exv4w1



 







Exhibit 4.1




CELL GENESYS, INC.




2005 EQUITY INCENTIVE PLAN




     1. Purposes of the Plan. The purposes of this Plan are:




	 	•	 	to attract and retain the best available personnel for positions of
substantial responsibility,
	 
	 	•	 	to provide incentives to individuals who perform services to the Company, and
	 
	 	•	 	to promote the success of the Company’s business.





          The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted
Stock, SARs, Performance Units, Performance Shares and other stock awards as the Administrator may
determine.




     2. Definitions. As used herein, the following definitions will apply:



          (a) “Administrator” means the Board or any of its Committees as will be administering
the Plan, in accordance with Section 4 of the Plan.




          (b) “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.




          (c) “Award” means, individually or collectively, a grant under the Plan of Options,
Restricted Stock, SARs, Performance Units, Performance Shares and other stock awards as the
Administrator may determine.




          (d) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The Award Agreement is
subject to the terms and conditions of the Plan.




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




          (f) “Cash Position” means as to any Performance Period, the Company’ s level of cash
and cash equivalents, including, without limitation, amounts classified for financial reporting
purposes as short-term investments and restricted investments.




          (g) “Change in Control” means the occurrence of any of the following events:




 









 








               (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities; or



               (ii) The consummation of the sale or disposition by the Company of all or substantially all
of
the Company’s assets; or



               (iii) A change in the composition of the Board occurring within a two-year period, as a
result
of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors”
means directors who either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company); or



               (iv) The consummation of a merger or consolidation of the Company with any other
corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation.



          (h) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a
section of the Code herein will be a reference to any successor or amended section of the Code.




          (i) “Committee” means a committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.




          (j) “Common Stock” means the common stock of the Company.




          (k) “Company” means Cell Genesys, Inc., a Delaware corporation, or any successor
thereto.




          (l) “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.




          (m) “Determination Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based compensation” under Section
162(m) of the Code.




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




          (o) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code, provided that in the case of Awards other than Incentive Stock Options, the
Administrator in its discretion may determine whether a permanent and total disability




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exists in accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.




          (p) “Earnings Per Share” means as to any Performance Period, the Company’s or a
business unit’s Net Income, divided by a weighted average number of Shares outstanding and dilutive
equivalent Shares deemed outstanding, determined in accordance with U.S. GAAP; provided, however,
that if Net Income as to any such Performance Period is a negative amount, then Earnings Per Share
means the Company’s or business unit’s Net Income, divided by a weighted average number of Shares
outstanding, determined in accordance with U.S. GAAP.




          (q) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a
director’s fee by the Company will be sufficient to constitute “employment” by the Company.




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




          (s) “Excluded Items” includes, without limitation, (i) incentive compensation, (ii)
in-process research and development expenses, (iii) acquisition costs, (iv) compensation expense
from equity compensation, (v) operating expenses from acquired businesses, (vi) amortization of
acquired intangible assets, and (vii) such other unusual or one-time items as may be identified by
the Administrator.




          (t) “Fair Market Value” means, as of any date, the value of Common Stock as the
Administrator may determine in good faith.




          (u) “Fiscal Year” means the fiscal year of the Company.




          (v) “Incentive Stock Option” means an Option that by its terms qualifies and is
otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.




          (w) “Inside Director” means a Director who is an Employee.




          (x) “Net Income” means as to any Performance Period, the Company’s or a business
unit’s income after taxes determined in accordance with U.S. GAAP, adjusted for any Excluded Items
approved for exclusion by the Administrator.




          (y) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or
is not intended to qualify as an Incentive Stock Option.




          (z) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.




          (aa) “ Operating Cash Flow” means as to any Performance Period, the Company’s
or a business unit’s cash flow generated from operating activities, as reported in the Company’s
cash flow statements and calculated in accordance with U.S. GAAP, adjusted for any Excluded Items
approved for exclusion by the Administrator.




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          (bb) “Operating Income” means as to any Performance Period, the Company’s or a
business unit’s income from operations determined in accordance with U.S. GAAP, adjusted for any
Excluded Items approved for exclusion by the Administrator.




          (cc)
“Option” means a stock option granted pursuant to the Plan.



          (dd)
“Outside Director” means a Director who is not an Employee.




          (ee) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.




          (ff) “Participant” means the holder of an outstanding Award.




          (gg) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the
Administrator (in its discretion) to be applicable to a Participant with respect to an Award
granted under the Plan. As determined by the Administrator, the Performance Goals applicable to an
Award may provide for a targeted level or levels of achievement using one or more of the following
measures: (a) Cash Position, (b) Earnings Per Share, (c) Net Income, (d) Operating Cash Flow, (e)
Operating Income, (f) Return on Assets, (g) Return on Equity, (h) Return on Sales, (i) Revenue, (j)
Total Shareholder Return, and (k) certain pre-defined corporate milestones related to product
development and other business activities. The Performance Goals may differ from Participant to
Participant and from Award to Award. Prior to the Determination Date, the Administrator will
determine whether any significant element(s) will be included in or excluded from the calculation
of any Performance Goal with respect to any Participant.




          (hh) “Performance Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.




          (ii) “Performance Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 9.




          (jj) “Performance Unit” means an Award which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator may determine and
which may be settled for cash, Shares or other securities or a combination of the foregoing
pursuant to Section 9.




          (kk) “Period of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial
risk of forfeiture. Such restrictions may lapse based on the passage of time, the achievement of
target levels of performance, or the occurrence of other events as determined by the Administrator.




          (ll) “Plan” means this 2005 Equity Incentive Plan.




          (mm) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under
Section 7 of the Plan, or issued pursuant to the early exercise of an Option.




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          (nn) “Return on Assets” means as to any Performance Period, the percentage equal to
the Company’s or a business unit’s Operating Income divided by average net Company or business
unit, as applicable, assets, determined in accordance with U.S. GAAP.




          (oo) “Return on Equity” means as to any Performance Period, the percentage equal to
the Company’s Net Income divided by average stockholder’s equity, determined in accordance with
U.S. GAAP.




          (pp) “Return on Sales” means as to any Performance Period, the percentage equal to the
Company’s or a business unit’s Operating Income divided by the Company’s or the business unit’s, as
applicable, Revenue.




          (qq) “Revenue” means as to any Performance Period, the Company’s or business unit’s
net sales, determined in accordance with U.S. GAAP.




          (rr) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.




          (ss)
“Section 16(b)” means Section 16(b) of the Exchange Act.



          (tt)
“Service Provider” means an Employee, Director or Consultant.




          (uu) “Share” means a share of the Common Stock, as adjusted in accordance with Section
14 of the Plan.




          (vv) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with an Option, that pursuant to Section 8 is designated as a SAR.




          (ww) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code.




          (xx) “Total Shareholder Return” means as to any Performance Period, the total return
(change in share price plus reinvestment of any dividends) of a Share.




          (yy) “U.S. GAAP” means generally accepted accounting principles in the United States.




     3. Stock Subject to the Plan.



          (a) Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan,
the maximum aggregate number of Shares that may be awarded and sold under the Plan is 1,000,000
plus (a) such number of Shares which have been reserved but not issued under the Company’s 1998
Stock Plan (the “1998 Plan”) as of the date the Plan is approved by the stockholders of the
Company, plus any Shares returned to the 1998 Plan thereafter as a result of termination of options
or repurchase of Shares issued under such plan, (b) such number of Shares which have been reserved
but not issued under the Company’s 2001 Nonstatutory Stock Option Plan (the “2001 Plan”) as of the
date the Plan is approved by the stockholders of the Company, plus any Shares returned to the 2001
Plan thereafter as a result of termination of options or repurchase of Shares issued under such



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plan, and (c) such number of Shares which have been reserved but not issued under the
Company’s 2001 Director Option Plan (the “2001 Director Plan”) as of the date the Plan is approved
by the stockholders of the Company, plus any Shares returned to the 2001 Director Plan thereafter
as a result of termination of options or repurchase of Shares issued under such plan. The Shares
may be authorized, but unissued, or reacquired Common Stock. Shares shall not be deemed to have
been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash.
Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for
issuance under the Plan shall be reduced only by the number of Shares actually issued in such
payment. If the exercise price of an Option is paid by tender to the Company, or attestation to
the ownership, of Shares owned by the Participant, the number of Shares available for issuance
under the Plan shall be reduced by the gross number of Shares for which the Option is exercised.
The Shares may be authorized, but unissued, or reacquired Common Stock.




          (b) Lapsed Awards. If an Award expires or becomes unexercisable without having been
exercised in full or, with respect to Restricted Stock, Performance Shares or Performance Units, is
forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than
Options and SARs, the forfeited or repurchased Shares) which were subject thereto will become
available for future grant or sale under the Plan (unless the Plan has terminated). With respect
to SARs, only Shares actually issued pursuant to an SAR will cease to be available under the Plan;
all remaining Shares under SARs will remain available for future grant or sale under the Plan
(unless the Plan has terminated). However, Shares that have actually been issued under the Plan
under any Award will not be returned to the Plan and will not become available for future
distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock,
Performance Shares or Performance Units are repurchased by the Company or are forfeited to the
Company, such Shares will become available for future grant under the Plan. To the extent an Award
under the Plan is paid out in cash rather than Shares, such cash payment will not result in
reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing
and, subject to adjustment provided in Section 14, the maximum number of Shares that may be issued
upon the exercise of Incentive Stock Options shall equal the aggregate Share number stated in
Section 3(a), plus, to the extent allowable under Section 422 of the Code, any Shares that become
available for issuance under the Plan under this Section 3(b).




          (c) Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to satisfy the requirements
of the Plan.




     4. Administration of the Plan.



          (a) Procedure.




               (i) Multiple Administrative Bodies. Different Committees with respect to different
groups of Service Providers may administer the Plan.



               (ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code.



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               (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt
under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the
requirements for exemption under Rule 16b-3.



               (iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy
Applicable Laws.



          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:




               (i) to determine the Fair Market Value;



               (ii) to select the Service Providers to whom Awards may be granted hereunder;



               (iii) to determine the terms and conditions, not inconsistent with the terms of the Plan, of
any Award granted hereunder;



               (iv) to approve forms of agreement for use under the Plan;



               (v) to modify or amend each Award (subject to Section 19(c) of the Plan). Notwithstanding
the
previous sentence, the Administrator may not modify or amend an Option or SAR to reduce the
exercise price of such Option or SAR after it has been granted (except for adjustments made
pursuant to Section 14), unless approved by the Company’s stockholders and neither may the
Administrator, without the approval of the Company’s stockholders, cancel any outstanding Option or
SAR and immediately replace it with a new Option or SAR with a lower exercise price;



               (vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan;



               (vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws;



               (viii) to authorize any person to execute on behalf of the Company any instrument required
to
effect the grant of an Award previously granted by the Administrator;



               (ix) to allow a Participant to defer the receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award pursuant to such procedures
as the Administrator may determine;



               (x) to grant, in addition to the incentives described in Sections 6, 7, 8 and 9 below,
other
incentives payable in cash or Shares under the Plan as determined by the Administrator to be in the
best interests of the Company and subject to any terms and conditions the Administrator deems
advisable; and



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               (xi) to make all other determinations deemed necessary or advisable for administering the
Plan.



          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations will be final and binding on all Participants and any other holders of Awards.




     5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock Appreciation
Rights, Performance Units, Performance Shares and such stock awards as the Administrator determines
may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.



     6. Stock Options.



          (a) Limitations.




               (i) Each Option will be designated in the Award Agreement as either an Incentive Stock
Option
or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
will be determined as of the time the Option with respect to such Shares is granted.



               (ii) The following limitations will apply to grants of Options:



                    (1) No Service Provider will be granted, in any Fiscal Year,
Options to purchase more than
500,000 Shares.



                    (2) In connection with his or her initial service, a Service
Provider may be granted Options
to purchase up to an additional 1,500,000 Shares, which will not count against the limit set forth
in Section 6(a)(ii)(1) above.



                    (3) The foregoing limitations will be adjusted proportionately
in connection with any change
in the Company’s capitalization as described in Section 14.



                    (4) If an Option is cancelled in the same Fiscal Year in which
it was granted (other than in
connection with a transaction described in Section 14), the cancelled Option, as applicable, will
not be counted against the limits set forth in subsections (1) and (2) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated as a cancellation of
the Option and the grant of a new Option and/or Stock Appreciation Right, as applicable.



                    (5) The exercise price for an Option may not be reduced
without the consent of the Company’s
stockholders. This will include, without limitation, a repricing of the Option as well as an
Option exchange program whereby the Participant agrees to cancel an existing Option in exchange for
an Option, SAR or other Award.



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          (b) Term of Option. The Administrator will determine the term of each Option in its
sole discretion. In the case of an Incentive Stock Option, the term will be ten (10) years from
the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the
case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option will be five (5) years from the date of grant or such shorter term as may be provided
in the Award Agreement.




          (c) Option Exercise Price and Consideration.




               (i) Exercise Price. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option will be determined by the Administrator, subject to the following:



                    (1) In the case of an Incentive Stock Option



                         a) granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair
Market Value per Share on the date of grant.



                         b) granted to any Employee other than
an Employee described in paragraph (A) immediately
above, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on
the date of grant.



                    (2) In the case of a Nonstatutory Stock Option, the per Share
exercise price will be
determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share
on the date of grant.



                    (3) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of
less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction
described in, and in a manner consistent with, Section 424(a) of the Code.



               (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and will determine any
conditions that must be satisfied before the Option may be exercised.



               (iii) Form of Consideration. The Administrator will determine the acceptable form(s)
of consideration for exercising an Option, including the method of payment, to the extent permitted
by Applicable Laws.



          (d) Exercise of Option.




               (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
will be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. An Option may not be
exercised for a fraction of a Share.



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               An Option will be deemed exercised when the Company receives: (i) notice of exercise (in
such
form as the Administrator may specify from time to time) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is exercised
(together with an applicable withholding taxes). No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.



               (ii) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, other than upon the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for three (3) months
following the Participant’s termination. Unless otherwise provided by the Administrator, if on the
date of termination the Participant is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified by the Administrator, the
Option will terminate, and the Shares covered by such Option will revert to the Plan.



               (iii) Disability of Participant. If a Participant ceases to be a Service Provider as
a result of the Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term of such Option as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
will revert to the Plan. If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.



               (iv) Death of Participant. If a Participant dies while a Service Provider, the Option
may be exercised following the Participant’s death within such period of time as is specified in
the Award Agreement to the extent that the Option is vested on the date of death (but in no event
may the option be exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has
been designated prior to Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the
personal representative of the Participant’s estate or by the person(s) to whom the Option is
transferred pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the
Administrator, if at the time of death Participant is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If
the Option is not so exercised within the time specified herein, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.



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     7. Restricted Stock.



          (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the
Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service
Providers in such amounts as the Administrator, in its sole discretion, will determine.




          (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by
an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and
such other terms and conditions as the Administrator, in its sole discretion, will determine.
Notwithstanding the foregoing, during any Fiscal Year no Participant will receive more than an
aggregate of 150,000 Shares of Restricted Stock; provided, however, that in connection with a
Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an
additional 250,000 Shares of Restricted Stock. Unless the Administrator determines otherwise,
Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on
such Shares have lapsed.




          (c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.




          (d) Other Restrictions. The Administrator, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.




          (e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares
of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released
from escrow as soon as practicable after the last day of the Period of Restriction. The
Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or
be removed.




          (f) Voting Rights. During the Period of Restriction, Service Providers holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless the Administrator determines otherwise.




          (g) Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the Award Agreement.
If any such dividends or distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect
to which they were paid.




          (h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company
and again will become available for grant under the Plan.




          (i) Section 162(m) Performance Restrictions. For purposes of qualifying grants of
Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the Determination

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Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the
Code, the Administrator will follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code
(e.g., in determining the Performance Goals).




     8. Stock Appreciation Rights.



          (a) Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be
granted to Service Providers at any time and from time to time as will be determined by the
Administrator, in its sole discretion.




          (b) Number of Shares. The Administrator will have complete discretion to determine
the number of SARs granted to any Participant, provided that during any Fiscal Year, no Participant
will be granted SARs covering more than 500,000 Shares. Notwithstanding the foregoing limitation,
in connection with a Participant’s initial service as an Employee, an Employee may be granted SARs
covering up to an additional 1,500,000 Shares.




          (c) Exercise Price and Other Terms. The Administrator, subject to the provisions of
the Plan, will have complete discretion to determine the terms and conditions of SARs granted under
the Plan. In the case of a freestanding SAR, the exercise price will be not less than 100% of the
Fair Market Value of a Share on the date of grant. The exercise price of a tandem or affiliated
SARs will equal the exercise price of the related Option.




          (d) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will
specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Administrator, in its sole discretion, will determine.




          (e) Expiration of SARs. A SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.
Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs.




          (f) Payment of SAR Amount. Upon exercise of a SAR, a Participant will be entitled to
receive payment from the Company in an amount determined by multiplying:




               (i) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times



               (ii) The number of Shares with respect to which the SAR is exercised.


At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.




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     9. Performance Units and Performance Shares.



          (a) Grant of Performance Units/Shares. Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have complete discretion in
determining the number of Performance Units/Shares granted to each Participant provided that during
any Fiscal Year, (a) no Participant will receive Performance Units having an initial value greater
than $500,000 and (b) no Participant will receive more than 150,000 Performance Shares.
Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as an
Employee, an Employee may be granted up to an additional 250,000 Performance Shares.




          (b) Value of Performance Units/Shares. Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of grant. Each Performance
Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.




          (c) Performance Objectives and Other Terms. The Administrator will set performance
objectives or other vesting provisions (including, without limitation, continued status as a
Service Provider) in its discretion which, depending on the extent to which they are met, will
determine the number or value of Performance Units/Shares that will be paid out to the Participant.
Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify
the Performance Period, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.




               (i) General Performance Objectives. The Administrator may set performance objectives
based upon the achievement of Company-wide, divisional, or individual goals, or any other basis
determined by the Administrator in its discretion.



               (ii) Section 162(m) Performance Objectives. For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may determine that the performance objectives applicable to
Performance Units/Shares will be based on the achievement of Performance Goals. The Administrator
will set the Performance Goals on or before the Determination Date. In granting Performance
Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will
follow any procedures determined by it from time to time to be necessary or appropriate to ensure
qualification of the Performance Units/Shares under Section 162(m) of the Code (e.g., in
determining the Performance Goals).



          (d) Earning of Performance Units/Shares. After the applicable Performance Period has
ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of
Performance Units/Shares earned by the Participant over the Performance Period, to be determined as
a function of the extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in
its sole discretion, may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share.





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          (e) Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made as soon as practicable after the expiration of the applicable
Performance Period. The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.




          (f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and
again will be available for grant under the Plan.




     10. Other Stock Awards. In addition to the incentives described in Sections 6 through
9 above, the Administrator may grant other incentives payable in Shares or cash under the Plan as
it determines to be in the best interests of the Company and subject to such other terms and
conditions as it deems appropriate.



     11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards
granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will
not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent, or any Subsidiary.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3)
months following the 91st day of such leave any Incentive Stock Option held by the Participant will
cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.



     12. Transferability of Awards. Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.



     13. Awards to Outside Directors




          (a) General. Outside Directors will be entitled to receive all types of Awards under
this Plan, including discretionary Awards not covered under this Section 13. All grants of Options
to Outside Directors pursuant to this Section will be automatic and nondiscretionary, except as
otherwise provided herein, and will be made in accordance with the following provisions:




          (b) Granting of Awards.




               (i) First Option. Each Outside Director who becomes an Outside Director after the
effective date of this Plan will be automatically granted a Nonstatutory Stock Option to purchase
30,000 Shares (the “First Option”) on the date on which such person first becomes an Outside
Director, whether through election by the stockholders of the Company or appointment by the Board
to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director will not receive a First Option.



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               (ii) Subsequent Option. Each Outside Director will be automatically granted an Option
to purchase 7,500 Shares (a “Subsequent Option”) on June 30 of each year provided he or she is then
an Outside Director and if, as of such date, he or she shall have served on the Board as an Outside
Director for at least the preceding twelve (12) months.



          (c) Terms of Options. The terms of First Options and Subsequent Options granted
hereunder will be as follows:




               (i) the term of each Option will be ten (10) years.



               (ii) the exercise price per Share will be 100% of the Fair Market Value per Share on the
date
of grant. In the event that the date of grant is not a trading day, the exercise price per Share
will be the Fair Market Value on the next trading day immediately following the date of grant.



               (iii) 25% of the Shares subject to the First Option will vest twelve (12) months after
the
date of grant, and 1/48 of the Shares subject to the First Option will vest each month thereafter
so that 100% of the Shares subject to the First Option will be vested four (4) years from the grant
date, subject to the Outside Director remaining on through each such vesting date.



               (iv) the Subsequent Option shall become exercisable as to 100% of the Shares subject to the
Subsequent Option on date of grant, provided that the Outside Director continues to serve as a
Director on such date.



          (d) In the event that any Option granted under the Plan would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased under Awards to
exceed the maximum number of shares that may be awarded and sold under the Plan, then the remaining
Shares available for grant shall be granted under Options to the Outside Directors on a pro rata
basis. No further grants shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the stockholders to increase the
number of Shares which may be issued under the Plan or through cancellation or expiration of Awards
previously granted hereunder.




     14. Adjustments; Dissolution or Liquidation; Merger or Change in Control.



          (a) Adjustments. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Shares or other securities of the Company, or other change in the corporate structure
of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or
enlargement of the benefits or potential benefits intended to be made available under the Plan, may
(in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan
and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical
Share limits set forth in Sections 3, 6, 7, 8 and 9.




          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as soon as practicable




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prior to the effective date of such proposed transaction. To the extent it has not been
previously exercised, an Award will terminate immediately prior to the consummation of such
proposed action.




          (c) Change in Control. In the event of a Change in Control, each outstanding Award
will be assumed or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the Award, the Participant will fully vest in and have the
right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including
Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on
Restricted Stock will lapse, and, with respect to Performance Shares and Performance Units, all
Performance Goals or other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met. In addition, if an Option or Stock Appreciation Right becomes fully
vested and exercisable in lieu of assumption or substitution in the event of a Change in Control,
the Administrator will notify the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of time determined by the
Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate
upon the expiration of such period.




          With respect to Awards granted to Outside Directors that are assumed or substituted for, if on
the date of or following such assumption or substitution the Participant’s status as a Director or
a director of the successor corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then the Participant will fully vest in and have the right to
exercise Options and/or Stock Appreciation Rights as to all of the Shares subject thereto,
including Shares as to which such Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Stock will lapse, and, with respect to Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at
target levels and all other terms and conditions met.




          For the purposes of this Section 14(c), an Award will be considered assumed if, following the
Change in Control, the Award confers the right to purchase or receive, for each Share subject to
the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or
other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the consideration received in
the merger or Change in Control by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of an Option or Stock
Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share
subject to such Award (or in the case of Performance Units, the number of implied shares determined
by dividing the value of the Performance Units by the per share consideration received by holders
of Common Stock in the Change in Control), to be solely common stock of the successor corporation
or its Parent equal in fair market value to the per share consideration received by holders of
Common Stock in the Change in Control.




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          Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed
if the Company or its successor modifies any of such Performance Goals without the Participant’s
consent; provided, however, a modification to such Performance Goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to invalidate an
otherwise valid Award assumption.




     15. Tax Withholding



          (a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company will have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, local, foreign or other taxes (including the Participant’s FICA obligation)
required to be withheld with respect to such Award (or exercise thereof).




          (b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant
to such procedures as it may specify from time to time, may permit a Participant to satisfy such
tax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b)
electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market
Value equal to the amount required to be withheld, (c) delivering to the Company already-owned
Shares having a Fair Market Value equal to the amount required to be withheld, or (d) selling a
sufficient number of Shares otherwise deliverable to the Participant through such means as the
Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to
the amount required to be withheld. The amount of the withholding requirement will be deemed to
include any amount which the Administrator agrees may be withheld at the time the election is made,
not to exceed the amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date that the amount of
tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or
delivered will be determined as of the date that the taxes are required to be withheld.




     16. No Effect on Employment or Service. Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor will they interfere in any way with the Participant’s right or the
Company’s right to terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.



     17. Date of Grant. The date of grant of an Award will be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is determined by the Administrator. Notice of the determination will be provided to each
Participant within a reasonable time after the date of such grant.



     18. Term of Plan. Subject to Section 22 of the Plan, the Plan will become effective
upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless
terminated earlier under Section 19 of the Plan.



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     19. Amendment and Termination of the Plan.



          (a) Amendment and Termination. The Administrator may at any time amend, alter,
suspend or terminate the Plan.




          (b) Stockholder Approval. The Company will obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.




          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and signed by the
Participant and the Company. Termination of the Plan will not affect the Administrator’s ability
to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior
to the date of such termination.




     20. Conditions Upon Issuance of Shares.



          (a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares will comply with
Applicable Laws and will be further subject to the approval of counsel for the Company with respect
to such compliance.




          (b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.




     21. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.



     22. Stockholder Approval. The Plan will be subject to approval by the stockholders of
the Company within twelve (12) months after the date the Plan is adopted. Such stockholder
approval will be obtained in the manner and to the degree required under Applicable Laws.




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