Document:

Exhibit 10.2

 

 

INOVIO
BIOMEDICAL CORPORATION

 

2007
OMNIBUS INCENTIVE PLAN

As Amended

 

Adopted by
the Board of Directors: March 31, 2007

Approved by
Stockholders: May 4, 2007

 

As Amended
by the Board of Directors: July 10, 2009

As Approved
by Stockholders: August 25, 2009

 

 

INOVIO BIOMEDICAL CORPORATION

 

2007
OMNIBUS INCENTIVE PLAN

 

ARTICLE I

 

PURPOSE AND
ADOPTION OF THE PLAN

 

1.1   Purpose.  The purpose
of the Inovio Biomedical Corporation 2007 Incentive Plan (as amended from time
to time, the “Plan”) is to assist in attracting and retaining highly competent
employees, directors and consultants to act as an incentive in motivating
selected employees, directors and consultants of the Company and its
Subsidiaries to achieve long-term corporate objectives and to enable
stock-based and cash-based incentive awards to qualify as performance-based
compensation for purposes of the tax deduction limitations under Section 162(m) of
the Code.

 

1.2   Adoption and Term. 
The Plan has been approved by the Board to be effective as of March 31,
2007, subject to the approval of the stockholders of the Company. The Plan
shall remain in effect until terminated by action of the Board; provided,
however, that no Awards may be granted hereunder after the tenth anniversary of
its initial effective date.

 

ARTICLE II

 

DEFINITIONS

 

For the purpose of this Plan, capitalized terms shall have the
following meanings:

 

2.1   Award means any one or a combination of Non-Qualified Stock
Options or Incentive Stock Options described in Article VI, Stock
Appreciation Rights described in Article VI, Restricted Shares and
Restricted Stock Units described in Article VII, Performance Awards
described in Article VIII, other stock-based Awards described in Article IX,
short-term cash incentive Awards described in Article X or any other Award
made under the terms of the Plan.

 

2.2   Award Agreement means a written agreement between the
Company and a Participant or a written acknowledgment from the Company to a
Participant specifically setting forth the terms and conditions of an Award
granted under the Plan.

 

2.3   Assumed means that pursuant to a Merger either (i) the
Award is expressly affirmed by the Company, (ii) the contractual
obligations represented by the Award are expressly assumed (and not simply by
operation of law) by the successor entity or its parent in connection with the
Merger with appropriate adjustments to the number and type of securities of the
successor entity or its parent subject to the Award and the exercise or
purchase price thereof which at least preserves the compensation element of the
Award existing at the time of the Merger as determined in accordance with the
instruments evidencing the agreement to assume the Award, or (iii) the
Award is otherwise to continue in effect following the Merger.

 

2.4   Award Period means, with respect to an Award, the period of
time, if any, set forth in the Award Agreement during which specified target
performance goals must be achieved or other conditions set forth in the Award
Agreement must be satisfied.

 

2.5   Beneficiary means an individual, trust or estate who or
which, by a written designation of the Participant filed with the Company, or
if no such written designation is filed, by operation of law, succeeds to the
rights and obligations of the Participant under the Plan and the Award
Agreement upon the Participant’s death.

 

2.6   Board means the Board of Directors of the Company.

 

1

 

2.7   Change in Control means, and shall be deemed to have
occurred upon the occurrence of, any one of the following events:

 

(a)  The acquisition in one or more transactions,
other than from the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act),
other than the Company, a Subsidiary or any employee benefit plan (or related
trust) sponsored or maintained by the Company or a Subsidiary, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of a number of Company Voting Securities in excess of 25% of the Company
Voting Securities unless such acquisition has been approved by the Board;

 

(b)  Any election has occurred of persons to the
Board that causes two-thirds of the Board to consist of persons other than (i) persons
who were members of the Board on the effective date of the Plan and (ii) persons
who were nominated for elections as members of the Board at a time when
two-thirds of the Board consisted of persons who were members of the Board on
the effective date of the Plan, provided, however, that any person nominated
for election by a Board at least two-thirds of whom constituted persons
described in clauses (i) and/or (ii) or by persons who were
themselves nominated by such Board shall, for this purpose, be deemed to have
been nominated by a Board composed of persons described in clause (i);

 

(c)  The consummation (i.e. closing) of a reorganization, merger or
consolidation involving the Company, unless, following such reorganization,
merger or consolidation, all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding Common
Stock and Company Voting Securities immediately prior to such reorganization,
merger or consolidation, following such reorganization, merger or consolidation
beneficially own, directly or indirectly, more than seventy five percent (75%)
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors or trustees, as the case may be, of the
entity resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the Outstanding Common
Stock and Company Voting Securities immediately prior to such reorganization,
merger or consolidation, as the case may be;

 

(d)  The consummation (i.e. closing) of a sale or other disposition of all or
substantially all the assets of the Company, unless, following such sale or
disposition, all or substantially all of the individuals and entities who were
the respective beneficial owners of the Outstanding Common Stock and Company
Voting Securities immediately prior to such reorganization, merger or
consolidation, following such reorganization, merger or consolidation
beneficially own, directly or indirectly, more than seventy five percent (75%)
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors or trustees, as the case may be, of the
entity purchasing such assets in substantially the same proportion as their
ownership of the Outstanding Common Stock and Company Voting Securities
immediately prior to such sale or disposition, as the case may be; or

 

(e)  a complete liquidation or dissolution of the
Company.

 

2.8   Code means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes said section.

 

2.9   Committee means the Compensation Committee of the Board.

 

2.10 Company means Inovio Biomedical Corporation and its
successors.

 

2.11 Common Stock means the common stock of the Company, par
value $0.001 per share.

 

2

 

2.12 Company Voting Securities means the combined voting power of
all outstanding voting securities of the Company entitled to vote generally in
the election of directors to the Board.

 

2.13 Date of Grant means the date designated by the Committee as
the date as of which it grants an Award, which shall not be earlier than the
date on which the Committee approves the granting of such Award.

 

2.14 Dividend Equivalent Account means a bookkeeping account in
accordance with under Section 11.17 and related to an Award that is
credited with the amount of any cash dividends or stock distributions that
would be payable with respect to the shares of Common Stock subject to such Awards
had such shares been outstanding shares of Common Stock.

 

2.15 Exchange Act means the Securities Exchange Act of 1934, as
amended.

 

2.16 Exercise Price means, with respect to a Stock Appreciation
Right, the amount established by the Committee in the Award Agreement which is
to be subtracted from the Fair Market Value on the date of exercise in order to
determine the amount of the payment to be made to the Participant, as further
described in Section 6.02(b).

 

2.17 Fair
Market Value means, on any date, (i) the closing sale price of
a share of Common Stock, as reported on the American Stock Exchange (or other
established stock exchange on which the Common Stock is regularly traded) on
such date or, if there were no sales on such date, on the last date preceding
such date on which a sale was reported; or (ii) if shares of Common Stock
are not listed for trading on an established stock exchange, Fair Market Value
shall be determined by the Committee in good faith.

 

2.18 Incentive
Stock Option means a stock option within the meaning of Section 422
of the Code.

 

2.19 Merger
means any merger, reorganization, consolidation, exchange, transfer of assets
or other transaction having similar effect involving the Company.

 

2.20 Non-Qualified
Stock Option means a stock option which is not an Incentive Stock
Option.

 

2.21 Options
means all Non-Qualified Stock Options and Incentive Stock Options granted at
any time under the Plan.

 

2.22 Outstanding
Common Stock means, at any time, the issued and outstanding shares
of Common Stock.

 

2.23 Participant
means a person designated to receive an Award under the Plan in accordance with
Section 5.01.

 

2.24 Performance
Awards means Awards granted in accordance with Article VIII.

 

2.25 Performance
Goals are based on one or more of the following measures and
intended to comply with the performance-based compensation exception under Code
Section 162(m):

 

·                    Net earnings or net income
(before or after taxes)

 

·                    Earnings per share or
earnings per share growth, total units, or unit growth

 

·                    Net sales, sales growth,
total revenue, or revenue growth

 

·                    Net operating profit

 

·                    Return measures (including,
but not limited to, return on assets, capital, invested capital, equity, sales,
or revenue)

 

·                    Cash flow (including, but
not limited to, operating cash flow, free cash flow, cash flow return on
equity, and cash flow return on investment)

 

3

 

·                    Earnings before or after
taxes, interest, depreciation, and/or amortization

 

·                    Gross or operating margins

 

·                    Productivity ratios

 

·                    Share price or relative
share price (including, but not limited to, growth measures and total stockholder
return)

 

·                    Expense targets

 

·                    Margins

 

·                    Operating efficiency

 

·                    Market share or change in
market share

 

·                    Customer retention or
satisfaction

 

·                    Working capital targets

 

·                    Completion of strategic
financing goals, acquisitions or alliances and clinical progress

 

·                    Company project milestones

 

·                    Economic value added or EVA®
(net operating profit after tax minus the sum of capital multiplied by the cost
of capital)

 

2.26 Plan
has the meaning given to such term in Section 1.01.

 

2.27 Purchase
Price, with respect to Options, shall have the meaning set forth in Section 6.01(b).

 

2.28 Restricted
Shares means Common Stock subject to restrictions imposed in
connection with Awards granted under Article VII.

 

2.29 Restricted
Stock Unit means a unit representing the right to receive Common
Stock or the value thereof in the future subject to restrictions imposed in
connection with Awards granted under Article VII.

 

2.30 Rule 16b-3
means Rule 16b-3 promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act, as the same may be amended from time
to time, and any successor rule.

 

2.31 Stock
Appreciation Rights means awards granted in accordance with Article VI.

 

2.32 Subsidiary
means a subsidiary of the Company within the meaning of Section 424(f) of
the Code.

 

2.33 Termination
of Service means the voluntary or involuntary termination of a
Participant’s service as an employee, director or consultant with the Company
or a Subsidiary for any reason, including death, disability, retirement or as
the result of the divestiture of the Participant’s employer or any similar
transaction in which the Participant’s employer ceases to be the Company or one
of its Subsidiaries. Whether entering military or other government service
shall constitute Termination of Service, or whether and when a Termination of
Service shall occur as a result of disability, shall be determined in each case
by the Committee in its sole discretion.

 

4

 

ARTICLE III

 

ADMINISTRATION

 

3.1   Committee.

 

(a)  Duties and Authority.  The Plan shall be administered by the
Committee and the Committee shall have exclusive and final authority in each
determination, interpretation or other action affecting the Plan and its
Participants. The Committee shall have the sole discretionary authority to
interpret the Plan, to establish and modify administrative rules for the
Plan, to impose such conditions and restrictions on Awards as it determines
appropriate, and to make all factual determinations with respect to and take
such steps in connection with the Plan and Awards granted hereunder as it may
deem necessary or advisable. The Committee shall not, however, have or exercise
any discretion that would disqualify amounts payable under Article X as performance-based
compensation for purposes of Section 162(m) of the Code. The
Committee may delegate such of its powers and authority under the Plan as it
deems appropriate to a subcommittee of the Committee or designated officers or
employees of the Company. In addition, the full Board may exercise any of the
powers and authority of the Committee under the Plan. In the event of such
delegation of authority or exercise of authority by the Board, references in
the Plan to the Committee shall be deemed to refer, as appropriate, to the
delegate of the Committee or the Board. Actions taken by the Committee or any
subcommittee thereof, and any delegation by the Committee to designated
officers or employees, under this Section 3.01 shall comply with Section 16(b) of
the Exchange Act, the performance-based provisions of Section 162(m) of
the Code, and the regulations promulgated under each of such statutory
provisions, or the respective successors to such statutory provisions or
regulations, as in effect from time to time, to the extent applicable.

 

(b)  Indemnification.  Each person who is or shall have been a
member of the Board or the Committee, or an officer or employee of the Company
to whom authority was delegated in accordance with the Plan shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such individual in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him or her in settlement thereof, with the Company’s
approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf;
provided, however, that the foregoing indemnification shall not apply to any
loss, cost, liability, or expense that is a result of his or her own willful
misconduct. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company’s Certificate of Incorporation or Bylaws, conferred in a separate
agreement with the Company, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

 

ARTICLE IV

 

SHARES

 

4.1   Number of Shares Issuable. 
(as amended July 10, 2009)
The maximum aggregate number of shares of Common Stock which may be issued
pursuant to Awards shall be 3,750,000 shares of Common Stock. No more than
3,750,000 shares of Common Stock may be issued under the Plan as Incentive
Stock Options. The foregoing share limits shall be subject to adjustment in
accordance with Section 11.07. The shares to be offered under the Plan
shall be authorized and unissued Common Stock, or issued Common Stock that
shall have been reacquired by the Company.

 

5

 

4.2   Shares Subject to Terminated Awards.  Common Stock covered by any unexercised
portions of terminated or forfeited Options (including canceled Options)
granted under Article VI, Common Stock forfeited as provided in Section 7.02(a),
Stock Units and other stock-based Awards terminated or forfeited as provided in
Article IX, and Common Stock subject to any Awards that are otherwise
surrendered by the Participant may again be subject to new Awards under the
Plan. Shares of Common Stock surrendered to or withheld by the Company in
payment or satisfaction of the Purchase Price of an Option or tax withholding
obligation with respect to an Award shall be available for the grant of new
Awards under the Plan. In the event of the exercise of Stock Appreciation
Rights, whether or not granted in tandem with Options, only the number of
shares of Common Stock actually issued in payment of such Stock Appreciation
Rights shall be charged against the number of shares of Common Stock available
for the grant of Awards hereunder.

 

ARTICLE V

 

PARTICIPATION

 

5.1   Eligible Participants. 
(as amended July 10, 2009)
Participants in the Plan shall be such employees, directors and consultants of
the Company and its Subsidiaries as the Committee, in its sole discretion, may
designate from time to time. The Committee’s designation of a Participant in
any year shall not require the Committee to designate such person to receive
Awards or grants in any other year. The designation of a Participant to receive
Awards or grants under one portion of the Plan does not require the Committee
to include such Participant under other portions of the Plan. The Committee
shall consider such factors as it deems pertinent in selecting Participants and
in determining the type and amount of their respective Awards. Incentive Stock
Options may only be granted to employees of the Company or its Subsidiaries.
Subject to adjustment in accordance with Section 11.07, in any calendar
year, no Participant shall be granted Awards in respect of more than 500,000
shares of Common Stock (whether through grants of Options or Stock Appreciation
Rights or other Awards of Common Stock or rights with respect thereto) or
cash-based Awards for more than $1,500,000.00.

 

ARTICLE VI

 

STOCK
OPTIONS AND STOCK APPRECIATION RIGHTS

 

6.1   Option Awards.

 

(a)  Grant of Options.  The Committee may grant, to such Participants
as the Committee may select, Options entitling the Participant to purchase
shares of Common Stock from the Company in such number, at such price, and on
such terms and subject to such conditions, not inconsistent with the terms of
this Plan, as may be established by the Committee. The terms of any Option
granted under this Plan shall be set forth in an Award Agreement.

 

(b)  Purchase Price of Options.  (as
amended July 10, 2009) The Purchase Price of each share of
Common Stock which may be purchased upon exercise of any Option granted under
the Plan shall be determined by the Committee; provided, however, that in no
event shall the Purchase Price be less than the Fair Market Value on the Date
of Grant. In the case of an Incentive Stock Option granted to a Participant
who, on the Date of Grant owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or its Subsidiaries,
the per share exercise price shall be not less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the Date of Grant.

 

(c)  Designation of Options.  The Committee shall designate, at the time of
the grant of each Option, the Option as an Incentive Stock Option or a
Non-Qualified Stock Option.

 

6

 

(d)  Incentive Stock Option Share Limitation.  (as
amended July 10, 2009) Notwithstanding an Option’s designation
as an Incentive Stock Option, an Option will qualify as an Incentive Stock
Option under the Code only to the extent the $100,000 limitation of Section 422(d) of
the Code is not exceeded. The $100,000 limitation of Section 422(d) of
the Code is calculated based on the aggregate Fair Market Value (measured on
the Date of Grant) of the shares of Common Stock subject to Options designated
as Incentive Stock Options which first become exercisable in any one calendar
year (under the Plan or any other plans of the Company and its Subsidiaries).
For purposes of this calculation, Incentive Stock Options shall be taken into
account in the order in which they were granted.

 

(e)  Rights As a Stockholder.  A Participant or a transferee of an Option
pursuant to Section 11.04 shall have no rights as a stockholder with
respect to Common Stock covered by an Option until the Participant or
transferee shall have become the holder of record of any such shares, and no
adjustment shall be made for dividends in cash or other property or
distributions or other rights with respect to any such Common Stock for which
the record date is prior to the date on which the Participant or a transferee
of the Option shall have become the holder of record of any such shares covered
by the Option; provided, however, that Participants are entitled to share
adjustments to reflect capital changes under Section 11.07.

 

6.2   Stock Appreciation Rights.

 

(a)  Stock Appreciation Right Awards.  The Committee is authorized to grant to any
Participant one or more Stock Appreciation Rights. Such Stock Appreciation
Rights may be granted either independent of or in tandem with Options granted
to the same Participant. Stock Appreciation Rights granted in tandem with
Options may be granted simultaneously with, or, in the case of Non-Qualified
Stock Options, subsequent to, the grant to such Participant of the related
Option; provided however, that: (i) any Option covering any share of
Common Stock shall expire and not be exercisable upon the exercise of any Stock
Appreciation Right with respect to the same share, (ii) any Stock
Appreciation Right covering any share of Common Stock shall expire and not be
exercisable upon the exercise of any related Option with respect to the same
share, and (iii) an Option and Stock Appreciation Right covering the same
share of Common Stock may not be exercised simultaneously. Upon exercise of a
Stock Appreciation Right with respect to a share of Common Stock, the
Participant shall be entitled to receive an amount equal to the excess, if any,
of (A) the Fair Market Value of a share of Common Stock on the date of
exercise over (B) the Exercise Price of such Stock Appreciation Right
established in the Award Agreement, which amount shall be payable as provided
in Section 6.02(c).

 

(b)  Exercise Price.  The Exercise Price established under any
Stock Appreciation Right granted under this Plan shall be determined by the
Committee, but in the case of Stock Appreciation Rights granted in tandem with
Options shall not be less than the Purchase Price of the related Option;
provided, however, that in no event shall the Exercise Price be less than the
Fair Market Value on the Date of Grant. Upon exercise of Stock Appreciation
Rights granted in tandem with options, the number of shares subject to exercise
under any related Option shall automatically be reduced by the number of shares
of Common Stock represented by the Option or portion thereof which are
surrendered as a result of the exercise of such Stock Appreciation Rights.

 

(c)  Payment of Incremental Value.  Any payment which may become due from the
Company by reason of a Participant’s exercise of a Stock Appreciation Right may
be paid to the Participant as determined by the Committee (i) all in cash,
(ii) all in Common Stock, or (iii) in any combination of cash and
Common Stock. In the event that all or a portion of the payment is made in
Common Stock, the number of shares of Common Stock delivered in satisfaction of
such payment shall be determined by dividing the amount of such payment or
portion thereof by the 

 

7

 

Fair Market Value on the Exercise Date. No fractional share of Common
Stock shall be issued to make any payment in respect of Stock Appreciation
Rights; if any fractional share would be issuable, the combination of cash and
Common Stock payable to the Participant shall be adjusted as directed by the
Committee to avoid the issuance of any fractional share.

 

6.3   Terms of Stock Options and Stock Appreciation Rights.

 

(a)  Conditions on Exercise.  An Award Agreement with respect to Options or
Stock Appreciation Rights may contain such waiting periods, exercise dates and restrictions
on exercise (including, but not limited to, periodic installments) as may be
determined by the Committee at the time of grant.

 

(b)  Duration of Options and Stock Appreciation Rights.  (as
amended July 10, 2009) Options and Stock Appreciation Rights
shall terminate upon the first to occur of the following events:

 

(i) Expiration of the
Option or Stock Appreciation Right as provided in the Award Agreement; or

 

(ii) Termination of the
Award in the event of a Participant’s disability, retirement, death or other
Termination of Service as provided in the Award Agreement; or

 

(iii) In the case of an
Incentive Stock Option, ten years from the Date of Grant;

 

(iv) In the case of an
Incentive Stock Option granted to a Participant who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any of its
Subsidiaries, five years from the Date of Grant or

 

(v) Solely in the case
of a Stock Appreciation Right granted in tandem with an Option, upon the
expiration of the related Option.

 

(c)  Acceleration or Extension of Exercise Time.  The Committee, in its sole discretion, shall
have the right (but shall not be obligated), exercisable on or at any time after
the Date of Grant, to permit the exercise of an Option or Stock Appreciation
Right (i) prior to the time such Option or Stock Appreciation Right would
become exercisable under the terms of the Award Agreement, (ii) after the
termination of the Option or Stock Appreciation Right under the terms of the
Award Agreement, or (iii) after the expiration of the Option or Stock
Appreciation Right.

 

6.4   Exercise Procedures. 
Each Option and Stock Appreciation Right granted under the Plan shall be
exercised prior to the close of business on the expiration date of the Option
or Stock Appreciation Right by notice to the Company or by such other method as
provided in the Award Agreement or as the Committee may establish or approve
from time to time. The Purchase Price of shares purchased upon exercise of an
Option granted under the Plan shall be paid in full in cash by the Participant
pursuant to the Award Agreement; provided, however, that the Committee may (but
shall not be required to) permit payment to be made by delivery to the Company
of either (a) Common Stock (which may include Restricted Shares or shares
otherwise issuable in connection with the exercise of the Option, subject to
such rules as the Committee deems appropriate) or (b) any combination
of cash and Common Stock, or (c) such other consideration as the Committee
deems appropriate and in compliance with applicable law (including payment
under an arrangement constituting a brokerage transaction as permitted under
the provisions of Regulation T applicable to cashless exercises
promulgated by the Federal Reserve Board, unless prohibited by Section 402
of the Sarbanes-Oxley Act of 2002). In the event that any Common Stock shall be
transferred to the Company to satisfy all or any part of the Purchase Price, the
part of the Purchase Price deemed to have been satisfied by such transfer of
Common Stock shall be equal to the product derived by multiplying the Fair
Market Value as of the date of exercise times the number of shares of Common
Stock transferred to the Company. The Participant may not transfer to the
Company in satisfaction of the Purchase Price any fractional 

 

8

 

share of Common Stock. Any part of the Purchase Price paid in cash upon
the exercise of any Option shall be added to the general funds of the Company
and may be used for any proper corporate purpose. Unless the Committee shall
otherwise determine, any Common Stock transferred to the Company as payment of
all or part of the Purchase Price upon the exercise of any Option shall be held
as treasury shares.

 

6.5   Change in Control. 
Unless otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all Options outstanding on the
date of such Change in Control, and all Stock Appreciation Rights shall become
immediately and fully exercisable. The provisions of this Section 6.05
shall not be applicable to any Options or Stock Appreciation Rights granted to
a Participant if any Change in Control results from such Participant’s
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of Common Stock or Company Voting Securities.

 

ARTICLE VII

 

RESTRICTED
SHARES AND RESTRICTED STOCK UNITS

 

7.1   Award of Restricted Stock and Restricted Stock Units.  The Committee may grant to any Participant an
Award of Restricted Shares consisting of a specified number of shares of Common
Stock issued to the Participant subject to such terms, conditions and
forfeiture and transfer restrictions, whether based on performance standards,
periods of service, retention by the Participant of ownership of specified
shares of Common Stock or other criteria, as the Committee shall establish. The
Committee may also grant Restricted Stock Units representing the right to receive
shares of Common Stock in the future subject to such terms, conditions and
restrictions, whether based on performance standards, periods of service,
retention by the Participant of ownership of specified shares of Common Stock
or other criteria, as the Committee shall establish. With respect to
performance-based Awards of Restricted Shares or Restricted Stock Units
intended to qualify as “performance-based” compensation for purposes of Section 162(m) of
the Code, performance targets will consist of specified levels of one or more
of the Performance Goals. The terms of any Restricted Share and Restricted
Stock Unit Awards granted under this Plan shall be set forth in an Award
Agreement which shall contain provisions determined by the Committee and not inconsistent
with this Plan.

 

7.2   Restricted Shares.

 

(a)  Issuance of Restricted Shares.  As soon as practicable after the Date of
Grant of a Restricted Share Award by the Committee, the Company shall cause to
be transferred on the books of the Company, or its agent, Common Stock,
registered on behalf of the Participant, evidencing the Restricted Shares
covered by the Award, but subject to forfeiture to the Company as of the Date
of Grant if an Award Agreement with respect to the Restricted Shares covered by
the Award is not duly executed by the Participant and timely returned to the
Company. All Common Stock covered by Awards under this Article VII shall
be subject to the restrictions, terms and conditions contained in the Plan and
the Award Agreement entered into by the Participant. Until the lapse or release
of all restrictions applicable to an Award of Restricted Shares, the share
certificates representing such Restricted Shares may be held in custody by the
Company, its designee, or, if the certificates bear a restrictive legend, by
the Participant. Upon the lapse or release of all restrictions with respect to
an Award as described in Section 7.02(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of shares
as provided in Section 7.02(d), free of any restrictions set forth in the
Plan and the Award Agreement shall be delivered to the Participant.

 

(b)  Stockholder Rights.  Beginning on the Date of Grant of the
Restricted Share Award and subject to execution of the Award Agreement as
provided in Section 7.02(a), the Participant shall become a stockholder of
the Company with respect to all shares subject to the Award Agreement 

 

9

 

and shall have all of the rights of a stockholder, including, but not
limited to, the right to vote such shares and the right to receive dividends;
provided, however, that any Common Stock distributed as a dividend or otherwise
with respect to any Restricted Shares as to which the restrictions have not yet
lapsed, shall be subject to the same restrictions as such Restricted Shares and
held or restricted as provided in Section 7.02(a).

 

(c)  Restriction on Transferability.  None of the Restricted Shares may be assigned
or transferred (other than by will or the laws of descent and distribution, or
to an inter vivos trust with respect to which the Participant is treated as the
owner under Sections 671 through 677 of the Code, except to the extent
that Section 16 of the Exchange Act limits a Participant’s right to make
such transfers), pledged or sold prior to lapse of the restrictions applicable
thereto.

 

(d)  Delivery of Shares Upon Vesting.  Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of or release from
any other conditions prescribed by the Committee, or at such earlier time as
provided under the provisions of Section 7.04, the restrictions applicable
to the Restricted Shares shall lapse. As promptly as administratively feasible
thereafter, subject to the requirements of Section 11.05, the Company
shall deliver to the Participant or, in case of the Participant’s death, to the
Participant’s Beneficiary, one or more share certificates for the appropriate
number of shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.

 

(e)  Forfeiture of Restricted Shares.  Subject to Sections 7.02(f) and
7.04, all Restricted Shares shall be forfeited and returned to the Company and
all rights of the Participant with respect to such Restricted Shares shall
terminate unless the Participant continues in the service of the Company or a
Subsidiary as an employee until the expiration of the forfeiture period for
such Restricted Shares and satisfies any and all other conditions set forth in
the Award Agreement. The Committee shall determine the forfeiture period (which
may, but need not, lapse in installments) and any other terms and conditions
applicable with respect to any Restricted Share Award.

 

(f)  Waiver of Forfeiture Period.  Notwithstanding anything contained in this Article VII
to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Award Agreement
under appropriate circumstances (including the death, disability or retirement
of the Participant or a material change in circumstances arising after the date
of an Award) and subject to such terms and conditions (including forfeiture of
a proportionate number of the Restricted Shares) as the Committee shall deem
appropriate.

 

7.3   Restricted Stock Units.

 

(a)  Settlement of Restricted Stock Units.  Payments shall be made to Participants with
respect to their Restricted Stock Units as soon as practicable after the
Committee has determined that the terms and conditions applicable to such Award
have been satisfied or at a later date if distribution has been deferred.
Payments to Participants with respect to Restricted Stock Units shall be made
in the form of Common Stock, or cash or a combination of both, as the Committee
may determine. The amount of any cash to be paid in lieu of Common Stock shall be
determined on the basis of the Fair Market Value of the Common Stock on the
date any such payment is processed. As to shares of Common Stock which
constitute all or any part of such payment, the Committee may impose such
restrictions concerning their transferability and/or their forfeiture as may be
provided in the applicable Award Agreement or as the Committee may otherwise
determine, provided such determination is made on or before the date
certificates for such shares are first delivered to the applicable Participant.

 

(b)  Shareholder Rights.  Until the lapse or release of all
restrictions applicable to an Award of Restricted Stock Units, no shares of
Common Stock shall be issued in respect of such Awards and no Participant shall
have any rights as a shareholder of the Company with respect to the shares of
Common Stock covered by such Award of Restricted Stock Units.

 

10

 

(c)  Waiver of Forfeiture Period.  Notwithstanding anything contained in this Section 7.03
to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Award Agreement
under appropriate circumstances (including the death, disability or retirement
of the Participant or a material change in circumstances arising after the date
of an Award) and subject to such terms and conditions (including forfeiture of
a proportionate number of shares issuable upon settlement of the Restricted
Stock Units constituting an Award) as the Committee shall deem appropriate.

 

(d)  Deferral of Payment.  If approved by the Committee and set forth in
the applicable Award Agreement, a Participant may elect to defer the amount
payable with respect to the Participant’s Restricted Stock Units in accordance
with such terms as may be established by the Committee.

 

7.4   Change in Control. 
Unless otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all restrictions applicable to
Restricted Shares and Restricted Stock Unit Awards shall terminate fully and
the Participant shall immediately have the right to the delivery in accordance
with Section 7.02(d) of a share certificate or certificates
evidencing a number of shares of Common Stock equal to the full number of
shares subject to each such Award (in the case of Restricted Stock) or payment
in accordance with Section 7.03(a) of a number of shares of Common
Stock determined by the Committee, in its discretion, but, in the case of a
performance-based or other contingent Award, in no event less than the number
of shares payable at the “target” level for each such Award (in the case of
Restricted Stock Units). The provisions of this Section 7.04 shall not be
applicable to any Restricted Share or Restricted Stock Unit Award granted to a
Participant if any Change in Control results from such Participant’s beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
Common Stock or Company Voting Securities.

 

ARTICLE VIII

 

PERFORMANCE
AWARDS

 

8.1   Performance Awards.

 

(a)  Award Periods and Calculations of Potential
Incentive Amounts.  The
Committee may grant Performance Awards to Participants. A Performance Award
shall consist of the right to receive a payment (measured by the Fair Market
Value of a specified number of shares of Common Stock, increases in such Fair
Market Value during the Award Period and/or a fixed cash amount) contingent
upon the extent to which certain predetermined performance targets have been
met during an Award Period. The Award Period shall be two or more fiscal or
calendar years as determined by the Committee. The Committee, in its discretion
and under such terms as it deems appropriate, may permit newly eligible
Participants, such as those who are promoted or newly hired, to receive
Performance Awards after an Award Period has commenced.

 

(b)  Performance Targets.  Subject to Section 11.18, the
performance targets applicable to a Performance Award may include such goals
related to the performance of the Company or, where relevant, any one or more
of its Subsidiaries or divisions and/or the performance of a Participant as may
be established by the Committee in its discretion. In the case of Performance
Awards to “covered employees” (as defined in Section 162(m) of the
Code), the targets will be limited to specified levels of one or more of the
Performance Goals. The performance targets established by the Committee may
vary for different Award Periods and need not be the same for each Participant
receiving a Performance Award in an Award Period.

 

(c)  Earning Performance Awards.  The Committee, at or as soon as practicable
after the Date of Grant, shall prescribe a formula to determine the percentage
of the Performance Award to be earned based upon the degree of attainment of
the applicable performance targets.

 

11

 

(d)  Payment of Earned Performance Awards.  Subject to the requirements of Section 11.05,
payments of earned Performance Awards shall be made in cash or Common Stock, or
a combination of cash and Common Stock, in the discretion of the Committee. The
Committee, in its sole discretion, may define, and set forth in the applicable
Award Agreement, such terms and conditions with respect to the payment of
earned Performance Awards as it may deem desirable.

 

8.2   Termination of Service. 
In the event of a Participant’s Termination of Service during an Award
Period, the Participant’s Performance Awards shall be forfeited except as may
otherwise be provided in the applicable Award Agreement.

 

8.3   Change in Control. 
Unless otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all Performance Awards for all
Award Periods shall immediately become fully vested and payable to all
Participants and shall be paid to Participants in accordance with Section 8.01(d),
within 30 days after such Change in Control. The provisions of this Section 8.03
shall not be applicable to any Performance Award granted to a Participant if
any Change in Control results from such Participant’s beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of Common Stock
or Company Voting Securities.

 

ARTICLE IX

 

OTHER
STOCK-BASED AWARDS

 

9.1   Grant of Other Stock-Based Awards.  (as
amended July 10, 2009) Other stock-based awards, consisting of
stock purchase rights (with or without loans to Participants by the Company
containing such terms as the Committee shall determine), Awards of Common
Stock, or Awards valued in whole or in part by reference to, or otherwise based
on, Common Stock or dividends on Common Stock, may be granted either alone or
in addition to or in conjunction with other Awards under the Plan. Subject to
the provisions of the Plan, the Committee shall have sole and complete
authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be granted
pursuant to such Awards, and all other conditions of the Awards. Any such Award
shall be confirmed by an Award Agreement executed by the Committee and the
Participant, which Award Agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
this Plan with respect to such Award.

 

9.2   Terms of Other Stock-Based Awards.  In addition to the terms and conditions
specified in the Award Agreement, Awards made pursuant to this Article IX
shall be subject to the following:

 

(a)  Any Common Stock subject to Awards made under
this Article IX may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses; and

 

(b)  If specified by the Committee in the Award
Agreement, the recipient of an Award under this Article IX shall be
entitled to receive, currently or on a deferred basis, interest or dividends or
dividend equivalents with respect to the Common Stock or other securities
covered by the Award; and

 

(c)  The Award Agreement with respect to any Award
shall contain provisions dealing with the disposition of such Award in the
event of a Termination of Service prior to the exercise, payment or other
settlement of such Award, whether such termination occurs because of
retirement, disability, death or other reason, with such provisions to take
account of the specific nature and purpose of the Award.

 

12

 

ARTICLE X

 

SHORT-TERM
CASH INCENTIVE AWARDS

 

10.1  Eligibility. 
Executive officers of the Company who are from time to time determined
by the Committee to be “covered employees” for purposes of Section 162(m) of
the Code will be eligible to receive short-term cash incentive awards under
this Article X.

 

10.2  Awards.

 

(a)  Performance Targets.  The Committee shall establish objective
performance targets based on specified levels of one or more of the Performance
Goals. Such performance targets shall be established by the Committee on a
timely basis to ensure that the targets are considered “preestablished” for
purposes of Section 162(m) of the Code.

 

(b)  Amounts of Awards.  In conjunction with the establishment of
performance targets for a fiscal year, the Committee shall adopt an objective
formula (on the basis of percentages of Participants’ salaries, shares in a
bonus pool or otherwise) for computing the respective amounts payable under the
Plan to Participants if and to the extent that the performance targets are
attained. Such formula shall comply with the requirements applicable to
performance-based compensation plans under Section 162(m) of the Code
and, to the extent based on percentages of a bonus pool, such percentages shall
not exceed 100% in the aggregate.

 

(c)  Payment of Awards.  Awards will be payable to Participants in
cash each year upon prior written certification by the Committee of attainment
of the specified performance targets for the preceding fiscal year.

 

(d)  Negative Discretion.  Notwithstanding the attainment by the Company
of the specified performance targets, the Committee shall have the discretion,
which need not be exercised uniformly among the Participants, to reduce or
eliminate the award that would be otherwise paid.

 

(e)  Guidelines.  The Committee shall adopt from time to time
written policies for its implementation of this Article X. Such guidelines
shall reflect the intention of the Company that all payments hereunder qualify
as performance-based compensation under Section 162(m) of the Code.

 

(f)  Non-Exclusive Arrangement.  The adoption and operation of this Article X
shall not preclude the Board or the Committee from approving other short-term
incentive compensation arrangements for the benefit of individuals who are
Participants hereunder as the Board or Committee, as the case may be, deems
appropriate and in the best of the Company.

 

ARTICLE XI

 

TERMS
APPLICABLE GENERALLY TO AWARDS

GRANTED
UNDER THE PLAN

 

11.1  Plan Provisions Control Award Terms.  Except as provided in Section 11.16, the
terms of the Plan shall govern all Awards granted under the Plan, and in no
event shall the Committee have the power to grant any Award under the Plan
which is contrary to any of the provisions of the Plan. In the event any
provision of any Award granted under the Plan shall conflict with any term in
the Plan as constituted on the Date of Grant of such Award, the term in the
Plan as constituted on the Date of Grant of such Award shall control. Except as
provided in Section 11.03 and Section 11.07, the terms of any Award
granted under the Plan may not be changed after the Date of Grant of such Award
so as to materially decrease the value of the Award without the express written
approval of the holder.

 

11.2  Award Agreement.  No
person shall have any rights under any Award granted under the Plan unless and
until the Company and the Participant to whom such Award shall have been
granted 

 

13

 

shall
have executed and delivered an Award Agreement or received any other Award
acknowledgment authorized by the Committee expressly granting the Award to such
person and containing provisions setting forth the terms of the Award.

 

11.3   Modification of Award After Grant.  No Award granted under the Plan to a
Participant may be modified (unless such modification does not materially
decrease the value of the Award) after the Date of Grant except by express
written agreement between the Company and the Participant, provided that any such
change (a) shall not be inconsistent with the terms of the Plan, and (b) shall
be approved by the Committee.

 

11.4   Limitation on Transfer. 
Except as provided in Section 7.01(c) in the case of
Restricted Shares, a Participant’s rights and interest under the Plan may not
be assigned or transferred other than by will or the laws of descent and
distribution, and during the lifetime of a Participant, only the Participant
personally (or the Participant’s personal representative) may exercise rights
under the Plan. The Participant’s Beneficiary may exercise the Participant’s
rights to the extent they are exercisable under the Plan following the death of
the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of
the Exchange Act with respect to Participants subject to such Section, the
Committee may grant Non-Qualified Stock Options that are transferable, without
payment of consideration, to immediate family members of the Participant or to
trusts or partnerships for such family members, and the Committee may also
amend outstanding Non-Qualified Stock Options to provide for such
transferability.

 

11.5   Taxes.  The Company
shall be entitled, if the Committee deems it necessary or desirable, to
withhold (or secure payment from the Participant in lieu of withholding) the
amount of any withholding or other tax required by law to be withheld or paid
by the Company with respect to any amount payable and/or shares issuable under
such Participant’s Award, or with respect to any income recognized upon a
disqualifying disposition of shares received pursuant to the exercise of an
Incentive Stock Option, and the Company may defer payment or issuance of the
cash or shares upon exercise or vesting of an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee determines in
accordance with the following rules:

 

(a)       The Participant shall have the right to elect to meet his or
her withholding requirement (i) by having withheld from such Award at the
appropriate time that number of shares of Common Stock, rounded up to the next
whole share, whose Fair Market Value is equal to the amount of withholding
taxes due, (ii) by direct payment to the Company in cash of the amount of
any taxes required to be withheld with respect to such Award or (iii) by a
combination of shares and cash.

 

(b)      In the case of Participants who are subject to Section 16
of the Exchange Act, the Committee may impose such limitations and restrictions
as it deems necessary or appropriate with respect to the delivery or
withholding of shares of Common Stock to meet tax withholding obligations.

 

11.6   Surrender of Awards. 
Any Award granted under the Plan may be surrendered to the Company for
cancellation on such terms as the Committee and the holder approve. With the
consent of the Participant, the Committee may substitute a new Award under this
Plan in connection with the surrender by the Participant of an equity
compensation award previously granted under this Plan or any other plan
sponsored by the Company; provided, however, that no such substitution shall be
permitted without the approval of the Company’s stockholders if such approval
is required by the rules of any applicable stock exchange.

 

11.7   Adjustments to Reflect Capital Changes.

 

(a)  Recapitalization.  In the event of any corporate event or
transaction (including, but not limited to, a change in the Common Stock or the
capitalization of the Company) such as a merger, 

 

14

 

consolidation, reorganization, recapitalization, separation, partial or
complete liquidation, stock dividend, stock split, reverse stock split, split
up, spin-off, or other distribution of stock or property of the Company, a
combination or exchange of Common Stock, dividend in kind, or other like change
in capital structure, number of outstanding shares of Common Stock, distribution
(other than normal cash dividends) to shareholders of the Company, or any
similar corporate event or transaction, the Committee, in order to prevent
dilution or enlargement of Participants’ rights under this Plan, shall make
equitable and appropriate adjustments and substitutions, as applicable, to or
of the number and kind of shares subject to outstanding Awards, the Purchase
Price or Exercise Price for such shares, the number and kind of shares
available for future issuance under the Plan and the maximum number of shares
in respect of which Awards can be made to any Participant in any calendar year,
and other determinations applicable to outstanding Awards. The Committee shall
have the power and sole discretion to determine the amount of the adjustment to
be made in each case.

 

(b)  Merger. 
(as amended July 10, 2009)
Effective upon the consummation of a Merger, all outstanding Awards under the
Plan shall terminate. However, all such Awards shall not terminate to the
extent they are Assumed in connection with the Merger. The Committee shall have
the authority, exercisable either in advance of any actual or anticipated
Merger or at the time of an actual Merger and exercisable at the Date of Grant
of an Award under the Plan or any time while an Award remains outstanding, to
provide for the full or partial automatic vesting and exercisability of one or
more outstanding unvested Awards under the Plan and the release from
restrictions on transfer and repurchase or forfeiture rights of such Awards in
connection with a Merger, on such terms and conditions as the Committee may
specify. The Committee also shall have the authority to condition any such
Award vesting and exercisability or release from such limitations upon the
subsequent Termination of Service of the Participant within a specified period
following the effective date of the Merger. The Committee may provide that any
Awards so vested or released from such limitations in connection with a Merger
shall remain fully exercisable until the expiration or sooner termination of
the Award. Any Incentive Stock Option accelerated under this Section 11.7(b) in
connection with a Merger shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section 422(d) is
not exceeded.

 

(c)  Options to Purchase Shares or Stock of Acquired
Companies.  After any Merger
in which the Company or a Subsidiary shall be a surviving corporation, the
Committee may grant substituted options under the provisions of the Plan,
pursuant to Section 424 of the Code, replacing old options granted under a
plan of another party to the Merger whose shares or stock subject to the old
options may no longer be issued following the Merger. The foregoing adjustments
and manner of application of the foregoing provisions shall be determined by
the Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to
any Options.

 

11.8   No Right to Continued Service.  No person shall have any claim of right to be
granted an Award under this Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any Participant any right to be retained
in the service of the Company or any of its Subsidiaries.

 

11.9   Awards Not Includable for Benefit Purposes.  Payments received by a Participant pursuant
to the provisions of the Plan shall not be included in the determination of
benefits under any pension, group insurance or other benefit plan applicable to
the Participant which is maintained by the Company or any of its Subsidiaries,
except as may be provided under the terms of such plans or determined by the
Board.

 

11.10  Governing Law.  All
determinations made and actions taken pursuant to the Plan shall be governed by
the laws of California and construed in accordance therewith.

 

15

 

11.11  No Strict Construction. 
No rule of strict construction shall be implied against the
Company, the Committee, or any other person in the interpretation of any of the
terms of the Plan, any Award granted under the Plan or any rule or
procedure established by the Committee.

 

11.12  Compliance with Rule 16b-3.  It is intended that, unless the Committee
determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3.
The Board is authorized to amend the Plan and to make any such modifications to
Award Agreements to comply with Rule 16b-3, as it may be amended from time
to time, and to make any other such amendments or modifications as it deems
necessary or appropriate to better accomplish the purposes of the Plan in light
of any amendments made to Rule 16b-3.

 

11.13  Captions.  The
captions (i.e., all Section headings) used in the Plan are for
convenience only, do not constitute a part of the Plan, and shall not be deemed
to limit, characterize or affect in any way any provisions of the Plan, and all
provisions of the Plan shall be construed as if no captions have been used in
the Plan.

 

11.14  Severability. 
Whenever possible, each provision in the Plan and every Award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any Award at any time granted under the Plan shall be held to be prohibited by
or invalid under applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (b) all other provisions of the Plan
and every other Award at any time granted under the Plan shall remain in full
force and effect.

 

11.15  Amendment and Termination.

 

(a)  Amendment.  The Board shall have complete power and
authority to amend the Plan at any time; provided, however, that the Board
shall not, without the requisite affirmative approval of stockholders of the
Company, make any amendment which requires stockholder approval under the Code
or under any other applicable law or rule of any stock exchange which
lists Common Stock or Company Voting Securities. No termination or amendment of
the Plan may, without the consent of the Participant to whom any Award shall
theretofore have been granted under the Plan, adversely affect the right of
such individual under such Award.

 

(b)  Termination.  The Board shall have the right and the power
to terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall not
have any other effect and any Award outstanding at the time of the termination
of the Plan may be exercised after termination of the Plan at any time prior to
the expiration date of such Award to the same extent such Award would have been
exercisable had the Plan not terminated.

 

11.16  Foreign Qualified Awards. 
Awards under the Plan may be granted to such employees of the Company
and its Subsidiaries who are residing in foreign jurisdictions as the Committee
in its sole discretion may determine from time to time. The Committee may adopt
such supplements to the Plan as may be necessary or appropriate to comply with
the applicable laws of such foreign jurisdictions and to afford Participants
favorable treatment under such laws; provided, however, that no Award shall be
granted under any such supplement with terms or conditions inconsistent with
the provision set forth in the Plan.

 

16

 

11.17  Dividend Equivalents. 
For any Award granted under the Plan, the Committee shall have the
discretion, upon the Date of Grant or thereafter, to establish a Dividend
Equivalent Account with respect to the Award, and the applicable Award
Agreement or an amendment thereto shall confirm such establishment. If a
Dividend Equivalent Account is established, the following terms shall apply:

 

(a)  Terms and Conditions.  Dividend Equivalent Accounts shall be subject
to such terms and conditions as the Committee shall determine and as shall be
set forth in the applicable Award Agreement. Such terms and conditions may
include, without limitation, for the Participant’s Account to be credited as of
the record date of each cash dividend on the Common Stock with an amount equal
to the cash dividends which would be paid with respect to the number of shares
of Common Stock then covered by the related Award if such shares of Common
Stock had been owned of record by the Participant on such record date.

 

(b)  Unfunded Obligation.  Dividend Equivalent Accounts shall be
established and maintained only on the books and records of the Company and no
assets or funds of the Company shall be set aside, placed in trust, removed
from the claims of the Company’s general creditors, or otherwise made available
until such amounts are actually payable as provided hereunder.

 

11.18  Adjustment of Performance Goals and Targets.  Notwithstanding any provision of the Plan to
the contrary, the Committee shall have the authority to adjust any Performance
Goal, performance target or other performance-based criteria established with
respect to any Award under the Plan if circumstances occur (including, but not
limited to, unusual or nonrecurring events, changes in tax laws or accounting
principles or practices or changed business or economic conditions) that cause
any such Performance Goal, performance target or performance-based criteria to
be inappropriate in the judgment of the Committee; provided, that with respect
to any Award that is intended to qualify for the “performance-based
compensation” exception under Section 162(m) of the Code and the
regulations thereunder, any adjustment by the Committee shall be consistent
with the requirements of Section 162(m) and the regulations
thereunder.

 

11.19  Legality of Issuance. 
Notwithstanding any provision of this Plan or any applicable Award
Agreement to the contrary, the Committee shall have the sole discretion to
impose such conditions, restrictions and limitations (including suspending
exercises of Options or Stock Appreciation Rights and the tolling of any
applicable exercise period during such suspension) on the issuance of Common
Stock with respect to any Award unless and until the Committee determines that
such issuance complies with (i) any applicable registration requirements
under the Securities Act of 1933 or the Committee has determined that an
exemption there from is available, (ii) any applicable listing requirement
of any stock exchange on which the Common Stock is listed, and (iii) any
other applicable provision of state, federal or foreign law, including foreign
securities laws where applicable.

 

11.20  Restrictions on Transfer. 
Regardless of whether the offering and sale of Common Stock under the
Plan have been registered under the Securities Act of 1933 or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Common
Stock (including the placement of appropriate legends on stock certificates)
if, in the judgment of the Company and its counsel, such restrictions are
necessary or desirable to achieve compliance with the provisions of the
Securities Act of 1933, the securities laws of any state, the United States or
any other applicable foreign law.

 

11.21  Further Assurances. 
As a condition to receipt of any Award under the Plan, a Participant
shall agree, upon demand of the Company, to do all acts and execute, deliver
and perform all additional documents, instruments and agreements which may be
reasonably required by the Company, to implement the provisions and purposes of
the Plan.

 

17Exhibit 10.1

 

SETTLEMENT AND MUTUAL RELEASE
AGREEMENT

 

This Agreement (“Agreement”)
is made effective as of July 2, 2009 (the “Effective Date”) by and between
LONGVIEW SPECIAL FINANCE, INC., a
British Virgin Islands corporation (“Longview Finance”), and LONGVIEW FUND, L.P., a limited partnership formed under
California law (“Longview Fund,” and together with Longview Finance, the
“Longview Entities”), on the one hand, and BIO-KEY
INTERNATIONAL, INC., a Delaware corporation (“BIO-key”), on
the other hand.  Each of Longview
Finance, Longview Fund and BIO-key may hereinafter individually be referred to
as a “Party” and may hereinafter collectively be referred to as the “Parties.”

 

RECITALS

 

WHEREAS, on January 23,
2006, the Parties entered into a Securities Purchase Agreement (the “Series B
Agreement”) pursuant to which the Longview Entities obtained shares of
BIO-key’s Series B Convertible Preferred Stock, $0.0001 par value per
share (“Series B Preferred Stock”);

 

WHEREAS, on August 10,
2006, the Parties entered into a Securities Exchange Agreement (the “Series C
Agreement”) pursuant to which the Longview Entities obtained shares of
BIO-key’s Series C Convertible Preferred Stock, $0.0001 par value per
share (“Series C Preferred Stock”);

 

WHEREAS, BIO-key
has issued shares of its Series A Convertible Preferred Stock, $0.0001 par
value per share (“Series A Preferred Stock”), to certain of its
shareholders, and certain other entities and individuals have obtained shares
of Series B Preferred Stock and Series C Preferred Stock pursuant to
the Series B Agreement and the Series C Agreement, respectively (such
holders of preferred stock are collectively referred to herein as the “Other
Holders of Preferred Stock”);

 

WHEREAS, the
Longview Entities have alleged that BIO-key was required, on or about January 10,
2009, to redeem in cash all of the shares of Series B Preferred Stock and Series C
Preferred Stock held by the Longview Entities;

 

WHEREAS, BIO-key
asserts that each of the Other Holders of Preferred Stock have agreed to defer
their right, if any, to redemption of their shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock until December 31,
2009, or otherwise have not pursued their rights, if any, to redemption of
their shares on or about January 10, 2009;

 

WHEREAS, on February 2,
2009, the Longview Entities filed a lawsuit against BIO-key in the United
Stated District Court for the Southern District of New York (Civil Action No. 09-00904)
(the “Lawsuit”) seeking to compel BIO-key to redeem their shares of Series B
Preferred Stock and Series C Preferred Stock;

 

1

 

WHEREAS,  Longview Finance has alleged that BIO-key owes it
$780,780.00;

 

WHEREAS,  Longview Fund has alleged that BIO-key owes it
$2,105,783.00;

 

WHEREAS, BIO-key
has denied any liability in the Lawsuit, has raised particularized affirmative
defenses to the claims of the Longview Entities, and has requested that the
Court dismiss the Lawsuit in its entirety;

 

WHEREAS, the Parties,
without admission of any liability or fault and following good faith
negotiations, now desire to settle, compromise and resolve amicably their
disputes and to avoid the expense, inconvenience, distraction and risks of
litigation; and

 

NOW, THEREFORE, in
consideration of the aforesaid recitals and the covenants described herein, and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:

 

TERMS OF SETTLEMENT

 

1.             Recitals. 
The foregoing recitals are made an integral part of this Agreement and
are binding on the Parties.

 

2.             Settlement Payments. 
For and in consideration of the full and final settlement of any and all
claims that are, could have been or might in the future be asserted by either
or both of the Longview Entities against BIO-key arising out of or in
connection with, or in any way related to, the Lawsuit or the Series B
Preferred Stock and Series C Preferred Stock, BIO-key agrees to make the
following payments by wire transfer pursuant to wire transfer instructions
delivered to BIO-key by each of the Longview Entities:

 

A.            BIO-key shall pay to Longview Finance a total cash
settlement amount of $585,585.00. 
BIO-key shall make payment of such settlement amount as follows: (i) within
three (3) business days following the date that this Agreement is executed
by all of the Parties (the “Execution Date”), BIO-key shall pay to
Longview Finance the sum of $292,793.00 (the “Initial Longview Finance
Payment”); and (ii) within 120 days following the Execution Date,
BIO-key shall pay to Longview Finance the remaining sum of $292,792.00 (the “Final
Longview Finance Payment”).

 

B.            BIO-key shall pay to Longview Fund a total cash
settlement amount of $1,579,337.00. 
BIO-key shall make payment of such settlement amount as follows: (i) within
three (3) business days following the Execution Date, BIO-key shall pay to
Longview Fund the sum of $789,669.00 (the “Initial Longview Fund Payment”);
and (ii) within 120 days following the Execution Date, BIO-key shall pay
to Longview Fund the remaining sum of $789,668.00 (the “Final Longview Fund
Payment”).  Hereinafter, the term “Final
Payment Date” shall refer to the earlier date of (i) 120 days
following the Execution Date, or (ii) the day on which BIO-key has

 

2

 

completed its
payment of both the Final Longview Finance Payment and the Final Longview Fund
Payment.

 

C.            All dividends with respect to the shares of Series B
Preferred Stock (as set forth in the Certificate of Designation of the
Preferred Stock of BIO-key International, Inc. to be Designated Series B
Convertible Preferred Stock filed with the Delaware Secretary of State) and Series C
Preferred Stock (as set forth in the Certificate of Designation of the
Preferred Stock of BIO-key International, Inc. to be Designated Series C
Convertible Preferred Stock filed with the Delaware Secretary of State) held by
the Longview Entities shall cease to accrue immediately after the Initial
Longview Finance Payment and Initial Longview Fund Payment are made by BIO-key.

 

D.            No interest shall accrue on the Initial Longview
Finance Payment or the Initial Longview Fund Payment owed hereunder.  Interest shall accrue on the Final Longview
Finance Payment and the Final Longview Fund Payment at the rate of seventeen
percent (17%) per annum.  Such interest
shall be calculated on the basis of a 360 day year and shall be payable on the
Final Payment Date.  Each such interest
payment shall hereinafter be referred to as an “Interest Payment.”  Each Interest Payment shall be paid in shares
of BIO-key’s common stock, $0.0001 par value per share (“Common Stock”).  The number of such shares to be issued by
BIO-key to each Longview Entity on the Final Payment Date shall be determined
by dividing (x) the aggregate amount of the applicable Interest Payment
owed to such Longview Entity by (y) the average closing bid price for one
share of Common Stock, as reported by Bloomberg, L.P. (or such successor to its
function of reporting share prices) during the ten (10) consecutive
trading day period ending on the day prior to the Final Payment Date.  A certificate representing the Common Stock
issuable in payment of each such Interest Payment shall be delivered to the
applicable Longview Entity on the Final Payment Date.

 

E.            If BIO-key should fail to pay as and when due
either the Final Longview Finance Payment or the Final Longview Fund Payment,
then commencing on the date of such payment default interest shall begin to
accrue on such unpaid amount(s) at the rate of twenty percent (20%) per
annum.

 

F.             BIO-key shall be entitled to pre-pay, in whole or in
part, the remaining unpaid amounts owed hereunder plus accrued interest at any
time without penalty.

 

G.            Within two (2) business days after the Final
Payment Date, each Longview Entity shall surrender the original certificate or
certificates representing all of its shares of Series B Preferred Stock
and Series C Preferred Stock (or, if such holder alleges that any such
certificate has been lost, stolen or destroyed, a lost certificate affidavit
and agreement acceptable to BIO-key to indemnify BIO-key against any claim that
may be made against BIO-key on account of the alleged loss, theft or
destruction of such certificate) to BIO-key (via physical delivery or overnight
mail) at the address specified for BIO-key in Section 12 hereof.  Notwithstanding that the certificates
evidencing any such shares of Series B Preferred Stock or Series C
Preferred Stock shall not have been surrendered, all remaining rights with
respect to

 

3

 

such shares shall
forthwith after the Final Payment Date terminate.  For the avoidance of doubt, any shares of Series B
Preferred Stock or Series C Preferred Stock held by the Longview Entities
shall, immediately upon the payment of the Final Longview Finance Payment and
the Final Longview Fund Payment on the Final Payment Date, be automatically and
immediately cancelled and retired and shall not be reissued, sold or transferred.  Following their receipt of such payments,
neither of the Longview Entities may exercise any voting or other rights
granted to the holders of Series B Preferred Stock or Series C
Preferred Stock.

 

3.             Default.  If
BIO-key should fail to pay as and when due any payment required under this
Agreement (a “Default”), the Longview Entities or their counsel shall
give notice thereof to BIO-key and its counsel, and BIO-key shall have until
the fifteenth (15th) day following the date of its receipt of the Longview Entities’
notice (the “Cure Date”) to cure any such Default.  Provided, however, no notice is required for
and BIO-key shall have no cure period related to any BIO-key failure to timely
make the Initial Longview Finance Payment or the Initial Longview Fund Payment.

 

4.             Remedies Upon Event of Default. 
In the event there exists a Default, after the giving of notice as
required under this Agreement, that is not timely cured as set forth in Section 3
above (an “Uncured Default”), then all unpaid amounts, plus accrued and
unpaid interest due thereon, shall automatically become immediately due and
payable.  Moreover, in the event of an
Uncured Default, the defaulted settlement amount then owed shall be increased
to the original unpaid amount claimed by the Longview Entities solely with
respect to that defaulted settlement amount. 
So long as there is no Uncured Default existing, the Longview Entities
and their counsel shall forbear from demanding the payment of any amounts owed
from BIO-key or exercising any rights or remedies against BIO-key related to
this Agreement.

 

5.             Release of Claims.

 

A.            In consideration of the undertakings and covenants set
forth in this Agreement and of the other consideration set forth hereinabove,
which the Parties acknowledge to be sufficient and adequate consideration in
all respects, the Parties, as of the Effective Date, release and forever
discharge each other and their respective predecessors, successors, heirs,
assigns, employees, agents, officers, directors, attorneys, partners, subsidiaries,
affiliates and divisions (also jointly referred to herein as “Released
Parties”), from any and all claims, demands, causes of action, obligations,
damages, attorneys’ fees, costs and liabilities, whether or not now known,
suspected or claimed, which the Parties ever had and/or now have or may have
against the Released Parties, or any of them, including without limitation all
claims that were or could have been alleged in the Lawsuit.

 

B.            Notwithstanding any other provision of this Agreement,
the releases contained herein shall not limit, affect, or apply to any of the
Parties’ obligations under this Agreement.

 

4

 

C.            Each Party hereto acknowledges that it has been
informed by its respective counsel of the provisions of section 1542 of the
California Civil Code and the possible applicability of those provisions to
this Agreement.  With the advice of its
respective counsel, to the extent the releases in this Agreement are deemed to
be general releases in connection with the matters they encompass, each Party
hereto hereby expressly waives and relinquishes all rights and benefits which
they have or may in the future have under section 1542 of the California Civil
Code which reads as follows:

 

A GENERAL RELEASE
DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

 

All Parties hereto
acknowledge that they may hereafter discover facts which are different from or
in addition to those which they now know or believe to be true with respect to
the Agreement or to the matters herein released, and they agree that the
Agreement shall be and remain in full force and effect in all respects
notwithstanding any such different or additional facts.  The foregoing references to California law
shall not in any way derogate from the provisions of Paragraph 7 below, it
being understood and agreed by all Parties that, as provided for in Paragraph
7, New York law shall govern this Agreement.

 

	
  Longview Special
  Finance, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Longview Fund,
  L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BIO-key
  International, Inc.

  	
   

  	
   

  

 

6.             Dismissal of the Lawsuit. 
Contemporaneous with the payment of the Initial Longview Finance Payment
and the Initial Longview Fund Payment., counsel of record for the Parties shall
sign and file a joint Stipulation of Dismissal pursuant to which the Parties
shall dismiss with prejudice all claims and requests for injunctive relief
asserted in the Lawsuit.

 

7.             Governing  Law.  This Agreement
and the rights and obligations of the Parties herein shall be governed by, and
construed in accordance with, the internal laws of the state of New York
(without giving effect to its principles of conflicts of law).

 

8.             Choice of Forum and Venue.  The Parties
hereby consent to the jurisdiction of any state court located within the state
of New York and irrevocably agree that all actions or proceedings related to
this Agreement shall be litigated in such courts and each party waives any defense
of forum non conveniens.

 

9.             Successor and Assigns. 
This Agreement and the covenants and conditions

 

5

 

contained herein
shall apply to, be binding upon, and inure to the benefit of the respective
representatives, assigns, successors, employees and insurers of the Parties
hereto.

 

10.          No Prior Assignments. 
The Parties represent that there has been no assignment, sale, or
transfer, by operation of law or otherwise of any claim, right or interest
released and that each of the Parties has the authority and right to settle,
compromise and release any claim, right or interest released.

 

11.          Representations and Warranties.  
Each Party represents and warrants to the other Parties as follows:

 

A.            This Agreement is the product of negotiation and
preparation by and between the Parties and their respective attorneys.  Therefore, each Party acknowledges and agrees
that this Agreement shall not be deemed prepared or drafted by one Party or
another and should be construed accordingly.

 

B.            The Parties have not made any statement or
representation regarding any facts relied upon in entering into this Agreement
and no Party has relied upon any statements, representations or comments made
by any other Party in executing this Agreement, or in making this settlement,
except as expressly stated in this Agreement. 
Each Party further represents and warrants that the consideration
recited in this Agreement is the sole and only consideration for this
Agreement, and that no representations, promises or inducements have been made
by any Party or its officers, employees, agents or attorneys thereof other than
those appearing in this Agreement.

 

C.                                    Each Party has read this Agreement and
understands its contents.

 

D.            Each Party has full corporate or limited partnership
power and authority, as the case may be, to execute and deliver this Agreement.

 

E.            Each Party acknowledges and agrees that this Agreement
is entered into as part of a compromise and settlement of disputed claims.  Each Party further acknowledges and agrees
that acceptance of this Agreement is not an admission of any facts, matter or
things.  Neither this Agreement nor any
of its terms shall be offered or received as evidence in any proceeding in any
forum as an admission of any liability or wrongdoing on the part of any person
released by this Agreement, except a proceeding related to this Agreement.

 

F.             Each of the Longview Entities acknowledges and agrees
that (i) some or all of the Other Holders of Preferred Stock may receive
different rates of recovery (either higher or lower) with respect to the
redemption of their shares of Series A Preferred Stock, Series B
Preferred Stock and/or Series C Preferred Stock (including, potentially,
payment of any such redemption amount in full) than the rate of recovery
contemplated by this Agreement and (ii) any number of factors may affect
such rates of recovery obtained by the Other Holders of Preferred Stock,
including but not limited to BIO-key’s cash flow from operations, BIO-key’s
ability to

 

6

 

obtain additional
equity or debt financing, BIO-key’s sales of assets outside of the ordinary
course of its business, whether the particular Other Holders of Preferred Stock
have complied with all of their contractual obligations, and other similar
factors.

 

12.          Notices.  Unless otherwise
expressly provided herein, any notices to be furnished under this Agreement
will be sufficient if in writing and (i) hand delivered, (ii) sent by
certified or registered mail, (iii) by nationally recognized overnight
courier, (iv) by facsimile or (v) by e-mail, if notice is also
contemporaneously sent by one of the other methods of delivery.  Notices sent pursuant to the provisions of
this section shall be deemed delivered on the earlier of actual receipt or two (2) business
days after transmittal.  All notices
shall be addressed as follows:

 

If to Longview
Special Finance, Inc.:

 

Arie
Rabinowitz 

L. H. Financial Services Corp.

150 Central Park South

New York, NY 10019

 

with a copy (which shall not constitute notice) to:

 

Edward M. Grushko, Esq.

Grushko & Mittman, P.C.

551 Fifth Avenue, Suite 1601

New York, NY 10176

 

If to Longview
Fund, L.P.:

 

Peter Benz

Viking Asset Management,
LLC 

505 Sansome Street, Ste. 1275

San Francisco, CA 94111

 

with a copy (which shall not constitute notice) to:

 

Edward M. Grushko, Esq.

Grushko & Mittman, P.C.

551 Fifth Avenue, Suite 1601

New
York, NY 10176

 

If to BIO-key:

 

BIO-key International, Inc.

3349 Highway 138

Building D, Suite B

 

7

 

Wall, NJ 07719

Attn:  Michael
W. DePasquale

Telephone:  732-359-1111

E-Mail:  mike.depasquale@bio-key.com

 

with a copy (which shall not constitute notice) to:

 

Choate,
Hall & Stewart LLP

Two International Place

Boston, Massachusetts 02110

Attention:  Charles J. Johnson, Esq.

Facsimile: 617-248-4000

E-mail: 
cjohnson@choate.com

 

The Parties may at
any time change the address to which notices are to be given to it by notice to
the other in accordance with the terms hereof.

 

13.          Counterparts.  This
Agreement may be executed in one or more counterparts, by either facsimile or
scanned signatures, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.

 

14.          Independent Representation. 
Each Party acknowledges that it has been represented by independent
counsel of its own choosing throughout the negotiations which preceded the
execution of this Agreement, and that this Agreement was executed with the
consent and advice of such independent legal counsel.

 

15.          Entire Agreement. 
This Agreement constitutes the entire agreement, and supersedes all
prior written agreements, arrangements, communications and understandings and
all prior and contemporaneous oral agreements, arrangements, communications and
understandings among the Parties with respect to the subject matter of this
Agreement.

 

16.          Amendment.  This
Agreement may not be amended, modified or supplemented in any manner, whether
by course of conduct or otherwise, except by an instrument in writing signed on
behalf of each Party and otherwise as expressly set forth herein.

 

17.          Severability.  Whenever
possible, each provision or portion of any provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or portion of any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or portion of any provision in such
jurisdiction, and this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.

 

8

 

18.          Waiver.  No failure or
delay of either Party in exercising any right or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such right
or power, or any course of conduct, preclude any other or further exercise thereof
or the exercise of any other right or power. 
The rights and remedies of the Parties hereunder are cumulative and are
not exclusive of any rights or remedies which they would otherwise have
hereunder.  Any agreement on the part of
either Party to any such waiver shall be valid only if set forth in a written
instrument executed and delivered by a duly authorized officer on behalf of
such Party.

 

19.          Further Assurances. 
From time to time after the execution of this Agreement, and for no
further consideration, each of the Parties shall execute, acknowledge and
deliver such assignments, transfers, consents and other documents and
instruments and take such other actions as may be necessary or desirable to
consummate and make effective the transactions contemplated by this Agreement.

 

[signature page follows]

 

9

 

WHEREFORE, the Parties hereto have executed this
Agreement as of the date first set forth above.

 

	
   

  	
  BIO-KEY
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LONGVIEW
  SPECIAL FINANCE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LONGVIEW
  FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]