Document:

2004 Stock Incentive Plan

 Exhibit 10.22 
  
 SALMEDIX, INC. 
  
 2004 STOCK INCENTIVE PLAN 
  
 ARTICLE ONE 
  
 GENERAL PROVISIONS 
  
 I. PURPOSE OF THE PLAN 
  
 This
2004 Stock Incentive Plan is intended to promote the interests of Salmedix, Inc., a Delaware corporation, by providing eligible persons in the Corporation’s service with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to remain in such service. 
  
 Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 
  
 II. STRUCTURE OF THE PLAN 
  
 A. The Plan shall be divided into five separate equity incentives programs: 
  
 (i) the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock; 
  
 (ii) the Salary Investment Option Grant Program under which eligible employees may elect to have a portion of their base salary invested each year in special option grants; 
  
 (iii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary); 

 
 (iv) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive option grants at designated intervals over their period of continued Board service; and 
  
 (v) the Director Fee Option Grant Program under which non-employee Board members may elect to have all or any portion of their annual fee
otherwise payable in cash applied to a special stock option grant. 
  
 B. The provisions of Articles One and Seven shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. 

 III. ADMINISTRATION OF THE PLAN 
  
 A. The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders. Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board’s
discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. However, any discretionary option grants or stock issuances for members of the
Primary Committee must be authorized by a disinterested majority of the Board (in accordance with the rules under Section 16 under the 1934 Act), and no member of the Primary Committee or the Secondary Committee may act as to any matter specifically
relating to such member. 
  
 B. Members of the
Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume
all powers and authority previously delegated to such committee. 
  
 C. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it
may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of those programs and any outstanding options or
stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary
Option Grant and Stock Issuance Programs under its jurisdiction or any stock option or stock issuance thereunder. 
  
 D. The Primary Committee shall have the sole and exclusive authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option Grant Program for one or more calendar years. However, all option grants under the Salary Investment Option Grant Program shall be made in accordance with the express
terms of that program, and the Primary Committee shall not exercise any discretionary functions with respect to the option grants made under that program. 
  
 E. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in
good faith with respect to the Plan or any option grants or stock issuances under the Plan. 
  
 F. Administration of the Automatic Option Grant and Director Fee Option Grant Programs shall be self-executing in accordance with the
terms of those programs, and no Plan Administrator shall exercise any discretionary functions with respect to any option grants or stock issuances made under those programs. 
  

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 IV. ELIGIBILITY 
  

A. The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 
  
 (i) Employees; 
  
 (ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary; and 
  
 (iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 
  
 B. Only Employees who are Section 16 Insiders or other highly compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program. 
  
 C. Each Plan
Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine, 
  
 (i) with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive such grants, the
time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and 
  
 (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive such issuances, the time or
times when the issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares. 
  
 D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program. 
  

E. The individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals
serving as non-employee Board members on the Underwriting Date, (ii) those individuals who first become non-employee Board members at any time after the Underwriting Date, whether through appointment by the Board or election by the
Corporation’s stockholders, and (iii) those individuals who continue to serve as non-employee Board members at one or more Annual Stockholders Meetings held after the Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but shall be eligible to receive
periodic option grants under the Automatic Option Grant Program while he or she continues to serve as a non-employee Board member. 
  

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 F. All non-employee Board members shall be eligible to participate in the Director Fee
Option Grant Program. 
  
 V. STOCK SUBJECT TO THE PLAN 

 
 A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed
             shares, and shall include options outstanding under the Predecessor Plan as set forth in Article Seven, Section III, as well as the available share reserve under the
Predecessor Plan. Such reserve shall equal fifteen percent (15%) of the shares of Common Stock outstanding following the consummation of the initial public offering pursuant to the Underwriting Agreement, assuming exercise in full of the
underwriters’ over-allotment option, on a fully-diluted basis. 
  
 B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with calendar
year 2005, by an amount equal to the lesser of any of (i) three percent (3%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, (ii) 1,000,000 shares of Common
Stock or (iii) such amount as the Board may determine. 
  
 C. No one person participating in the Plan may receive stock options, separately exercisable stock appreciation rights and direct stock issuances for more than 1,000,000 shares of Common Stock in the aggregate per calendar year. 

 
 D. Shares of Common Stock subject to outstanding options
(including options transferred to this Plan from the Predecessor Plan) shall be available for subsequent issuance under the Plan to the extent (i) those options expire or terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation, at a price per share not greater than the original issue price paid
per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall
be reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. Shares of Common Stock
underlying one or more stock appreciation rights exercised under Section IV of Article Two, Section III of Article Three, Section II of Article Five or Section III of Article Six of the Plan shall NOT be available for subsequent issuance under the
Plan. 
  

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 E. If any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made by the Plan
Administrator to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, (iv) the
number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan, (v) the number and/or class of securities and exercise price per share in effect under each outstanding option transferred to
this Plan from the Predecessor Plan and (vi) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section V.B of this Article One. Such adjustments to
the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

  
 ARTICLE TWO 
  
 DISCRETIONARY OPTION GRANT PROGRAM 
  
 I. OPTION TERMS 
  
 Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. 
  
 A. EXERCISE PRICE. 
  
 (i) The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 
  
 (ii) The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more of the forms specified below: 
  
 1. cash or check made payable to the Corporation; 
  
 2. shares of Common Stock held for the requisite period necessary to avoid a charge to the
Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or 
  
 3. if permitted by the Plan Administrator, in its discretion (after taking into account applicable prohibitions on loans to officers and
directors of the Corporation under the Sarbanes-Oxley Act of 2002 and the rules and regulations thereunder and applicable 
  

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 rules promulgated by the U.S. Securities and Exchange Commission, the Nasdaq National Market or any
Stock Exchange), to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale. 
  
 Except to the extent such sale and
remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  
 B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares
as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. The Plan Administrator shall also determine
the schedule and/or performance milestones relating to vesting, if any, applicable to the option shares. 
  
 C. EFFECT OF TERMINATION OF SERVICE. 
  
 (i) The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

  
 1. Any option outstanding at the time of the
Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term. 
  
 2. Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option. 
  
 3. Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage
in Misconduct while holding one or more outstanding options under this Article Two, then all those options shall terminate immediately and cease to be outstanding. 
  
 4. During the applicable post-Service exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, 
  

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 terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable
for vested shares. 
  
 (ii) The Plan
Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: 
  
 1. extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the
limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term; and/or 
  
 2. permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued in Service. 
  
 D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. 
  
 E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase any or all of those unvested shares at a price per share equal to the LOWER of (i) the exercise price paid per
share or (ii) the Fair Market Value per share of Common Stock at the time of repurchase. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. 
  
 F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death. Non-Statutory Options shall be subject to the same restriction, except that a Non-Statutory Option may be assigned in
whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s family or to a trust established exclusively for one or more such family members or to Optionee’s former spouse, to the extent such assignment is
in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two, and those options shall, in accordance with such designation,
automatically be 
  

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 transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during
which the option may be exercised following the Optionee’s death. 
  
 II. INCENTIVE OPTIONS 
  
 The terms specified below shall
be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Seven shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall NOT be subject to the terms of this Section II. 
  
 A. ELIGIBILITY. Incentive Options may only be granted to Employees. 
  
 B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the
respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation
on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted or as is otherwise consistent with applicable rules and regulations of the U.S. Internal Revenue Service.

  
 C. 10% STOCKHOLDER. If any Employee to whom
an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date. 
  
 III. CHANGE IN CONTROL/HOSTILE TAKE-OVER 
  
 A. In the event of a Change in Control, each outstanding option under the Discretionary Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of that Change in Control,
become exercisable for all the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock. However, an outstanding option shall NOT become exercisable on such
an accelerated basis if and to the extent: (i) such option is to be assumed by the successor corporation (or parent thereof) or is otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such
option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on any shares for which the option is not otherwise at that time exercisable and provides
for subsequent payout of that spread in accordance with the same exercise/vesting schedule applicable to those option shares or 
  

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 (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator
at the time of the option grant. 
  
 B. All
outstanding repurchase rights under the Discretionary Option Grant Program shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of a Change in Control, except
to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 
  
 C. Immediately following the consummation of the Change in Control, all outstanding options under the Discretionary Option Grant Program
shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction. 
  
 D. Each option which is assumed in connection with a Change
in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments to reflect such Change in Control shall also be made to (i) the exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan, (iii) the maximum number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year and (iv) the maximum number and/or class of securities by which the share reserve is to
increase automatically each calendar year. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may,
in connection with the assumption of the outstanding options under the Discretionary Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common
Stock in such Change in Control transaction. 
  
 E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effective date of a Change in
Control, become exercisable for all the shares of Common Stock at the time subject to those options and may be exercised for any or all of those shares as fully vested shares of Common Stock, whether or not those options are to be assumed in the
Change in Control transaction or otherwise continued in effect. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant
Program so that those rights shall immediately terminate upon the consummation of the Change in Control transaction, and the shares subject to those terminated rights shall thereupon vest in full. 
  

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 F. The Plan Administrator shall have full power and authority to structure one or more
outstanding options under the Discretionary Option Grant Program so that those options shall become exercisable for all the shares of Common Stock at the time subject to those options in the event the Optionee’s Service is subsequently
terminated by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control transaction in which those options do not otherwise accelerate. In addition, the
Plan Administrator may structure one or more of the Corporation’s repurchase rights so that those rights shall immediately terminate with respect to any shares held by the Optionee at the time of such Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at that time. 
  
 G. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to the effective date of a Hostile Take-Over, become exercisable for all the shares of Common Stock at the time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those
rights shall terminate automatically upon the consummation of such Hostile Take-Over, and the shares subject to those terminated rights shall thereupon vest in full. Alternatively, the Plan Administrator may condition the automatic acceleration of
one or more outstanding options under the Discretionary Option Grant Program and the termination of one or more of the Corporation’s outstanding repurchase rights under such program upon the subsequent termination of the Optionee’s Service
by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of such Hostile Take-Over. 
  

H. The portion of any Incentive Option accelerated in connection with a Change in Control or Hostile Take-Over shall remain exercisable
as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded, as determined in accordance with applicable rules and regulations of the U.S. Internal Revenue Service. To the extent such
dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Nonstatutory Option under the Federal tax laws. 
  
 I. The outstanding options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
  
 IV. CANCELLATION AND REGRANT OF OPTIONS 
  
 The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option Grant Program (including outstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or a different number of
shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new grant date. 
  

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 V. STOCK APPRECIATION RIGHTS 
  
 A. The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock
appreciation rights and/or limited stock appreciation rights. 
  
 B. The following terms shall govern the grant and exercise of tandem stock appreciation rights: 
  
 (i) One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between
the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the
number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price payable for such shares. 
  
 (ii) No such option surrender shall be effective unless it is approved by the Plan Administrator, either at
the time of the actual option surrender or at any earlier time. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 
  
 (iii) If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the LATER of (a) five (5) business days after the receipt of the rejection notice or (b) the last day on
which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant date. 
  
 C. The following terms shall govern the grant and exercise
of limited stock appreciation rights: 
  
 (i) One
or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. 
  
 (ii) Upon the occurrence of a Hostile Tender-Offer, each individual holding one or more options with such a limited stock appreciation
right shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Tender-Offer) to surrender each such option to the Corporation. In return for the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the excess of (A) the Tender-Offer Price of the shares of Common Stock at the time subject to such option (whether or not the option is otherwise at that time vested and exercisable for those
shares) over (B) the aggregate exercise price payable for those shares. Such cash distribution shall be paid within five (5) days following the option surrender date. 
  

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 (iii) At the time such limited stock appreciation right is granted, the Plan
Administrator shall pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no further approval of the Plan Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution. 
  

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 ARTICLE THREE 
  
 SALARY INVESTMENT OPTION GRANT PROGRAM 
  
 I. OPTION GRANTS 
  
 The Primary Committee shall have the sole and exclusive authority to determine the calendar year or years (if any) for which the Salary Investment Option
Grant Program is to be in effect and to select the Section 16 Insiders and other highly compensated Employees eligible to participate in the Salary Investment Option Grant Program for such calendar year or years. Each selected individual who elects
to participate in the Salary Investment Option Grant Program must, prior to the start of each calendar year of participation, file with the Plan Administrator (or its designee) an irrevocable authorization directing the Corporation to reduce his or
her base salary for that calendar year by an amount not less than Ten Thousand Dollars ($10,000) nor more than Fifty Thousand Dollars ($50,000). Each individual who files such a timely authorization shall automatically be granted an option under the
Salary Investment Option Grant Program on the first trading day in January of the calendar year for which the salary reduction is to be in effect. 
  
 II. OPTION TERMS 
  
 Each option shall be a Non-Statutory Option evidenced by one or more documents in the form approved by the Plan Administrator; PROVIDED, however, that
each such document shall comply with the terms specified below. 
  
 A. EXERCISE PRICE. 
  
 (i) The exercise price per share shall be thirty-three and one-third percent (33 1/3%) of the Fair
Market Value per share of Common Stock on the option grant date. 
  
 (ii) The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  
 B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined
pursuant to the following formula (rounded down to the nearest whole number): 
  
 X = A DIVIDED BY (B x 66 2/3%), where 
  
 X is the number of option shares, 
  
 A is the dollar amount by which the Optionee’s base
salary is to be reduced for the calendar year pursuant to his or her election under the Salary Investment Option Grant Program, and 
  

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 B is the Fair Market Value per share of Common Stock on the option grant date.

  
 C. EXERCISE AND TERM OF OPTIONS. The option
shall become exercisable in a series of twelve (12) successive equal monthly installments upon the Optionee’s completion of each calendar month of Service in the calendar year for which the salary reduction is in effect. Each option shall have
a maximum term of ten (10) years measured from the option grant date. 
  
 D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service for any reason while holding one or more options under this Article Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of Service, until the EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such
cessation of Service. Should the Optionee die while holding one or more options under this Article Three, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s
cessation of Service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will
or the laws of inheritance or by the designated beneficiary or beneficiaries of the option. Such right of exercise shall lapse, and the option shall terminate, upon the EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee’s cessation of Service. However, the option shall, immediately upon the Optionee’s cessation of Service for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that time exercisable. 
  
 III. CHANGE IN CONTROL/HOSTILE TAKE-OVER/HOSTILE TENDER-OFFER 
  
 A. In the event of a Change in Control while the Optionee remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested shares of Common Stock. Each such outstanding option shall terminate immediately following the Change in Control, except to the extent assumed by the successor corporation
(or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction. Any option so assumed or continued shall remain exercisable for the fully vested shares until the EARLIER of (i) the expiration of the
ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service. 
  
 B. In the event of a Hostile Take-Over while the Optionee remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Hostile Take-Over, become exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as 
  

 14 

 fully vested shares of Common Stock. The option shall remain so exercisable until the EARLIEST to occur
of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service, (iii) the termination of the option in connection with a Change in Control
or (iv) the surrender of the option in connection with a Hostile Tender-Offer. 
  
 C. Upon the occurrence of a Hostile Tender-Offer while the Optionee remains in Service, such Optionee shall have a thirty (30)-day period
in which to surrender to the Corporation each outstanding option held by him or her under the Salary Investment Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Tender-Offer Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. The Primary Committee shall, at the time the option with such limited stock appreciation right is granted under the
Salary Investment Option Grant Program, pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no further approval of the Primary Committee or the Board shall be required at the time of the
actual option surrender and cash distribution. 
  
 D. Each option which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would
have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such securities shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in
consummation of the Change in Control, the successor corporation may, in connection with the assumption of the outstanding options under the Salary Investment Option Grant Program, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control. 
  
 E. The grant of options under the Salary Investment Option Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
  
 IV. REMAINING TERMS 
  
 The remaining terms of each option granted under the Salary Investment Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program. 
  

 15 

 ARTICLE FOUR 
  
 STOCK ISSUANCE PROGRAM 
  
 I. STOCK ISSUANCE TERMS 
  
 Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each
such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the
recipients to receive those shares upon the attainment of designated performance goals or the satisfaction of specified Service requirements. 
  
 A. PURCHASE PRICE. 
  
 (i) The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the issuance date. 
  
 (ii) Subject to the provisions of Section I of Article Seven, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance: 
  
 1.
cash or check made payable to the Corporation; or 
  
 2. past services rendered to the Corporation (or any Parent or Subsidiary). 
  
 B. VESTING PROVISIONS. 
  
 (i) Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested shares of
Common Stock issued under the Stock Issuance Program shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment of designated performance goals or the satisfaction of specified Service requirements. 
  
 (ii) Any new, substituted or additional securities or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 
  

 16 

 (iii) The Participant shall have full stockholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares. 
  
 (iv) Should
the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s permitted purchase money indebtedness), the Corporation shall repay to the Participant the LOWER of (i) the cash consideration paid for the
surrendered shares or (ii) the Fair Market Value of those shares at the time of cancellation and shall cancel the unpaid principal balance of any outstanding purchase money note of the Participant attributable to the surrendered shares by the
applicable clause (i) or (ii) amount. 
  
 (v) The
Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. 
  
 (vi) Outstanding share right awards under the Stock Issuance Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained or satisfied. The Plan Administrator, however, shall have the discretionary authority to issue shares
of Common Stock under one or more outstanding share right awards as to which the designated performance goals or Service requirements have not been attained or satisfied. 
  
 II. CHANGE IN CONTROL/HOSTILE TAKE-OVER 
  
 A. All of the Corporation’s outstanding repurchase rights under the Stock Issuance Program shall
terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement. 
  
 B. The Plan Administrator
shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that 
  

 17 

 those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to
those terminated rights shall vest, either immediately upon the effective date of a Change in Control or subsequently upon an Involuntary Termination of the Participant’s Service within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof) or are otherwise continued in effect. 
  
 C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights
shall immediately vest, either upon the occurrence of a Hostile Take-Over or upon the subsequent termination of the Participant’s Service by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of that Hostile Take-Over. 
  
 III.
SHARE ESCROW/LEGENDS 
  
 Unvested shares may, in the Plan
Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested
shares. 
  
 ARTICLE FIVE 
  
 AUTOMATIC OPTION GRANT PROGRAM 
  
 I. OPTION TERMS 
  
 A. GRANT DATES. Option grants shall be made on the dates specified below: 
  
 (i) Each individual who is serving as a non-employee Board
member on the Underwriting Date shall automatically be granted on that date a Non-Statutory Option to purchase 20,000 shares(1) of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or
Subsidiary. 
  
 (ii) Each individual who is first
elected or appointed as a non-employee Board member at any time after the Underwriting Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 

	(1)	This share number shall not be adjusted for any stock split, stock dividend or other similar change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration which is effected prior to the closing of the initial public offering of such Common Stock associated with the Underwriting Date. 

  

 18 

 20,000 shares(2) of Common Stock, provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary. 
  
 (iii) On the date of each Annual Stockholders Meeting held after the Underwriting Date, each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at
that particular Annual Meeting, shall automatically be granted a Non-Statutory Option to purchase 5,000 shares(3) of Common Stock, provided such individual has served as a non-employee Board member for at least six (6) months. There shall be no
limit on the number of such 5,000-share option grants any one non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously been in the employ of the Corporation (or any Parent or
Subsidiary) or who have otherwise received one or more stock option grants from the Corporation prior to the Underwriting Date shall be eligible to receive one or more such annual option grants over their period of continued Board service.

  
 B. EXERCISE PRICE. 
  
 (i) The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 
  
 (ii) The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  
 C. OPTION TERM. Each option shall have a term of ten (10) years measured from the option grant date.

  
 D. EXERCISE AND VESTING OF OPTIONS. Each
option shall be immediately exercisable for any or all of the option shares. However, any unvested shares purchased under the option shall be subject to repurchase by the Corporation, at the LOWER of (i) the exercise price paid per share or (ii) the
Fair Market Value per share of Common Stock at the time of repurchase, upon the Optionee’s cessation of Board service prior to vesting in those shares. The shares subject to each initial 20,000-share grant shall vest, and the Corporation’s
repurchase right shall lapse, in a series of four (4) successive equal annual installments upon the Optionee’s completion of each year of service as a Board member over the four (4)-year period measured from the option grant date. The shares
subject to each annual 5,000-share option grant 

	(2)	This share number shall not be adjusted for any stock split, stock dividend or other similar change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration which is effected prior to the closing of the initial public offering of such Common Stock associated with the Underwriting Date. 

  

	(3)	This share number shall not be adjusted for any stock split, stock dividend or other similar change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration which is effected prior to the closing of the initial public offering of such Common Stock associated with the Underwriting Date. 

  

 19 

 shall vest in one installment upon the Optionee’s completion of the one (1)-year period of service
measured from the grant date. 
  
 E. LIMITED
TRANSFERABILITY OF OPTIONS. Each option under this Article Five may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s family or to a trust established exclusively for one or more such
family members or to Optionee’s former spouse, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons
who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Five, and those options
shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to
all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death. 
  
 F. TERMINATION OF BOARD SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve as a Board member: 
  
 (i) The Optionee (or, in the event of Optionee’s death, the personal representative of the Optionee’s estate or the person or
persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or the designated beneficiary or beneficiaries of such option) shall have a twelve (12)-month period following the date of such cessation of
Board service in which to exercise each such option. 
  
 (ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the Optionee’s cessation
of Board service. 
  
 (iii) Should the Optionee
cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for any or all of those shares as fully vested shares of Common Stock. 
  
 (iv) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month
exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the
Optionee’s cessation of Board service for any reason other than death or Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 
  

 20 

 II. CHANGE IN CONTROL/HOSTILE TAKE-OVER/HOSTILE TENDER-OFFER 
  
 A. In the event of a Change in Control while the Optionee
remains a Board member, the shares of Common Stock at the time subject to each outstanding option held by such Optionee under this Automatic Option Grant Program but not otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become exercisable for all the option shares as fully vested shares of Common Stock and may be exercised for any or all of those vested shares. Immediately following the
consummation of the Change in Control, each automatic option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of
the Change in Control transaction. 
  
 B. In the
event of a Hostile Take-Over while the Optionee remains a Board member, the shares of Common Stock at the time subject to each outstanding option held by such Optionee under this Automatic Option Grant Program but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to the effective date of the Hostile Take-Over, become exercisable for all the option shares as fully vested shares of Common Stock and may be exercised for any or all of
those vested shares. Each such option shall remain exercisable for such fully vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Tender-Offer. 
  
 C. All outstanding repurchase rights under this Automatic
Option Grant Program shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control or Hostile Take-Over. 
  
 D. Upon the occurrence of a Hostile Tender-Offer while the
Optionee remains a Board member, such Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his or her outstanding options under this Automatic Option Grant Program. The Optionee shall in return be entitled to
a cash distribution from the Corporation in an amount equal to the excess of (i) the Tender-Offer Price of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in
those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and cash distribution. 
  
 E. Each option which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted,
immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, PROVIDED the aggregate exercise price payable for such securities shall remain the same. To the extent the actual holders of
the Corporation’s outstanding Common Stock receive cash consideration for their Common 
  

 21 

 Stock in consummation of the Change in Control, the successor corporation may, in connection with the
assumption of the outstanding options under the Automatic Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in
Control transaction. 
  
 F. The grant of options
under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer
all or any part of its business or assets. 
  
 III. REMAINING
TERMS 
  
 The remaining terms of each option granted under the
Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
  
 ARTICLE SIX 
  
 DIRECTOR FEE OPTION GRANT PROGRAM 
  
 I. OPTION GRANTS 
  
 The Primary
Committee shall have the sole and exclusive authority to determine the calendar year or years for which the Director Fee Option Grant Program is to be in effect. For each such calendar year the program is in effect, each non-employee Board member
may irrevocably elect to apply all or any portion of the annual fee otherwise payable in cash for his or her service on the Board for that year to the acquisition of a special option grant under this Director Fee Option Grant Program. Such election
must be filed with the Corporation’s Chief Financial Officer prior to the first day of the calendar year for which the annual fee which is the subject of that election is otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in January in the calendar year for which the fee election is in effect. The dollar amount of the “annual fee” subject
to the Board member’s election each year shall be equal to the number of regularly scheduled Board meetings for that year multiplied by the per Board meeting fee in effect for such year, plus any annual retainer fee(s) in effect for such year.

  
 II. OPTION TERMS 
  
 Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below. 
  
 A. EXERCISE PRICE.

  
 (i) The exercise price per share shall be
thirty-three and one-third percent (33 1/3%) of the Fair Market Value per share of Common Stock on the option
grant date. 
  

 22 

 (ii) The exercise price shall become immediately due upon exercise of the option and
shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date. 
  
 B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number): 
  
 X = A DIVIDED BY (B x 66 2/3%), where 
  
 X is the number of option shares, 
  
 A is the portion of the annual fee subject to the non-employee Board member’s election under this Director Fee Option Grant Program,
and 
  
 B is the Fair Market Value per share of
Common Stock on the option grant date. 
  
 C.
EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series of twelve (12) equal monthly installments upon the Optionee’s completion of each calendar month of Board service during the calendar year for which the fee election
is in effect. Each option shall have a maximum term of ten (10) years measured from the option grant date. 
  
 D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this Article Six may be assigned in whole or in part during the Optionee’s
lifetime to one or more members of the Optionee’s family or to a trust established exclusively for one or more such family members or to Optionee’s former spouse, to the extent such assignment is in connection with Optionee’s estate
plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or more persons as
the beneficiary or beneficiaries of his or her outstanding options under this Article Six, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death
while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited
time period during which the option may be exercised following the Optionee’s death. 
  
 E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board service for any reason (other than death or Permanent Disability) while
holding one or more options under this Director Fee Option Grant Program, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Board service, until the
EARLIER of (i) the expiration of the ten (10)-year option 
  

 23 

 term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of
Board service. However, each option held by the Optionee under this Director Fee Option Grant Program at the time of his or her cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares
of Common Stock for which the option is not otherwise at that time exercisable. 
  
 F. DEATH OR PERMANENT DISABILITY. Should the Optionee’s service as a Board member cease by reason of death or Permanent Disability,
then each option held by such Optionee under this Director Fee Option Grant Program shall immediately become exercisable for all the shares of Common Stock at the time subject to that option, and the option may be exercised for any or all of those
shares as fully vested shares until the EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. To the extent such option is held
by the Optionee at the time of his or her death, that option may be exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws
of inheritance or by the designated beneficiary or beneficiaries of such option. 
  
 Should the Optionee die after cessation of Board service but while holding one or more options under this Director Fee Option Grant Program, then each such option may be exercised, for any or all of the shares for
which the option is exercisable at the time of the Optionee’s cessation of Board service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or
persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the designated beneficiary or beneficiaries of such option. Such right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee’s cessation of Board service. 
  
 III. CHANGE IN CONTROL/HOSTILE TAKE-OVER/HOSTILE TENDER-OFFER 
  
 A. In the event of any Change in Control while the Optionee remains a Board member, each outstanding option
held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all the shares of Common Stock
at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock. Each such outstanding option shall terminate immediately following the Change in Control, except to the extent assumed by
the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction. Any option so assumed or continued shall remain exercisable for the fully vested shares until the EARLIEST to
occur of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Board service or (iii) the surrender of the option in connection with a Hostile
Tender-Offer. 
  
 B. In the event of a Hostile
Take-Over while the Optionee remains a Board member, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the 
  

 24 

 effective date of the Hostile Take-Over, become exercisable for all the shares of Common Stock at the
time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock. The option shall remain so exercisable until the EARLIEST to occur of (i) the expiration of the ten (10)-year option term, (ii)
the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Board service, (iii) the termination of the option in connection with a Change in Control transaction or (iv) the surrender of the option in
connection with a Hostile Tender-Offer. 
  
 C.
Upon the occurrence of a Hostile Tender-Offer while the Optionee remains a Board member, such Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each outstanding option held by him or her under the Director Fee
Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Tender-Offer Price of the shares of Common Stock at the time subject to each surrendered option
(whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall be required at the time of the actual option surrender and cash distribution. 
  

D. Each option which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, PROVIDED the aggregate exercise price payable for such securities shall remain the same. To the extent the actual
holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption of the outstanding options under
the Director Fee Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction. 
  
 E. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or
assets. 
  
 IV. REMAINING TERMS 
  
 The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
  

 25 

 ARTICLE SEVEN 
  
 MISCELLANEOUS 
  
 I. FINANCING 
  
 The Plan Administrator may in its discretion (subject to applicable prohibitions on loans to officers and directors of the Corporation under the
Sarbanes-Oxley Act of 2002 and the rules and regulations thereunder and similar rules promulgated by the U.S. Securities and Exchange Commission, the Nasdaq National Market or any Stock Exchange) permit any Optionee or Participant to pay the option
exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest-bearing promissory note payable in one or more installments. The terms of any
such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i)
the aggregate option exercise price or purchase price payable for the purchased shares (less the par value of such shares) plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase. 
  
 II. TAX
WITHHOLDING 
  
 A. The Corporation’s
obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to the Optionee’s or Participant’s satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements. 
  
 B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan (other than the options granted or the shares issued under the Automatic Option Grant or
Director Fee Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes to which such holders may become subject in connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or both of the following formats: 
  
 STOCK WITHHOLDING: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 
  
 STOCK DELIVERY: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Withholding Taxes) with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 
  

 26 

 III. EFFECTIVE DATE AND TERM OF THE PLAN 
  
 A. The Plan was adopted by the Board on April 21, 2004 and shall become effective immediately on the Plan
Effective Date. However, the Salary Investment Option Grant Program and the Director Fee Option Grant Program shall not be implemented until such time as the Primary Committee may deem appropriate. Options may be granted under the Discretionary
Option Grant at any time on or after the Plan Effective Date, and the initial option grants under the Automatic Option Grant Program shall also be made on the Plan Effective Date to any non-employee Board members eligible for such grants at that
time. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. 
  
 B. The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants or direct stock issuances shall be made under the Predecessor Plan after the Plan Effective Date. All options outstanding under the Predecessor Plan on the Plan Effective Date shall be transferred to the Plan at
that time and shall be treated as outstanding options under the Plan. However, each outstanding option so transferred shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of such transferred options with respect to their acquisition of shares of Common Stock. 
  
 C. One or more provisions of the Plan, including (without limitation) the option/vesting acceleration
provisions of Article Two relating to Changes in Control and Hostile Take-Overs, may, in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such
provisions. 
  
 D. The Plan shall terminate upon
the EARLIEST to occur of (i) April 20, 2014, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully vested shares or (iii) the termination of all outstanding options in connection with a Change in
Control. Should the Plan terminate on April 20, 2014, then all option grants and unvested stock issuances outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing such grants or
issuances. 
  
 IV. AMENDMENT OF THE PLAN 
  
 A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations. 
  
 B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs and shares of 
  

 27 

 Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 
  
 V. USE OF PROCEEDS 
  
 Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes. 
  
 VI. REGULATORY APPROVALS 
  
 A. The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it.

  
 B. No shares of Common Stock or other assets
shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for
the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any Stock Exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 
  
 VII. NO EMPLOYMENT/SERVICE RIGHTS 
  
 Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant,
which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause. 
  

 28 

 APPENDIX 
  
 The following definitions shall be in effect under the Plan: 
  
 A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant program in effect under Article Five of the Plan. 
  
 B. BOARD shall mean the Corporation’s Board of
Directors. 
  
 C. CHANGE IN CONTROL shall mean a
change in ownership or control of the Corporation effected through any of the following transactions: 
  
 (i) a merger, consolidation or other reorganization approved by the Corporation’s stockholders, UNLESS securities representing more
than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction; 
  
 (ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or
dissolution of the Corporation; or 
  
 (iii) the
acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the
Corporation’s stockholders. 
  
 D. CODE
shall mean the Internal Revenue Code of 1986, as amended. 
  
 E. COMMON STOCK shall mean the Corporation’s common stock. 
  
 F. CORPORATION shall mean Salmedix, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or
voting stock of Salmedix, Inc. which shall by appropriate action adopt the Plan. 
  
 G. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option grant in effect for non-employee Board members under Article Six
of the Plan. 
  
 H. DISCRETIONARY OPTION GRANT
PROGRAM shall mean the discretionary option grant program in effect under Article Two of the Plan. 
  
 I. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the manner and method of performance. 
  

 A-1 

 J. EXERCISE DATE shall mean the date on which the Corporation shall have received written
notice of the option exercise. 
  
 K. FAIR MARKET
VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market and published in THE WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 
  

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and
published in THE WALL STREET JOURNAL. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

  
 (iii) For purposes of any option grants made
on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement. 
  
 L. HOSTILE TAKE-OVER shall mean a change in ownership or
control of the Corporation effected through either of the following transactions: 
  
 (i) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination; or 
  
 (ii) a Hostile Tender-Offer. 
  
 M. HOSTILE TENDER-OFFER shall mean the acquisition, directly
or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s
stockholders which the Board does not recommend such stockholders to accept. 
  
 N. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. 
  

 A-2 

 O. INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual
which occurs by reason of: 
  
 (i) such
individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct; or 
  
 (ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation
without the individual’s consent. 
  
 P.
MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the
right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or
omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. 
  
 Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. 
  
 R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422.

  
 S. OPTIONEE shall mean any person to whom an
option is granted under the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option Grant or Director Fee Option Grant Program. 
  
 T. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other
corporations in such chain. 
  
 U. PARTICIPANT
shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 
  
 V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the 
  

 A-3 

 Automatic Option Grant and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration
of twelve (12) months or more. 
  
 W. PLAN shall
mean the Corporation’s 2004 Stock Incentive Plan, as set forth in this document. 
  
 X. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction. 
  
 Y. PLAN
EFFECTIVE DATE shall mean the date the Plan shall become effective and shall be coincident with the Underwriting Date. 
  
 Z. PREDECESSOR PLAN shall mean the Corporation’s 2001 Stock Option/Stock Issuance Plan, in effect immediately prior to the Plan
Effective Date hereunder. 
  
 AA. PRIMARY
COMMITTEE shall mean the committee of two (2) or more non-employee Board members (as defined for purposes of Rule 16b-3 under the 1934 Act and, to the extent that relief from the limitations of under Section 162(m) under the Code is sought with
respect to Options, such directors shall qualify as “outside directors” for purposes of such Section 162(m)) appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16
Insiders and to administer the Salary Investment Option Grant Program solely with respect to the selection of the eligible individuals who may participate in such program. 
  
 BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment option grant program in effect
under Article Three of the Plan. 
  
 CC.
SECONDARY COMMITTEE shall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders. 
  
 DD. SECTION 16 INSIDER shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 
  
 EE. SERVICE shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 
  
 FF. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange. 
  

 A-4 

 GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and
the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. 
  
 HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under Article Four of the Plan. 
  
 II. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such chain. 
  
 JJ. TENDER-OFFER PRICE shall mean the GREATER of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered
to the Corporation in connection with a Hostile Tender-Offer or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Tender-Offer. However, if the surrendered option is an Incentive Option,
the Tender-Offer Price shall not exceed the clause (i) price per share. 
  
 KK. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any
Parent or Subsidiary). 
  
 LL. UNDERWRITING
AGREEMENT shall mean the agreement between the Corporation and the underwriter or underwriters managing the initial public offering of the Common Stock. 
  
 MM. UNDERWRITING DATE shall mean the date on which the Underwriting Agreement is executed and the Common Stock is priced in connection
with an initial public offering of the Common Stock. 
  
 NN. WITHHOLDING TAXES shall mean the Federal, state and local income and employment withholding taxes to which the holder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with the exercise of
those options or the vesting of those shares. 
  

 A-5Form of Supplemental Indenture

 EXHIBIT 4.3 
  

PPL ENERGY SUPPLY, LLC, 
 Issuer

  
 TO 
  
 JPMORGAN CHASE BANK 
 (formerly known as The Chase Manhattan Bank), 
 Trustee 
  

  
 Supplemental Indenture No. [2] 
  
 Dated as of                     

  
 Supplemental to the Indenture 
 dated as of October 1, 2001 
  
 Establishing a series of Securities designated 
 Senior Notes [    ]% Series [    ], due [    ] 
 limited in aggregate principal amount to $[            ] 

 SUPPLEMENTAL INDENTURE No. [2], dated as of
                     between PPL ENERGY SUPPLY, LLC, a limited liability company duly organized and existing under the laws of the
State of Delaware (herein called the “Company”), and JPMORGAN CHASE BANK, a New York banking corporation (formerly known as The Chase Manhattan Bank), as Trustee (herein called the “Trustee”), under the Indenture dated as
of October 1, 2001 (hereinafter called the “Original Indenture”), this Supplemental Indenture No. [2] being supplemental thereto. The Original Indenture and any and all indentures and instruments supplemental thereto are hereinafter
sometimes collectively called the “Indenture.” 
  
 Recitals of the Company 
  
 The Original Indenture
was authorized, executed and delivered by the Company to provide for the issuance by the Company from time to time of its Securities (such term and all other capitalized terms used herein without definition having the meanings assigned to them in
the Original Indenture), to be issued in one or more series as contemplated therein. 
  
 As contemplated by Sections 301 and 1201(f) of the Original Indenture, the Company wishes to establish a series of Securities to be designated “Senior Notes,     % Series
    , due [    ]” to be limited in aggregate principal amount (except as contemplated in Section 301(b) and the last paragraph of Section 301 of the Original Indenture) to
$[            ], such series of Securities to be hereinafter sometimes called “Series No.     .” 
  
 The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. [2] to establish the Securities of Series No.      and has duly authorized the issuance of such Securities; and all acts necessary to make this Supplemental Indenture No. [2] a valid agreement of
the Company and to make the Securities of Series No.      valid obligations of the Company have been performed. 
  
 NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE No. [2] WITNESSETH: 
  
 For and in consideration of the premises and of the purchase of the Securities by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities of Series No.     , as follows: 
  
 ARTICLE ONE 
  
 Third Series of Securities 
  
 Section 1. There is hereby created a series of Securities designated “Senior Notes,     % Series     ” and limited in aggregate principal amount
(except as contemplated in Section 301(b) and the last paragraph of Section 301 of the Original Indenture) to $[            ]. The form and terms of the Securities of Series No.
     shall be established in an Officer’s Certificate of the Company, as contemplated by Section 301 of the Original Indenture. 
  

 2 

 Section 2. The Company hereby agrees that, if the Company shall make any deposit of money and/or
Eligible Obligations with respect to any Securities of Series No. __, or any portion of the principal amount thereof, as contemplated by Section 701 of the Indenture, the Company shall not deliver an Officer’s Certificate described in clause
(z) in the first paragraph of said Section 701 unless the Company shall also deliver to the Trustee, together with such Officer’s Certificate, either: 
  
 (A) an instrument wherein the Company, notwithstanding the satisfaction and discharge of its indebtedness in respect of such Securities,
shall assume the obligation (which shall be absolute and unconditional) to irrevocably deposit with the Trustee or Paying Agent such additional sums of money, if any, or additional Eligible Obligations (meeting the requirements of Section 701), if
any, or any combination thereof, at such time or times, as shall be necessary, together with the money and/or Eligible Obligations theretofore so deposited, to pay when due the principal of and premium, if any, and interest due and to become due on
such Securities or portions thereof, all in accordance with and subject to the provisions of said Section 701; provided, however, that such instrument may state that the obligation of the Company to make additional deposits as aforesaid shall arise
only upon the delivery to the Company by the Trustee of a notice asserting the deficiency and showing the calculation thereof and shall continue only until the Company shall have delivered to the Trustee an opinion of an independent public
accountant of nationally recognized standing to the effect that no such deficiency exists and showing the calculation of the sufficiency of the deposits then held by the Trustee; or 
  
 (B) an Opinion of Counsel to the effect that the Holders of such Securities, or portions of the principal
amount thereof, will not recognize income, gain or loss for United States federal income tax purposes as a result of the satisfaction and discharge of the Company’s indebtedness in respect thereof and will be subject to United States federal
income tax on the same amounts, at the same times and in the same manner as if such satisfaction and discharge had not been effected. 
  
 Section 3. The Company agrees that for so long as any Securities of Series No.      shall remain Outstanding, without
consent of the Holders of a majority in principal amount of the Outstanding Securities of such series, the Company shall not create, incur or assume any Lien (other than Permitted Liens) upon any property of the Company, whether now owned or
hereafter acquired, in order to secure any Debt of the Company. The foregoing agreement shall not restrict the ability of Subsidiaries or Affiliates of the Company to create, incur or assume any Lien upon their properties or assets. 
  
 Section 4. The provisions of Section 3 above shall not prohibit the
creation, issuance, incurrence or assumption of any Lien if either 
  
 (A) the Company shall make effective provision whereby all Securities of Series No.     then Outstanding shall be secured equally and ratably with all other Debt then outstanding under such
Lien; or 
  

 3 

 (B) the Company shall deliver to the Trustee bonds, notes or other evidences of
indebtedness secured by the Lien which secures such Debt (hereinafter called “Secured Obligations”) (I) in an aggregate principal amount equal to the aggregate principal amount of the Securities of Series No. 1 then Outstanding, (II)
maturing (or being subject to mandatory redemption) on such dates and in such principal amounts that, at each Stated Maturity of the Outstanding Securities of Series No.     , there shall mature (or be redeemed) Secured
Obligations equal in principal amount to such Securities then to mature and (III) containing, in addition to any mandatory redemption provisions applicable to all Secured Obligations outstanding under such Lien and any mandatory redemption
provisions contained therein pursuant to clause (II) above, mandatory redemption provisions correlative to the provisions, if any, for the mandatory redemption (pursuant to a sinking fund or otherwise) of the Securities of Series
No.     or for the redemption thereof at the option of the Holder, as well as a provision for mandatory redemption upon an acceleration of the maturity of all Outstanding Securities of Series No.
     following an Event of Default (such mandatory redemption to be rescinded upon the rescission of such acceleration); it being expressly understood that such Secured Obligations (X) may, but need not, bear interest, (Y)
may, but need not, contain provisions for the redemption thereof at the option of the issuer, any such redemption to be made at a redemption price or prices not less than the principal amount thereof and (Z) shall be held by the Trustee for the
benefit of the Holders of all Securities of Series No.      from time to time Outstanding subject to such terms and conditions relating to surrender to the Company, transfer restrictions, voting, application of payments of
principal and interest and other matters as shall be set forth in an indenture supplemental hereto specifically providing for the delivery to the Trustee of such Secured Obligations. 
  
 Section 5. If the Company shall elect either of the alternatives described in Section 4 above, the Company shall
deliver to the Trustee: 
  
 (A) an indenture
supplemental to the Original Indenture (I) together with any appropriate inter-creditor arrangements, whereby such Securities of Series No.      then Outstanding shall be secured by the Lien referred to in Section 4 above
equally and ratably with all other indebtedness secured by such Lien or (II) providing for the delivery to the Trustee of Secured Obligations; and 
  
 (B) an Officer’s Certificate (I) stating that, to the knowledge of the signer, (1) no Event of Default has occurred and is continuing
and (2) no event has occurred and is continuing which entitles the secured party under such Lien to accelerate the maturity of the indebtedness outstanding thereunder and (II) stating the aggregate principal amount of indebtedness issuable, and then
proposed to be issued, under and secured by such Lien; and 
  
 (C) an Opinion of Counsel (I) if the Securities of Series No.      then Outstanding are to be secured by such Lien, to the effect that all such Securities then Outstanding are entitled to
the benefit of such Lien equally and ratably with all other indebtedness outstanding under such Lien or (II) if Secured Obligations are to be 
  

 4 

 delivered to the Trustee, to the effect that such Secured Obligations have been duly issued under such
Lien and constitute valid obligations, entitled to the benefit of such Lien equally and ratably with all other indebtedness then outstanding under such Lien. 
  
 Section 6. The Company agrees that for so long as any Securities of Series No.      shall remain Outstanding, and except
for the sale of the properties and assets of the Company substantially as an entirety pursuant to Article Eleven of the Original Indenture, and other than assets required to be sold to conform with governmental requirements, the Company shall not,
and shall not permit any of its Subsidiaries to, consummate any Asset Sale, if the aggregate net book value of all such Asset Sales consummated during the four calendar quarters immediately preceding any date of determination would exceed 15% of the
consolidated assets of the Company and its consolidated Subsidiaries as of the beginning of the Company’s most recently ended full fiscal quarter; provided, however, that any such Asset Sale will be disregarded for purposes of the 15%
limitation specified above (i) if any such Asset Sale is in the ordinary course of business, (ii) to the extent that such assets are worn out or are no longer useful or necessary in connection with the operation of the business of the Company or its
Subsidiaries, (iii) to the extent such assets are being transferred to a wholly-owned Subsidiary of the Company, (iv) to the extent any such assets subject to any such Asset Sale involve transfers of assets of or equity interests in connection with
(a) the formation of any joint venture between the Company or any of its Subsidiaries and any other entity, or (b) any project development and acquisition activities, and (v) if the proceeds thereof (a) are, within 12 months of such Asset Sale,
invested or reinvested by the Company or any Subsidiary in a Permitted Business, (b) are used by the Company or a Subsidiary to repay Debt of the Company or such Subsidiary, or (c) are retained by the Company or its Subsidiaries. Additionally, if
prior to any Asset Sale that otherwise would cause the 15% limitation to be exceeded, Moody’s and S&P confirm the then current long term debt rating of such Securities of Series No.      after giving effect to
such Asset Sale, such Asset Sale shall also be disregarded for purposes of the foregoing limitations. 
  
 Section 7. So long as any Securities of Series No.      shall remain Outstanding, the following event shall be an Event
of Default with respect to the Securities of Series No.     : the occurrence of a matured event of default, as defined in any instrument of the Company under which there may be issued or evidenced any Debt of the Company,
that has resulted in the acceleration of such Debt in excess of $25,000,000, or any default in payment of Debt in excess of $25,000,000 at final maturity, after the expiration of any applicable grace or cure periods; provided, however, that the
waiver or cure of any such default under any such instrument or Debt shall constitute a waiver and cure of the corresponding Event of Default under the Indenture and the rescission and annulment of the consequences thereof shall constitute a
rescission and annulment of the corresponding consequences under the Indenture. 
  
 Section 8. So long as any Securities of Series No.      shall remain Outstanding, for purposes of Section 1101(a) of the Indenture, “corporation” shall be deemed to refer to
a corporation or limited liability company. For all other purposes, the definition of “corporation” in Section 101 of the Original Indenture shall govern. 
  

 5 

 Section 9. For the purposes of this Article One, except as otherwise expressly provided or unless
the context otherwise requires: 
  
 (A)
“Asset Sale” shall mean any sale of any assets of the Company or its Subsidiaries including by way of the sale by the Company or any of its Subsidiaries of equity interests in such Subsidiaries. 
  
 (B) “Debt”, with respect to any Person, means (A)
indebtedness of such Person for borrowed money evidenced by a bond, debenture, note or other similar written instrument or agreement by which such Person is obligated to repay such borrowed money and (B) any guaranty by such Person of any such
indebtedness of another Person. “Debt” does not include, among other things, (W) indebtedness of such Person under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase
price of property or services, (X) any trade obligations (including obligations under agreements relating to the purchase and sale of any commodity, including power purchase or sale agreements, and any commodity hedges or derivatives regardless or
whether such transaction is a “financial” or physical transaction) or other obligations of such Person in the ordinary course of business, (Y) obligations of such Person under any lease agreement (including any lease intended as security),
whether or not such obligations are required to be capitalized on the balance sheet of such Person under generally accepted accounting principles, or (Z) liabilities secured by any Lien on any property owned by such Person if and to the extent that
such Person has not assumed or otherwise become liable for the payment thereof. 
  
 (C) “Lien” means any lien, mortgage, deed of trust, pledge or security interest, in each case, intended to secure the repayment
of Debt, except for any Permitted Lien. 
  
 (D)
“Material Subsidiary” means PPL Global, LLC, a Delaware limited liability company, PPL EnergyPlus, LLC, a Delaware limited liability company, or PPL Generation, LLC, a Delaware limited liability company. 
  
 (E) “Moody’s” means Moody’s Investors
Service, Inc. and its successors and assigns, or absent a successor, or if such entity ceases to rate the Securities of Series No.     , such other nationally recognized statistical rating organization as the Company may
designate by notice to the Trustee. 
  
 (F)
“Permitted Business” means a business that is the same or similar to the business of the Company or any Subsidiary as of the date that Securities of Series No.      are first authenticated hereunder, or any
business reasonably related thereto. 
  
 (G)
“Permitted Liens” means 
  
 (i) any
Liens existing at [date of execution and delivery of this Supplemental Indenture]; 
  

 6 

 (ii) any vendors’ Liens, purchase money Liens and other Liens on property at the
time of acquisition thereof by the Company and Liens to secure or provide for the construction or improvement of property provided that no such Lien shall extend to or cover any other property of the Company; 
  
 (iii) any Liens on cash or securities (other than limited
liability company interests issued by any Material Subsidiary) on hand or in banks or other financial institutions, deposit accounts and interests in general or limited partnerships; 
  
 (iv) any Liens on the equity interest of any Subsidiary that is not a Material Subsidiary; 
  
 (v) any Liens on property or shares of capital stock, or
arising out of any Debt of any corporation existing at the time the corporation becomes or is merged or consolidated into the Company; 
  
 (vi) any Liens in connection with the issuance of tax-exempt industrial development or pollution control bonds or other similar bonds
issued pursuant to Section 103(b) of the Internal Revenue Code of 1986, as amended (or any successor provision), to finance all or any part of the purchase price of or the cost of constructing, equipping or improving property, provided that such
Liens are limited to the property acquired or constructed or improved and to substantially unimproved real property on which such construction or improvement is located; provided further, that the Company may further secure all or any part of such
purchase price or the cost of construction or improvement by an interest on additional property of the Company only to the extent necessary for the construction, maintenance and operation of, and access to, such property so acquired or constructed
or such improvement; 
  
 (vii) any Liens on
contracts, leases and other agreements of whatsoever kind and nature; any Liens on contract rights, bills, notes and other instruments; any Liens on revenues, income and earnings, accounts, accounts receivable and unbilled revenues, claims, credits,
demands and judgments; any Liens on governmental and other licenses, permits, franchises, consents and allowances; and any Liens on patents, patent licenses and other patent rights, patent applications, trade names, trademarks, copyrights, claims,
credits, choses in action and other intangible property and general intangibles including, but not limited to, computer software; 
  
 (viii) any Liens securing Debt which matures less than one year from the date of issuance or incurrence thereof and is not extendible at
the option of the issuer, and any refundings, refinancings and/or replacements of any such Debt by or with similar secured Debt; 
  

 7 

 (ix) any Liens on automobiles, buses, trucks and other similar vehicles and movable
equipment; vessels, boats, barges and other marine equipment; airplanes, helicopters, aircraft engines and other flight equipment; parts, accessories and supplies used in connection with any of the foregoing; 
  
 (x) any Liens on furniture and furnishings, and computers,
data processing, data storage, data transmission, telecommunications and other equipment and facilities, equipment and apparatus, which, in any case, are used primarily for administrative or clerical purposes; 
  
 (xi) any Liens on property which is the subject of a lease
agreement designating the Company as lessee and all right, title and interest of the Company in and to such property and in, to and under such lease agreement, whether or not such lease agreement is intended as security; 
  
 (xii) other Liens securing Debt the principal amount of
which does not exceed 10% of the total assets of the Company and its consolidated Subsidiaries as shown on the Company’s most recent audited consolidated balance sheet; and 
  
 (xiii) any Liens granted in connection with extending, renewing, replacing or refinancing, in whole or in
part, the Debt secured by liens described in the foregoing clauses (i) through (xii), to the extent of such Debt so extended, renewed, replaced or refinanced. 
  

(H) “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc. and its
successors and assigns, or absent a successor, or if such entity ceases to rate the Securities of Series No.     , such other nationally recognized statistical rating organization as the Company may designate by notice to
the Trustee. 
  
 (I) “Subsidiary” means
any corporation a majority of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company. 
  
 (J) “Voting Stock” means stock (or other interests) of a corporation having voting power for the
election of directors, managers or trustees thereof, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. 
  
 ARTICLE TWO 
  
 Miscellaneous Provisions 
  
 Section 1. This Supplemental Indenture No. [2] is a supplement to the Original Indenture. As supplemented by this Supplemental Indenture No. [2],
the Indenture is in all respects ratified, approved and confirmed, and the Original Indenture and this Supplemental Indenture No. [2] shall together constitute one and the same instrument. 
  

 8 

 Section 2. The recitals contained in this Supplemental Indenture No. [2] shall be taken as the
statements of the Company and the Trustee assumes no responsibility for their correctness and makes no representations as to the validity or sufficiency of this Supplemental Indenture No. [2]. 
  
 Section 3. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 
  

 9 

 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. [2] to be duly
executed, and their respective seals to be hereunto affixed and attested, all as of the day and year first written above. 
  

					
	 	 	PPL ENERGY SUPPLY, LLC
			
	 	 	 By:
	 	  

	 	 	 Name:
	 	 
	 	 	 Title:
	 	 
	 [SEAL]
	 	 	 	 
			
	 ATTEST:
	 	 	 	 
	  

	 	 
		
	 	 	 JPMORGAN CHASE BANK,
 as
Trustee

			
	 	 	 By:
	 	  

	 	 	 Name:
	 	 
	 	 	 Title:
	 	 
	 [SEAL]
	 	 	 	 
			
	 ATTEST:
	 	 	 	 
	  

	 	 	 	 

  

 10

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