Document:

Exhibit 10.39

IMCLONE SYSTEMS INCORPORATED

2006 STOCK INCENTIVE PLAN

ARTICLE I

PURPOSE

The purpose of this ImClone Systems Incorporated 2006
Stock Incentive Plan is to enhance the profitability and value of the Company
for the benefit of its stockholders by enabling the Company to offer Eligible
Employees, Consultants and Non-Employee Directors stock-based incentives
(thereby creating a means to raise the level of equity ownership by such
individuals) and provide other incentives in order to attract, retain and
reward such individuals and strengthen the mutuality of interests between such
individuals and the Company’s stockholders.

ARTICLE II

DEFINITIONS

For purposes of the Plan, the following terms shall
have the following meanings:

2.1   “Acquisition Event” has
the meaning set forth in Section 4.2(d).

2.2   “Affiliate”  
means each of the following: (a) any Subsidiary or Parent; (b) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) that is directly or indirectly controlled 50% or
more (whether by ownership of stock, assets or an equivalent ownership interest
or voting interest) by the Company or one of its Affiliates; and (c) any
other entity in which the Company or any of its Affiliates has a material
equity interest and that is designated as an “Affiliate” by resolution of the
Committee.

2.3   “Award” means any award
under the Plan of any Option, Stock Appreciation Right, Restricted Stock Award,
RSU Award, Performance Award or Other Stock-Based Award.

2.4   “Board” means the Board
of Directors of the Company.

2.5   “Cause” means with
respect to a Participant’s Termination of Employment or Termination of
Consultancy, the following: (a) in the case where there is an employment
agreement, consulting agreement, change in control agreement or similar
agreement in effect between the Company or an Affiliate and the Participant at
the time of the grant of the Award that defines “cause” (or words or a concept
of like import), “cause” as defined under such agreement; provided, however,
that with regard to any agreement under which the definition of “cause” applies
only on occurrence of a change in control, such definition of “cause” shall not
apply until a change in control actually takes place and then only with regard
to a termination in the period covered thereby; or (b) if such an
agreement does not exist or “cause” is not defined in any such agreement,
termination due to a Participant’s insubordination, dishonesty, fraud,
incompetence, moral turpitude, willful misconduct, refusal to perform his or
her duties or responsibilities for any reason other than illness or incapacity
or materially unsatisfactory performance of his or her duties for the Company
or an Affiliate, as determined by the Committee in its sole discretion. With
respect to a Participant’s Termination of Directorship, “cause” means an act or
failure to act that constitutes cause for removal of a director under
applicable Delaware law.

2.6   “Change in Control” has
the meaning set forth in Article XI.

2.7   “Change in Control Price” has
the meaning set forth in Section 11.1.

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2.8   “Code” means the Internal
Revenue Code of 1986, as amended. Any reference to any section of the Code
shall also be a reference to any successor provision and any Treasury
Regulation promulgated thereunder.

2.9   “Committee”

(a)   with respect to the application of the
Plan to Eligible Employees and Consultants, the “Committee” means the
Compensation Committee of the Board appointed from time to time by the Board (or
another committee or committees of the Board appointed for the purposes of
administering the Plan). In the event that more than one Committee is appointed
by the Board, the Board shall specify with respect to each Committee the group
of Persons with respect to which such Committee shall have the power to grant
Awards. In the event that more than one Committee is appointed by the Board,
then each reference in the Plan to “the Committee” shall be deemed a reference
to each such Committee (subject to the last sentence of this paragraph);
provided, however, that each such Committee may exercise only the power and
authority granted to “the Committee” by the Plan with respect to those Persons
to which it has the power to grant Awards as specified in the resolution of the
Board appointing such Committee. Each Committee shall be comprised of two or
more Directors. Each Committee shall consist of two or more non-employee
directors, each of whom is intended to be a “non-employee director” as defined
in Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act, an “outside director” as defined under Section 162(m) of the
Code and, to the extent required by the rules and regulations of the
Nasdaq Stock Market, an “independent director” as defined under such
rules and regulations; provided, however, that the foregoing shall not
apply to any Committee that does not have the power to grant Awards to
executive officers or Directors of the Company or otherwise make any decisions
with respect to the timing or the pricing of any Awards granted to such
executive officers and Directors. If for any reason such Committee does not
meet the requirements of Rule 16b-3 or Section 162(m) of the
Code, such noncompliance with the requirements of Rule 16b-3 or Section 162(m) of
the Code, as applicable, shall not affect the validity of Awards, grants,
interpretations or other actions of the Committee.

(b)   With respect to the application of the
Plan to Non-Employee Directors, the “Committee” means the Board.

2.10   “Common Stock” means the
Common Stock, $0.001  par value per
share, of the Company.

2.11   “Company” means ImClone
Systems Incorporated, a Delaware corporation, and its successors by operation
of law.

2.12   “Consultant” means any
individual who (either directly or through his or her employer) is an advisor
or consultant to, or subject to Section 5.3, a prospective advisor or
consultant to, the Company or an Affiliate.

2.13   “Director” means a member
of the Board of Directors of the Company (or any successor to the Company).

2.14   “Disability” means, with
respect to a Participant’s Termination, the following:  (a) in the
case where there is an employment agreement, consulting agreement, change in
control agreement or similar agreement in effect between the Company or an
Affiliate and the Participant at the time of the grant of the Award that
defines “disability” (or words or a concept of like import), “disability” as
defined under such agreement; provided, however, that with regard to any
agreement under which the definition of “disability” applies only on occurrence
of a change in control, such definition of “cause” shall not apply until a
change in control actually takes place and then only with regard to a
termination in the period covered thereby; or (b) if such an agreement does
not exist or if “disability” is not defined in any such agreement, a permanent
and total disability as defined in Section 22(e)(3) of the Code. A
Disability shall be deemed to occur only at the time of the determination by
the Committee of the Disability.

2.15   “Effective Date” means
the effective date of the Plan as defined in Article XV.

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2.16   “Eligible Employee” means
each employee of, or subject to Section 5.3, each prospective employee of,
the Company or an Affiliate.

2.17   “Exchange Act” means the
Securities Exchange Act of 1934, as amended. Any references to any section of
the Exchange Act shall also be a reference to any successor provision.

2.18   “Fair Market Value” means,
for purposes of the Plan, unless otherwise required by any applicable provision
of the Code or any regulations issued thereunder, as of any date and except as
provided below, the closing sales price reported for the Common Stock on the
applicable date: (a) as reported on the principal national securities
exchange in the United States on which it is then traded; or (b) if not
traded on any such national securities exchange, as quoted on an automated
quotation system sponsored by the National Association of Securities
Dealers, Inc. For purposes of the grant of any Award, the applicable date
shall be the date on which the Award is granted, or if the Common Stock shall
not have been reported or quoted on such date, on the first day prior thereto
on which the Common Stock was reported or quoted. For purposes of the exercise
of any Award, the applicable date shall be the date a notice of exercise is
received by the Committee or, if not a day on which the applicable market is
open, the next day that it is open.

2.19   “Family Member” means “family
member” as defined in Section A.1.(a)(5) of the general instructions
of Form S-8.

2.20   “Good Reason” means, with
respect to a Participant’s Termination of Employment, the following:
(a) in the case where there is an employment agreement, change in control
agreement or similar agreement in effect between the Company or an Affiliate
and the Participant at the time of the grant of the Award that defines “good
reason” (or words or a concept of like import), a termination due to good
reason (or words or a concept of like import), as defined in such agreement at
the time of the grant of the Award; provided, however, that with regard to any
agreement under which the definition of “good reason” applies only on
occurrence of a change in control, such definition of “good reason” shall not
apply until a change in control actually takes place and then only with regard
to a termination in the period covered thereby; or (b) if such an
agreement does not exist or if “good reason” is not defined in any such
agreement, as defined in the Award agreement, if at all.

2.21   “Incentive Stock Option” means
any Option awarded to an Eligible Employee under this Plan intended to be and
designated as an “Incentive Stock Option” within the meaning of
Section 422 of the Code.

2.22   “Non-Employee Director” means
a Director of the Company who is not an active employee of the Company or an
Affiliate.

2.23   “Non-Qualified Stock Option” means
any Option awarded under this Plan that is not an Incentive Stock Option.

2.24   “Non-Tandem Stock Appreciation Right”
shall mean the right to receive an amount in cash and/or stock equal to the
difference between (a) the Fair Market Value of a share of Common Stock on
the date such right is exercised, and (b) the aggregate exercise price of
such right, otherwise than on surrender of an Option.

2.25   “Option” means any option
to purchase shares of Common Stock granted to Eligible Employees, Non-Employee
Directors or Consultants pursuant to Article VI.

2.26   “Other Stock-Based Award” means
an Award under Article X of the Plan that is valued in whole or in part by
reference to, or is payable in or otherwise based on, Common Stock.

2.27   “Parent” means any parent
corporation of the Company within the meaning of Section 424(e) of
the Code.

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2.28   “Participant” means an
Eligible Employee, Non-Employee Director or Consultant to whom an Award has
been granted pursuant to the Plan.

2.29   “Performance Award” means
an Award made pursuant to Article IX of the Plan, which may be stated with
reference to shares of Common Stock or to cash.

2.30   “Performance Period” has
the meaning set forth in Section 9.1.

2.31   “Person” means any
individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, incorporated organization,
governmental or regulatory or other entity.

2.32   “Plan” means this ImClone
Systems Incorporated 2006 Stock Incentive Plan, as amended from time to time.

2.33   “Prior Plan” means the
ImClone Systems Incorporated 2002 Stock Option Plan, as amended from time to
time.

2.34   “Reference Stock Option” has
the meaning set forth in Section 7.1.

2.35   “Restricted Stock Award” means
an Award of shares of Common Stock, or the right to receive shares of Common
Stock in the future, subject to the restrictions under Article VIII.

2.36   “RSU” means a restricted
stock unit, which is an Award the value of which is calculated by reference to
the value of shares of Common Stock, subject to the restrictions under
Article VIII.

2.37   “Restriction Period” has
the meaning set forth in Subsection 8.3(a) with respect to Restricted
Stock Awards.

2.38   “Retirement” means,
unless otherwise provided by the Committee at grant, a Termination of
Employment without Cause or Termination of Consultancy without Cause (other
than, in any such case, after the occurrence of an event that would provide a
basis for a Cause termination) at or after age 60 (provided the Participant has
at least ten years of service to the Company or its Affiliates) or after age 65
(provided the Participant has at least five years of service to the Company or
its Affiliates). With respect to a Termination of Directorship, Retirement
means the failure to stand for reelection or the failure to be reelected on or
after the Participant has attained age 60 (provided the Participant has at
least ten years of service to the Company or its Affiliates) or after age 65
(provided the Participant has at least five years of service to the Company or
its Affiliates). Determinations of length of service shall be made by the
Committee in its sole discretion.

2.39   “Rule 16b-3” means
Rule 16b-3 under Section 16(b) of the Exchange Act as then in
effect or any successor provision.

2.40   “Section 162(m) of the Code” means
the exception for performance-based compensation under
Section 162(m) of the Code and any Treasury regulations thereunder.

2.41   “Securities Act” means
the Securities Act of 1933, as amended and all rules and regulations
promulgated thereunder. Any reference to any section of the Securities Act
shall also be a reference to any successor provision.

2.42   “Stock Appreciation Right” shall
mean the right pursuant to an Award granted under Article VII.

2.43   “Stock Option” or “Option”
means any option to purchase shares of Common Stock granted to Eligible
Employees, Non-Employee Directors or Consultants granted pursuant to
Article VI.

2.44   “Subsidiary” means any
subsidiary corporation of the Company within the meaning of
Section 424(f) of the Code.

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2.45   “Substitute Awards” mean
Awards granted or shares of Common Stock issued by the Company in assumption
of, or in substitution or exchange for, awards previously granted, by a company
acquired by the Company or an Affiliate or with which the Company or an
Affiliate combines.

2.46   “Tandem Stock Appreciation Right”
means the right to surrender to the Company all (or a portion) of an Option in
exchange for an amount in cash and/or stock equal to the difference between
(a) the Fair Market Value, on the date such Option (or such portion
thereof) is surrendered, of the Common Stock covered by such Option (or such
portion thereof), and (b) the aggregate exercise price of such Option (or
such portion thereof), or, if such Tandem Stock Appreciation Right is granted
after the date of the Reference Stock Option, the aggregate exercise price of
such appreciation right (or portion thereof).

2.47   “Ten Percent Stockholder” means
a person owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, its Subsidiaries or its Parent.

2.48   “Termination” means a
Termination of Consultancy, Termination of Directorship or Termination of
Employment, as applicable.

2.49   “Termination of Consultancy” means:
(a) that the Consultant is no longer acting as a consultant to the Company
or an Affiliate; or (b) when an entity retaining a Participant as a
Consultant ceases to be an Affiliate unless the Participant otherwise is, or
thereupon becomes, a Consultant to the Company or another Affiliate at the time
the entity ceases to be an Affiliate. In the event that a Consultant becomes an
Eligible Employee or a Non-Employee Director upon the termination of his or her
consultancy, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Consultancy shall be deemed to occur until such
time as such Consultant is no longer any of a Consultant, an Eligible Employee
or a Non-Employee Director. Notwithstanding the foregoing, the Committee may
otherwise define Termination of Consultancy in the Award agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Consultancy thereafter.

2.50   “Termination of Directorship” means
that the Non-Employee Director has ceased to be a Director of the Company;
except that if a Non-Employee Director becomes an Eligible Employee or a
Consultant upon the termination of his or her directorship, his or her ceasing
to be a Director of the Company shall not be treated as a Termination of
Directorship unless and until the Participant has a Termination of Employment
or Termination of Consultancy, as the case may be. Notwithstanding the
foregoing, the Committee may otherwise define Termination of Directorship in
the Award agreement or, if no rights of a Participant are reduced, may
otherwise define Termination of Directorship thereafter.

2.51   “Termination of Employment” means:
(a) a termination of employment (for reasons other than a military or
personal leave of absence granted by the Company) of a Participant from the
Company and its Affiliates; or (b) when an entity employing a Participant
ceases to be an Affiliate, unless the Participant otherwise is, or thereupon
becomes, employed by the Company or another Affiliate at the time the entity
ceases to be an Affiliate. In the event that an Eligible Employee becomes a
Consultant or a Non-Employee Director upon the termination of his or her
employment, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer any of an Eligible Employee, a
Consultant or a Non-Employee Director. Notwithstanding the foregoing, the
Committee may otherwise define Termination of Employment in the Award agreement
or, if no rights of a Participant are reduced, may otherwise define Termination
of Employment thereafter.

2.52   “Transfer” means:
(a) when used as a noun, any direct or indirect transfer, sale,
assignment, pledge, hypothecation, encumbrance or other disposition (including
the issuance of equity in a Person), whether for value or no value and whether
voluntary or involuntary (including by operation of law), and (b) when
used as a verb, to directly or indirectly transfer, sell, assign, pledge,
encumber, charge, hypothecate or otherwise dispose of (including by the
issuance of equity in a Person) whether for value or

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for no
value and whether voluntarily or involuntarily (including by operation of law).
“Transferred” and “Transferable” shall have a correlative meaning.

ARTICLE III

ADMINISTRATION

3.1   The Committee.   The
Plan shall be administered and interpreted by the Committee. Notwithstanding
anything herein to the contrary, the Board shall have authority for
administration and interpretation of the Plan with respect to Non-Employee
Directors and all references herein to the authority of the Committee as
applied to Non-Employee Directors shall be deemed to refer to the Board.

3.2   Grants of Awards.  
The Committee shall have full authority to grant, pursuant to the terms of the
Plan, to Eligible Employees, Consultants and Non-Employee Directors:
(i) Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock Awards, (iv) RSU Awards, (v) Performance Awards, and
(vi) Other Stock-Based Awards. Without limiting the generality of the
foregoing, the Committee shall have the authority:

(a)    to select the Eligible
Employees, Consultants and Non-Employee Directors to whom Awards may from time
to time be granted hereunder;

(b)   to determine whether and to what
extent Awards, or any combination thereof, are to be granted hereunder to one or
more Eligible Employees, Consultants or Non-Employee Directors;

(c)    to determine the number of
shares of Common Stock (if any) to be covered by an Award granted hereunder;

(d)   to determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Award granted hereunder
(including, but not limited to, the exercise or purchase price (if any), any
restriction or limitation, any vesting schedule or acceleration thereof, or any
forfeiture restrictions or waiver thereof, regarding any Award and the shares
of Common Stock relating thereto, based on such factors, if any, as the
Committee shall determine, in its sole discretion);

(e)    to determine whether, to what
extent and under what circumstances grants of Options and other Awards under
the Plan are to operate on a tandem basis and/or in conjunction with or apart
from other awards made by the Company outside of the Plan;

(f)    to determine whether and under
what circumstances an Option may be settled in cash, Common Stock and/or restricted
stock;

(g)    to determine whether, to what
extent and under what circumstances Common Stock and other amounts payable with
respect to an Award under the Plan shall be deferred either automatically or at
the election of the Participant;

(h)   to determine whether an Option is an
Incentive Stock Option or Non-Qualified Stock Option;

(i)    to determine whether to require
a Participant, as a condition of the granting of any Award, to not sell or
otherwise dispose of shares acquired pursuant to the exercise of an Award for a
period of time as determined by the Committee, in its sole discretion,
following the date of the acquisition of such Award;

(j)     to modify, extend or renew
an Award, subject to Article XII herein, provided, however, that if an Award
is modified, extended or renewed and thereby deemed to be the issuance of a new
Award under the Code or the applicable accounting rules, the exercise price of
an Option may continue to be the original exercise price even if less than the
Fair Market Value of the Common Stock at the time of such modification,
extension or renewal;

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(k)         to
determine at grant that an Option shall cease to be exercisable or an Award
shall be forfeited, or that proceeds or profits applicable to an Award shall be
returned to the Company, in the event the Participant engages in detrimental
activity with respect to the Company or its Affiliates (as such term is defined
by the Committee in the Award agreement) and, to interpret such definition and
to approve waivers with regard thereto; and

(l)         
to determine whether or not an Award is intended to comply with
Section 162(m) of the Code.

3.3   Guidelines.

(a)   Subject to Article XII hereof,
the Committee shall have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan and perform all acts,
including the delegation of its responsibilities (to the extent permitted by
applicable law and applicable stock exchange rules), as it shall, from time to
time, deem advisable; to construe and interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement relating thereto in the manner and to the extent it
shall deem necessary to effectuate the purpose and intent of the Plan.
Notwithstanding the foregoing, no action of the Committee under this
Section 3.3 shall reduce the rights of any Participant without the
Participant’s consent. To the extent applicable, the Plan is intended to comply
with the applicable requirements of Rule 16b-3 and
Section 162(m) of the Code, and the Plan shall be limited, construed
and interpreted in a manner so as to comply therewith.

(b)   Without limiting the generality of the
foregoing, the Committee may adopt special guidelines and provisions for
persons who are residing in or employed in, or subject to, the taxes of, any
domestic or foreign jurisdictions, to comply with applicable laws, regulations,
or accounting, listing or other rules with respect to such domestic or
foreign jurisdictions.

3.4   Decisions Final.  
Any decision, interpretation or other action made or taken in good faith by or
at the direction of the Company, the Board or the Committee (or any of its
members) arising out of or in connection with the Plan shall be within the
absolute discretion of all and each of them, as the case may be, and shall be
final, binding and conclusive on the Company and all employees and Participants
and their respective heirs, executors, administrators, successors and assigns.

3.5   Procedures.  
The Board shall designate one of the members of the Committee as chairman and
the Committee shall hold meetings, subject to the By-Laws of the Company, at
such times and places as it shall deem advisable, including, without
limitation, by telephone conference or by written consent to the extent
permitted by applicable law. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the By-Laws of the
Company, shall be fully effective as if it had been made by a vote at a meeting
duly called and held. The Committee shall make such rules and regulations
for the conduct of its business as it shall deem advisable.

3.6   Designation of Consultants/Liability.

(a)   The Committee may designate employees
of the Company and professional advisors to assist the Committee in the
administration of the Plan and (to the extent permitted by applicable law and
applicable exchange rules) may grant authority to officers or other employees
to execute agreements or other documents on behalf of the Committee.

(b)   The Committee may employ such legal
counsel, consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion received from any such counsel or
consultant and any computation received from any such consultant or agent.
Expenses incurred by the

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Committee
or the Board in the engagement of any such counsel, consultant or agent shall
be paid by the Company. The Committee, its members and any person designated
pursuant to sub-section (a) above shall not be liable for any action or
determination made in good faith with respect to the Plan. To the maximum
extent permitted by applicable law, no officer of the Company or member or
former member of the Committee or of the Board shall be liable for any action
or determination made in good faith with respect to the Plan or any Award
granted under it.

3.7   Indemnification.  
To the maximum extent permitted by applicable law and the Certificate of
Incorporation and By-Laws of the Company and to the extent not covered by
insurance directly insuring such person, each officer and member or former
member of the Committee or the Board shall be indemnified and held harmless by
the Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Committee) or liability (including any sum paid in
settlement of a claim with the approval of the Committee), and advanced amounts
necessary to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection with the
administration of the Plan, except to the extent arising out of such officer’s,
member’s or former member’s own fraud or bad faith. Such indemnification shall
be in addition to any rights of indemnification the employees, officers,
Directors or members or former officers, Directors or members may have under
applicable law or under the Certificate of Incorporation or By-Laws of the
Company or any Affiliate or any agreement of indemnification. Notwithstanding
anything else herein, this indemnification will not apply to the actions or
determinations made by an individual with regard to Awards granted to him or
her under the Plan.

3.8   Delegation.  
The Committee may delegate, to the extent permitted by law, to one or more
Directors or one or more officers or a committee of Directors or officers the
right to grant Awards to Eligible Employees who are not Directors or officers
of the Company and to cancel or suspend Awards to Eligible Employees who are
not Directors or officers of the Company.

ARTICLE IV

SHARE LIMITATION

4.1   Shares.

(a)   Aggregate Limitation.   The following provisions
apply in determining the aggregate number of shares of Common Stock available
under the Plan.

(i)    The
aggregate number of shares of Common Stock that may be granted or used for
reference purposes under the Plan shall not exceed 5,500,000 shares plus
(x) any Common Stock available for grant under the Prior Plan as of the
date stockholder approval of the Plan is obtained, and (y) any other
shares under the Prior Plan that again become available under
Section 4.1(a)(ii) (subject to any increase or decrease pursuant to
Section 4.2), which may be either authorized and unissued Common Stock or
Common Stock held in or acquired for the treasury of the Company or both. With
respect to Stock Appreciation Rights settled in Common Stock, the number of
shares of Common Stock underlying the Award at the time of grant (and not the
net number of shares of Common Stock issued to the Participant upon exercise
and settlement) shall count against the aggregate and individual share
limitations set forth under Sections 4.1(a) and (b). Any shares of Common
Stock that are subject to Awards of Options or Stock Appreciation Rights shall
be counted against this limit as one share for every share granted. Any shares
of Common Stock that are subject to Awards other than Options or Stock
Appreciation Rights shall be counted against this limit as 2.0 shares for every
share granted. In no event shall the aggregate number of shares of Common Stock
granted pursuant to Incentive Stock Options exceed 5,500,000 shares.

(ii)   If any shares of Common Stock subject to an
Award (or an award under the Prior Plan) are forfeited, expire or otherwise
terminate without issuance of such shares, or any Award or

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Prior
Plan award is settled for cash, the shares shall, to the extent of such
forfeiture, expiration, termination or cash settlement, again be available for
Awards under the Plan. If a Stock Appreciation Right is granted in tandem with
an Option, such grant shall apply only once against the maximum number of
shares of Common Stock that may be issued under the Plan. Shares of Common
Stock underlying Awards (or Prior Plan stock options) settled in cash shall
again be available for issuance under the Plan.

(iii)  Any shares of Common Stock that again become
available for grant pursuant to this Section 4.1(a) shall be added
back as one share if such share were subject to an award under the Prior Plan
or is subject to an Option or Stock Appreciation Right granted under the Plan,
and as 2.0 shares if such shares were subject to an Award other than an Option
or a Stock Appreciation Right granted under the Plan.

(b)   Individual
Participant Limitations.   The following provisions apply
in determining the Awards that may be granted to an individual during a fiscal
year of the Company.

(i)    The
maximum number of shares of Common Stock subject to any Option or Stock
Appreciation Right which may be granted under the Plan during any 36-month
period to each Eligible Employee shall be 1,000,000 shares for each type of
Award (subject to any increase or decrease pursuant to Section 4.2). The
maximum number of shares of Common Stock subject to any Restricted Stock Award,
RSU Award, Performance Award or Other Stock-Based Award that is subject to the
attainment of specified performance goals which may be granted under the Plan
during any 36-month period to each Eligible Employee shall be 250,000 shares
for each type of Award (subject to any increase or decrease pursuant to
Section 4.2). If a Stock Appreciation Right is granted in tandem with an
Option it shall apply against the Eligible Employee’s individual share limitations
for both Stock Appreciation Rights and Options.

(ii)   The maximum payment under any Performance Award
denominated in dollars under the Plan to each Eligible Employee for any fiscal
year shall be $5,000,000.

(c)   Substitute
Awards.   Substitute Awards shall not reduce the shares of
Common Stock authorized for grant under the Plan pursuant to
Section 4.1(a) or authorized for grant to an Eligible Employee during
any period pursuant to Section 4.1(b).

4.2   Changes.

(a)   The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize (i) any
adjustment, recapitalization, reorganization or other change in the Company’s
capital structure or its business, (ii) any merger or consolidation of the
Company or any Affiliate, (iii) any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock,
(iv) the dissolution or liquidation of the Company or any Affiliate,
(v) any sale or transfer of all or part of the assets or business of the
Company or any Affiliate or (vi) any other corporate act or proceeding.

(b)   Subject to the provisions of
Section 4.2(d), in the event of any such change in the capital structure
or business of the Company by reason of any stock split, reverse stock split,
stock dividend, combination or reclassification of shares, recapitalization,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase any Common Stock or
securities convertible into Common Stock, any sale or transfer of all or part
of the Company’s assets or business, any special cash dividend or any other
corporate transaction or event having an effect similar to any of the foregoing
and effected without receipt of consideration by the Company, then the
aggregate number and kind of shares that thereafter may be issued under the
Plan, the number and kind of shares or other property (including cash) to be issued
upon exercise of an outstanding Award or under other Awards granted under the
Plan and the purchase price thereof shall be appropriately adjusted consistent
with such

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change
in such manner as the Committee shall deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available for,
Participants under the Plan, and any such adjustment determined by the
Committee in good faith shall be final, binding and conclusive on the Company
and all Participants and employees and their respective heirs, executors,
administrators, successors and assigns. In connection with any event described
in this paragraph, the Committee may provide, in its sole discretion, for the
cancellation of any outstanding Awards and payment in cash or other property in
exchange therefor. Except as provided in this Section 4.2 or in the
applicable Award agreement, a Participant shall have no rights by reason of any
issuance by the Company of any class or securities convertible into stock of
any class, any subdivision or consolidation of shares of stock of any class,
the payment of any stock dividend, any other increase or decrease in the number
of shares of stock of any class, any sale or transfer of all or part of the
Company’s assets or business or any other change affecting the Company’s
capital structure or business.

(c)   Except as otherwise determined by the
Committee, fractional shares of Common Stock resulting from any adjustment in
Awards pursuant to Section 4.2(a) or (b) shall be aggregated
until, and eliminated at, the time of exercise by rounding-down and any
remaining fractional shares of Common Stock shall be settled in cash. Notice of
any adjustment shall be given by the Committee to each Participant whose Award
has been adjusted and such adjustment (whether or not such notice is given)
shall be effective and binding for all purposes of the Plan.

(d)   In the event of (x) a merger or
consolidation in which the Company is not the surviving entity, (y) any
transaction that results in the acquisition of substantially all of the Company’s
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or (z) the sale or transfer of all or
substantially all of the Company’s assets (all of the foregoing being referred
to as an “Acquisition Event”),
then the Committee, in its sole discretion, may terminate all vested and
unvested Awards that are outstanding as of the date of Acquisition Event by
delivering notice of termination to each Participant at least 20 days prior to
the date of the Acquisition Event, in which case, during the period from the
date on which such notice of termination is delivered to the date of the
Acquisition Event, each such Participant shall have the right to exercise in
full all of his or her vested and unvested Awards that are then outstanding
(without regard to any limitations on vesting or exercisability otherwise
contained in the Award agreements), but any such exercise shall be contingent
on the consummation of the Acquisition Event, and, provided that, if the
Acquisition Event does not occur within a specified period after giving such
notice for any reason whatsoever, the notice and exercise pursuant thereto
shall be null and void. If an Acquisition Event occurs but the Committee does
not terminate the outstanding Awards pursuant to this Section 4.2(d), then
the provisions of Section 4.2(b) and Article XI shall apply.

4.3   Minimum Purchase Price.  
Notwithstanding any provision of the Plan to the contrary, if authorized but previously
unissued shares of Common Stock are issued under the Plan, such shares shall
not be issued for a consideration that is less than as permitted under
applicable law.

ARTICLE V

ELIGIBILITY

5.1   General Eligibility.  
All Eligible Employees, Consultants and Non-Employee Directors are eligible to
be granted Awards. Eligibility for the grant of Awards and actual participation
in the Plan shall be determined by the Committee in its sole discretion.

5.2   Incentive Stock Options.  
Notwithstanding the foregoing, only Eligible Employees of the Company, its
Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock
Options under this Plan. Eligibility for the grant of an Incentive Stock Option
and actual participation in this Plan shall be determined by the Committee in
its sole discretion.

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5.3   General Requirement.  
The vesting and exercise of Awards granted to a prospective employee or
consultant shall be conditioned upon such individual actually becoming an
employee of or consultant to the Company or an Affiliate within a reasonable
time thereafter, as determined by the Committee.

5.4   Awards to Non-Employee Directors.  
Awards made to Non-Employee Directors shall in all cases be granted only in
accordance with the compensation policy established by the Company for members
of the Board from time to time, which policy may provide for formulaic Awards
to Non-Employee Directors with additional Awards to the chairman and
vice-chairman of the Board and committee chairs for services they provide in
such roles, as well as additional grants to Non-Employee Directors upon joining
the Board.

ARTICLE VI

STOCK OPTIONS

6.1   Options.  
Options may be granted alone or in addition to other Awards granted under the
Plan. The Committee shall have the authority to grant any Eligible Employee,
Consultant or Non-Employee Director one or more Options. Each Option granted
under the Plan shall be either: (a) an Incentive Stock Option or
(b) a Non-Qualified Stock Option.

6.2   Grants.   The
Committee shall have the authority to grant to any Eligible Employee one or
more Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options. The Committee shall have the authority to grant any Consultant
or Non-Employee Director one or more Non-Qualified Stock Options. To the extent
that any Stock Option does not qualify as an Incentive Stock Option (whether
because of its provisions or the time or manner of its exercise or otherwise),
such Stock Option or the portion thereof that does not so qualify shall
constitute a separate Non-Qualified Stock Option.

6.3   Terms of Options.  
Options granted under the Plan shall be subject to the following terms and
conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

(a)   Exercise
Price.   Other than in connection with Substitute Awards,
the exercise price per share of Common Stock subject to an Option shall be
determined by the Committee at the time of grant, provided that the per-share
exercise price of any Option shall not be less than 100% (or, in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair
Market Value of the Common Stock at the time of grant (unless adjusted in
accordance with Section 4.2(b) pursuant to a merger, acquisition, or
similar corporate transaction). Other than pursuant to Section 4.2(b), in
the absence of shareholder approval, the Committee shall not be permitted to
(a) lower the option price per share of an Option after it is granted,
(b) cancel an Option in exchange for another Award or cash, and
(c) take any other action with respect to an Option that may be treated as
a repricing under the rules and regulations of the Nasdaq Stock Market.

(b)   Option
Term.   The term of each Option shall be fixed by the
Committee, provided that no Option shall be exercisable more than ten
(10) years after the date the Option is granted, and provided, further,
that the term of an Incentive Stock Option granted to a Ten Percent Stockholder
shall not exceed five years.

(c)   Exercisability.  
Options shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee at grant, provided,
however, that in no event (except as provided in the next sentence) shall
Options be fully exercisable earlier than one year after grant (except with
respect to Options granted to Non-Employee Directors). Notwithstanding the
foregoing, in connection with an employment termination or Change in Control,
the Committee may waive any limitations on exercisability at any time at or
after grant in whole or in part (including, without limitation, waiver of the
installment exercise provisions or acceleration of the time at which such
Option may be exercised).

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(d)   Method
of Exercise.   Subject to whatever installment exercise
and waiting period provisions apply under subsection (c) above, to the
extent vested, Options may be exercised in whole or in part at any time during
the Option term, by giving written notice of exercise to the Company specifying
the number of shares of Common Stock to be purchased. Such notice shall be
accompanied by payment in full of the purchase price (or arrangements
satisfactory to the Committee made for such payment) as follows: (i) in
cash or by check, bank draft or money order payable to the order of the
Company; or (ii) on such other terms and conditions as may be acceptable
to the Committee, including tendering (either actually or through attestation)
or withholding shares of Common Stock. No shares of Common Stock shall be
issued until payment therefor, as provided herein, has been made or provided
for.

(e)   Non-Transferability
of Options.   No Option shall be Transferable by the
Participant otherwise than by will or by the laws of descent and distribution,
and all Options shall be exercisable, during the Participant’s lifetime, only
by the Participant. Notwithstanding the foregoing, the Committee may determine,
in its sole discretion, at the time of grant or thereafter that a Non-Qualified
Stock Option that is otherwise not Transferable pursuant to this
Section is Transferable to a Family Member in whole or in part and in such
circumstances, and under such conditions, as specified by the Committee. A
Non-Qualified Stock Option that is Transferred to a Family Member pursuant to
the preceding sentence (i) may not be subsequently Transferred otherwise
than by will or by the laws of descent and distribution and (ii) remains
subject to the terms of the Plan and the applicable Award agreement. Any shares
of Common Stock acquired upon the exercise of a Non-Qualified Stock Option by a
permissible transferee of a Non-Qualified Stock Option or a permissible
transferee pursuant to a Transfer after the exercise of the Non-Qualified Stock
Option shall be subject to the terms of the Plan and the applicable Award
agreement.

(f)    Termination
by Death, Disability or Retirement.   Except as otherwise
(x) provided in a written agreement between the Company and the
Participant or (y) determined by the Committee at grant or (if no rights
of the Participant are reduced) thereafter, if a Participant’s Termination is
by reason of death, Disability or Retirement, all Options that are held by such
Participant that are vested and exercisable at the time of the Participant’s
Termination may be exercised by the Participant (or, in the case of death, by
the legal representative of the Participant’s estate) at any time within a
period of one year from the date of such Termination, but in no event beyond
the expiration of the stated term of such Options if the Options are Incentive
Stock Options or if such Termination is by reason of Retirement; provided,
however, that in the case of Retirement or Disability, if the Participant dies
within such exercise period, all unexercised Options held by such Participant
shall thereafter be exercisable, to the extent to which they were exercisable
at the time of death, for a minimum period of one year from the date of such
death, but in no event beyond the expiration of the stated term of such Options
if the Options are Incentive Stock Options.

(g)   Termination
for Cause.   Except as otherwise (x) provided in a
written agreement between the Company and the Participant or
(y) determined by the Committee at grant or (if no rights of the Participant
are reduced) thereafter, if a Participant’s Termination (i) is for Cause
or (ii) is a voluntary Termination after the occurrence of an event that
would be grounds for a Termination for Cause, all Options held by such
Participant, whether or not vested,  shall thereupon terminate and expire
as of the date of such Termination or, if earlier, the date of the Cause event.

(h)   Termination
for Any Other Reason.   Except as otherwise
(x) provided in a written agreement between the Company and the Participant
or (y) determined by the Committee at grant, or (if no rights of the
Participant are reduced) thereafter, if a Participant’s Termination is for any
reason not set forth in Section 6.3(f) or (g), all Options that are
held by such Participant that are vested and exercisable at the time of the
Participant’s Termination may be exercised by the Participant at any time
within a period of 90 days from the date of such Termination, but in no event
beyond the expiration of the stated term of such Options.

(i)    Unvested
Options.   Except as otherwise (x) provided in a
written agreement between the Company and the Participant or
(y) determined by the Committee at grant or (if no rights of the

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Participant
are reduced) thereafter, Options that are not vested as of the date of a
Participant’s Termination for any reason shall terminate and expire as of the
date of such Termination.

(j)    Incentive
Stock Option Limitations.   To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by an Eligible Employee during any calendar year under this Plan
and/or any other stock option plan of the Company, any Subsidiary or any Parent
exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.
Should any provision of this Plan not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend this Plan accordingly, without
the necessity of obtaining the approval of the stockholders of the Company.

(k)   Form,
Modification, Extension and Renewal of Options.   Subject
to the terms and conditions and within the limitations of the Plan, Options shall
be evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may modify, extend or renew outstanding Options
granted under the Plan (provided that the rights of a Participant are not
reduced without his or her consent).

(l)    Early
Exercise.   The Committee may provide that an Option
include a provision whereby the Participant may elect at any time before the
Participant’s Termination to exercise the Option as to any part or all of the
shares of Common Stock subject to the Option prior to the full vesting of the
Option and such shares shall be subject to the provisions of Article VIII
and treated as restricted stock. Any unvested shares of Common Stock so
purchased may be subject to a repurchase option in favor of the Company or to
any other restriction the Committee determines to be appropriate.

(m)  Other
Terms and Conditions.   Options may contain such other
provisions, which shall not be inconsistent with any of the terms of the Plan,
as the Committee shall deem appropriate.

ARTICLE VII

STOCK APPRECIATION RIGHTS

7.1    Tandem Stock Appreciation Rights.  
Tandem Stock Appreciation Rights, by their nature, may be granted only in
conjunction with all or part of any Option (a “Reference
Stock Option”) granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Reference Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Reference Stock Option.

7.2    Terms and Conditions of Tandem Stock Appreciation
Rights.   Tandem Stock Appreciation
Rights granted hereunder shall be subject to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, and the following:

(a)   Term.  
A Tandem Stock Appreciation Right or applicable portion thereof granted with
respect to a Reference Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the Reference Stock Option,
except that, unless otherwise determined by the Committee, in its sole
discretion, at the time of grant, a Tandem Stock Appreciation Right granted
with respect to less than the full number of shares covered by the Reference
Stock Option shall not be reduced until and then only to the extent the
exercise or termination of the Reference Stock Option causes the number of
shares covered by the Tandem Stock Appreciation Right to exceed the number of
shares remaining available and unexercised under the Reference Stock Option.

(b)   Exercisability.  
Tandem Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Reference Stock Options to which they relate
shall be exercisable in accordance with the provisions of Article VI, and
shall be subject to the provisions of Section 6.3(c).

(c)   Method
of Exercise.   A Tandem Stock Appreciation Right may be
exercised by the Participant by surrendering the applicable portion of the Reference
Stock Option. Upon such exercise and surrender, the

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Participant
shall be entitled to receive an amount determined in the manner prescribed in
this Section 7.2. Options that have been so surrendered, in whole or in
part, shall no longer be exercisable to the extent the related Tandem Stock
Appreciation Rights have been exercised.

(d)   Payment.  
Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be
entitled to receive up to, but no more than, an amount in cash and/or Common
Stock (as determined by the Committee in its sole discretion at the time of
grant or, if permitted by the grant, at the time of exercise) equal in value to
the excess of the Fair Market Value of one share of Common Stock over the
Option exercise price per share specified in the Reference Stock Option
agreement (or, in the case of a Tandem Stock Appreciation Right granted after
the time of the grant of such Reference Stock Option, the exercise price
determined as set forth below) multiplied by the number of shares in respect of
which the Tandem Stock Appreciation Right shall have been exercised. The
exercise price of a Tandem Stock Appreciation Right shall be required to be in
accordance with Section 6.3(a) on the date of grant except (i) if
such Tandem Stock Appreciation Right is added to an Option after the date of
grant of the Option, in which case the exercise price of may not be less than
100% of the Fair Market Value of one share of Common Stock on the date the
right was granted to the Participant (except in the case of Substitute Awards
as provided in Clause (ii), or (ii) in the case of Substitute Awards, in
connection with an adjustment pursuant to Section 4.2(b)..

(e)   Deemed
Exercise of Reference Stock Option.   Upon the exercise of
a Tandem Stock Appreciation Right for Common Stock, the Reference Stock Option
(or part thereof, based on the value of the Common Stock issued on exercise) to
which such Stock Appreciation Right is related shall be deemed to have been
exercised for purposes of the limitation set forth in Article IV of the
Plan on the number of shares of Common Stock to be issued under the Plan.

7.3    Non-Tandem Stock Appreciation Rights.  
Non-Tandem Stock Appreciation Rights may also be granted without reference to
any Options granted under the Plan.

7.4    Terms and Conditions of Non-Tandem Stock Appreciation
Rights.   Non-Tandem Stock Appreciation
Rights granted hereunder shall be subject to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, and the following:

(a)   Term.  
The term of each Non-Tandem Stock Appreciation Right shall be fixed by the
Committee, but shall not exceed ten (10) years after the date the right is
granted.

(b)   Exercisability.  
Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Committee at grant, provided, however, that in no event (except as provided in
the next sentence) shall Non-Tandem Stock Appreciation Rights be fully
exercisable earlier than one year after grant (except with respect to
Non-Tandem Stock Appreciation Rights granted to Non-Employee Directors).
Notwithstanding the foregoing, in connection with an employment termination or
Change in Control, the Committee may waive any limitations on exercisability at
any time at or after grant in whole or in part (including, without limitation,
waiver of the installment exercise provisions or acceleration of the time at
which such right may be exercised).

(c)   Method
of Exercise.   Subject to the installment, exercise and
waiting period provisions that apply under subsection (b) above,
Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at
any time in accordance with the applicable Award agreement, by giving written
notice of exercise to the Company specifying the number of Non-Tandem Stock
Appreciation Rights to be exercised.

(d)   Payment.  
Upon the exercise of a Non-Tandem Stock Appreciation Right, a Participant shall
be entitled to receive, for each right exercised, an amount in cash and/or
Common Stock (as determined by the Committee in its sole discretion at the time
of grant or, if permitted by the grant, at the time of exercise) no greater
than the excess of the Fair Market Value of one share of Common Stock on the
date the right is exercised over the Fair Market Value of one share of Common
Stock on the date the right was awarded to the Participant. The exercise price
of a Non-Tandem Stock Appreciation Right may not be less

 A-14
 

 

than
100% of Fair Market Value of a share of Common Stock on the date of grant
except in the case of Substitute Awards, in connection with an adjustment
pursuant to Section 4.2(b). Other than pursuant to Section 4.2(b), in
the absence of shareholder approval, the Committee shall not be permitted to
(a) lower the Fair Market Value per share of a Non-Tandem Stock
Appreciation Right after it is granted, (b) cancel a Non-Tandem Stock
Appreciation Right in exchange for another Award or cash, and (c) take any
other action with respect to a Non-Tandem Stock Appreciation Right that may be
treated as a repricing under the rules and regulations of the Nasdaq Stock
Market.

7.5    Non-Transferability of Stock Appreciation
Rights.   No Stock Appreciation Right (whether
a Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right)
shall be Transferable by the Participant otherwise than by will or by the laws
of descent and distribution, and all Stock Appreciation Rights shall be exercisable,
during the Participant’s lifetime, only by the Participant. 
Notwithstanding the foregoing, the Committee may determine, in its sole
discretion, at the time of grant or thereafter that a Stock Appreciation Right
that is otherwise not Transferable pursuant to this Section is Transferable to
a Family Member in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee.  A Stock Appreciation Right
that is Transferred to a Family Member pursuant to the preceding sentence (i)
may not be subsequently Transferred otherwise than by will or by the laws of
descent and distribution and (ii) remains subject to the terms of the Plan and
the applicable Award agreement.  Any shares of Common Stock acquired upon
the exercise of a Stock Appreciation Right by a permissible transferee of a
Stock Appreciation Right or a permissible transferee pursuant to a Transfer
after the exercise of the Stock Appreciation Right shall be subject to the
terms of the Plan and the applicable Award agreement.

ARTICLE VIII

RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNITS

8.1    Restricted Stock Awards and RSU Awards.  
Restricted Stock Awards and RSU Awards may be issued either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the Eligible Employees, Consultants and Non-Employee Directors, to whom, and
the time or times at which, grants of Restricted Stock Awards and RSU Awards
shall be made, the number of shares to be awarded, the price (if any) to be paid
by the Participant (subject to Section 8.2), the time or times within
which such Awards may be subject to forfeiture, the vesting schedule and rights
to acceleration thereof, and all other terms and conditions of the Awards. RSU
Awards may be settled in shares of Common Stock and/or in cash or any
combination as determined by the Committee in its sole discretion at or after
the time of grant.

8.2   Awards and Certificates.  
Eligible Employees, Consultants and Non-Employee Directors selected to receive
a Restricted Stock Award or RSU Award shall not have any rights with respect to
such Award, unless and until such Participant has delivered a fully executed
copy of the agreement evidencing the Award to the Company and has otherwise
complied with the applicable terms and conditions of such Award. Further, such
Award shall be subject to the following conditions:

(a)    Purchase
Price. Unless (x) otherwise provided by the Committee or
(y) prohibited by applicable law, the purchase price of a Restricted Stock
Award or RSU Award shall be zero. If required by law or the Committee otherwise
determines that a Restricted Stock Award or RSU Award shall have a purchase
price, such purchase price shall not be less than par value.

(b)   Acceptance.
Restricted Stock Awards must be accepted within a period of 60 days (or such
shorter period as the Committee may specify at grant) after the grant date, by
executing an Award agreement and by paying the price (if any) the Committee has
designated thereunder (such acceptance may be in any manner that the Committee
may establish, including deemed acceptance).

 A-15
 

 

8.3   Restrictions and Conditions.  
Restricted Stock Awards and RSU Awards awarded pursuant to the Plan shall be
subject to the following restrictions and conditions:

(a)    Restriction
Period.

(i)    
The Participant shall not be permitted to Transfer a Restricted Stock
Award or RSU Award awarded under the Plan during the period or periods set by
the Committee (the “Restriction Period”)
commencing on the date of such Award, as set forth in the Award agreement and
such agreement shall set forth a vesting schedule and any events that would
accelerate vesting of the Restricted Stock Award or RSU Award during such
Restriction Period. Except as provided herein, and except for Restricted Stock
Awards or RSU Awards to Non-Employee Directors, the minimum Restriction Period
for a Restricted Stock Award or RSU Award shall be three years (but with
pro-rata or other graded vesting permitted over such three-year period, but not
prior to one year after grant, and in no event more than one-third of the Award
vesting in respect of any year); provided, that if the Award is a
performance-based Award the minimum Restriction Period for full vesting and
transfer shall be one year rather than three years. The limitations in the
preceding sentence shall not apply on up to five percent of the aggregate
shares of Common Stock available under the Plan set forth in Section 4.1,
as adjusted, when combined with the aggregate grants made under the limits set
forth in Section 10.2. Within these limits, based on service, attainment
of performance goals pursuant to Section 8.3(a)(ii) below and/or such
other factors or criteria as the Committee may determine in its sole
discretion, the Committee may place conditions on the grant. In addition,
(x) upon a Change in Control, (y) upon a Participant’s without Cause
or Good Reason termination or termination by reason of death, Disability or
Retirement, or (z) if required pursuant to an agreement in existence prior
to the date of grant to which the Participant is a party, the Committee in its
sole discretion may (A) provide for the lapse of restrictions in whole or
in part, (B) accelerate the vesting of all or any part of any Restricted
Stock Award or RSU Award and/or (C) waive the deferral limitations for all
or any part of any such Award.

(ii)    Objective
Performance Goals, Formulas or Standards. If the grant of a
Restricted Stock Award or RSU Award or the lapse of restrictions is based on
the attainment of performance goals, the Committee shall establish the
objective performance goals, including, to the extent the Committee so
determines, from among those set forth in Exhibit A hereto, and the
applicable vesting percentage of the Restricted Stock Award or RSU Award applicable
to each Participant or class of Participants in writing prior to the beginning
of the applicable fiscal year or at such later date as otherwise determined by
the Committee and while the outcome of the performance goals are substantially
uncertain.

(b)   Rights
as a Stockholder; Dividends. Beginning on the date of grant of a
Restricted Stock Award and subject to acceptance of the associated Award
agreement, the Participant shall become a shareholder of the Company with
respect to all shares of Common Stock subject to the Restricted Stock Award and
shall have all of the rights of a shareholder, including the right to vote such
shares and the right to receive distributions made with respect to such shares;
provided, however, that, in the absence of Committee action to the contrary,
any shares of Common Stock or any other property (other than regular cash
distributions) distributed as a dividend or otherwise with respect to any
Restricted Stock Award as to which the restrictions have not yet lapsed shall
be subject to the same restrictions as the shares covered by such Award.

(c)    Termination.
Except as otherwise (x) provided in a written agreement between the
Company and the Participant or (y) determined by the Committee at grant or
(if no rights of the Participant are reduced) thereafter, subject to the
applicable provisions of the Award agreement and the Plan, upon a

 A-16
 

 

Participant’s
Termination for any reason during the relevant Restriction Period, all
Restricted Stock Awards and RSU Awards still subject to restriction will vest
or be forfeited in accordance with the terms and conditions established by the
Committee at grant or thereafter. In the absence of such provisions in the
Award agreement, in the event of:  (i) death, Disability or Retirement,
restrictions shall lapse on the Participant’s Restricted Stock Awards and RSU
Awards on a pro rata monthly basis through the date of Termination, with
performance awards paid at the end of the performance period based on actual
results; and (ii) any other Termination, any unvested Restricted Stock
Awards or RSUs shall immediately be cancelled.

(d)   Lapse
of Restrictions. If and when the Restriction Period expires without
a prior forfeiture of the Restricted Stock Award or RSU Award, certificates for
shares attributable to such Award shall be delivered to the Participant (or, if
certificates were previously issued, replacement certificates shall be
delivered upon return of the previously issued certificates). All legends shall
be removed from said certificates at the time of delivery to the Participant,
except as otherwise required by applicable law or other limitations imposed by
the Committee. Notwithstanding the foregoing, actual certificates shall not be
issued to the extent that book entry recordkeeping is used.

ARTICLE IX

PERFORMANCE AWARDS

9.1   Performance Awards.  
Performance Awards may be awarded either alone or in addition to other Awards
granted under the Plan. The Committee shall determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at
which, Performance Awards shall be awarded, the number of Performance Awards to
be awarded to any person, the duration of the period (the “Performance Period”) during which, and the
conditions under which, a Participant’s right to Performance Awards will be
vested, the ability of Participants to defer receipt of Performance Awards, and
the other terms and conditions of the Award in addition to those set forth in
Section 9.2. The minimum Performance Period shall be one year.

The Committee shall condition the right to payment or
vesting of any Performance Award upon the attainment of objective performance
goals established pursuant to Section 9.2(b) below.

9.2   Terms and Conditions.  
Performance Awards awarded pursuant to this Article IX shall be subject to
the following terms and conditions:

(a)    Earning
or Vesting of Performance Award. At the expiration of the applicable
Performance Period, the Committee shall determine the extent to which the
performance goals established pursuant to Section 9.2(b) are achieved
and the percentage of each Performance Award that has been earned or vested.

(b)   Objective
Performance Goals, Formulas or Standards. The Committee shall
establish the objective performance goals, including, to the extent the
Committee so determines, from among those set forth in Exhibit A hereto,
for the earning of Performance Awards based on a Performance Period applicable
to each Participant or class of Participants in writing prior to the beginning
of the applicable Performance Period or, to the extent such Award is intended
to comply with Section 162(m) of the Code, at such later date as
permitted thereunder and while the outcome of the performance goals is
substantially uncertain.

(c)    Payment.
Following the Committee’s determination, shares of Common Stock and/or cash, as
determined by the Committee in its sole discretion at the time of grant or, if
permitted by the grant, thereafter, shall be delivered to the Eligible
Employee, Consultant or Non-Employee Director, or his legal representative, in
an amount equal to such individual’s earned or vested Performance Award.
Notwithstanding the foregoing, the Committee may, in its sole discretion and,
to the extent

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Section 162(m) of
the Code is applicable, in accordance therewith, (i) award a number of
shares of Common Stock or an amount of cash less than the earned Performance
Award and/or (ii) subject the payment of all or part of any Performance
Award to additional vesting, forfeiture and deferral conditions.

(d)   Termination.
Subject to the applicable provisions of the Award agreement and the Plan, upon
a Participant’s Termination for any reason during the Performance Period for a
Performance Award, such Performance Award will vest or be forfeited in accordance
with the terms and conditions established by the Committee at grant or, if no
rights of the Participant are reduced, thereafter.

(e)    Accelerated
Vesting. Upon (x) a Change in Control, (y) a Participant’s
without Cause or Good Reason termination or termination by reason of death,
Disability or Retirement, or (z) if required pursuant to an agreement in
existence prior to the date of grant to which the Participant is a party, the
Committee, in its sole discretion, may accelerate the vesting of all or any
part of any Performance Award or waive the deferral limitations for all or any
part of such Award.

ARTICLE X

OTHER STOCK-BASED AWARDS

10.1   Other Awards.

(a)    Subject to the limitations set
forth in Section 4.1(a), the Committee is authorized to grant to Eligible
Employees, Consultants and Non-Employee Directors Other Stock-Based Awards that
are payable in, valued in whole or in part by reference to, or otherwise based
on or related to, shares of Common Stock, including, but not limited to, (a) shares
of Common Stock awarded as a bonus, (b) shares of Common Stock in payment
of the amounts due under an incentive or performance plan sponsored or
maintained by the Company or an Affiliate, (c) stock equivalent units, and
(d) Awards valued by reference to book value of shares of Common Stock.
Other Stock-Based Awards may be granted either alone or in addition to or in
tandem with other Awards granted under the Plan.

(b)   Subject to the provisions of the Plan,
the Committee shall have authority to determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at
which, such Awards shall be made, the number of shares of Common Stock to be
awarded pursuant to such Awards, and all other conditions of the Awards.

(c)    The Committee may condition the
grant or vesting of Other Stock-Based Awards upon the attainment of specified
performance goals, including, to the extent the Committee so determines, from
among those set forth on Exhibit A hereto, as the Committee may determine,
in its sole discretion.

10.2   Terms and Conditions.  
Other Stock-Based Awards made pursuant to this Article X shall be subject
to the following terms and conditions:

(a)    Vesting.
Any Award under this Article X and any Common Stock covered by any such
Award shall vest or be forfeited to the extent so provided in the Award
agreement, as determined by the Committee, in its sole discretion; provided,
that, except for Awards under this Article X to Non-Employee Directors,
the minimum vesting period for any such Award and any Common Stock covered by
such Award shall be three years (but with pro-rata or other graded vesting
permitted over such three-year period, but not prior to one year after grant,
and in no event more than one-third of the Award vesting in respect of any
year); provided, further, that if the Award is a performance-based Award the
minimum vesting period for full vesting shall be one year rather than three
years. The minimum vesting period limitations in the preceding sentence shall not
apply on up to five percent of the aggregate shares of Common Stock available
under the Plan set forth in Section 4.1, as adjusted,

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when
combined with the aggregate grants made under the limits set forth in
Section 8.3. Within these limits, based on service, attainment of
performance goals, and/or such other factors or criteria as the Committee may
determine in its sole discretion, the Committee may place conditions on the
grant. In addition, (x) upon a Change in Control, (y) upon a Participant’s
without Cause or Good Reason termination or termination by reason of death,
Disability or Retirement, or (z) if required pursuant to an agreement in
existence prior to the date of grant to which the Participant is a party, the
Committee in its sole discretion may (A) accelerate the vesting of all or
any part of any Other Stock Based Award, and/or (B) waive the deferral
limitations for all or any part of any such Award.

(b)   Price.
Common Stock issued on a bonus basis under this Article X may be issued
for no cash consideration to the extent permitted by law.

ARTICLE XI

CHANGE IN CONTROL PROVISIONS

11.1   Benefits.   In
the event of a Change in Control of the Company (as defined below), and except
as otherwise provided by the Committee in an Award agreement or, if no rights
of the Participants are reduced, thereafter, a Participant’s Award shall be
treated as follows:

(a)    Unless the Committee provides
otherwise in an Award agreement or if no rights of the Participant are reduced,
thereafter, no acceleration of vesting or lapsing of restrictions shall occur
with respect to an Award if the Committee reasonably determines in good faith,
prior to the occurrence of the Change in Control, that the Award shall be
continued, assumed, have new rights substituted therefor or be treated in
accordance with Section 4.2(d) hereof, but, unless the Committee
determines otherwise, any such Award shall automatically vest in full upon the
Participant’s Termination without Cause or for Good Reason within 18 months
after the Change in Control.

(b)   In the event that subsection
(a) above does not apply, all outstanding Options and Non-Tandem Stock
Appreciation Rights granted to a Participant prior to the Change in Control
shall be fully vested and immediately exercisable in their entirety. The
Committee, in its sole discretion, may provide at the time of grant for the
purchase of any Awards by the Company or an Affiliate for an amount of cash
equal to the excess of the Change in Control Price (as defined below) of the
shares of Common Stock covered by such Awards, over the aggregate exercise
price of such Awards. For purposes of this Section 11.1, “Change in Control Price” shall mean the
average Fair Market Value of a share of Common Stock during the 20 trading days
immediately prior to a Change in Control of the Company or as otherwise
determined by the Committee. Notwithstanding anything to the contrary contained
herein, for purposes of Incentive Stock Options, any assumed or substituted
Option shall comply with the requirements of Treasury Regulation § 1.425-1 (and
any amendments thereto).

(c)    In the event that subsection
(a) above does not apply and unless the Committee otherwise determines,
all Performance Awards granted to a Participant prior to the Change in Control
shall vest on the following schedule:  (i) if at least 50% of a
Performance Award’s Performance Period has been completed, the Award shall vest
in full and be paid out as if the relevant Performance Period had ended upon
such Change in Control and the determination of the extent to which any
specified performance goals or targets had been achieved had been made at such
time, and (ii) if less than 50% of the Performance Award’s Performance
Period has been completed, the Award shall vest in full and shall be paid out
at 50% of Award target without consideration of performance to date.

(d)   In the event that subsection
(a) above does not apply, the restrictions to which any Restricted Stock
Awards or RSU Awards granted to a Participant prior to the Change in Control
are subject shall lapse as if the applicable Restriction Period had ended upon
such Change in Control.

 

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11.2   Change in Control.   “Change in Control” shall mean the
occurrence of one of the following events:

(a)   individuals who, on the Effective Date,
constitute the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a majority
of the Board, provided that any person becoming a director subsequent to the
Effective Date whose election or nomination for election was approved by a vote
of at least two-thirds of the Incumbent Directors then on the Board (either by
a specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be an Incumbent Director;

(b)   any “person”
(as such term is defined in Section 3(a)(9) of the Exchange Act and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes, after the Effective Date, a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 40% or more of the combined voting power of the
Company’s then outstanding securities eligible to vote for the election of the
Board (the “Company Voting Securities”);
provided, however, that an event described in this subsection (b) shall
not be deemed to be a Change in Control if any of following becomes such a
beneficial owner:

(i)                the Company or any
majority-owned subsidiary (provided, that this exclusion applies solely to the
ownership levels of the Company or the majority-owned subsidiary),

(ii)             any tax-qualified,
broad-based employee benefit plan sponsored or maintained by the Company or any
majority-owned subsidiary,

(iii)          any underwriter
temporarily holding securities pursuant to an offering of such securities, or

(iv)         any person pursuant to a
Non-Qualifying Transaction (as defined below);

(c)   the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the Company’s
stockholders, whether for such transaction or the issuance of securities in the
transaction (a “Business Combination”),
unless immediately following such Business Combination:

(i)                50% or more of the
total voting power of:

(x)             the corporation
resulting from such Business Combination (the “Surviving
Corporation”), or

(y)           if applicable, the
ultimate parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”),

is
represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination;

(ii)             no person (other than
any employee benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the beneficial
owner, directly or indirectly, of 40% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation);
and

 A-20
 

 

(iii)          at least a majority of
the members of the board of directors of the Parent Corporation (or if there is
no Parent Corporation, the Surviving Corporation) following the consummation of
the Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination

(any
Business Combination which satisfies all of the criteria specified in (i),
(ii) and (iii) above shall be deemed to be a “Non-Qualifying Transaction”); or

(d)   stockholder approval of a liquidation or
dissolution of the Company, unless the voting common equity interests of an
ongoing entity (other than a liquidating trust) are beneficially owned,
directly or indirectly, by the Company’s shareholders in substantially the same
proportions as such shareholders owned the Company’s outstanding voting common
equity interests immediately prior to such liquidation and such ongoing entity
assumes all existing obligations of the Company under this Plan.

Notwithstanding the foregoing, a Change in Control of
the Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 40% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that, if
after such acquisition by the Company such person becomes the beneficial owner
of Company Voting Securities that increases the percentage of outstanding
Company Voting Securities beneficially owned by such person, a Change in
Control of the Company shall then occur.

ARTICLE XII

TERMINATION OR AMENDMENT OF PLAN/NON-TRANSFERABILITY OF AWARDS

12.1  
Termination or Amendment.   Notwithstanding
any other provision of the Plan, the Board (or a duly authorized Committee
thereof) may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XIV), or suspend or terminate it entirely,
retroactively or otherwise; provided, however, that, except (x) to correct
obvious drafting errors or as otherwise required by law or (y) as
specifically provided herein, the rights of a Participant with respect to
Awards granted prior to such amendment, suspension or termination, may not be
reduced without the consent of such Participant and, provided further, without
the approval of the holders of the Company’s Common Stock entitled to vote in
accordance with applicable law, no amendment may be made that would
(i) increase the aggregate number of shares of Common Stock that may be
issued under the Plan under Section 4.1(a) (except by operation of
Section 4.2); (ii) increase the maximum individual limitations under
Section 4.1(b) (except by operation of Section 4.2);
(iii) change the classification of individuals eligible to receive Awards
under the Plan; (iv) extend the maximum option period under
Section 6.3; (v) materially alter the performance goals as set forth
in Exhibit A; (vi) take any actions prohibited by the last sentence
of Section 6.3(a) or Section 7.4(d); or (vii) require stockholder
approval in order for the Plan to continue to comply with the applicable
provisions of Section 162(m) of the Code or, to the extent applicable
to Incentive Stock Options, Section 422 of the Code. In no event may the
Plan be amended without the approval of the stockholders of the Company in
accordance with the applicable laws of the State of Delaware to increase the
aggregate number of shares of Common Stock that may be issued under the Plan,
decrease the minimum exercise price of any Award, or to make any other
amendment that would require stockholder approval under the rules of any
exchange or system on which the Company’s securities are listed or traded at
the request of the Company. The Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but, subject to
Article IV above, except (x) to correct obvious drafting errors or as
otherwise required by law or applicable

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accounting
rules, or (y) as specifically provided herein, no such amendment or other
action by the Committee shall reduce the rights of any holder without the
holder’s consent.

12.2   Non-Transferability of Awards.   Subject to Sections 6.3(e) and
7.5, no Award shall be Transferable by the Participant (including, without
limitation to, a Family Member) otherwise than by will or by the laws of
descent and distribution, and all Awards shall be exercisable, during the
Participant’s lifetime, only by the Participant. Any attempt to Transfer any
Award or benefit except as expressly permitted herein shall be void, and any
such benefit shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be
entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. An Award that is Transferred pursuant to
the first sentence of this Section 12.2 (i) may not be subsequently
Transferred otherwise than by will or by the laws of descent and distribution
and (ii) remains subject to the terms of the Plan and the applicable Award
agreement. Notwithstanding anything to the contrary contained in this
Section 12.2 (or 6.3(e) and 7.5), if and to the extent approved by the
Committee in its sole discretion, an employee or Non-Employee Director may
transfer an Award (but not Awards constituting in excess of one percent of the
Common Stock outstanding in any single Transfer) to a charitable organization.
Any shares of Common Stock acquired by a permissible transferee shall continue
to be subject to the terms of the Plan and the applicable Award agreement.

ARTICLE XIII

UNFUNDED PLAN

13.1   Unfunded Status of Plan.   The
Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments as to which a Participant has a
fixed and vested interest but that are not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the Company.

ARTICLE XIV

GENERAL PROVISIONS

14.1   Legend and Custody.

(a)   The Committee may require each person
receiving shares of Common Stock pursuant to an Option or other Award under the
Plan to represent to and agree with the Company in writing that the Participant
is acquiring the shares without a view to distribution thereof. In addition to
any legend required by the Plan, the certificates for such shares may include
any legend that the Committee deems appropriate to reflect any restrictions on
Transfer.

(b)   All certificates for shares of Common Stock
delivered under the Plan shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under (a) the
rules, regulations and other requirements of the Securities and Exchange
Commission, (b) any stock exchange upon which the Common Stock is then
listed or any national securities exchange system upon whose system the Common
Stock is then quoted, or (c) applicable law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

(c)   If stock certificates are issued in respect
of an Award, the Committee may require that any stock certificates evidencing
such Award be held in custody by the Company until the Award has vested or the
restrictions thereon have lapsed, and that, as a condition of any grant of such
an Award, the Participant shall have delivered a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such Award.

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14.2   Other Plans.   Nothing
contained in the Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally applicable or
applicable only in specific cases.

14.3   Deferral; Dividends and Dividend Equivalents.   The
Committee may, in its sole discretion, establish terms and conditions pursuant
to which the cash payment or delivery of Common Stock pursuant to an Award may
be deferred. Subject to the provisions of the Plan, the terms of any Award
(including a deferred Award) may provide, if so determined by the Committee in
its sole discretion, for the payment of cash, Common Stock or other property
dividends, or cash payments in amounts equivalent to cash, Common Stock or
other property dividends (“Dividend Equivalents”),
on either a current or a deferred basis, with respect to the number of shares
of Common Stock subject to such Award. The Committee may also provide that any
such dividends or dividend equivalents shall be subject to the same
restrictions and risk of forfeiture as the underlying Award or be deemed to
have been reinvested in additional Awards or otherwise reinvested.

14.4   No Right to Employment/Directorship/Consultancy.   Neither
the Plan nor the grant of any Option or other Award hereunder shall give any
Participant or other employee, Consultant or Non-Employee Director any right
with respect to continuance of employment, consultancy or directorship by the
Company or any Affiliate, nor shall they be a limitation in any way on the
right of the Company or any Affiliate by which an employee is employed or a
Consultant or Non-Employee Director is retained to terminate his or her
employment, consultancy or directorship at any time.

14.5   Withholding of Taxes.   The
Company shall have the right to deduct from any payment to be made pursuant to
the Plan, or to otherwise require, prior to the issuance or delivery of any
shares of Common Stock or the payment of any cash hereunder, payment by the
Participant of, any federal, state or local taxes required by law to be
withheld. Upon the vesting of a Restricted Stock Award or RSU Award (or other
Award that is taxable upon vesting), or upon making an election under
Section 83(b) of the Code, a Participant shall pay all required
withholding to the Company. If permitted by the Committee, the minimum
statutorily required withholding obligation with regard to any Participant may
be satisfied by (i) reducing the number of shares of Common Stock otherwise
deliverable or by delivering shares of Common Stock already owned, or
(ii) the Participant’s tendering to the Company of shares of Common Stock
owned by such Participant. Any fraction of a share of Common Stock required to
satisfy such tax obligations shall be disregarded and the amount due shall be
paid instead in cash by the Participant.

14.6   Listing and Other Conditions.

(a)   Except as otherwise determined by the
Committee, as long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the issuance
of any shares of Common Stock pursuant to an Award shall be conditioned upon
such shares being listed on such exchange or system. The Company shall have no
obligation to issue such shares unless and until such shares are so listed, and
the right to exercise any Option or other Award with respect to such shares
shall be suspended until such listing has been effected.

(b)   If at any time counsel to the Company shall
be of the opinion that any sale or delivery of shares of Common Stock pursuant
to an Option or other Award is or may be unlawful or result in the imposition
of excise taxes on the Company under the statutes, rules or regulations of
any applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act or otherwise, with respect
to shares of Common Stock or Awards, and the right to exercise any Option or
other Award shall be suspended until, in the opinion of said counsel, such sale
or delivery shall be lawful or will not result in the imposition of excise
taxes on the Company.

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(c)   Upon termination of any period of suspension
under this Section 14.6, any Award affected by such suspension that shall
not then have expired or terminated shall be reinstated as to all shares
available before such suspension and as to shares that would otherwise have
become available during the period of such suspension, but no such suspension
shall extend the term of any Award.

(d)   A Participant shall be required to supply
the Company with any certificates, representations and information that the Company
requests, and otherwise to cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval as the Company
deems necessary or appropriate.

14.7   Governing Law.   The Plan and
actions taken in connection herewith shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).

14.8   Construction.   Wherever any
words are used in the Plan in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases where they would
so apply, and wherever any words are used herein in the singular form they
shall be construed as though they were also used in the plural form in all
cases where they would so apply.

14.9   Other Benefits.   No Award
granted or paid out under the Plan shall be deemed compensation for purposes of
computing benefits under any retirement plan of the Company or its Affiliates
nor affect any benefits under any other benefit plan now or subsequently in
effect under which the availability or amount of benefits is related to the
level of compensation.

14.10   Costs.   The Company shall bear
all expenses associated with administering the Plan, including expenses of
issuing Common Stock pursuant to any Awards hereunder.

14.11   No Right to Same Benefits.   The
provisions of Awards need not be the same with respect to each Participant, and
such Awards to individual Participants need not be the same in subsequent
years.

14.12   Death/Disability.   The Committee may, in its sole
discretion, require the transferee of a Participant to supply it with written
notice of the Participant’s death or Disability and to supply it with a copy of
the will (in the case of the Participant’s death) and/or such other evidence as
the Committee deems necessary to establish the validity of the transfer of an
Award. The Committee may also require that the agreement of the transferee to
be bound by all of the terms and conditions of the Plan.

14.13   Section 16(b) of the Exchange Act.   All
elections and transactions under the Plan by persons subject to Section 16
of the Exchange Act involving shares of Common Stock are intended to comply
with any applicable exemptive condition under Rule 16b-3. The Committee
may establish and adopt written administrative guidelines, designed to
facilitate compliance with Section 16(b) of the Exchange Act, as it
may deem necessary or proper for the administration and operation of the Plan
and the transaction of business thereunder.

14.14   Section 409A of the Code.   The Board may amend the Plan as
necessary to comply with Section 409A of the Code without shareholder
consent.

14.15   Successor and Assigns.   The
Plan shall be binding on all successors and permitted assigns of a Participant,
including, without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate.

 A-24
 

 

14.16   Severability of Provisions.   If
any provision of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions hereof,
and the Plan shall be construed and enforced as if such provisions had not been
included.

14.17   Payments to Minors, Etc.   Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person’s guardian or to the
party providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Committee, the Board, the Company,
its Affiliates and their employees, agents and representatives with respect
thereto.

14.18   Headings and Captions.   The
headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be employed in the
construction of the Plan.

ARTICLE XV

EFFECTIVE DATE OF PLAN

The Plan shall become effective upon the date
specified by the Board in its resolution adopting the Plan, subject to the
approval of the Plan by the stockholders of the Company within 12 months before
or after such date of adoption, in accordance with the requirements of the laws
of the State of Delaware.

ARTICLE XVI

TERM OF PLAN

No Award shall be granted pursuant to the Plan on or
after the tenth anniversary of the earlier of the date the Plan is adopted or
the date of stockholder approval, but Awards granted prior to such tenth
anniversary may extend beyond that date.

ARTICLE XVII

NAME OF PLAN

The Plan shall be known as “ImClone Systems
Incorporated 2006 Stock Incentive Plan.”

 A-25

EXHIBIT A

PERFORMANCE GOALS

Performance goals established for purposes of the
vesting of performance-based Restricted Stock Awards, RSU Awards, Performance
Awards and/or Other Stock-Based Awards shall be based on one or more of the
following performance goals (“Performance Goals”), which may be set in terms of the
performance of the Company or any subsidiary, division, other operational unit
or business segment of the Company:  (i) the attainment of certain
target levels of, or a specified increase in, enterprise value or value
creation targets; (ii) the attainment of certain target levels of, or a
specified increase in, after-tax or pre-tax profits, including without
limitation as attributable to continuing and/or other operations of the
Company; (iii) the attainment of certain target levels of, or a specified
increase in, operational cash flow or economic value added; (iv) the
attainment of a certain level of reduction of, or other specified objectives
with regard to limiting the level of increase in all or a portion of, the
Company’s bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of cash balances and/or other offsets and adjustments as may be established by
the Committee; (v) the attainment of certain target levels of, or a
specified increase in, earnings per share or earnings per share from continuing
operations; (vi) the attainment of certain target levels of, or a
specified increase in, net sales, revenues, net income or earnings before
income tax or other exclusions; (vii) the attainment of certain target
levels of, or a specified increase in, return on capital employed or return on
invested capital; (viii) the attainment of certain target levels of, or a
specified increase in, after-tax or pre-tax return on stockholder equity;
(ix) the attainment of certain target levels of, or a specified increase
in, the fair market value of the shares of the Company’s Common Stock;
(x) the growth in the value of an investment in the Company’s Common Stock
assuming the reinvestment of dividends; (xi) a transaction that results in the
sale of stock or assets of the Company; (xii) the attainment of certain target
levels of, or a specified reduction in, expenses; or (xiii) implementation,
completion or attainment of interim measurable goals with regard to research,
development, products or projects. The Committee may also exclude the impact of
an event or occurrence which the Committee determines should be appropriately
excluded, including (i) restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring charges, (ii) an
event either not directly related to the operations of the Company or not
within the reasonable control of the Company’s management, or (iii) a
change in tax law or accounting standards required by generally accepted
accounting principles.

In addition, such Performance Goals may be based upon
the attainment of specified levels of Company (or subsidiary, division or other
operational unit or business segment of the Company) performance under one or
more of the measures described above relative to the performance of other
corporations. The Committee may: (i) designate additional business
criteria on which the performance goals may be based or (ii) adjust,
modify or amend the aforementioned business criteria.Exhibit 10.40

CONFIDENTIAL TREATMENT REQUESTED

[Note: Certain portions of this document have been
marked to indicate that Confidential Treatment has been requested for such
portions by ImClone Systems Incorporated. These portions have been marked with
one asterisk enclosed in brackets (i.e. [*]). The confidential portions have
been omitted and filed separately with the Securities and Exchange Commission.]

Letter Agreement

 

From:                                    ImClone Systems Incorporated

180 Varick Street

New York, NY 10014

USA

To:                                                UCB Pharma S.A..

Allée de la Recherche

60 1070 Brussels

Belgium

Attn: General Counsel

 

Re:                                      Collaboration and License Agreement dated 15th August 2005

Among UCB, S.A. (“UCB”) and ImClone Systems Incorporated

(“ImClone”), and any and all amendments thereto (the “Agreement”)

Dear Sirs

All capitalised terms not otherwise defined herein
shall have the meaning given such terms in the Agreement.  This letter agreement (the “Letter Agreement”)
shall memorialise the settlement and compromise reached between UCB and ImClone
(each a “Party”, and together the “Parties”) with respect to the Agreement.

WHEREAS, UCB and ImClone are parties to the Agreement;

 

WHEREAS, on 20th December 2006, the business of UCB S.A. was transferred to UCB
Pharma S.A.  As a result of such transfer,
the Agreement was assigned to UCB Pharma S.A.;

WHEREAS, ImClone desires to voluntarily terminate the Agreement at this time;
and

WHEREAS, the Parties have agreed to settle and fully resolve UCB’s claims
against ImClone for reimbursement of certain costs in connection with the
Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and obligations set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be bound hereby,
the Parties agree as follows:

1.                                       When used in this Letter Agreement, the following terms shall have the
meanings set out in this paragraph 1:

Dispute means the dispute between
the Parties concerning the payment of, and their respective responsibility for,
any and all costs under the Agreement, including development costs incurred
prior to the Effective Date, Development Costs for Agreed Indications,
Development Costs for Independent Indications, Manufacturing costs with respect
to Antibody Products and the costs of Commercialisation of the Antibody
Products.

2.                                       ImClone hereby gives UCB notice that it is terminating the Agreement
under Article 12.2 thereof.  UCB
acknowledges and agrees that such termination notice is valid, timely and
binding upon UCB.  Upon termination, UCB
shall be designated as the Remaining Party under Article 12 of the Agreement.

3.                                       Notwithstanding the terms of paragraph 2 above and subject to paragraph
4 below, the Parties agree that the articles of the Agreement listed in Article
12.11(b) of the Agreement shall survive termination of the Agreement.

4.                                       The Parties agree that the words “(with consent not to be unreasonably
withheld or delayed)” shall be deleted from Article 12.8(c)(ii) of the
Agreement.  UCB shall however provide
written notice to ImClone of the identity of any such sublicense within five
(5) business days of any such sublicense having been entered into pursuant to
Article 12.8(c)(ii), together with confirmation that such sublicense contains
all of the restrictions that apply to UCB, including without limitation those
under Article 11 of the Agreement (Confidentiality and Non-Use).

5.                                       The Parties each acknowledge and agree that neither Party owes to the
other Party any monetary consideration with respect to the Agreement nor any
other amount relating to costs under the Agreement, including development costs
incurred prior to the Effective Date, Development Costs for Agreed Indications,
Development Costs for Independent Indications, Manufacturing costs with respect
to Antibody Products or the costs of Commercialisation of the Antibody
Products, except as follows:

a.                                       within
ten (10) days of the date UCB countersigns this Letter Agreement, ImClone shall
pay to UCB the total sum of Four Hundred Fifty Thousand Dollars and Zero Cents
(US $450,000.00); and

 

b.                                      UCB shall pay to ImClone the post-termination royalty required under
Article 12.9(b) of the Agreement, but at the amended royalty rate of [*] rather
than [*].

For the avoidance of doubt, the provisions of Article
2.3(g) of the Agreement shall apply to payments or portions due under this
Letter Agreement that are not paid on the date such payments are due.

6.                                       This Letter Agreement is in full and final settlement of, and each Party
hereby releases and forever discharges, all and/or any actions, claims, rights,
demands and set-offs, whether in this jurisdiction or any other, whether or not
presently known to the Parties or to the law, and whether in law or equity,
that it, its parent, subsidiaries, assigns, transferees, representatives,
principals, agents, officers and directors or any of them ever had, may have or
hereafter can, shall or may have against the other Party or any other of its
parent, subsidiaries, assigns, transferees, representatives, principals,
agents, officers or directors arising out of or connected with:

(a)           the
Dispute; and

(b)           the
underlying facts relating to the Dispute,

collectively the Released Claims.  The Parties each acknowledge and agree that
the foregoing releases do not extend to the Parties’ rights and obligations
under this Letter Agreement.

7.                                       Each Party agrees, on behalf of itself and on behalf of its parent,
subsidiaries, assigns, transferees, representatives, principals, agents,
officers or directors, not to sue, commence, voluntarily aid in any way,
prosecute or cause to be commenced or prosecuted against the other Party or its
parent, subsidiaries, assigns, transferees, representatives, principals,
agents, officers or directors, any action, suit or other proceeding concerning
the Released Claims, in any jurisdiction.

8.                                       The Parties shall each bear their own legal costs in relation to the
Dispute and this Letter Agreement.

9.                                       Each Party warrants and represents that it has not sold, transferred,
assigned or otherwise disposed of its interest in the Released Claims.

10.                                 Each Party warrants and represents to the other with respect to itself
that it has the full right, power and authority to execute, deliver and perform
this Letter Agreement.

11.                                 This Letter Agreement is entered into in connection with the compromise
of the Released Claims. It is not, and shall not be represented or construed by
the Parties as, an admission of liability or wrongdoing on the part of either
Party.

12.                                 If any provision of this Letter Agreement is found to be void or
unenforceable, that provision shall be deemed to be deleted from this Letter
Agreement and the remaining provisions of this Letter Agreement shall continue
in full force and effect and the parties shall use their respective reasonable
endeavours to procure that any such provision is replaced by a provision which
is valid and enforceable, and which gives effect to the spirit and intent of
this Letter Agreement.

13.                                 The Parties agree that the terms of this Letter Agreement are not
enforceable by any third party, including under the Contracts (Rights of Third
Parties) Act 1999.

14.                                 The provisions of Article 11 (Confidentiality and Non-Use) of the
Agreement shall apply mutatis mutandis to this Letter Agreement.

* Omitted pursuant to a request for confidential
treatment submitted to the Securities and Exchange Commission.

 

15.                                 The Parties shall deliver or cause to be delivered such instruments and
other documents at such times and places as are reasonably necessary or
desirable, and shall take any other action reasonably requested by the other
Party for the purpose of putting this Letter Agreement into effect.

16.                                 This Letter Agreement may be signed in any number of counterparts, each
of which, when signed, shall be an original and all of which together evidence
the same agreement.

17.                                 Any variation of this Letter Agreement shall be in writing and signed by
or on behalf of each Party.

18.                                 This Letter Agreement contains the entire Agreement among the Parties
concerning to its subject matter.  All
discussions and agreements previously entered between the Parties concerning
the subject matter of this Letter Agreement are merged into this Letter
Agreement.  Each Party acknowledges that
it has not entered into this Letter Agreement in reliance wholly or partly on
any representation or warranty made by or on behalf of the other Party (whether
orally or in writing) other than as expressly set out in this Letter Agreement.

19.                                 This Letter Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without application of any conflict of
laws principles.

Please indicate UCB’s
agreement and acceptance of the foregoing terms by countersigning this Letter
Agreement below.

Very truly yours,

Daniel J. O’Connor

Senior Vice President, Interim General Counsel

	
  ACKNOWLEDGED AND AGREED:

  	
   

  	
   

  
	
  UCB Pharma S.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/  William Robinson

  	
   

  	
   

  	
  /s/ Robert J.
  Trainor

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William ROBINSON

  	
   

  	
  Robert J. TRAINOR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Executive Vice
  President

  	
   

  	
  Executive Vice President

  
	
  Global
  Operations

  	
   

  	
  & General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  February 1, 2007

  	
   

  	
  January 31, 2007

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