**Exhibit 10.1**

**SECOND AMENDMENTAND RESTATEMENT OF THE 2001 INCENTIVE AWARD PLAN OFWATSON PHARMACEUTICALS, INC.**

Watson Pharmaceuticals, Inc., a Nevada**corporation, adopted the 2001 Incentive Award Plan ofWatson Pharmaceuticals, Inc. (the “*Plan*”),effective as of February 12, 2001 (the “*EffectiveDate*”), for the benefit of its eligible Employees, Consultants andDirectors. The Plan was subsequently amended effective as of May 16, 2001,May 19, 2003, and August 4, 2003, May 13, 2005, and November 3,2006.

The Plan is hereby amended and restated in itsentirety to provide for certain additional types of awards to eligibleEmployees, Consultants and Directors. This amendment and restatement of thePlan is effective as of May 4, 2007, subject to the approval of thisamendment and restatement of the Plan by the stockholders of the Company.Awards authorized under this amendment and restatement of the Plan that werenot authorized under the Plan (as in effect prior to this amendment andrestatement) shall not be granted unless and until this amendment andrestatement of the Plan is so approved. If this amendment and restatement ofthe Plan is not so approved, this amendment and restatement of the Plan shallbe null and void and of no further force and effect, and the Plan (as in effectprior to such amendment and restatement) shall continue in full force andeffect in accordance with the terms and conditions thereof.

The purposes ofthe Plan are as follows:

(1)           Toprovide an additional incentive for Directors, key Employees and Consultants(as such terms are defined below) to further the growth, development andfinancial success of the Company by personally benefiting through the ownershipof Company stock and/or rights which recognize such growth, development andfinancial success.

(2)           Toenable the Company to obtain and retain the services of Directors, keyEmployees and Consultants considered essential to the long range success of theCompany by offering them an opportunity to own stock in the Company and/orrights which will reflect the growth, development and financial success of theCompany.

**ARTICLE I.DEFINITIONS**

Wherever thefollowing terms are used in the Plan they shall have the meanings specifiedbelow, unless the context clearly indicates otherwise. The singular pronounshall include the plural where the context so indicates.

1.1.          “*Administrator*” shall mean the entity that conducts thegeneral administration of the Plan as provided herein. With reference to theadministration of the Plan with respect to Awards granted to IndependentDirectors, the term “Administrator” shall refer to the Board. With reference tothe administration of the Plan with respect to any other Award, the term “Administrator”shall refer to the Committee unless the Board has assumed the authority foradministration of the Plan generally as provided in Section 11.1. Withreference to the duties of the Committee under the Plan which have beendelegated to one or more persons pursuant to Section 11.5, the term “Administrator”shall refer to such person(s) unless the Committee or the Board hasrevoked such delegation.

1.2.          “*Award*” shall mean an Option, a Restricted Stock award, aRestricted Stock Unit award, a Dividend Equivalents award, a Deferred Stockaward, a Stock Payment award or a Stock Appreciation Right, which may beawarded or granted under the Plan (collectively, “*Awards*”).

----

1.3.          “*Award Agreement*” shall mean a written agreement executed byan authorized officer of the Company and the Holder which shall contain suchterms and conditions with respect to an Award as the Administrator shalldetermine, consistent with the Plan.

1.4.          “*Award Limit*”shall mean five hundred thousand (500,000) shares of Common Stock, as adjustedpursuant to Section 12.3; provided, however, that each share ofCommon Stock subject to an Award shall be counted as one share against theAward Limit.

1.5.          “*Board*” shall mean the Board of Directors of the Company.

1.6.          “*Change in Control*” shall mean the occurrence of any of thefollowing:

(a)           asale of assets representing fifty percent (50%) or more of the net book valueand of the fair market value of the Company’s consolidated assets (in a singletransaction or in a series of related transactions);

(b)           aliquidation or dissolution of the Company;

(c)           amerger or consolidation involving the Company or any subsidiary of the Companyafter the completion of which: (i) in the case of a merger (other than atriangular merger) or a consolidation involving the Company, the stockholdersof the Company immediately prior to the completion of such merger orconsolidation beneficially own (within the meaning of Rule 13d-3promulgated under the Exchange Act, or comparable successor rules), directly orindirectly, outstanding voting securities representing less than sixty percent(60%) of the combined voting power of the surviving entity in such merger orconsolidation, and (ii) in the case of a triangular merger involving theCompany or a subsidiary of the Company, the stockholders of the Companyimmediately prior to the completion of such merger beneficially own (within themeaning of Rule 13d-3 promulgated under the Exchange Act, orcomparable successor rules), directly or indirectly, outstanding votingsecurities representing less than sixty percent (60%) of the combined votingpower of the surviving entity in such merger and less than sixty percent (60%)of the combined voting power of the parent of the surviving entity in suchmerger;

(d)           anacquisition by any person, entity or “group” (within the meaning of Section 13(d) or14(d) of the Exchange Act or any comparable successor provisions), otherthan any employee benefit plan, or related trust, sponsored or maintained bythe Company or an affiliate of the Company and other than in a merger orconsolidation of the type referred to in subsection (c), of beneficialownership (within the meaning of Rule 13d-3 promulgated under theExchange Act, or comparable successor rules) of outstanding voting securitiesof the Company representing more than thirty percent (30%) of the combinedvoting power of the Company (in a single transaction or series of relatedtransactions); or

(e)           inthe event that the individuals who, as of the Effective Date, are members ofthe Board (the “*Incumbent Board*”), cease for anyreason to constitute at least fifty percent (50%) of the Board; *provided*, that if the election, or nomination for electionby the Company’s stockholders, of any new member of the Board is approved by avote of at least fifty percent (50%) of the Incumbent Board, such new member ofthe Board shall be considered as a member of the Incumbent Board.

1.7.          “*Code*” shall mean the Internal Revenue Code of 1986, asamended.

1.8.          “*Committee*” shall mean the Compensation Committee of theBoard, or another committee or subcommittee of the Board, appointed as providedin Section 11.1.

1.9.          “*Common Stock*” shall mean the common stock of the Company,par value $0.0033 per share.

1.10.        “*Company*” shall mean Watson Pharmaceuticals, Inc.*,* a Nevada corporation.

-2-

----

1.11.        “*Consultant*” shall mean any consultant or adviser if: (a) theconsultant or adviser renders bona fide services to the Company; (b) theservices rendered by the consultant or adviser are not in connection with theoffer or sale of securities in a capital-raising transaction and do notdirectly or indirectly promote or maintain a market for the Company’ssecurities; and (c) the consultant or adviser is a natural person who hascontracted directly with the Company to render such services.

1.12.        “*Deferred Stock*” shall mean rights to receive Common Stockawarded under Section 8.4 of the Plan.

1.13.        “*Director*” shall mean a member of the Board.

1.14.        “*Dividend Equivalent*” shall mean a right to receive theequivalent value (in cash or Common Stock) of dividends paid on Common Stock,awarded under Section 8.2 of the Plan.

1.15.        “*DRO*” shall mean a domestic relations order as defined by theCode or Title I of the Employee Retirement Income Security Act of 1974, asamended, or the rules thereunder.

1.16.        “*Employee*” shall mean any officer or other employee (asdefined in accordance with Section 3401(c) of the Code) of theCompany, or of any corporation which is a Subsidiary.

1.17.        “*Exchange Act*” shall mean the Securities Exchange Act of1934, as amended.

1.18.        “*Fair Market Value*”means, as of any date, the value of a share of Common Stock determined as follows:

(a)           Ifthe Common Stock is listed on any established stock exchange (such as the NewYork Stock Exchange, the NASDAQ Global Market and the NASDAQ Global SelectMarket) or any national market system, including without limitation any marketsystem of The NASDAQ Stock Market, the value of a share of Common Stock shallbe the closing sales price for a share of Common Stock as quoted on suchexchange or system for such date, or if there is no closing sales price for ashare of Common Stock on the date in question, the closing sales price for ashare of Common Stock on the last preceding date for which such quotationexists, as reported in The Wall Street Journal or such other source as theAdministrator deems reliable;

(b)           Ifthe Common Stock is regularly quoted by a recognized securities dealer butclosing sales prices are not reported, the value of a share of Common Stockshall be the mean of the high bid and low asked prices for such date or, ifthere are no high bid and low asked prices for a share of Common Stock on thedate in question, the high bid and low asked prices for a share of Common Stockon the last preceding date for which such information exists, as reported inThe Wall Street Journal or such other source as the Administrator deemsreliable; or

(c)           Ifthe Common Stock is neither listed on an established stock exchange or anational market system nor regularly quoted by a recognized securities dealer,the value of a share of Common Stock shall be established by the Administrator in goodfaith.

1.19.        “*Holder*” shall mean a person who has been granted or awardedan Award.

1.20.        “*Incentive Stock Option*” shall mean an option which conformsto the applicable provisions of Section 422 of the Code and which isdesignated as an Incentive Stock Option by the Administrator.

1.21.        “*Independent Director*” shall mean a member of the Board whois not an Employee.

1.22.        “FullValue Award” shall mean any Award other than an Option or Stock AppreciationRight.

1.23.        “*Non-Qualified Stock Option*” shall mean an Option which isnot designated as an Incentive Stock Option by the Administrator.

-3-

----

1.24.        “*Option*” shall mean a stock option granted underArticle IV of the Plan. An Option granted under the Plan shall, asdetermined by the Administrator, be either a Non-Qualified Stock Option or anIncentive Stock Option; *provided*, *however*, that Options granted to Independent Directors andConsultants shall be Non-Qualified Stock Options.

1.25.        “*Performance Criteria*” shall mean any one or more of thefollowing business criteria with respect to the Company, any Subsidiary or anydivision or operating unit thereof: (a) revenue or sales, (b) netincome, (c) pre-tax income, (d) operating income, (e) cash flow,(f) earnings per share, (g) return on equity, (h) return oninvested capital or assets, (i) cost reductions or savings, (j) fundsfrom operations, (k) appreciation in the Fair Market Value of CommonStock, or (l) earnings before any one or more of the following:(i) interest, (ii) taxes, (iii) depreciation or(iv) amortization, each as determined in accordance with generallyaccepted accounting principles.

1.26.        “*Plan*” shall mean the 2001 Incentive Award Plan of WatsonPharmaceuticals, Inc., as amended.

1.27.        “*Restricted Stock*” shall mean Common Stock awarded underArticle VII of the Plan.

1.28.        “*Restricted Stock Units*” shall mean rights to receive CommonStock awarded under Section 8.5 of the Plan.

1.29.        “*Rule 16b-3*” shall mean Rule 16b-3promulgated under the Exchange Act, as such Rule may be amended from timeto time.

1.30.        “*Section 162(m) Participant*” shall mean any keyEmployee designated by the Administrator as a key Employee whose compensationfor the fiscal year in which the key Employee is so designated or a futurefiscal year may be subject to the limit on deductible compensation imposed bySection 162(m) of the Code.

1.31.        “*Securities Act*” shall mean the Securities Act of 1933, asamended.

1.32.        “*Stock Appreciation Right*” shall mean a stock appreciationright granted under Article IX of the Plan.

1.33.        “*Stock Payment*” shall mean: (a) a payment in the form ofshares of Common Stock, or (b) an option or other right to purchase sharesof Common Stock, as part of a deferred compensation arrangement, made in lieuof all or any portion of the compensation, including without limitation,salary, bonuses and commissions, that otherwise would become payable to a keyEmployee, Independent Director or Consultant in cash, awarded underSection 8.3 of the Plan.

1.34.        “*Subsidiary*” shall mean any corporation in an unbroken chainof corporations beginning with the Company if each of the corporations otherthan the last corporation in the unbroken chain then owns stock possessingfifty percent (50%) or more of the total combined voting power of all classesof stock in one of the other corporations in such chain.

1.35.        “*Substitute Award*” shall mean an Option granted under thisPlan upon the assumption of, or in substitution for, outstanding equity awardspreviously granted by a company or other entity in connection with a corporatetransaction, such as a merger, combination, consolidation or acquisition ofproperty or stock; *provided*, *however*, that in no event shall the term “Substitute Award”be construed to refer to an award made in connection with the cancellation andrepricing of an Option.

1.36.        “*Termination of Consultancy*” shall mean the time when theengagement of a Holder as a Consultant to the Company or a Subsidiary isterminated for any reason, with or without cause, including, but not by way oflimitation, by resignation, discharge, death or retirement, but excludingterminations where there is a simultaneous commencement of employment with theCompany or any Subsidiary, or any parent thereof. The Administrator, in itsabsolute discretion, shall determine the effect of all matters and questionsrelating to Termination of Consultancy, including, but not by way oflimitation, the question of whether a Termination of Consultancy resulted froma discharge for good cause, and all questions of 

-4-

----

whether a particularleave of absence constitutes a Termination of Consultancy. Notwithstanding anyother provision of the Plan, the Company or any Subsidiary has an absolute andunrestricted right to terminate a Consultant’s service at any time for any reasonwhatsoever, with or without cause, except to the extent expressly providedotherwise in writing.

1.37.        “*Termination of Directorship*” shall mean the time when aHolder who is an Independent Director ceases to be a Director for any reason,including, but not by way of limitation, a termination by resignation, removal,failure to be elected, death or retirement. The Board, in its sole and absolutediscretion, shall determine the effect of all matters and questions relating toTermination of Directorship with respect to Independent Directors.

1.38.        “*Termination of Employment*” shall mean the time when theemployee-employer relationship between a Holder and the Company or anySubsidiary is terminated for any reason, with or without cause, including, butnot by way of limitation, a termination by resignation, discharge, death,disability or retirement; but excluding: (a) terminations where there is asimultaneous reemployment or continuing employment of a Holder by the Companyor any Subsidiary, or any parent thereof, (b) at the discretion of theAdministrator, terminations which result in a temporary severance of theemployee-employer relationship, and (c) at the discretion of theAdministrator, terminations which are followed by the simultaneous establishmentof a consulting relationship by the Company or a Subsidiary, or any parentthereof, with the former employee. The Administrator, in its absolutediscretion, shall determine the effect of all matters and questions relating toTermination of Employment, including, but not by way of limitation, thequestion of whether a Termination of Employment resulted from a discharge forgood cause, and all questions of whether a particular leave of absenceconstitutes a Termination of Employment; *provided*, *however*, that, with respect to Incentive Stock Options,unless otherwise determined by the Administrator in its discretion, a leave ofabsence, change in status from an employee to an independent contractor orother change in the employee-employer relationship shall constitute aTermination of Employment if, and to the extent that, such leave of absence,change in status or other change interrupts employment for the purposes ofSection 422(a)(2) of the Code and the then applicable regulations andrevenue rulings under said Section.

**ARTICLE II.SHARES SUBJECT TO PLAN**

2.1.          *Shares Subject to Plan.*

(a)           Theshares of stock subject to Awards shall be Common Stock.  Subject to adjustment as provided in Section12.3, the aggregate number of such shares of Common Stock which may be issuedpursuant to Awards under the Plan shall not exceed 19,728,333 shares.  The shares of Common Stock issuable uponexercise of such Options or rights or upon any such Awards may be eitherpreviously authorized but unissued shares or treasury shares.  The aggregate number of shares of CommonStock available for issuance under the Plan pursuant to this Section 2.1 shallbe reduced by two shares for each share of Common Stock delivered in settlementof any Full Value Award.

(b)           Themaximum number of shares which may be subject to Awards granted under the Planto any individual in any fiscal year of the Company shall not exceed the AwardLimit.  To the extent required by Section162(m) of the Code, shares subject to Awards which are canceled continue to becounted against the Award Limit.

2.2.          *Add-Back of Options and Other Rights*.   If any Option,or other right to acquire shares of Common Stock under any other Award underthe Plan, expires or is canceled without having been fully exercised, thenumber of shares subject to such Option or other right but as to which suchOption or other right was not exercised prior to its expiration, cancellationor exercise may again be optioned, granted or 

-5-

----

awarded hereunder,subject to the limitations of Section 2.1; provided, however, that thenumber of shares that shall again be available for the grant of an Awardpursuant to the Plan shall be increased by two shares for each share of CommonStock subject to a Full Value Award at the time such Full Value Awardterminates, expires, lapses or is forfeited for any reason. Furthermore, anyshares subject to Awards which are adjusted pursuant to Section 12.3 andbecome exercisable with respect to shares of stock of another corporation shallbe considered cancelled and may again be optioned, granted or awardedhereunder, subject to the limitations of Section 2.1. If any shares ofRestricted Stock are surrendered by the Holder or repurchased by the Companypursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned,granted or awarded hereunder, subject to the limitations of Section 2.1.To the extent exercised, the full number of shares subject to an Option orStock Appreciation Right shall be counted for purposes of calculating theaggregate number of shares of Common Stock available for issuance under thePlan as set forth in Section 2.1(a) and for purposes of calculatingthe share limitation set forth in Section 2.1(b), regardless of the actualnumber of shares issued or transferred upon any net exercise of an Option (inwhich Common Stock is withheld to satisfy the exercise price or taxes) or uponexercise of any Stock Appreciation Right for Common Stock or cash.Notwithstanding the provisions of this Section 2.2, no shares of CommonStock may again be optioned, granted or awarded if such action would cause anIncentive Stock Option to fail to qualify as an incentive stock option underSection 422 of the Code.

**ARTICLE III.GRANTING OF AWARDS**

3.1.          *Award Agreement*.   Each Award shall be evidenced by anAward Agreement. Award Agreements evidencing Awards intended to qualify asperformance-based compensation as described inSection 162(m)(4)(C) of the Code shall contain such terms andconditions as may be necessary to meet the applicable provisions ofSection 162(m) of the Code. Award Agreements evidencing IncentiveStock Options shall contain such terms and conditions as may be necessary tomeet the applicable provisions of Section 422 of the Code.

3.2.          *Provisions Applicable to Section 162(m) Participants*.

(a)           TheCommittee, in its discretion, may determine whether an Award is to qualify asperformance-based compensation as described inSection 162(m)(4)(C) of the Code.

(b)           Notwithstandinganything in the Plan to the contrary, the Committee may grant any Award to aSection 162(m) Participant, including a Restricted Stock award, aRestricted Stock Unit award, a Dividend Equivalent award, a Deferred Stockaward or a Stock Payment award, the restrictions with respect to which lapseupon the attainment of performance goals which are related to one or more ofthe Performance Criteria and any Award described in Article VIII thatvests or becomes exercisable or payable upon the attainment of performancegoals which are related to one or more of the Performance Criteria.

(c)           Tothe extent necessary to comply with the performance-based compensationrequirements of Section 162(m)(4)(C) of the Code, with respect to anyAward granted under Articles VII and VIII which may be granted to one or moreSection 162(m) Participants, no later than ninety (90) days followingthe commencement of any fiscal year in question or any other designated fiscalperiod or period of service (or such other time as may be required or permittedby Section 162(m) of the Code), the Committee shall, in writing,(i) designate one or more Section 162(m) Participants,(ii) select the Performance Criteria applicable to the fiscal year orother designated fiscal period or period of service, (iii) establish thevarious performance targets, in terms of an objective formula or standard, andamounts of such Awards, as applicable, which may be earned for such fiscal yearor other designated fiscal period or period of service, and (iv) specifythe relationship between Performance Criteria and the performance targets andthe amounts of such Awards, as applicable, to be earned by 

-6-

----

eachSection 162(m) Participant for such fiscal year or other designatedfiscal period or period of service. Following the completion of each fiscal yearor other designated fiscal period or period of service, the Committee shallcertify in writing whether the applicable performance targets have beenachieved for such fiscal year or other designated fiscal period or period ofservice. In determining the amount earned by aSection 162(m) Participant, the Committee shall have the right toreduce (but not to increase) the amount payable at a given level of performanceto take into account additional factors that the Committee may deem relevant tothe assessment of individual or corporate performance for the fiscal year orother designated fiscal period or period of service.

(d)           Furthermore,notwithstanding any other provision of the Plan, any Award which is granted toa Section 162(m) Participant and is intended to qualify asperformance-based compensation as described inSection 162(m)(4)(C) of the Code shall be subject to any additionallimitations set forth in Section 162(m) of the Code (including anyamendment to Section 162(m) of the Code) or any regulations orrulings issued thereunder that are requirements for qualification asperformance-based compensation as described inSection 162(m)(4)(C) of the Code, and the Plan shall be deemedamended to the extent necessary to conform to such requirements.

3.3.          *Limitations Applicable to Section 16 Persons*.   Notwithstandingany other provision of the Plan, the Plan, and any Award granted or awarded toany individual who is then subject to Section 16 of the Exchange Act,shall be subject to any additional limitations set forth in any applicableexemptive rule under Section 16 of the Exchange Act (including anyamendment to Rule 16b-3 of the Exchange Act) that are requirementsfor the application of such exemptive rule. To the extent permitted byapplicable law, the Plan and Awards granted or awarded hereunder shall bedeemed amended to the extent necessary to conform to such applicable exemptiverule.

3.4.          *Consideration*.   In consideration of the granting of anAward under the Plan, the Holder shall agree, in the Award Agreement, to remainin the employ of (or to consult for or to serve as an Independent Director of,as applicable) the Company or any Subsidiary for a period of at least one year(or such shorter period as may be fixed in the Award Agreement or by action ofthe Administrator following grant of the Award) after the Award is granted (or,in the case of an Independent Director, until the next annual meeting of stockholdersof the Company).

3.5.          *At-Will Employment*.   Nothing in the Plan or in anyAward Agreement hereunder shall confer upon any Holder any right to continue inthe employ of, or as a Consultant for, the Company or any Subsidiary, or as aDirector of the Company, or shall interfere with or restrict in any way therights of the Company and any Subsidiary, which are hereby expressly reserved,to discharge any Holder at any time for any reason whatsoever, with or withoutcause, except to the extent expressly provided otherwise in a writtenemployment agreement between the Holder and the Company and any Subsidiary.

**ARTICLE IV.GRANTING OF OPTIONS TO EMPLOYEES,CONSULTANTS AND INDEPENDENT DIRECTORS**

4.1.          *Eligibility*.   Any Employee or Consultant selected bythe Administrator pursuant to Section 4.4(a)(i) shall be eligible tobe granted an Option. Each Independent Director of the Company shall beeligible to be granted Options at the times and in the manner set forth in Section 4.5.

4.2.          *Disqualification for Stock Ownership*.   No person may begranted an Incentive Stock Option under the Plan if such person, at the timethe Incentive Stock Option is granted, owns stock possessing more than 10% ofthe total combined voting power of all classes of stock of the Company or anythen existing Subsidiary or parent corporation (within the meaning ofSection 422 of the Code) unless such Incentive Stock Option conforms tothe applicable provisions of Section 422 of the Code.

-7-

----

4.3.          *Qualification of Incentive Stock Options*.   No IncentiveStock Option shall be granted to any person who is not an Employee.

4.4.          *Granting of Options to Employees and Consultants*.

(a)           TheAdministrator shall from time to time, in its absolute discretion, and, subjectto applicable limitations of the Plan:

(i)            Determinewhich Employees are key Employees and select from among the key Employees orConsultants (including Employees or Consultants who have previously receivedAwards under the Plan) such of them as in its opinion should be grantedOptions;

(ii)           Subjectto the Award Limit, determine the number of shares to be subject to suchOptions granted to the selected key Employees or Consultants;

(iii)          Subjectto Section 4.3, determine whether such Options are to be Incentive StockOptions or Non-Qualified Stock Options and whether such Options are to qualifyas performance-based compensation as described inSection 162(m)(4)(C) of the Code; and

(iv)          Determinethe terms and conditions of such Options, consistent with the Plan; *provided*, *however*, thatthe terms and conditions of Options intended to qualify as performance-basedcompensation as described in Section 162(m)(4)(C) of the Code shallinclude, but not be limited to, such terms and conditions as may be necessaryto meet the applicable provisions of Section 162(m) of the Code.

(b)           Uponthe selection of a key Employee or Consultant to be granted an Option, theAdministrator shall instruct the Secretary of the Company to issue the Optionand may impose such conditions on the grant of the Option as it deemsappropriate.

(c)           AnyIncentive Stock Option granted under the Plan may be modified by theAdministrator, with the consent of the Holder, to disqualify such Option fromtreatment as an “incentive stock option” under Section 422 of the Code.

4.5.          *Granting of Options to Independent Directors*.   TheBoard shall from time to time, in its absolute discretion, and subject toapplicable limitations of the Plan:

(a)           Selectfrom among the Independent Directors (including Independent Directors who havepreviously received Options under the Plan) such of them as in its opinionshould be granted Options;

(b)           Subjectto the Award Limit, determine the number of shares to be subject to suchOptions granted to the selected Independent Directors; and

(c)           Determinethe terms and conditions of such Options, consistent with the Plan.

All the foregoingOption grants authorized by this Section 4.5 are subject to stockholderapproval of the Plan.

4.6.          *Options in Lieu of Cash Compensation*.   Options may begranted under the Plan to Employees and Consultants in lieu of cash bonuseswhich would otherwise be payable to such Employees and Consultants, and toIndependent Directors in lieu of directors’ fees which would otherwise bepayable to such Independent Directors, pursuant to such policies which may beadopted by the Administrator from time to time.

-8-

----

**ARTICLE V.TERMS OF OPTIONS**

5.1.          *Option Price*.   The price per share of the sharessubject to each Option granted to Employees, Independent Directors andConsultants shall be set by the Administrator; *provided*,*however*, that:

(a)           Inthe case of Options intended to qualify as performance-based compensation asdescribed in Section 162(m)(4)(C) of the Code, such price shall notbe less than 100% of the Fair Market Value of a share of Common Stock on thedate the Option is granted;

(b)           Inthe case of Incentive Stock Options such price shall not be less than 100% ofthe Fair Market Value of a share of Common Stock on the date the Option isgranted (or the date the Option is modified, extended or renewed for purposesof Section 424(h) of the Code);

(c)           Inthe case of Incentive Stock Options granted to an individual then owning(within the meaning of Section 424(d) of the Code) more than 10% ofthe total combined voting power of all classes of stock of the Company or anySubsidiary or parent corporation thereof (within the meaning ofSection 422 of the Code), such price shall not be less than 110% of theFair Market Value of a share of Common Stock on the date the Option is granted(or the date the Option is modified, extended or renewed for purposes ofSection 424(h) of the Code); and

(d)           Inthe case of Non-Qualified Stock Options, such price shall not be less than 100%of the Fair Market Value of a share of Common Stock on the date the Option isgranted.

5.2.          *Option Term*.   The term of an Option granted to anEmployee, Independent Director or Consultant shall be set by the Administratorin its discretion; provided, however, that the term shall not be more than ten(10) years from the date the Option is granted, or five (5) yearsfrom the date the Option is granted if the Option is an Incentive Stock Optiongranted to an individual then owning (within the meaning ofSection 424(d) of the Code) more than 10% of the total combinedvoting power of all classes of stock of the Company or any SubsidiaryCorporation or parent corporation thereof (as defined inSection 424(e) of the Code). Except as limited by requirements ofSection 422 of the Code and regulations and rulings thereunder applicableto Incentive Stock Options, the Administrator may extend the term of anyoutstanding Option in connection with any Termination of Employment,Termination of Directorship or Termination of Consultancy of the Holder, oramend any other term or condition of such Option relating to such a Terminationof Employment, Termination of Directorship or Termination of Consultancy.

5.3.          *Option Vesting*.

(a)           Theperiod during which the right to exercise, in whole or in part, an Optiongranted to an Employee, Independent Director or a Consultant vests in the Holdershall be set by the Administrator and the Administrator may determine that anOption may not be exercised in whole or in part for a specified period after itis granted; *provided*, *however*,that, unless the Administrator otherwise provides in the terms of the AwardAgreement or otherwise, no Option shall be exercisable by any Holder who isthen subject to Section 16 of the Exchange Act within the period endingsix months and one day after the date the Option is granted. At any time aftergrant of an Option, the Administrator may, in its sole and absolute discretionand subject to whatever terms and conditions it selects, accelerate the periodduring which an Option granted to an Employee, Independent Director orConsultant vests.

(b)           Noportion of an Option granted to an Employee, Independent Director or Consultantwhich is unexercisable at Termination of Employment, Termination ofDirectorship or Termination of Consultancy, as applicable, shall thereafterbecome exercisable, except as may be otherwise provided 

-9-

----

by the Administratoreither in the Award Agreement or by action of the Administrator following thegrant of the Option.

(c)           Tothe extent that the aggregate fair market value of stock with respect to which “incentivestock options” (within the meaning of Section 422 of the Code, but withoutregard to Section 422(d) of the Code) are exercisable for the firsttime by a Holder during any calendar year under the Plan, and all other plansof the Company and any Subsidiary or parent corporation thereof, within themeaning of Section 424 of the Code, exceeds $100,000, the Options shall betreated as Non-Qualified Stock Options to the extent required bySection 422 of the Code. The rule set forth in the preceding sentenceshall be applied by taking Options and other “incentive stock options” intoaccount in the order in which they were granted. For purposes of thisSection 5.3(c), the fair market value of stock shall be determined as ofthe time the Option or other “incentive stock options” with respect to suchstock is granted.

5.4.          *Substitute Awards*.   Notwithstanding the foregoingprovisions of this Article V to the contrary, in the case of an Optionthat is a Substitute Award, the price per share of the shares subject to suchOption may be less than the Fair Market Value per share on the date of grant, *provided*, that the excess of:  (a) the aggregate Fair Market Value (asof the date such Substitute Award is granted) of the shares subject to theSubstitute Award, over (b) the aggregate exercise price thereof, does notexceed the excess of:  (c) theaggregate fair market value (as of the time immediately preceding thetransaction giving rise to the Substitute Award, such fair market value to bedetermined by the Committee) of the shares of the predecessor entity that weresubject to the grant assumed or substituted for by the Company, over(d) the aggregate exercise price of such shares.

5.5.          *Substitution of Stock Appreciation Rights*.   TheAdministrator may provide in the Award Agreement evidencing the grant of anOption that the Administrator, in its sole discretion, shall have the right tosubstitute a Stock Appreciation Right for such Option at any time prior to orupon exercise of such Option, subject to the provisions of Section 9.2; *provided*, that such Stock Appreciation Right shall beexercisable with respect to the same number of shares of Common Stock for whichsuch substituted Option would have been exercisable and at the Option exerciseprice per share.

**ARTICLE VI.EXERCISE OF OPTIONS**

6.1.          *Partial Exercise*.   An exercisable Option may beexercised in whole or in part. However, an Option shall not be exercisable withrespect to fractional shares and the Administrator may require that, by theterms of the Option, a partial exercise be with respect to a minimum number ofshares.

6.2.          *Manner of Exercise*.   All or a portion of an exercisableOption shall be deemed exercised upon delivery of all of the following to theSecretary of the Company, or such other person or entity designated by theBoard, or his, her or its office, as applicable:

(a)           Awritten notice complying with the applicable rules established by theAdministrator stating that the Option, or a portion thereof, is exercised. Thenotice shall be signed by the Holder or other person then entitled to exercisethe Option or such portion of the Option;

(b)           Suchrepresentations and documents as the Administrator, in its absolute discretion,deems necessary or advisable to effect compliance with all applicableprovisions of the Securities Act and any other federal or state securities lawsor regulations. The Administrator may, in its absolute discretion, also takewhatever additional actions it deems appropriate to effect such complianceincluding, without limitation, placing legends on share certificates andissuing stop-transfer notices to agents and registrars;

-10-

----

(c)           Inthe event that the Option shall be exercised pursuant to Section 12.1 byany person or persons other than the Holder, appropriate proof of the right ofsuch person or persons to exercise the Option; and

(d)           Fullcash payment to the Secretary of the Company for the shares with respect towhich the Option, or portion thereof, is exercised. However, the Administratormay, in its discretion, (i)  allow payment, in whole or in part, throughthe delivery of shares of Common Stock which have been owned by the Holder forat least six months, duly endorsed for transfer to the Company with a FairMarket Value on the date of delivery equal to the aggregate exercise price ofthe Option or exercised portion thereof; (ii) allow payment, in whole orin part, through the surrender of shares of Common Stock then issuable uponexercise of the Option having a Fair Market Value on the date of Optionexercise equal to the aggregate exercise price of the Option or exercisedportion thereof; (iii) allow payment, in whole or in part, through thedelivery of property of any kind which constitutes good and valuableconsideration; (iv) allow payment, in whole or in part, through thedelivery of a notice that the Holder has placed a market sell order with abroker with respect to shares of Common Stock then issuable upon exercise ofthe Option, and that the broker has been directed to pay a sufficient portionof the net proceeds of the sale to the Company in satisfaction of the Optionexercise price, *provided*, that payment of suchproceeds is then made to the Company upon settlement of such sale; or(v) allow payment through any combination of the consideration provided inthe foregoing paragraphs (i), (ii), (iii) and (iv); *provided*,*however*, that the payment in the mannerprescribed in the preceding paragraphs shall not be permitted to the extentthat the Administrator determines that payment in such manner shall result inan extension or maintenance of credit, an arrangement for the extension ofcredit, or a renewal or an extension of credit in the form of a personal loanto or for any Director or executive officer of the Company that is prohibitedby Section 13(k) of the Exchange Act or other applicable law.

6.3.          *Conditions to Issuance of Stock Certificates*.   TheCompany shall not be required to issue or deliver any certificate orcertificates for shares of stock purchased upon the exercise of any Option orportion thereof prior to fulfillment of all of the following conditions:

(a)           Theadmission of such shares to listing on all stock exchanges on which such classof stock is then listed;

(b)           Thecompletion of any registration or other qualification of such shares under anystate or federal law, or under the rulings or regulations of the Securities andExchange Commission or any other governmental regulatory body which theAdministrator shall, in its absolute discretion, deem necessary or advisable;

(c)           Theobtaining of any approval or other clearance from any state or federal governmentalagency which the Administrator shall, in its absolute discretion, determine tobe necessary or advisable;

(d)           Thelapse of such reasonable period of time following the exercise of the Option asthe Administrator may establish from time to time for reasons of administrativeconvenience; and

(e)           Thereceipt by the Company of full payment for such shares, including payment ofany applicable withholding tax, which in the discretion of the Administratormay be in the form of consideration used by the Holder to pay for such sharesunder Section 6.2(d).

6.4.          *Rights as Stockholders*.   Holders shall not be, nor haveany of the rights or privileges of, stockholders of the Company in respect ofany shares purchasable upon the exercise of any part of an Option unless anduntil certificates representing such shares have been issued by the Company tosuch Holders.

-11-

----

6.5.          *Ownership and Transfer Restrictions*.   TheAdministrator, in its absolute discretion, may impose such restrictions on theownership and transferability of the shares purchasable upon the exercise of anOption as it deems appropriate. Any such restriction shall be set forth in therespective Award Agreement and may be referred to on the certificatesevidencing such shares. The Holder shall give the Company prompt notice of anydisposition of shares of Common Stock acquired by exercise of an IncentiveStock Option within (a) two years from the date of granting (including thedate the Option is modified, extended or renewed for purposes of Section 424(h) ofthe Code) such Option to such Holder, or (b) one year after the transferof such shares to such Holder.

6.6.          *Additional Limitations on Exercise of Options*.   Holdersmay be required to comply with any timing or other restrictions with respect tothe settlement or exercise of an Option, including a window-period limitation,as may be imposed in the discretion of the Administrator.

**ARTICLE VII.AWARD OF RESTRICTED STOCK**

7.1.          *Eligibility*.   Subject to the Award Limit, RestrictedStock may be awarded to any Employee whom the Administrator determines is a keyEmployee, or any Independent Director or any Consultant, whom the Administratordetermines should receive such an Award.

7.2.          *Award of Restricted Stock*.

(a)           The Administrator may from time totime, in its absolute discretion:

(i)            Determinewhich Employees are key Employees, and select from among the key Employees,Independent Directors or Consultants (including Employees, IndependentDirectors or Consultants who have previously received other Awards under thePlan) such of them as in its opinion should be awarded Restricted Stock; and

(ii)           Determinethe purchase price, if any, and other terms and conditions applicable to suchRestricted Stock, consistent with the Plan.

(b)           TheAdministrator shall establish the purchase price, if any, and form of paymentfor Restricted Stock; *provided*, *however*, that such purchase price shall be no less than thepar value of the Common Stock to be purchased, unless otherwise permitted byapplicable state law. In all cases, legal consideration shall be required foreach issuance of Restricted Stock.

(c)           Uponthe selection of an Employee, Independent Director or Consultant to be awardedRestricted Stock, the Administrator shall instruct the Secretary of the Companyto issue such Restricted Stock and may impose such conditions on the issuanceof such Restricted Stock as it deems appropriate.

7.3.          *Rights as Stockholders*.   Subject to Section 7.4,upon delivery of the shares of Restricted Stock to the escrow holder pursuantto Section 7.7, the Holder shall have, unless otherwise provided by theAdministrator, all the rights of a stockholder with respect to said shares,subject to the restrictions in his or her Award Agreement, including the rightto receive all dividends and other distributions paid or made with respect tothe shares; *provided*, *however*,that, in the discretion of the Administrator, any dividends or distributionswith respect to the Common Stock shall be subject to the restrictions set forthin Section 7.4.

7.4.          *Restriction*.   All shares of Restricted Stock issuedunder the Plan (including any shares received by Holders thereof with respectto shares of Restricted Stock as a result of stock dividends, stock splits orany other form of recapitalization) shall, in the terms of each individualAward Agreement, be subject to such restrictions as the Administrator shallprovide, which restrictions may include, without limitation, restrictionsconcerning voting rights and transferability and restrictions based on durationof employment, directorship or consultancy with the Company, or any Subsidiary,or any parent thereof, Company 

-12-

----

performance andindividual performance, or any one or more of the Performance Criteria or otherspecific performance criteria determined appropriate by the Administrator; *provided*, *however*, that,unless the Administrator otherwise provides in the terms of the Award Agreementor otherwise, no share of Restricted Stock granted to a person subject toSection 16 of the Exchange Act shall be sold, assigned or otherwisetransferred until at least six months and one day have elapsed from the date onwhich the Restricted Stock was issued; and, *provided*, *further*, that, except with respect to shares of RestrictedStock granted to Section 162(m) Participants, by action taken afterthe Restricted Stock is issued, the Administrator may, on such terms andconditions as it may determine to be appropriate, remove any or all of therestrictions imposed by the terms of the Award Agreement. Restricted Stock maynot be sold or encumbered until all restrictions are terminated or expire. Ifno consideration was paid by the Holder upon issuance, a Holder’s rights inunvested Restricted Stock shall lapse, and such Restricted Stock shall besurrendered to the Company without consideration, upon Termination ofEmployment, Termination of Directorship, or Termination of Consultancy, asapplicable; *provided*, *however*,that the Administrator in its sole and absolute discretion may provide thatsuch rights shall not lapse in the event of a Termination of Employment,Termination of Directorship or Termination of Consultancy, as applicable,following a “change of ownership or control” (within the meaning of TreasuryRegulation Section 1.162-27(e)(2)(v) or any successorregulation thereto) of the Company or because of the Holder’s death ordisability; and, *provided*, *further*,except with respect to shares of Restricted Stock granted toSection 162(m) Participants that is intended to qualify asperformance-based compensation as described in Section 162(m)(4)(C) ofthe Code, the Administrator in its sole and absolute discretion may providethat no such lapse or surrender shall occur in the event of a Termination ofEmployment, Termination of Directorship, or Termination of Consultancy,  as applicable, without cause or following anyChange in Control**or because of the Holder’sretirement, or otherwise.

7.5.          *Repurchase of Restricted Stock*.   The Administratorshall provide in the terms of each individual Award Agreement that the Companyshall have the right to repurchase from the Holder the Restricted Stock thensubject to restrictions under the Award Agreement immediately upon aTermination of Employment, Termination of Directorship, or Termination ofConsultancy, as applicable, at a cash price per share equal to the price paidby the Holder for such Restricted Stock; *provided*, *however*, that the Administrator in its sole and absolutediscretion may provide that no such right of repurchase shall exist in theevent of a Termination of Employment, Termination of Directorship orTermination of Consultancy, as applicable, following a “change of ownership orcontrol” (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) orany successor regulation thereto) of the Company or because of the Holder’s deathor disability; and, *provided*, *further*, that, except with respect to shares of RestrictedStock granted to Section 162(m) Participants that is intended toqualify as performance-based compensation as described inSection 162(m)(4)(C) of the Code, the Administrator in its sole andabsolute discretion may provide that no such right of repurchase shall exist inthe event of a Termination of Employment, Termination of Directorship, orTermination of Consultancy, as applicable, without cause or following any Changein Control or because of the Holder’s retirement, or otherwise.

7.6.          *Escrow*.   The Secretary of the Company or such otherescrow holder as the Administrator may appoint shall retain physical custody ofeach certificate representing Restricted Stock until all of the restrictionsimposed under the Award Agreement with respect to the shares evidenced by suchcertificate expire or shall have been removed.

7.7.          *Legend*.   In order to enforce the restrictions imposedupon shares of Restricted Stock hereunder, the Administrator shall cause alegend or legends to be placed on certificates representing all shares ofRestricted Stock that are still subject to restrictions under Award Agreements,which legend or legends shall make appropriate reference to the conditionsimposed thereby.

7.8.          *Section 83(b) Election*.   If a Holder makes anelection under Section 83(b) of the Code, or any successor sectionthereto, to be taxed with respect to the Restricted Stock as of the date oftransfer of 

-13-

----

the Restricted Stockrather than as of the date or dates upon which the Holder would otherwise betaxable under Section 83(a) of the Code, the Holder shall deliver acopy of such election to the Company immediately after filing such electionwith the Internal Revenue Service.

**ARTICLE VIII.DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS, RESTRICTED STOCK UNITS**

8.1.          *Eligibility*.   Subject to the Award Limit, one or moreDividend Equivalent awards, Deferred Stock awards, Stock Payment awards, and/orRestricted Stock Unit awards may be granted to any Employee whom theAdministrator determines is a key Employee, or any Independent Director or anyConsultant, whom the Administrator determines should receive such an Award.

8.2.          *Dividend Equivalents*.

(a)           Anykey Employee, Independent Director or Consultant selected by the Administratormay be granted Dividend Equivalents based on the dividends declared on theCommon Stock, to be credited as of dividend payment dates, during the periodbetween the date a Stock Appreciation Right, Deferred Stock award, orRestricted Stock Unit award is granted, and the date such Stock AppreciationRight, Deferred Stock award, or Restricted Stock Unit award vests, isexercised, is distributed, terminates or expires, as determined by theAdministrator. Such Dividend Equivalents shall be converted to cash oradditional shares of Common Stock by such formula and at such time and subjectto such limitations as may be determined by the Administrator.

(b)           AnyHolder of an Option who is an Employee, Independent Director or Consultantselected by the Administrator may be granted Dividend Equivalents based on thedividends declared on the Common Stock, to be credited as of dividend paymentdates, during the period between the date an Option is granted, and the datesuch Option vests, is exercised, terminates or expires, as determined by theAdministrator. Such Dividend Equivalents shall be converted to cash oradditional shares of Common Stock by such formula and at such time and subjectto such limitations as may be determined by the Administrator.

(c)           DividendEquivalents granted with respect to Options intended to be qualifiedperformance-based compensation for purposes of Section 162(m) of theCode shall be payable, with respect to pre-exercise periods, regardless ofwhether such Option is subsequently exercised.

8.3.          *Stock Payments*.   Any key Employee, Independent Directoror Consultant selected by the Administrator may receive Stock Payments in themanner determined from time to time by the Administrator. The number of sharesshall be determined by the Administrator and may be based upon the PerformanceCriteria or other specific performance criteria determined appropriate by theAdministrator, determined on the date such Stock Payment is made or on any datethereafter.

8.4.          *Deferred Stock*.   Any key Employee, Independent Directoror Consultant selected by the Administrator may be granted an award of DeferredStock in the manner determined from time to time by the Administrator. Thenumber of shares of Deferred Stock shall be determined by the Administrator andmay be based upon the Performance Criteria or other specific performancecriteria determined to be appropriate by the Administrator, in each case on aspecified date or dates or over any period or periods determined by theAdministrator. Common Stock underlying a Deferred Stock award shall not beissued until the Deferred Stock award shall have vested, pursuant to a vestingschedule or performance criteria set by the Administrator. The Administratorshall specify the distribution dates applicable to each Deferred Stock awardwhich shall be no earlier than the vesting dates or events of the award and maybe determined at the election of the Employee, Independent Director orConsultant. Unless otherwise provided by the Administrator, a Holder ofDeferred Stock shall have no rights as a Company stockholder 

-14-

----

with respect to suchDeferred Stock until such time as the Award has vested and the Common Stockunderlying the Award has been issued.

8.5.          *Restricted Stock Units*.   Any key Employee, IndependentDirector or Consultant selected by the Administrator may be granted an award ofRestricted Stock Units in the manner determined from time to time by theAdministrator. The Administrator is authorized to make awards of RestrictedStock Units in such amounts and subject to such terms and conditions asdetermined by the Administrator. The Administrator shall specify the date ordates on which the Restricted Stock Units shall become fully vested andnonforfeitable, and may specify such conditions to vesting as it deemsappropriate, and may  specify that suchRestricted Stock Units become fully vested and nonforfeitable pursuant to thesatisfaction of one or more Performance Goals or other specific performancegoals as the Administrator determines to be appropriate at the time of thegrant of the Restricted Stock Units or thereafter, in each case on a specifieddate or dates or over any period or periods determined by the Administrator.The Administrator shall specify the distribution dates applicable to each awardof Restricted Stock Units which shall be no earlier than the vesting dates orevents of the award and may be determined at the election of the Employee,Independent Director or Consultant. On the distribution dates, the Companyshall issue to the Participant one unrestricted, fully transferable share ofCommon Stock for each Restricted Stock Unit distributed. The Administratorshall specify the purchase price, if any, to be paid by the Employee,Independent Director or Consultant to the Company for such shares of CommonStock to be distributed pursuant to the Restricted Stock Unit award.

8.6.          *Term*.   The term of a Dividend Equivalent award,Deferred Stock award, Stock Payment award and/or Restricted Stock Unit awardshall be set by the Administrator in its discretion.

8.7.          *Exercise or Purchase Price*.   The Administrator mayestablish the exercise or purchase price of shares of Deferred Stock, sharesdistributed as a Stock Payment award or shares distributed pursuant to aRestricted Stock Unit award; *provided*, *however*, that such price shall not be less than the parvalue of a share of Common Stock, unless otherwise permitted by applicablestate law.

8.8.          *Exercise upon Termination of Employment, Termination of Consultancy orTermination of Directorship*.   A Dividend Equivalent award,Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award isexercisable or distributable only while the Holder is an Employee, Consultantor Independent Director, as applicable; *provided*, *however*, that the Administrator in its sole and absolutediscretion may provide that the Dividend Equivalent award, Deferred Stockaward, Stock Payment award and/or Restricted Stock Unit award may be exercisedor distributed subsequent to a Termination of Employment, Termination ofDirectorship or Termination of Consultancy following a “change of control orownership” (within the meaning of Section 1.162-27(e)(2)(v) orany successor regulation thereto) of the Company.

8.9.          *Form of Payment*.   Payment of the amount determinedunder Section 8.2 above shall be in cash, in Common Stock or a combinationof both, as determined by the Administrator. To the extent any payment underthis Article VIII is effected in Common Stock, it shall be made subject tosatisfaction of all provisions of Section 6.3.

**ARTICLE IX.STOCK APPRECIATION RIGHTS**

9.1.          *Grant of Stock Appreciation Rights*.   A StockAppreciation Right may be granted to any key Employee, Independent Director orConsultant selected by the Administrator. A Stock Appreciation Right may begranted:  (a) in connection andsimultaneously with the grant of an Option, (b) with respect to apreviously granted Option, or (c) independent of an Option. A StockAppreciation Right shall be subject to such terms and conditions notinconsistent with the Plan as the Administrator shall impose and shall beevidenced by an Award Agreement.

-15-

----

9.2.          *Coupled Stock Appreciation Rights*.

(a)           ACoupled Stock Appreciation Right (“*CSAR*”) shall berelated to a particular Option and shall be exercisable only when and to theextent the related Option is exercisable.

(b)           ACSAR may be granted to the Holder for no more than the number of shares subjectto the simultaneously or previously granted Option to which it is coupled.

(c)           ACSAR shall entitle the Holder (or other person entitled to exercise the Optionpursuant to the Plan) to surrender to the Company unexercised a portion of theOption to which the CSAR relates (to the extent then exercisable pursuant toits terms) and to receive from the Company in exchange therefor an amountdetermined by multiplying the difference obtained by subtracting the Optionexercise price from the Fair Market Value of a share of Common Stock on thedate of exercise of the CSAR by the number of shares of Common Stock withrespect to which the CSAR shall have been exercised, subject to any limitationsthe Administrator may impose.

9.3.          *Independent Stock Appreciation Rights*.

(a)           An Independent Stock Appreciation Right (“*ISAR*”) shall be unrelated to any Option and shall have aterm set by the Administrator provided, however, that the term shall notbe more than ten (10) years from the date the ISAR is granted. An ISARshall be exercisable in such installments as the Administrator may determine. An ISAR shall cover suchnumber of shares of Common Stock as the Administrator may determine; provided,however, that unless the Administrator otherwise provides in the terms of theISAR or otherwise, no ISAR granted to a person subject to Section 16 ofthe Exchange Act shall be exercisable until at least six months have elapsedfrom (but excluding) the date on which the Option was granted. The exerciseprice per share of Common Stock subject to each ISAR shall be set by theAdministrator; provided, that such exercise price per share shall not be lessthan 100% of the Fair Market Value of a share of Common Stock on the date theISAR is granted. An ISAR is exercisable only while the Holder is an Employee,Independent Director or Consultant; provided, that the Administrator maydetermine that the ISAR may be exercised subsequent to Termination ofEmployment, Termination of Directorship or Termination of Consultancy withoutcause, or following a Change in Control of the Company, or because of theHolder’s retirement, death or disability, or otherwise.

(b)           AnISAR shall entitle the Holder (or other person entitled to exercise the ISARpursuant to the Plan) to exercise all or a specified portion of the ISAR (tothe extent then exercisable pursuant to its terms) and to receive from theCompany an amount determined by multiplying the difference obtained bysubtracting the exercise price per share of the ISAR from the Fair Market Valueof a share of Common Stock on the date of exercise of the ISAR by the number ofshares of Common Stock with respect to which the ISAR shall have beenexercised, subject to any limitations the Administrator may impose.

9.4.          *Payment and Limitations on Exercise*.

(a)           Paymentof the amounts determined under Section 9.2(c) and 9.3(b) aboveshall be in cash, in Common Stock (based on its Fair Market Value as of thedate the Stock Appreciation Right is exercised) or a combination of both, asdetermined by the Administrator. To the extent such payment is effected inCommon Stock it shall be made subject to satisfaction of all provisions ofSection 6.3 above pertaining to Options.

(b)           Holdersof Stock Appreciation Rights may be required to comply with any timing or otherrestrictions with respect to the settlement or exercise of a Stock AppreciationRight, including a window-period limitation, as may be imposed in thediscretion of the Administrator.

-16-

----

**ARTICLE X.COMPLIANCE WITH SECTION 409A OF THE CODE**

10.1.        *Awards subject to Code Section 409A*.   Any Awardthat constitutes, or provides for, a deferral of compensation subject toSection 409A of the Code (a “*Section 409A Award*”)shall satisfy the requirements of Section 409A of the Code and thisArticle X, to the extent applicable. The Award Agreement with respect to aSection 409A Award shall incorporate the terms and conditions required bySection 409A of the Code and this Article X.

10.2.        *Distributions under a Section 409A Award*.

(a)           Subjectto subsection (b), any shares of Common Stock, cash or other property oramounts to be paid or distributed upon the grant, issuance, vesting, exerciseor payment of a Section 409A Award shall be distributed in accordance withthe requirements of Section 409A(a)(2) of the Code, and shall not bedistributed earlier than:

(i)            theHolder’s separation from service, as determined by the Secretary of theTreasury,

(ii)           thedate the Holder becomes disabled,

(iii)          theHolder’s death,

(iv)          aspecified time (or pursuant to a fixed schedule) specified under the AwardAgreement at the date of the deferral of such compensation,

(v)           tothe extent provided by the Secretary of the Treasury, a change in the ownershipor effective control of the Company or a Subsidiary, or in the ownership of asubstantial portion of the assets of the Company or a Subsidiary, or

(vi)          theoccurrence of an unforeseeable emergency with respect to the Holder.

(b)           Inthe case of a Holder who is a specified employee, the requirement of paragraph(a)(i) shall be met only if the distributions with respect to theSection 409A Award may not be made before the date which is six monthsafter the Holder’s separation from service (or, if earlier, the date of theHolder’s death). For purposes of this subsection (b), a Holder shall be aspecified employee if such Holder is a key employee (as defined inSection 416(i) of the Code without regard to paragraph(5) thereof) of a corporation any stock of which is publicly traded on anestablished securities market or otherwise, as determined underSection 409A(a)(2)(B)(i) of the Code and the Treasury Regulationsthereunder.

(c)           Therequirement of paragraph (a)(vi) shall be met only if, as determined underTreasury Regulations under Section 409A(a)(2)(B)(ii) of the Code, theamounts distributed with respect to the unforeseeable emergency do not exceedthe amounts necessary to satisfy such unforeseeable emergency plus amountsnecessary to pay taxes reasonably anticipated as a result of the distribution,after taking into account the extent to which such unforeseeable emergency isor may be relieved through reimbursement or compensation by insurance orotherwise or by liquidation of the Holder’s assets (to the extent theliquidation of such assets would not itself cause severe financial hardship).

(d)           Forpurposes of this Section, the terms specified therein shall have the respectivemeanings ascribed thereto under Section 409A of the Code and the TreasuryRegulations thereunder.

10.3.        *Prohibition on Acceleration of Benefits*.   The time orschedule of any distribution or payment of any shares of Common Stock, cash orother property or amounts under a Section 409A Award shall not beaccelerated, except as otherwise permitted underSection 409A(a)(3) of the Code and the Treasury Regulationsthereunder.

-17-

----

10.4.        *Elections underSection 409A Awards*.

(a)           Any deferral election provided underor with respect to an Award to any Employee, Independent Director orConsultant, or to the Holder of a Section 409A Award, shall satisfy therequirements of Section 409A(a)(4)(B) of the Code, to the extentapplicable, and, except as otherwise permitted under paragraph (i) or(ii), any such deferral election with respect to compensation for servicesperformed during a taxable year shall be made not later than the close of thepreceding taxable year, or at such other time as provided in TreasuryRegulations.

(i)            Inthe case of the first year in which an Employee, Independent Director orConsultant, or the Holder, becomes eligible to participate in the Plan, anysuch deferral election may be made with respect to services to be performedsubsequent to the election with thirty (30) days after the date the Employee,Independent Director or Consultant, or the Holder, becomes eligible toparticipate in the Plan, as provided underSection 409A(a)(4)(B)(ii) of the Code.

(ii)           Inthe case of any performance-based compensation based on services performed byan Employee, Independent Director or Consultant, or the Holder, over a periodof at least twelve (12) months, any such deferral election may be made no laterthan six months before the end of the period, as provided underSection 409A(a)(4)(B)(iii) of the Code.

(b)           Inthe event that a Section 409A Award permits, under a subsequent electionby the Holder of such Section 409A Award, a delay in a distribution orpayment of any shares of Common Stock, cash or other property or amounts undersuch Section 409A Award, or a change in the form of distribution orpayment, such subsequent election shall satisfy the requirements ofSection 409A(a)(4)(C) of the Code, and:

(i)            suchsubsequent election may not take effect until at least twelve (12) months afterthe date on which the election is made,

(ii)           inthe case such subsequent election relates to a distribution or payment notdescribed in Section 10.2(a)(ii), (iii) or (vi), the first paymentwith respect to such election may be deferred for a period of not less thanfive years from the date such distribution or payment otherwise would have beenmade, and

(iii)          inthe case such subsequent election relates to a distribution or paymentdescribed in Section 10.2(a)(iv), such election may not be made less thantwelve (12) months prior to the date of the first scheduled distribution orpayment under Section 10.2(a)(iv).

10.5.        *Compliance in Form and Operation*.   ASection 409A Award, and any election under or with respect to suchSection 409A Award, shall comply in form and operation with therequirements of Section 409A of the Code and the Treasury Regulationsthereunder.

**ARTICLE XI.ADMINISTRATION**

11.1.        *Compensation Committee*.   The Compensation Committee (oranother committee or a subcommittee of the Board assuming the functions of theCommittee under the Plan) shall consist solely of two or more IndependentDirectors appointed by and holding office at the pleasure of the Board, each ofwhom is both a “non-employee director” as defined by Rule 16b-3 andan “outside director” for purposes of Section 162(m) of the Code.Appointment of Committee members shall be effective upon acceptance of appointment.Committee members may resign at any time by delivering written notice to theBoard. Vacancies in the Committee may be filled by the Board.

-18-

----

11.2.        *Duties and Powers of Committee*.   It shall be the dutyof the Committee to conduct the general administration of the Plan inaccordance with its provisions. The Committee shall have the power to interpretthe Plan and the Award Agreements, and to adopt such rules for theadministration, interpretation and application of the Plan as are consistenttherewith, to interpret, amend or revoke any such rules and to amend anyAward Agreement provided that the rights or obligations of the Holder of theAward that is the subject of any such Award Agreement are not affectedadversely. Any such grant or award under the Plan need not be the same withrespect to each Holder. Any such interpretations and rules with respect toIncentive Stock Options shall be consistent with the provisions of Section 422of the Code. In its absolute discretion, the Board may at any time and fromtime to time exercise any and all rights and duties of the Committee under thePlan except with respect to matters which under Rule 16b-3 orSection 162(m) of the Code, or any regulations or rules issuedthereunder, are required to be determined in the sole discretion of theCommittee. Notwithstanding the foregoing, the full Board, acting by a majorityof its members in office, shall conduct the general administration of the Planwith respect to Awards granted to Independent Directors.

11.3.        *Majority Rule; Unanimous Written Consent*.   TheCommittee shall act by a majority of its members in attendance at a meeting atwhich a quorum is present or by a memorandum or other written instrument signedby all members of the Committee.

11.4.        *Compensation; Professional Assistance; Good Faith Actions*.   Membersof the Committee shall receive such compensation, if any, for their services asmembers as may be determined by the Board. All expenses and liabilities whichmembers of the Committee incur in connection with the administration of thePlan shall be borne by the Company. The Committee may, with the approval of theBoard, employ attorneys, consultants, accountants, appraisers, brokers or otherpersons. The Committee, the Company and the Company’s officers and Directorsshall be entitled to rely upon the advice, opinions or valuations of any suchpersons. All actions taken and all interpretations and determinations made bythe Committee or the Board in good faith shall be final and binding upon allHolders, the Company and all other interested persons. No members of theCommittee or Board shall be personally liable for any action, determination orinterpretation made in good faith with respect to the Plan or Awards, and allmembers of the Committee and the Board shall be fully protected by the Companyin respect of any such action, determination or interpretation.

11.5.        *Delegation of Authority to Grant Awards*.   The Committeemay, but need not, delegate from time to time some or all of its authority togrant Awards under the Plan to a committee consisting of one or more members ofthe Committee or of one or more officers of the Company, to the extentpermitted by applicable state law; *provided*, *however*, that the Committee may not delegate its authorityto grant Awards to individuals: (a) who are subject on the date of the grant to the reportingrules under Section 16(a) of the Exchange Act, (b) who areSection 162(m) Participants, or (c) who are officers of theCompany who are delegated authority by the Committee hereunder. Any delegationhereunder shall be subject to the restrictions and limits that the Committeespecifies at the time of such delegation of authority and may be rescinded atany time by the Committee. At all times, any committee appointed under thisSection 11.5 shall serve in such capacity at the pleasure of theCommittee.

**ARTICLE XII.MISCELLANEOUS PROVISIONS**

12.1.        *Transferability of Awards*.

(a)           Exceptas otherwise provided in Section 12.1(b):

(i)            NoAward under the Plan may be sold, pledged, assigned or transferred in anymanner other than by will or the laws of descent and distribution or, subjectto the consent of the Administrator, pursuant to a DRO, unless and until suchAward has been exercised, or the shares 

-19-

----

underlying such Awardhave been issued, and all restrictions applicable to such shares have lapsed;

(ii)           NoOption, Restricted Stock award, Deferred Stock award, Stock Appreciation Right,Dividend Equivalent  award, Stock Paymentaward, or Restricted Stock Unit award, or any interest or right therein, shallbe liable for the debts, contracts or engagements of the Holder or hissuccessors in interest or shall be subject to disposition by transfer,alienation, anticipation, pledge, encumbrance, assignment or any other meanswhether such disposition be voluntary or involuntary or by operation of law byjudgment, levy, attachment, garnishment or any other legal or equitableproceedings (including bankruptcy), and any attempted disposition thereof shallbe null and void and of no effect, except to the extent that such dispositionis permitted by the preceding sentence; and

(iii)          Duringthe lifetime of the Holder, only the Holder may exercise an Option or otherAward (or any portion thereof) granted to him under the Plan, unless it hasbeen disposed of pursuant to a DRO; after the death of the Holder, anyexercisable portion of an Option or other Award may, prior to the time whensuch portion becomes unexercisable under the Plan or the applicable AwardAgreement, be exercised by his personal representative or by any personempowered to do so under the deceased Holder’s will or under the thenapplicable laws of descent and distribution.

(b)           NotwithstandingSection 12.1(a), the Administrator, in its sole discretion, may determineto permit a Holder to transfer a Non-Qualified Stock Option to any one or morePermitted Transferees (as defined below), subject to the following terms andconditions:  (i) a Non-QualifiedStock Option transferred to a Permitted Transferee shall not be assignable ortransferable by the Permitted Transferee other than by will or the laws ofdescent and distribution; (ii) any Non-Qualified Stock Option which istransferred to a Permitted Transferee shall continue to be subject to all theterms and conditions of the Non-Qualified Stock Option as applicable to theoriginal Holder (other than the ability to further transfer the Non-QualifiedStock Option); and (iii) the Holder and the Permitted Transferee shallexecute any and all documents requested by the Administrator, including,without limitation documents to (A) confirm the status of the transfereeas a Permitted Transferee, (B) satisfy any requirements for an exemptionfor the transfer under applicable federal and state securities laws and(C) evidence the transfer. For purposes of this Section 12.1(b), “*Permitted Transferee*” shall mean, with respect to a Holder,any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,former spouse, sibling, niece, nephew, mother-in-law, father-in-law,son-in-law, daughter-in-law, brother-in-law, or sister-in-law, includingadoptive relationships, any person sharing the Holder’s household (other than atenant or employee), a trust in which these persons (or the Holder) control themanagement of assets, and any other entity in which these persons (or theHolder) own more than fifty percent of the voting interests, or any othertransferee specifically approved by the Administrator after taking into accountany state or federal tax or securities laws applicable to transferableNon-Qualified Stock Options.

12.2.        *Amendment, Suspension or Termination of the Plan*.   Exceptas otherwise provided in this Section 12.2, the Plan may be wholly orpartially amended or otherwise modified, suspended or terminated at any time orfrom time to time by the Board. However, without approval of the Company’sstockholders given within twelve (12) months before or after the action by theBoard, no action of the Board may, except as provided in Section 12.3,(i) increase the limits imposed in Section 2.1 on the maximum numberof shares which may be issued under the Plan, or the maximum number of shareswhich may be granted or issued as Restricted Stock awards, Restricted StockUnit awards, Dividend Equivalent awards, Deferred Stock awards, or StockPayment awards, (ii) expand the classes of persons to whom Awards may begranted under the Plan, or (iii) decrease the exercise price of any outstanding Option or Stock Appreciation Rightgranted under the Plan. No amendment, suspension or termination of the Planshall, 

-20-

----

without the consent ofthe Holder, alter or impair any rights or obligations under any Awardtheretofore granted or awarded, unless the Award itself otherwise expressly soprovides. No Awards may be granted or awarded during any period of suspensionor after termination of the Plan, and in no event may any Award be granted underthe Plan after the first to occur of the following events:

(a)           The expiration of ten (10) years from the datethis second amendment and restatement of the Plan is adopted by the Board; or

(b)           Theexpiration of ten (10) years from the date this second amendment andrestatement of the Plan is approved by the Company’s stockholders underSection 12.4.

12.3.        *Changes in Common Stock or Assets of the Company, Acquisition orLiquidation of the Company and Other Corporate Events.*

(a)           Subjectto Section 12.3(e), in the event that the Administrator determines thatany dividend or other distribution (whether in the form of cash, Common Stock,other securities or other property), recapitalization, reclassification, stocksplit, reverse stock split, reorganization, merger, consolidation, split-up,spin-off, combination, repurchase, liquidation, dissolution, or sale,transfer, exchange or other disposition of all or substantially all of theassets of the Company, or exchange of Common Stock or other securities of the Company,issuance of warrants or other rights to purchase Common Stock or othersecurities of the Company, or other similar corporate transaction or eventaffects the Common Stock, then the Administrator shall equitably adjust any orall of the following in order to prevent dilution or enlargement of thebenefits or potential benefits intended to be made available under the Plan orwith respect to an Award:

(i)            Thenumber and kind of shares of Common Stock (or other securities or property)with respect to which Awards may be granted or awarded (including, but notlimited to, adjustments of the limitations in Section 2.1 on the maximumnumber and kind of shares which may be issued under the Plan, and the maximumnumber and kind of shares which may be granted or issued as Restricted Stockawards, Restricted Stock Unit awards, Dividend Equivalent awards, DeferredStock awards or Stock Payment awards, adjustments of the Award Limit, andadjustments of the manner in which shares subject to Full Value Awards will becounted);

(ii)           Thenumber and kind of shares of Common Stock (or other securities or property)subject to outstanding Awards; and

(iii)          Thegrant or exercise price with respect to any Award.

(b)           Subjectto Sections 12.3(c) and 12.3(e), in the event of any transaction or eventdescribed in Section 12.3(a) or any unusual or nonrecurringtransactions or events affecting the Company, any affiliate of the Company, orthe financial statements of the Company or any affiliate, or of changes inapplicable laws, regulations or accounting principles, the Administrator, inits sole and absolute discretion, and on such terms and conditions as it deemsappropriate, either by the terms of the Award or by action taken prior to theoccurrence of such transaction or event and either automatically or upon theHolder’s request, is hereby authorized to take any one or more of the followingactions whenever the Administrator determines that such action is appropriatein order to prevent dilution or enlargement of the benefits or potentialbenefits intended to be made available under the Plan or with respect to anyAward under the Plan, to facilitate such transactions or events or to giveeffect to such changes in laws, regulations or principles:

(i)            Toprovide for either the purchase of any such Award for an amount of cash equalto the amount that could have been attained upon the exercise of such Award orrealization of the Holder’s rights had such Award been currently exercisable orpayable or fully vested or the 

-21-

----

replacement of such Awardwith other rights or property selected by the Administrator in its solediscretion;

(ii)           Toprovide that the Award cannot vest, be exercised or become payable after suchevent;

(iii)          Toprovide that such Award shall be exercisable as to all shares covered thereby,notwithstanding anything to the contrary in Section 5.3 or the provisionsof such Award;

(iv)          Toprovide that such Award be assumed by the successor or survivor corporation, ora parent or subsidiary thereof, or shall be substituted for by similar options,rights or awards covering the stock of the successor or survivor corporation,or a parent or subsidiary thereof, with appropriate adjustments as to thenumber and kind of shares and prices; and

(v)           Tomake adjustments in the number and type of shares of Common Stock (or othersecurities or property) subject to outstanding Awards, and/or in the terms andconditions of (including the grant, exercise or purchase price), and thecriteria included in, outstanding options, rights and awards and options,rights and awards which may be granted in the future.

(vi)          Toprovide that, for a specified period of time prior to such event, therestrictions imposed under an Award Agreement upon some or all shares ofRestricted Stock, Restricted Stock Units or Deferred Stock may be terminated,and, in the case of Restricted Stock, some or all shares of such RestrictedStock may cease to be subject to repurchase under Section 7.5 orforfeiture under Section 7.4 after such event.

(c)           Notwithstandingany other provision of the Plan, in the event of a Change in Control, eachoutstanding Award shall remain outstanding, or shall be assumed or anequivalent award substituted by the successor corporation, or a parent orsubsidiary of the successor corporation. In the event that the successorcorporation, or a parent or subsidiary of the successor corporation, withrespect to the Change in Control transaction refuses to assume or substitutefor the Award, the Holder shall have the right to exercise the Award as to allof the shares subject thereto, including shares as to which such Awardotherwise would not be exercisable, and the Holder shall have the right to vestin, and received a distribution of, such Award, with respect to all of the sharessubject thereto. If an Award becomes exercisable in lieu of assumption orsubstitution by the successor corporation, or a parent or subsidiarycorporation, with respect to a Change in Control transaction, the Administratorshall notify the Holder that the Award shall be fully exercisable for a periodof not less than fifteen (15) days from the date of such notice prior to theChange in Control transaction, and the Award shall terminate upon theexpiration of such period. For purposes of this Section 12.3(c), the Awardshall be assumed, or an equivalent award shall be substituted for such Award,if, following the Change in Control transaction, the Award or substituted awardconfers on the Holder the right to purchase or receive, for each share subject tothe Award immediately prior to the Change in Control transaction, theconsideration (whether in stock, cash, or other securities or property, or acombination thereof) received or to be received for each share of Common Stockin the Change in Control transaction on the effective date of the Change inControl transaction (and if holders of shares of Common Stock were offered achoice of consideration, the type of consideration chosen by the holders of amajority of the outstanding shares of Common Stock); *provided*,*however*, that, if such considerationreceived in the Change in Control transaction was not solely common stock ofthe successor corporation or its parent, the Administrator may, with theconsent of the successor corporation or its parent, provide for theconsideration to be received upon the exercise, vesting or distribution of theassumed Award or substituted award, for each share subject to the Award, to besolely common stock of the successor corporation or its parent equal in fairmarket value to the per share consideration received by the holders of CommonStock in the Change in Control transaction.

-22-

----

(d)           Subjectto Sections 12.3(e), 3.2 and 3.3, the Administrator may, in its discretion,include such further provisions and limitations in any Award or Award Agreementas it may deem equitable and in the best interests of the Company.

(e)           Withrespect to Awards which are granted to Section 162(m) Participantsand are intended to qualify as performance-based compensation underSection 162(m)(4)(C), no adjustment or action described in thisSection 12.3 or in any other provision of the Plan shall be authorized tothe extent that such adjustment or action would cause such Award to fail to soqualify under Section 162(m)(4)(C), or any successor provisions thereto.No adjustment or action described in this Section 12.3 or in any otherprovision of the Plan shall be authorized to the extent that such adjustment oraction would cause the Plan to violate Section 422(b)(1) of the Code.Furthermore, no such adjustment or action shall be authorized to the extentsuch adjustment or action would result in short-swing profits liability underSection 16 or violate the exemptive conditions of Rule 16b-3unless the Administrator determines that the Award is not to comply with suchexemptive conditions. The number of shares of Common Stock subject to any Awardshall always be rounded to the next whole number.

(f)            Notwithstandingthe foregoing, in the event that the Company becomes a party to a transactionthat is intended to qualify for “pooling of interests” accounting treatmentand, but for one or more of the provisions of this Plan or any Award Agreementwould so qualify, then this Plan and any Award Agreement shall be interpretedso as to preserve such accounting treatment, and to the extent that anyprovision of the Plan or any Award Agreement would disqualify the transactionfrom pooling of interests accounting treatment (including, if applicable, anentire Award Agreement), then such provision shall be null and void. Alldeterminations to be made in connection with the preceding sentence shall bemade by the independent accounting firm whose opinion with respect to “poolingof interests” treatment is required as a condition to the Company’sconsummation of such transaction.

(g)           Theexistence of the Plan, the Award Agreement and the Awards granted hereundershall not affect or restrict in any way the right or power of the Company orthe shareholders of the Company to make or authorize any adjustment,recapitalization, reorganization or other change in the Company’s capitalstructure or its business, any merger or consolidation of the Company, anyissue of stock or of options, warrants or rights to purchase stock or of bonds,debentures, preferred or prior preference stocks whose rights are superior toor affect the Common Stock or the rights thereof or which are convertible intoor exchangeable for Common Stock, or the dissolution or liquidation of thecompany, or any sale or transfer of all or any part of its assets or business,or any other corporate act or proceeding, whether of a similar character orotherwise.

(h)           Noaction shall be taken under this Section 12.3 which shall cause an Awardto fail to comply with Section 409A of the Code or the TreasuryRegulations thereunder, to the extent applicable to such Award.

12.4.        *Approval of Plan by Stockholders*.   The Plan will besubmitted for the approval of the Company’s stockholders within twelve (12)months after the date of the Board’s initial adoption of the Plan. Awards maybe granted or awarded prior to such stockholder approval, *provided,*that such Awards shall not be exercisable nor shall such Awards vest prior tothe time when the Plan is approved by the stockholders, and *provided**further*, thatif such approval has not been obtained at the end of said twelve-month period,all Awards previously granted or awarded under the Plan shall thereupon becanceled and become null and void. In addition, if the Board determines thatAwards other than Options or Stock Appreciation Rights which may be granted toSection 162(m) Participants should continue to be eligible to qualifyas performance-based compensation under Section 162(m)(4)(C) of theCode, the Performance Criteria must be disclosed to and approved by the Company’sstockholders no later than the first 

-23-

----

stockholder meeting thatoccurs in the fifth year following the year in which the Company’s stockholderspreviously approved the Plan, as amended and restated to include thePerformance Criteria.

12.5.        *Tax Withholding*.   The Company shall be entitled torequire payment in cash or deduction from other compensation payable to eachHolder of any sums required by federal, state or local tax law to be withheldwith respect to the grant, issuance, vesting, exercise or payment of any Award.The Administrator may in its discretion and in satisfaction of the foregoingrequirement allow such Holder to elect to have the Company withhold shares ofCommon Stock otherwise issuable under such Award (or allow the return of sharesof Common Stock) having a Fair Market Value equal to the sums required to bewithheld. Notwithstanding any other provision of the Plan, the number of sharesof Common Stock which may be withheld with respect to the issuance, vesting,exercise or payment of any Award (or which may be repurchased from the Holderof such Award within six months after such shares of Common Stock were acquiredby the Holder from the Company) in order to satisfy the Holder’s federal andstate income and payroll tax liabilities with respect to the issuance, vesting,exercise or payment of the Award shall be limited to the number of shares whichhave a Fair Market Value on the date of withholding or repurchase equal to theaggregate amount of such liabilities based on the minimum statutory withholdingrates for federal and state tax income and payroll tax purposes that areapplicable to such supplemental taxable income.

12.6.        *Prohibition on Repricing*.   Subject toSection 12.3, the Administrator shall not, without the approval of thestockholders of the Company, authorize the amendment of any outstanding Awardto reduce its price per share. Furthermore, no Award shall be canceled andreplaced with the grant of an Award having a lesser price per share without thefurther approval of stockholders of the Company.

12.7.        *Forfeiture Provisions*.   Pursuant to its generalauthority to determine the terms and conditions applicable to Awards and theAward Agreements under the Plan, the Administrator shall have the right toprovide, in the terms of Awards made under the Plan, or to require a Holder to agreeby separate written instrument, that: (a)(i) any proceeds, gains or other economic benefit actually orconstructively received by the Holder upon any receipt or exercise of theAward, or upon the receipt or resale of any Common Stock underlying the Award,must be paid to the Company, and (ii) the Award shall terminate and anyunexercised portion of the Award (whether or not vested) shall be forfeited, if(b)(i) a Termination of Employment, Termination of Directorship or  Termination of Consultancy occurs prior to aspecified date, or within a specified time period following receipt or exerciseof the Award, or (ii) the Holder at any time, or during a specified timeperiod, engages in any activity in competition with the Company, or which isinimical, contrary or harmful to the interests of the Company, as furtherdefined by the Administrator or (iii) the Holder incurs a Termination ofEmployment, Termination of Directorship or Termination of Consultancy for “cause”(as such term is defined in the sole and absolute discretion of the Committee,or as set forth in a written agreement relating to such Award between theCompany and the Holder).

12.8.        *Effect of Plan upon Options and Compensation Plans*.   Theadoption of the Plan shall not affect any other compensation or incentive plansin effect for the Company or any Subsidiary. Nothing in the Plan shall beconstrued to limit the right of the Company: (a) to establish any other forms of incentives or compensation forEmployees, Directors or Consultants of the Company or any Subsidiary, or(b) to grant or assume options or other rights or awards otherwise thanunder the Plan in connection with any proper corporate purpose including butnot by way of limitation, the grant or assumption of options in connection withthe acquisition by purchase, lease, merger, consolidation or otherwise, of thebusiness, stock or assets of any corporation, partnership, limited liabilitycompany, firm or association.

12.9.        *Compliance with Laws*.   The Plan, the granting andvesting of Awards under the Plan and the issuance and delivery of shares ofCommon Stock and the payment of money under the Plan or under Awards granted orawarded hereunder are subject to compliance with all applicable federal andstate laws, rules and regulations (including but not limited to state andfederal securities law and federal margin 

-24-

----

requirements) and to suchapprovals by any listing, regulatory or governmental authority as may, in theopinion of counsel for the Company, be necessary or advisable in connectiontherewith. Any securities delivered under the Plan shall be subject to such restrictions,and the person acquiring such securities shall, if requested by the Company,provide such assurances and representations to the Company as the Company maydeem necessary or desirable to assure compliance with all applicable legalrequirements. To the extent permitted by applicable law, the Plan and Awardsgranted or awarded hereunder shall be deemed amended to the extent necessary toconform to such laws, rules and regulations.

12.10.       *Titles*.   Titlesare provided herein for convenience only and are not to serve as a basis forinterpretation or construction of the Plan.

12.11.       *Governing Law*.   The Plan and any agreements hereundershall be administered, interpreted and enforced under the internal laws of theState of California without regard to conflicts of laws thereof.

*  *  *

I hereby certify that the foregoing amendment andrestatement of the Plan was duly adopted by the Board of Directors of WatsonPharmaceuticals, Inc. on March 23, 2007.

Executed on this 4thday of May, 2007.
|        | /s/ David A. Buchen |
|--------|---------------------|
|   | Secretary           |

 

*  *  *

I hereby certify that the foregoing amendment andrestatement of the Plan was approved by the stockholders of WatsonPharmaceuticals, Inc. on May 4, 2007.

Executed on this 4thday of May, 2007.
|        | /s/ David A. Buchen |
|--------|---------------------|
|   | Secretary           |

 

 

-25-

----