AND
(Z) THE SHARES OF COMMON STOCK SUBJECT TO SUCH STOCK ISSUANCES SHALL ONLY VEST
OR BE ISSUABLE UPON THE ACHIEVEMENT OF CERTAIN PRE-ESTABLISHED OBJECTIVE
CORPORATE PERFORMANCE GOALS BASED ON ONE OR MORE OF THE FOLLOWING CRITERIA:
(1) EARNINGS PER SHARE; (2) REVENUES OR MARGINS; (3) CASH FLOW; (4) OPERATING
MARGIN; (5) RETURN ON NET ASSETS, INVESTMENT, CAPITAL, OR EQUITY; (6) DIRECT
CONTRIBUTION; (7) NET INCOME; PRETAX EARNINGS; (8) EARNINGS BEFORE INTEREST AND
TAXES; EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION; EARNINGS
AFTER INTEREST EXPENSE AND BEFORE EXTRAORDINARY OR SPECIAL ITEMS; OPERATING
INCOME; INCOME BEFORE INTEREST INCOME OR EXPENSE, UNUSUAL ITEMS AND INCOME
TAXES, LOCAL, STATE OR FEDERAL AND EXCLUDING BUDGETED AND ACTUAL BONUSES WHICH
MIGHT BE PAID UNDER ANY ONGOING BONUS PLANS OF THE COMPANY; (9) WORKING CAPITAL;
(10) MANAGEMENT OF FIXED COSTS OR VARIABLE COSTS; (11) IDENTIFICATION OR
CONSUMMATION OF INVESTMENT OPPORTUNITIES OR COMPLETION OF SPECIFIED PROJECTS IN
ACCORDANCE WITH CORPORATE BUSINESS PLANS, INCLUDING STRATEGIC MERGERS,
ACQUISITIONS OR DIVESTITURES; (12) TOTAL SHAREHOLDER RETURN; AND (13) DEBT
REDUCTION. IN ADDITION, SUCH PERFORMANCE GOALS MAY BE BASED UPON THE ATTAINMENT
OF SPECIFIED LEVELS OF THE CORPORATION'S PERFORMANCE UNDER ONE OR MORE OF THE
MEASURES DESCRIBED ABOVE RELATIVE TO THE PERFORMANCE OF OTHER ENTITIES AND MAY
ALSO BE BASED ON THE PERFORMANCE OF ANY OF THE CORPORATION'S BUSINESS UNITS OR
DIVISIONS OR ANY PARENT OR SUBSIDIARY. PERFORMANCE GOALS MAY INCLUDE A MINIMUM
THRESHOLD LEVEL OF PERFORMANCE BELOW WHICH NO AWARD WILL BE EARNED, LEVELS OF
PERFORMANCE AT WHICH SPECIFIED PORTIONS OF AN AWARD WILL BE EARNED AND A MAXIMUM
LEVEL OF PERFORMANCE AT WHICH AN AWARD WILL BE FULLY EARNED.
18
IN FURTHERANCE OF THE FOREGOING, IF AND TO THE EXTENT THAT THE CORPORATION
INTENDS THAT AN AWARD GRANTED UNDER THE PLAN PURSUANT TO THIS PARAGRAPH TO ANY
COVERED EMPLOYEE SHALL QUALIFY AS QUALIFIED PERFORMANCE-BASED COMPENSATION, ALL
DECISIONS REGARDING THE GRANT OF SUCH AWARD SHALL BE MADE ONLY BY MEMBERS OF THE
COMMITTEE WHO QUALIFY AS "OUTSIDE DIRECTORS" WITHIN THE MEANING OF TREAS. REG.
§ 1.162-27(E)(3).
19
APPENDIX
The following definitions shall be in effect under the Plan:
A.
ASSUMED OPTIONS SHALL MEAN THE STOCK OPTIONS
ASSUMED BY THE CORPORATION FROM ACACIA RESEARCH THAT WERE EXERCISABLE FOR ACACIA
RESEARCH - COMBIMATRIX STOCK AND WHICH INCLUDE, BUT ARE NOT LIMITED TO, THE
OPTIONS OUTSTANDING AS OF THE DATE OF THE TRANSACTION THAT WERE GRANTED UNDER
THE ACACIA RESEARCH CORPORATION 2002 COMBIMATRIX STOCK INCENTIVE PLAN, THE
COMBIMATRIX CORPORATION 1998 STOCK OPTION PLAN, THE COMBIMATRIX CORPORATION 2000
STOCK AWARDS PLAN AND THE ACACIA RESEARCH CORPORATION 1996 STOCK OPTION PLAN.
B.
AUTOMATIC OPTION GRANT PROGRAM SHALL MEAN THE
AUTOMATIC OPTION GRANT PROGRAM IN EFFECT UNDER ARTICLE FOUR OF THE PLAN.
C.
BOARD SHALL MEAN THE CORPORATION'S BOARD OF
DIRECTORS.
D.
CERTIFICATE OF INCORPORATION SHALL MEAN THE
CERTIFICATE OF INCORPORATION OF COMBIMATRIX CORPORATION FILED WITH THE DELAWARE
SECRETARY OF STATE ON THE PLAN EFFECTIVE DATE AND ALL SUBSEQUENT AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS AND REPLACEMENTS THEREOF.
E.
CHANGE IN CONTROL SHALL MEAN A CHANGE IN
OWNERSHIP