
constitute a quorum, and acts of the majority of members present at any meeting
at which a quorum is present shall be deemed the acts of the Committee.  The Committee may also act by instrument
signed by all members of the Committee.


 





















 


                (f)            “Date of Exercise”
shall mean the earlier of the date on which written notice of exercise,
together with payment in full, is received at the office of the Secretary of
the Company or the date on which such notice and payment are mailed to the
Secretary of the Company at its principal office by certified or registered
mail.


                (g)           “Director”  shall mean a member of the Board of Directors.


(h)           “Disability” or “Disabled” shall
mean incapacity of a Grantee or Participant as a result of demonstrable illness
(including mental illness), injury, or disease that prevents the Grantee or
Participant from engaging in any occupation or performing any work for
remuneration or profit for which the Grantee or Participant is reasonably
qualified (or may reasonably become qualified) by reason of education, work, or
experience.  However, the term “Disability”
shall not include any illness, injury, or disease that resulted from or
consists of incapacity resulting from illegal drug use; was contracted,
suffered, or incurred while the Grantee or Participant was engaged in criminal
conduct; or was intentionally self-inflicted total and permanent disability as
defined in Section 22(e)(3) of the Code.


(i)            “Employee” shall
mean any employee or any officer of the Company or any of its Subsidiaries, or
any other person and excluding any director of the Company who is not otherwise
an employee of the Company.  For the
purposes of any provision of this Plan relating to Incentive Stock Options, the
term “Employee” shall be limited to mean any employee (as that term is defined
under Code Section 3401(c)) or officer of the Company or any of its
Subsidiaries, but not any person who is merely an independent contractor, agent
or consultant of the Company or any of its subsidiaries.


(j)            “Executive
Officer” means an individual who is an “executive officer” of the
Company (as defined by Rule 3b-7 under the Exchange Act) or a “covered employee”
under Section 162(m) of the Code.


                (k)           “Fair Market Value”
of the Stock means, for all purposes of the Plan unless otherwise provided (i)
the mean between the high and low sales prices of the Stock as reported on the
NASDAQ Stock Market or any similar system of automated dissemination of quotations
of securities prices then in common use, if so quoted, or (ii) if not quoted as
described in clause (i) or listed as described in clause (iii), the mean
between the high bid and low asked quotations for the Stock as reported by a
the National Quotation Bureau Incorporated or such other source as the
Committee shall determine, or (iii) if the Stock is listed or admitted for
trading on any national securities exchange, the mean between the high and low
sales price, or the closing bid price if no sale occurred, of the Stock on the
principal securities exchange on which the Stock is listed, or (iv) if so
approved by the Committee for Awards with a Granting Date taking effective as
of the date on which the Company’s stock is first publicly traded, the price at
which the Company’s stock opened for trading on that date.  In the event that the method for determining
the Fair Market Value of the Stock provided for above shall either be not
applicable or not be practical, in the opinion of the Committee, then the Fair
Market Value shall be determined by such other reasonable method as the
Committee, in its discretion, shall select and apply.


 


 


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                (l)            “Good Reason”
shall mean the
Participant’s title, position or job
responsibilities have been materially reduced or the Participant has been
assigned duties that are materially inconsistent with his or her duties prior
to the Reorganization Event or which materially impair his or her ability to
perform his or her duties as required prior to the Reorganization Event.
Notwithstanding the foregoing, if a Grantee or Participant is a party to an
employment or similar agreement with the Company (or any parent corporation or
Subsidiary) and such agreement contains a definition of “Good Reason” or
similar term, such definition shall constitute the definition of “Good Reason”
under the Plan.


 


                (m)          “Grantee” shall
mean a Participant granted a Stock Option.


 


                (n)           “Granting Date”
shall mean the date on which the Committee authorizes the issuance of a Stock
Option for a specified number of shares of Stock to a specified Participant.


 


                (o)           “Incentive Stock Option”
shall mean a Stock Option granted under the Plan which is properly qualified
under the provisions of Section 422 of the Code.


 


                (p)           “Nonstatutory Stock Option”
shall mean a Stock Option granted within the Plan which is not an Incentive
Stock Option or otherwise qualified under similar tax provisions.


(q)           “Participant” shall mean a
person selected by the Committee or its delegee to receive an Award under the
Plan.


 


(r)            “Performance Objective” means a performance objective or goal
that must be achieved before an Award, or a feature of an Award, becomes
nonforfeitable.


 


                (s)           “Progressive Stock Options”
shall mean either Incentive Stock Options or Nonstatutory Stock Options granted
pursuant to Section 5(i) of this Plan.


 


(t)            “Reorganization
Event” means: (i) any merger or consolidation of the Company with or
into another entity as a result of which all of the capital stock of the Company
is converted into or exchanged for the right to receive cash, securities or
other property; or, if there is any other merger or consolidation, after such
merger or consolidation shareholders of the Company immediately prior to such
event hold less than 50% of the voting stock of the surviving entity; (ii) any
exchange of all of the capital stock of the Company for cash, securities or
other property pursuant to a share exchange transaction; (iii) a sale or
transfer of all or substantially all of the assets of the Company in one or a
series of transactions or there is a complete liquidation or dissolution of the
Company, or (iv) any individual or entity or group acting in concert and
affiliates thereof, acquires, directly or indirectly, more than 50% of the
outstanding shares of voting stock of the Company; provided that this
subsection (iv) shall not apply to an underwritten public offering of the
Company’s securities or to a private transaction resulting in new investors
owning more than 50% of the Company’s stock if those  investors purchased that stock at a lower
valuation of the Company than in the preceding round of financing.


 


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(u)           “Restricted Period” shall
mean the period of time selected by the Committee during which shares subject
to a Restricted Stock Award may be repurchased by or forfeited to the Company.


(v)           “Restricted Stock” shall
mean shares of Common Stock awarded to a Participant under Section 15.


(w)          “Retired” or “Retirement” shall mean a Grantee’s or Participant’s
voluntary termination of employment with the Company after having attained (i)
age 65 or (ii) age 55 with ten or more years of service with the Company.


 


                (x)            “Rule 16b-3”
shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended, or any rule in
replacement thereof.


 


                (y)           “Stock” shall
mean the Common Stock, par value $0.001 per share, of the Company.


 


                (z)            “Stock Appreciation Right”
shall mean a right granted pursuant to the Plan to receive Stock, cash, or a
combination thereof, upon the surrender of the right to purchase all or part of
the shares of Stock covered by a Stock Option.


 


                (aa)         “Stock Option”
shall mean an Incentive Stock Option or Nonstatutory Stock Option granted
pursuant to the Plan to purchase shares of Stock.


 


                (bb)         “Subsidiary”
shall mean any subsidiary corporation as defined in Section 424(f) of the Code.


 


SECTION 3. 
SHARES OF STOCK SUBJECT TO THE PLAN


 


 (a)          Subject
to increase under Section 3(b) of the Plan and adjustment under Section 10 of
the Plan, the number of shares of Common Stock reserved for issuance pursuant
to Awards made under the Plan shall not exceed 3,723,736 shares of Stock.


(b)           The total number of shares of Stock
available for issuance under this Plan, including shares of Stock subject to
then outstanding Awards, shall automatically increase on January 1 of each year
during the term of this Plan, beginning 2006, by a number of shares of Stock
equal to 4% of the outstanding shares of Stock on that date, unless otherwise
determined by the Board; except that, for 2006, such increase shall be equal to
the amount of outstanding shares of Stock and shares of Stock issuable upon
conversion of the outstanding preferred stock of the Company on, and shall be
made on, the Effective Date.  Shares
delivered under the Plan may be authorized and unissued shares or issued shares
held by the Company in its treasury.  If
any Awards expire or terminate without having been exercised, the shares of
Stock covered by such Award shall become available again for the grant of
Awards hereunder.  Similarly, if any
Awards are surrendered for cash pursuant to the provisions of Section 7, the
shares of Stock covered by such Awards shall also become available again for
the grant of Awards hereunder.  Shares of
Stock covered by Awards surrendered for Stock pursuant to Section 7, however,
shall not become available again for the grant of Awards hereunder.


(c)           Notwithstanding anything to the
contrary set forth in the Prior Plan, the total number of shares of Stock
available for issuance under the Prior Plan shall not be increased,
automatically or otherwise, on or after January 1, 2006 by the 4% increase set
forth in Amendment No. 2 to the Prior Plan and, to the extent necessary to
effect such limitation, this Section 3(c) shall constitute an amendment to the
Prior Plan.


 


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(d)           In any year, no individual Grantee or
Participant shall be granted Options or SARs with respect to more than five
million (5,000,000) shares.


 


SECTION 4. 
ADMINISTRATION OF THE PLAN


 


                (a)           The
Plan shall be administered by the Committee. 
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of Award
grants, and to make all other determinations necessary or advisable for the
administration of the Plan.  Neither the
Committee nor any Director or Executive Officer shall be liable for any act,
omission, interpretation, construction, or determination made in good faith in
connection with the Plan or any Award Agreement.


 


                (b)           It is intended that the Plan and any
transaction hereunder meet all of the requirements of Rule 16b-3 promulgated by
the Securities and Exchange Commission, as such rule is currently in effect or
as hereafter modified or amended, and all other applicable laws.  If any provision of the Plan or any
transaction would disqualify the Plan or such transaction under, or would not
comply with, Rule 16b-3 or other applicable laws, such provision or transaction
shall be construed or deemed amended to conform to Rule 16b-3 or such other
applicable laws or otherwise shall be deemed to be null and void, in each case
to the extent permitted by law and deemed advisable by the Committee.


 


(c)           To
the extent permitted by Applicable Law, the Board may delegate to one or more
Executive Officers of the Company the power to grant Awards to Participants and
to exercise such other powers under the Plan as the Board may determine,
provided that the Committee shall fix the terms of the Awards to be granted by
such executive officers (including the exercise price of such Awards) and the
maximum number of Shares subject to Awards that the Executive Officers may
grant; provided, however, that no Executive Officer shall be authorized to
grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7
under the Exchange Act or to any “officer” of the Company (as defined by Rule
16a-1 under the Exchange Act).


 


                (d)           Any controversy or claim arising out
of or related to this Plan shall be determined unilaterally by and at the sole
discretion of the Committee.


 


SECTION 5. 
GRANTING OF STOCK OPTIONS


 


                (a)           Directors, Employees, independent
contractors, agents and consultants to the Company shall be eligible to receive
Stock Options under the Plan.  Only
Employees shall be eligible to receive Incentive Stock Options under the Plan.


 


                (b)           The exercise price of each share of
Stock subject to an Incentive Stock Option shall be at least 100% of the Fair
Market Value of a share of the Stock on the Granting Date.


 


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                (c)           The exercise price of each share of Stock
subject to a Nonstatutory Stock Option shall be 100% of the Fair Market Value
of a share of the Stock on the Granting Date, or such other price either
greater than or less than the Fair Market Value (but in no event less than the
par value of the Stock) as the Committee shall determine, following
consideration of potential tax implications, appropriate to the purposes of the
Plan and to the Company’s total compensation program.


 


                (d)           The Committee shall determine and
designate from time to time those persons who are to be granted Stock Options
and whether the particular Stock Options are to be Incentive Stock Options or
Nonstatutory Stock Options, and shall also specify the number of shares covered
by and the option price per share of each Stock Option.  Each Stock Option granted under the Plan
shall be clearly identified as to its status as a Nonstatutory Stock Option or
an Incentive Stock Option.


 


                (e)           The aggregate Fair Market Value
(determined at the time the Stock Option is granted) of the Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
individual during any calendar year (under all plans of the individual’s
employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000.


 


                (f)            A Stock Option shall be exercisable
during such period or periods and in such installments as shall be fixed by the
Committee at the time the Stock Option is granted or in any amendment thereto;
but each Stock Option shall expire not later than ten years from the Granting
Date.


 


                (g)           The Committee shall have the
authority to grant both transferable Stock Options and nontransferable Stock
Options, and to amend outstanding nontransferable Stock Options to provide for
transferability.  Each nontransferable Stock
Option intended to qualify under Rule 16b-3 or otherwise shall provide by its
terms that it is not transferable otherwise than by will or the laws of descent
and distribution or, except in the case of Incentive Stock Options, incident to
a divorce (to the extent permitted by the applicable regulations governing
Incentive Stock Options), and is exercisable, during the Grantee’s lifetime,
only by the Grantee.  Each transferable
Stock Option may provide for such limitations on transferability and exercisability
as the Committee may designate at the time a Stock Option is granted or is
otherwise amended to provide for transferability (e.g., by limiting
transferability to family members).


 


                (h)           Stock Options may be granted to a
Grantee who has previously received Stock Options or other options whether such
prior Stock Options or other options are still outstanding, have previously
been exercised or surrendered in whole or in part, or are canceled in
connection with the issuance of new Stock Options.


 


                (i)            Without in any way limiting the
authority of the Committee to make grants of Stock Options under the Plan, and
in order to induce persons to retain ownership of Stock, the Committee shall
have the authority (but not the obligation) to include within any agreement
reflecting a Stock Option a provision entitling the Grantee of such a Stock
Option to a further Stock Option (a “Progressive Stock Option”) in the event
the Grantee exercises such Stock 


 


 


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Option evidenced by such agreement, in whole or in part, by
surrendering other shares of Stock in accordance with this Plan and the terms
and conditions of such agreement.  Any
such Progressive Stock Option shall be for a number of shares of Stock equal to
the number of surrendered shares, shall become exercisable no sooner than six
months after the Granting Date of the Stock Option or such longer period as the
Committee may establish, shall have an exercise price per share equal to one
hundred percent (100%) of the Fair Market Value of a share of Stock on the
Granting Date of the Progressive Stock Option, and shall be subject to such
other terms and conditions as the Committee may determine.


 


(j)            Notwithstanding
the foregoing, the option price of an Incentive Stock Option in the case of a
Grantee who owns more than ten percent of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries, will not be
less than one-hundred-ten percent (110%) of the Fair Market Value of the Stock
at the Granting date and in the case of such a Grantee, the Incentive Stock
Option may be exercised no more than five years after the Granting Date.


 


SECTION 6. 
EXERCISE OF STOCK OPTIONS


 


                (a)           Each option shall be exercisable as
provided in the applicable option agreement.


 


                (b)           The Grantee shall pay the exercise
price in full on the Date of Exercise of a Stock Option in cash, by check, or
by delivery of full shares of Stock of the Company, duly endorsed for transfer
to the Company with signature guaranteed,  by any combination thereof or by such other
mode of payment as the Committee may approve, including payment through a
broker in accordance with procedures permitted by rules and regulations of the
Federal Reserve Board.  Stock will be
accepted at its Fair Market Value on the Date of Exercise.


 


                (c)           With respect to non-Employee
Participants, the Board shall determine and specify in the applicable option
agreement the consequences, if any, of the termination of the Participant’s
relationship with the Company.


 


                (d)           The exercise of options by Grantees
is subject to the provisions of Section 9.


 


                (e)           If approved by the Committee, and
except to the extent that the Option is an Option to purchase Restricted Stock,
consideration may be paid by the Participant’s (i) irrevocable instructions to
the Company to deliver the Shares issuable upon exercise of the Option promptly
to a broker (acceptable to the Company) for the Participant’s account, and (ii)
an irrevocable instructions letter to such broker to sell Shares sufficient to
pay the exercise price and upon such sale to deliver the exercise price to the
Company, provided that, at the time of such exercise, this form of exercise
would not subject the Participant to liability under Section 16(b) of the
Exchange Act or would be exempt pursuant to Rule 16b-3 promulgated under the
Exchange Act or any other exemption from such liability.  The Company shall deliver an acknowledgement
to the broker upon receipt of instructions to deliver the Shares, and the
Company shall deliver the Shares to such broker upon the settlement date.  Upon receipt of the Shares from the Company,
the broker shall deliver to the Company cash sale proceeds sufficient to cover
the exercise price.  Shares acquired by a
cashless exercise shall be deemed to have a 


 


 


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Fair Market Value on the Option exercise date equal to the gross sales
price at which the broker sold the Shares to pay the exercise price.


 


 


SECTION 7.  STOCK APPRECIATION RIGHTS


 


                (a)           The
Committee may grant to any Participant Stock Appreciation Rights in connection
with any Stock Option.


 


                (b)           Stock Appreciation Rights shall be
exercisable at such times and to the extent that the related Stock Option shall
be exercisable and only to the extent the Stock Appreciation Right has a
positive value, unless the Committee specifies a more restrictive period.


 


                (c)           Upon the exercise of a Stock
Appreciation Right, the Grantee shall surrender the related Stock Option or a
portion thereof and shall be entitled to receive payment of an amount
determined by multiplying the number of shares as to which the Stock Option
rights are surrendered by the difference obtained by subtracting the exercise
price per share of the related Stock Option from the Fair Market Value of a
share of Stock on the Date of Exercise of the Stock Appreciation Right.


 


                (d)           Payment of the amount determined
under Section 7(c) shall be made in Stock, in cash, or partly in cash and
partly in Stock as the Committee shall determine in its sole discretion.


 


                (e)           Except as provided in Section 10(b),
the exercise of a Stock Appreciation Right for cash may be made only during the
period beginning on the third business day following the release of quarterly
or annual financial data and ending on the twelfth business day following such
date.


 


SECTION 8. 
PERFORMANCE OBJECTIVES


 


                (a)           The Committee may make any Awards
under this Plan contingent upon Performance Objectives.  Any Performance Objective shall relate to the
Participant’s performance for the Company or to the Company’s business
activities or organizational goals, and shall be sufficiently specific that a
third party having knowledge of the relevant facts could determine whether the
Performance Objective is achieved.  The
Performance Objectives with respect to any Award may be one or more of the
General Financial and/or Operational Objectives set forth on Schedule A
of this Plan.


 


                (b)           (i) All Awards Stock that are
intended to qualify as “performance-based compensation” under Section 162(m) of
the Code shall comply with the provisions of Section 8(b)(i) - (v), in addition
to those of Section 8(a).


 


                (ii)           The list of possible Performance
Objectives set forth in Schedule A and the other material terms of Awards of
Restricted Stock that are intended to qualify as “performance-based 


 


 


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compensation” under Section 162(m) of the Code, shall be subject to
reapproval by the Company’s stockholders at the first stockholder meeting that
occurs in          (1).  No Award of Restricted Stock that is intended
to qualify as “performance-based compensation” under Section 162(m) of the Code
shall be made after that meeting unless stockholders have reapproved the list
of Performance Objectives and other material terms of such Awards, or unless
the vesting of the Award is made contingent on stockholder approval of the
Performance Objectives and other material terms of such Awards.


 


                (iii)          The Committee shall, at the time it
establishes the Performance Objectives, specify the period over which the
Performance Objectives relate.  The
establishment of the actual Performance Objectives and, if an Award of
Restricted Stock is based on more than one Performance Objective, the relative
weighting of such criteria, shall be at the sole discretion of the Committee; provided, however, that
with respect to any Award, the Performance Objectives shall be set forth in
writing no later than 90 days after commencement of the period to which the
Performance Objective(s) relate(s) (or before 25% of such period has elapsed if
the period to which the Performance Objectives relate is less than six months
long) and at a time when achievement of the Performance Objectives is
substantially uncertain.  Such writing
shall also include the period for measuring achievement of the Performance
Objectives, which shall be no greater than five consecutive years, as
established by the Committee.  Once
established by the Committee, the Performance Objective(s) may not be changed
to accelerate the settlement of an Award or to accelerate the lapse or removal
of restrictions on Restricted Stock that otherwise would be due upon the
attainment of the Performance Objective(s).


 


                (iv)          Prior to settlement of any Award that
is contingent on achievement of one or more Performance Objectives, the
Committee shall certify in writing that the applicable Performance Objective(s)
and any other material terms of the Award were in fact satisfied.  For purposes of this Section 8(d), approved
minutes of the Committee shall be adequate written certification.


 


(v)           The
Committee may reduce, but may not increase, the number of Shares deliverable or
the amount payable under any Award after the applicable Performance Objectives
are satisfied.


 


SECTION 9. 
TERMINATION OF EMPLOYMENT


 


                Except
as otherwise provided by the Committee at the time the Stock Option is granted
or any amendment thereto, if a Grantee ceases to be an Employee then:


 


                (a)           except as provided in Sections 9(c)
and (d) and subject to the provisions of Section 9(e), if termination of
employment is voluntary or involuntary without Cause, the Grantee may exercise
each Stock Option held by the Grantee within three months after such
termination (but not after the expiration date of the Stock Option) to the
extent of the number of 


 










(1)  The first
meeting of stockholders at which directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which the
IPO occurs.


 


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shares subject to the Stock Option which are purchasable pursuant to
its terms at the date of termination;


 


                (b)           if termination is for Cause, all
Stock Options held by the Grantee shall be canceled as of the date of termination;


 


                (c)           subject to the provisions of Section
9(d), if termination is (i) by reason of Retirement, or (ii) by reason of
Disability, each Stock Option held by the Grantee may be exercised by the
Grantee at any time (but not after the expiration date of the Stock Option and
within one year of termination in the case of Incentive Stock Options) to the
extent of the number of shares subject to the Stock Option which were
purchasable pursuant to its terms at the date of termination;


 


                (d)           if termination is by reason of the
death of the Grantee, or if the Grantee dies after Retirement or Disability as
referred to in Section 9(c), each Stock Option held by the Grantee may be
exercised by the Grantee’s estate, or by any person who acquires the right to
exercise the Stock Option by reason of the Grantee’s death, at any time within
a period of three years after death (but not after the expiration date of the
Stock Option) to the extent of the total number of shares subject to the Stock
Option which were purchasable pursuant to its terms at the date of termination;
or


 


                (e)           if the Grantee should die within
three months after voluntary termination of employment or involuntary
termination without Cause, as contemplated in Section 9(a), each Stock Option
held by the Grantee may be exercised by the Grantee’s estate, or by any person
who acquires the right to exercise by reason of the Grantee’s death, at any
time within a period of one year after death (but not after the expiration date
of the Stock Option) to the extent of the number of shares subject to the Stock
Option which were purchasable pursuant to its terms at the date of termination.


 


SECTION 10. 
ADJUSTMENTS


 


                In the event of
any merger, consolidation, reorganization, recapitalization, stock dividend,
stock split or other change in the corporate structure or capitalization
affecting the Stock, there shall be an appropriate adjustment made by the
Committee in the number and kind of shares that may be granted in the aggregate
and to Grantees under the Plan, the number and kind of shares subject to each
outstanding Stock Option and Stock Appreciation Right and the option prices.


 


SECTION 11.  TENDER OFFER; CHANGE IN CONTROL


 


                (a)           Upon
the occurrence of a Reorganization Event, subject to subsection (b) below, each
outstanding Award (excluding grants of Restricted Stock as to which the
Participant has elected at the time of grant not to have acceleration upon a
Reorganization Event) shall, upon consummation of such Reorganization Event,
either be assumed or an equivalent exercisable or unrestricted award
substituted by the successor corporation or a parent corporation or Subsidiary
of the successor corporation.  If any
such Award is assumed in accordance with this subsection 


 


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(a) and, within eighteen
(18) months after the Reorganization Event, the Participant is involuntarily
terminated from employment with the Company without Cause or leaves the Company
With Good Reason, than such assumed Award shall become exercisable in full (or
free from restrictions) as of the date of such termination or diminution.


(b)                   In the event that the
successor corporation does not assume the Award or an equivalent Award is not
substituted, then the Committee shall, upon written or electronic notice to
each Participant, provide that one of the following will occur with respect to
each outstanding Award: (i) some or all Awards will become exercisable in full
(or free from restrictions) as of a specified time prior to the Reorganization
Event and will terminate immediately prior to the consummation of such
Reorganization Event, except to the extent exercised or sold by the
Participants prior to the consummation of the Reorganization Event; or (ii) all
outstanding Awards will terminate upon consummation of such Reorganization
Event and each Participant will receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (x) the amount payable in the
Reorganization Event with respect to a share of Stock multiplied by the number
of shares of Stock subject to such outstanding Awards exceeds (y) the aggregate
exercise price of such Awards, or (iii) if the Company’s stock is still
publicly traded, the Awards shall remain in place unchanged.


(c)                   For the purposes of this
Section 11, the Award shall be considered assumed if, following consummation of
the Reorganization Event, the Award confers the right to purchase or receive,
for each share of Stock subject to the Award immediately prior to the
Reorganization Event, the consideration (whether stock, cash, or other
securities or property) received in the Reorganization Event by holders of
Stock for each share of Stock held immediately prior to the consummation of the
Reorganization Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding shares of Stock immediately prior to consummation of the
Reorganization Event).  If such
consideration received in the Reorganization Event is not solely common stock
of the successor corporation or a parent corporation or Subsidiary thereof,
then the Committee may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Award for each
share of Stock subject to the Award to be solely common stock of the successor
corporation or a parent corporation or Subsidiary thereof equal in fair market
value to the per share consideration received by holders of Stock in the
Reorganization Event, and in such case such Awards shall be considered assumed
for the purposes of this Section 11.


(d)                   The Committee shall also have
full power and authority, exercisable either at the time the Award is granted
or at any time while the Award remains outstanding, to structure such Award so
that the shares subject to that Award that automatically vest and become free
of all restrictions on an accelerated basis as provided in Section 11(a) shall,
upon a Qualifying Termination of Employment remain exercisable until the earlier
of (i) the expiration of the Award term or (ii) the expiration of up to a one
(1)-year period measured from the effective date of the termination of
employment of the Employee, at the Committee’s discretion.  For this purpose, a Qualifying Termination of
Employment shall mean an involuntary termination of the Employee’s employment
by the successor corporation or a parent corporation or Subsidiary thereof,
other than for Cause, within a designated period (not to exceed eighteen (18)
months) following the effective date of any Reorganization Event.


 


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SECTION 12. 
GENERAL PROVISIONS


 


                (a)           Each Award shall be evidenced by a
written instrument containing such terms and conditions, not inconsistent with
this Plan, as the Committee shall approve.


 


                (b)           The granting of an Award in any year
shall not give the Participant any right to similar grants in future years or
any right to be retained in the employ of the Company or any Subsidiary or
interfere in any way with the right of the Company or such Subsidiary to
terminate an Employee’s employment at any time.


 


                (c)           The Company shall have the right to
deduct from any payment or distribution under the Plan any federal, state or
local taxes of any kind required by law to be withheld with respect to such
payments or to take such other action as may be necessary to satisfy all
obligations for the payment of such taxes. 
In case distributions are made in shares of Stock, the Company shall
have the right to retain the value of sufficient shares of Stock to equal the
amount of tax to be withheld for such distributions or require a recipient to
pay the Company for any such taxes required to be withheld on such terms and
conditions prescribed by the Committee.


 


                (d)           No Grantee shall have any of the
rights of a shareholder by reason of a Stock Option until it is exercised.


 


                (e)           This Plan shall be construed and
enforced in accordance with the laws of the State of Delaware (without regard
to the legislative or judicial conflict of laws rules of any state), except to
the extent superseded by federal law.


 


SECTION 13. 
AMENDMENT AND TERMINATION


 


                (a)           The Plan shall terminate on the date
that is ten (10) years after the date described in Section 14 and no Award shall be granted hereunder after that date,
provided that the Board may terminate the Plan at any time prior thereto.


 


                (b)           The Board may amend the Plan at any
time without notice, provided however, that the Board may not, without prior
approval by the shareholders, (i) increase the maximum number of shares of
Stock for which Awards may be granted (except as contemplated by the provisions
of Sections 3 and 10), (ii) materially increase the benefits accruing to
Participants under the Plan or (iii) materially modify the requirements as to
eligibility for participation in the Plan.


 


                (c)           No termination or amendment of the
Plan may, without the consent of a Participant to whom an Award shall
theretofore have been granted, adversely affect the rights of such Participant
under such Award.


 


 


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SECTION 14.  EFFECTIVE DATE


                The Plan shall
become effective as of the date it is approved by the Company’s stockholders.


 


SECTION 15. 
RESTRICTED STOCK


(a)           The
Committee may grant Restricted Stock Awards entitling recipients to acquire
shares of Stock, subject to the right of the Company to repurchase all or part
of such shares at their purchase price or at another price specified in the
Award (or to require forfeiture of such shares if purchased at no cost) from the
recipient in the event that conditions specified by the Committee in the
applicable Award are not satisfied prior to the end of the applicable
Restricted Period or Restricted Periods established by the Committee for such
Award.  Conditions for repurchase (or
forfeiture) may be based on continuing employment or service or achievement of
pre-established performance or other goals and objectives.


(b)           Shares
of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as permitted by the Committee during the
applicable Restricted Period.  Shares of
Restricted Stock shall be evidenced in such manner as the Committee may
determine.  Any certificates issued in
respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company
(or its designee).  At the expiration of
the Restricted Period, the Company (or such designee) shall deliver such
certificates to the Participant or if the Participant has died, to the
Participants’ designated beneficiary.


(c)           Restricted
Stock shall be issued for no cash consideration or such minimum consideration
as may be required by applicable law.


(d)           The
Committee may at any time accelerate the expiration of the Restricted Period
applicable to all, or any particular, outstanding shares of Restricted Stock.


(e)           A
Restricted Stock Award is subject to adjustment on the same terms set forth under
Section 10 of the Plan.


(f)            Grants
of Restricted Stock shall accelerate upon a Reorganization Event unless the
Participant elects at the time of grant that the grant not accelerate.


 


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Schedule A


 


I.  General Financial Criteria


 


•                  Increasing the revenue of the Company, an
affiliate or a business unit.


•                  Achieving a target level of earnings
(including gross earnings; earnings before certain deductions, such as
interest, taxes, depreciation, or amortization; or earnings per share).


•                  Achieving a target level of income
(including net income or income before consideration of certain factors, such
as overhead) or a target level of gross profits for the Company, an affiliate,
or a business unit.


•                  Achieving a target return on the Company’s
(or an affiliate’s) capital, assets, or stockholders’ equity.


•                  Increasing the market share of the
Company, an affiliate or a business unit to a specified target level.


•                  Maintaining or achieving a target level
of appreciation in the price of the Company’s shares.


•                  Achieving or maintaining a share price
that meets or exceeds the performance of specified stock market indices or
other benchmarks over a specified period.


•                  Achieving a level of share price,
earnings, or income performance that meets or exceeds performance in comparable
areas of peer companies over a specified period.


•                  Achieving specified reductions in costs.


•                  Achieving specified improvements in
collection of outstanding accounts or specified reductions in non-performing
debts.


 


II.  Operational Criteria


 


•                  Expanding one or more products into one
or more new markets.


•                  Acquiring a prescribed number of new
customers in a line of business.


•                  Achieving a prescribed level of
productivity within a business unit.


•                  Completing specified projects within or
below the applicable budget.


•                  Issuance of patents in U.S. and foreign
countries.


•                  Completion of a financing or
collaboration transaction.


•                  Key hires.


•                  Resolution of legal issues.


•                  Other strategic business criteria including
goals relating to acquisitions or divestitures.


 


 


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