Document:

YOUNG INNOVATIONS, INC.

 

February 23, 2007

Mr. Arthur L. Herbst, Jr.

500 North Michigan Avenue

Suite 1000

Chicago, Illinois 60611

Dear Mr. Herbst:

In connection with you entering into the Employment Agreement with Young Innovations, Inc. (the “Company”), dated January 31, 2007 (the “Employment Agreement”) and your provision of services over the initial Term of the Employment Agreement, the Compensation Committee of the Board of Directors of the has determined to pay a retention bonus to you.  The terms of the retention bonus are set forth below:

In consideration for the provision of services by Mr. Herbst over the initial Term of the Employment Agreement, the Company shall pay an aggregate retention bonus equal to $360,000 (the “Retention Bonus”) which shall be earned for services performed over the initial Term. The Retention Bonus shall be paid as follows:  $120,000 on December 15, 2007, $120,000 on December 15, 2008 and $120,000 on December 15, 2009: provided Mr. Herbst is employed by the Company on the particular payment date.  Capitalized terms not defined herein shall have the meanings ascribed thereto in the Employment Agreement.

 

Mr. Arthur L. Herbst, Jr.

February 23, 2007

Page 2

 

 

If the foregoing is acceptable please execute this letter agreement as provided below.

Very truly yours,

YOUNG INNOVATIONS, INC.

 

	
            By:
 	
            /s/ Alfred E. Brennan
 
	
            Its:
 	
            CEO                            
 	
             

Accepted and agreed

this 23rd day of February, 2007

 

	
            By:
 	
            /s/ Arthur L. Herbst, Jr.
 
	
             
	
            Arthur L. Herbst, Jr.exv10w3

 

EXHIBIT 10.3

THE 2000 EQUITY PARTICIPATION PLAN

OF

GEN-PROBE INCORPORATED

(Adopted by Board of Directors on August 17, 2000)

(Adopted by Stockholders on August 17, 2000)

(Amendment and Restatement Adopted by Board of Directors on November 16, 2006)

     Gen-Probe Incorporated, a Delaware corporation, has adopted The 2000 Equity Participation
Plan of Gen-Probe Incorporated (the “Plan”), effective August 17, 2000, for the benefit of its
eligible Employees, Consultants and Directors.

          The purposes of the Plan are as follows:

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

          (2) To enable the Company to obtain and retain the services of Directors, Employees and
Consultants considered essential to the long range success of the Company by offering them an
opportunity to own stock in the Company and/or rights which will reflect the growth, development
and financial success of the Company.

ARTICLE I.

DEFINITIONS

          1.1. General. Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.

          1.2. Administrator. “Administrator” shall mean the entity that conducts the general
administration of the Plan as provided herein. With reference to the administration of the Plan
with respect to Options granted to Non-Employee Directors, the term “Administrator” shall refer to
the Board. With reference to the administration of the Plan with respect to any other Options, the
term “Administrator” shall refer to the Committee, except to the extent the Board has assumed the
authority for administration of the Plan as provided in Section 7.2.

          1.3. Board. “Board” shall mean the Board of Directors of the Company.

          1.4. Change in Control. “Change in Control” shall mean a change in ownership or
control of the Company effected through any of the following transactions:

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          (a) any person or related group of persons (other than the Company or a person that, prior to
such transaction, directly or indirectly controls, is controlled by, or is under common control
with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company’s outstanding securities pursuant to a tender or exchange
offer for securities of the Company; or

          (b) there is a change in the composition of the Board over a period of thirty-six (36)
consecutive months (or less) such that a majority of the Board members (rounded up to the nearest
whole number) ceases, by reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (i) have been Board members continuously since the beginning
of such period or (ii) have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board; or

          (c) the stockholders of the Company approve a merger or consolidation of the Company with any
other corporation (or other entity), other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of the surviving
entity or another entity) more than 66-2/3% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person acquires more than 25%
of the combined voting power of the Company’s then outstanding voting securities shall not
constitute a Change in Control; or

          (d) the stockholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets.

          1.5. Code. “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.

          1.6. Committee. “Committee” shall mean the Board, or Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided in Section 7.1.

          1.7. Common Stock. “Common Stock” shall mean the Common Stock of the Company, par
value $0.0001 per share.

          1.8. Company. “Company” shall mean Gen-Probe Incorporated, a Delaware corporation.

          1.9. Consultant. “Consultant” shall mean any consultant or adviser (other than an
Employee) if:

2

 

          (a) the consultant or adviser renders bona fide services to the Company;

          (b) the services rendered by the consultant or adviser are not in connection with the offer or
sale of securities in a capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities; and

          (c) the consultant or adviser is a natural person who has contracted directly with the Company
to render such services.

          1.10. Director. “Director” shall mean a member of the Board. “Director” shall
include both a member of the Board who is an Employee and a Non-Employee Director.

          1.11. DRO. “DRO” shall mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.

          1.12. Employee. “Employee” shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a
Subsidiary.

          1.13. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

          1.14 Equity Restructuring. “Equity Restructuring” shall mean a non-reciprocal
transaction between the Company and its stockholders, such as a stock dividend, stock split,
spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that
affects the shares of Common Stock (or other securities of the Company) or the share price of
Common Stock (or other securities) and causes a change in the per share value of the Common Stock
underlying outstanding Awards.

          1.15 Fair Market Value. “Fair Market Value” of a share of Common Stock as of a
given date shall be (a) the closing price of a share of Common Stock on the principal exchange on
which shares of Common Stock are then trading, if any (or as reported on any composite index which
includes such principal exchange), for such date, or if shares were not traded on such date, then
on the next preceding date on which a trade occurred, or (b) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on such date as reported by NASDAQ or such
successor quotation system, or if shares were not traded on such date, then on the next preceding
date on which a trade occurred; or (c) if Common Stock is not publicly traded on an exchange and
not quoted on NASDAQ or a successor quotation system, the fair market value of a share of Common
Stock as established by the Administrator acting in good faith, which value shall be final and
binding on any Holder or other person entitled under an Option.

          1.16 Holder. “Holder” shall mean a person who has been granted an Option.

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          1.17 Incentive Stock Option. “Incentive Stock Option” shall mean an Option which
conforms to the applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Administrator.

          1.18 Non-Employee Director. “Non-Employee Director” shall mean a member of the
Board who is not an Employee.

          1.19 Non-Qualified Stock Option. “Non-Qualified Stock Option” shall mean an
Option which is not designated as an Incentive Stock Option by the Administrator.

          1.20. Option. “Option” shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by the Administrator, be either a
Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that
Options granted to Non-Employee Directors and Consultants shall be Non-Qualified Stock Options.

          1.21 Option Agreement. “Option Agreement” shall mean a written agreement
executed by an authorized officer of the Company and the Holder, which shall contain such terms and
conditions with respect to an Option, as the Administrator shall determine, consistent with the
Plan.

          1.22 Option Limit. “Option Limit” shall mean Three Hundred One Thousand Seven
Hundred Forty Six
(301,746)1 shares of Common Stock, as adjusted pursuant to Section 8.3
of the Plan.

          1.23 Performance Criteria. “Performance Criteria” shall mean the following
business criteria with respect to the Company, any Subsidiary or any division or operating unit:
(a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share,
(f) return on equity, (g) return on invested capital or assets, (h) cost reductions or savings, (i)
funds from operations, (j) appreciation in the Fair Market Value of Common Stock and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or amortization.

          1.24 Plan. “Plan” shall mean The 2000 Equity Participation Plan of Gen-Probe
Incorporated.

          1.25 Rule 16b-3. “Rule 16b-3” shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.

          1.26 Section 162(m) Employee. “Section 162(m) Employee” shall mean any Employee
designated by the Administrator as a Employee whose compensation for the fiscal year in which the
Employee is so designated or a future fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.

 

			
	1	 	Adjusted from 1,000,000 to 301,746 to
reflect: (i) the .8241-for-one option adjustment to give effect to the merger
of Gen-Probe Holding Company into Gen-Probe Incorporated in July 2002; (ii) the
..366153-for-one reverse stock split in August 2002; and (iii) the two-for-one
stock split implemented as a 100% stock dividend, effective September 2003.

4

 

          1.27 Securities Act. “Securities Act” shall mean the Securities Act of 1933, as
amended from time to time.

          1.28 Subsidiary. “Subsidiary” shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation
in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.

          1.29 Substitute Option. “Substitute Option” shall mean an Option granted under
the Plan upon the assumption of, or in substitution for, outstanding equity awards previously
granted by another company or entity, in connection with a corporate or similar transaction, such
as a merger, combination, consolidation or acquisition of property or stock; provided,
however, that in no event shall the term “Substitute Option” be construed to refer to an
option granted in connection with the cancellation and repricing of an Option.

          1.30 Termination of Consultancy. “Termination of Consultancy” shall mean the
time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation, by resignation,
discharge, death, disability or retirement; but excluding terminations where there is a
simultaneous engagement by or commencement of employment with the Company or any Subsidiary or a
parent corporation thereof (within the meaning of Section 422 of the Code). The Administrator, in
its absolute discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for cause, and all questions of whether a
particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other
provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to
terminate a Consultant’s service at any time for any reason whatsoever, with or without cause,
except to the extent expressly provided otherwise in writing.

          1.31 Termination of Directorship. “Termination of Directorship” shall mean the
time when a Holder who is a Non-Employee Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, removal, failure to be
re-elected, death, disability or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to Termination of Directorship with
respect to Non-Employee Directors.

          1.32 Termination of Employment. “Termination of Employment” shall mean the time
when the employee-employer relationship between a Holder and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but excluding
(a) terminations where there is a simultaneous reemployment or continuing employment of a
Holder by the Company or any Subsidiary or a parent corporation thereof (within the meaning of
Section 422 of the Code), (b) at the discretion of the Administrator, terminations which result in
a temporary severance of the employee-employer relationship, and (c) at the discretion of the
Administrator, terminations which are followed by the simultaneous establishment of a consulting
relationship by the Company or a Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions

5

 

relating to Termination of Employment, including, but not by way of limitation, the question of
whether a Termination of Employment resulted from a discharge for cause, and all questions of
whether a particular leave of absence constitutes a Termination of Employment; provided,
however, that, with respect to Incentive Stock Options, unless otherwise determined by the
Administrator in its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence, change in status or
other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.

ARTICLE II.

SHARES SUBJECT TO PLAN

          2.1. Shares Subject to Plan.

          (a) The shares of stock subject to Options shall be Common Stock, subject to Section 8.3 of
the Plan. The aggregate number of such shares which may be issued upon exercise of such Options
shall not exceed Four Million Eight Hundred Twenty Seven Thousand Nine Hundred Forty Six
(4,827,946)2. The shares of Common Stock issuable upon exercise of such Options may be
either previously authorized but unissued shares or treasury shares.

          (b) The maximum number of shares of Common Stock which may be subject to Options granted under
the Plan to any individual in any calendar year shall not exceed the Option Limit.  To
the extent required by Section 162(m) of the Code, shares subject to Options which are canceled
continue to be counted against the Option Limit.

          (c) Notwithstanding the foregoing, if the offer or sale of shares of Common Stock under the
Plan is subject to Section 260.140.45 of Title 10 of the California Code of Regulations (or other
applicable law limiting the offers or sales of shares of Common Stock under the Plan), the
aggregate number of shares of Common Stock issuable upon the exercise of all outstanding Options
(together with options and similar awards outstanding under any other stock option plan of the
Company) and the total number of shares provided for under any stock bonus or similar plan of the
Company shall not exceed thirty percent (30%) (or such other higher percentage limitation as may be
approved by the stockholders of the Company pursuant to Section 260.140.45) of the then outstanding shares of Common Stock, as calculated in
accordance with the conditions and exclusions of Section 260.140.45 (or such other limitation under
applicable law).

          2.2. Add-Back of Options. If any Option expires or is canceled without having been
fully exercised, the number of shares of Common Stock subject to such Option but as to

 

			
	2	 	Adjusted from 8,000,000 to 4,827,946 to
reflect: (i) the .8241-for-one option adjustment to give effect to the merger
of Gen-Probe Holding Company into Gen-Probe Incorporated in July 2002; (ii) the .366153-for-one reverse stock split in August 2002; and (iii) the two-for-one
stock split implemented as a 100% stock dividend, effective
September 2003.

6

 

which such
Option was not exercised prior to its expiration or cancellation may again be optioned hereunder,
subject to the limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 8.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered by the Holder or withheld
by the Company upon the exercise of any Option under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to
the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of
Common Stock may again be optioned if such action would cause an Incentive Stock Option to fail to
qualify as an “incentive stock option” under Section 422 of the Code.

ARTICLE III.

GRANTING OF OPTIONS

          3.1. Option Agreement. Each Option shall be evidenced by an Option Agreement. Option
Agreements evidencing Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 162(m) of the Code. Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

          3.2. Provisions Applicable to Section 162(m) Employees.

          (a) The Committee, in its discretion, may determine whether an Option is to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code.

          (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Option
to a Section 162(m) Employee that vests or becomes exercisable upon the attainment of performance
goals which are related to one or more of the Performance Criteria.

          (c) Furthermore, notwithstanding any other provision of the Plan, any Option which is granted
to a Section 162(m) Employee and is intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan and
such Options shall be deemed amended to the extent necessary to conform to such requirements.

          3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Option granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule
16b-3 of the Exchange Act) that are requirements for the application of such exemptive

7

 

rule. To
the extent permitted by applicable law, the Plan and the Options granted hereunder shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.

          3.4. At-Will Employment. Nothing in the Plan or in any Option Agreement hereunder
shall confer upon any Holder any right to continue in the employ of, or as a Consultant for, the
Company or any Subsidiary, or as a Director of the Company, or shall interfere with or restrict in
any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to
discharge any Holder at any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in a written employment or consulting agreement between the
Holder and the Company and any Subsidiary.

ARTICLE IV.

GRANTING OF OPTIONS TO EMPLOYEES,

CONSULTANTS AND NON-EMPLOYEE DIRECTORS

          4.1. Eligibility. Any Employee or Consultant selected by the Committee pursuant to
Section 4.4(a)(i) shall be eligible to be granted an Option. Any Non-Employee Director selected by
the Board pursuant to Section 4.5(a)(i) shall be eligible to be granted an Option. All grants
shall be made at the discretion of the Committee or the Board, as the case may be, and no person
shall be entitled to a grant of an Option as a matter of right.

          4.2. Disqualification for Stock Ownership. No person may be granted an Incentive
Stock Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns
stock possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions
of Section 422 of the Code.

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

          4.4. Granting of Options to Employees and Consultants.

          (a) The Committee shall from time to time, in its absolute discretion, and subject to
applicable limitations of the Plan:

          (i) Select from among the Employees or Consultants (including Employees or Consultants
who have previously been granted Options under the Plan) such of them as in its opinion
should be granted Options;

          (ii) Subject to the Option Limit, determine the number of shares of Common Stock to be
subject to such Options granted to the selected Employees or Consultants;

          (iii) Subject to Section 4.3, determine whether such Options are to be Incentive Stock
Options or Non-Qualified Stock Options and whether such Options are to

8

 

qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code; and

          (iv) Determine the terms and conditions of such Options, consistent with the Plan;
provided, however, that the terms and conditions of Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall include, but not be limited to, such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code.

          (b) Upon the selection of an Employee or Consultant to be granted an Option, the Committee
shall instruct the Secretary of the Company to issue the Option and may impose such conditions on
the grant of the Option as it deems appropriate, and the Committee shall authorize one or more of
the officers of the Company to prepare, execute and deliver the Option Agreement with respect to
such Option.

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

          4.5. Granting of Options to Non-Employee Directors.

          (a) Subject to Section 4.5(b), the Board shall from time to time, in its absolute discretion,
and subject to applicable limitations of the Plan:

          (i) Determine whether to grant Options to Non-Employee Directors, and, in the event
Options are so granted, select from among the Non-Employee Directors (including Non-Employee
Directors who have previously been granted Options under the Plan) such of them as in its
opinion should be granted Options;

          (ii) Subject to the Option Limit, determine the number of shares of Common Stock to be
subject to such Options granted to the selected Non-Employee Directors; and

          (iii) Determine the terms and conditions of such Options, consistent with the Plan.

          (b) Upon the selection of a Non-Employee Director to be granted an Option, and the grant of an
Option to a Non-Employee Director, the Board shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it deems appropriate, and
the Board shall authorize one or more officers of the Company to prepare, execute and deliver the
Option Agreement with respect to such Option.

          4.6. Options in Lieu of Cash Compensation. Options may be granted under the Plan to
Employees and Consultants in lieu of cash bonuses which would otherwise be payable to such
Employees and Consultants and to Non-Employee Directors in lieu of directors’ fees which would
otherwise be payable to such Non-Employee Directors, pursuant to such policies which may be adopted
by the Administrator from time to time.

9

 

ARTICLE V.

TERMS OF OPTIONS

          5.1. Option Price. The price per share of the shares of Common Stock subject to each
Option granted to Employees and Consultants shall be set by the Committee; provided,
however, that such price shall be no less than 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted, and:

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

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

          (c) To the extent required by Section 25102(o) of the California Corporations Code and
the regulations thereunder, in the case of Options granted to an individual then owning more
than 10% of the total combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation thereof (within the meaning of Section 260.140.41 of Title
10 of the California Code of Regulations), such price shall not be less than 110% of the
Fair Market Value of a share of Common Stock on the date the Option is granted.

          5.2. Option Term. The term of an Option granted to an Employee or Consultant shall be
set by the Committee in its absolute discretion; provided, however, that the term
shall not be more than ten (10) years from the date the Option is granted; and, provided,
further, that, in the case of Incentive Stock Options, the term shall not be more than five
(5) years from the date the Incentive Stock Option is granted if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, or the requirements of Section 25102(o) of the California Corporations
Code and the regulations thereunder, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of Consultancy of the
Holder, or amend any other term or condition of such Option relating to such a termination.

          5.3. Option Vesting

          (a) The period during which the right to exercise, in whole or in part, an Option granted to
an Employee or a Consultant vests in the Holder shall be set by the Committee

10

 

and the Committee may
determine that an Option may not be exercised in whole or in part for a specified period after it
is granted; provided, however, that, to the extent required by Section 25102(o) of
the California Corporations Code and the regulations thereunder, except with regard to Options
granted to officers of the Company or any Subsidiary, Directors or Consultants, in no event shall
an Option granted hereunder become vested and exercisable at a rate of less than twenty percent
(20%) per year over five (5) years from the date the Option is granted, subject to the continued
employment of the Holder with the Company or the Subsidiaries or other reasonable conditions
established by the Committee. At any time after grant of an Option, the Committee may, in its
absolute discretion and subject to whatever terms and conditions it selects, accelerate the period
during which an Option granted to an Employee or Consultant vests and becomes exercisable.

          (b) No portion of an Option granted to an Employee or Consultant which is unexercisable at
Termination of Employment or Termination of Consultancy, as applicable, shall thereafter become
exercisable, except as may be otherwise provided by the Committee either in the Option Agreement or
by action of the Committee following the grant of the Option.

          (c) To the extent that the aggregate Fair Market Value of stock with respect to which
“incentive stock options” (within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year
(under the Plan and all other incentive stock option plans of the Company and any parent or
subsidiary corporation (within the meaning of Section 422 of the Code) of the Company), exceeds
$100,000, such Options or other options shall be treated as non-qualified stock options to the
extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be
applied by taking Options or other options into account in the order in which they were granted.
For purposes of this Section 5.3(c), the Fair Market Value of stock shall be determined as of the
time the Option or other options with respect to such stock is granted.

          5.4. Terms of Options Granted to Non-Employee Directors. The price per share of the
shares subject to each Option granted to a Non-Employee Director shall equal 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted; provided,
however, that, to the extent required by Section 25102(o) of the California Corporations
Code and the regulations thereunder, in the case of Options granted to a Non-Employee Director then
owning more than 10% of the total combined voting power of all classes of stock of the Company or
any subsidiary or parent corporation thereof (within the meaning of Section 260.140.41 of Title 10
of the California Code of Regulations), such price shall be not less than 110% of the Fair Market
Value of a share of Common Stock on the date the Option is granted. The period during which the
right to exercise, in whole or in part, an Option granted to a Non-Employee Director vests in the
Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified
period after it is granted. The term of each Option granted to a Non-Employee Director shall be
determined by the Administrator and shall be no greater than ten (10) years from the date the
Option is granted. No portion of an Option which is unexercisable at Termination of Directorship
shall thereafter become exercisable. Options granted to Non-Employee Directors

11

 

under Section 4.5
shall be subject to such other terms and conditions as are determined by the Administrator.

          5.5. Substitute Awards. Notwithstanding the foregoing provisions of this Article V to
the contrary, in the case of an Option that is a Substitute Award, the price per share of the
shares subject to such Option may be less than the Fair Market Value per share on the date of
grant, provided, that the excess of:

          (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted)
of the shares subject to the Substitute Award; over

          (b) the aggregate exercise price thereof; does not exceed the excess of;

          (c) the aggregate fair market value (as of the time immediately preceding the
transaction giving rise to the Substitute Award, such fair market value to be determined by
the Administrator) of the shares of the predecessor entity that were subject to the grant
assumed or substituted for by the Company; over

          (d) the aggregate exercise price of such shares.

          5.6. Restrictions on Common Stock. The Administrator may, in its sole discretion,
provide under the terms of an Option that shares of Common Stock purchased upon exercise of such
Option shall be subject to repurchase from the Holder by the Company, or shall be subject to such
restrictions as the Administrator shall provide, which restrictions may include, without
limitation, restrictions concerning voting rights and transferability and restrictions based on
duration of employment with the Company and the Subsidiaries, Company performance and individual
performance; provided, however, that, by action taken after the Common Stock is
purchased upon exercise of the Option, the Administrator may, on such terms and conditions as it
may determine to be appropriate, terminate the Company’s repurchase right or remove any or all of
the restrictions imposed by the terms of the Option Agreement. The Company’s right to repurchase
the Common Stock from the Holder then subject to the right shall provide that immediately upon a
Termination of Employment, a Termination of Consultancy, or a Termination of Directorship, as
applicable, and for such period as the Administrator shall determine, the Company shall have the
right to purchase the Common Stock at a price per share equal to the price paid by the Holder for
such Common Stock, or such other price as is determined by the Administrator; provided,
however, that, in the event of a Change in Control, such right of repurchase shall
terminate immediately prior to the effective date of such Change in Control. Shares of Common
Stock purchased upon the exercise of an Option may not be sold, transferred or encumbered until any
repurchase right and any and all restrictions are terminated or expire. The Secretary of the
Company or such other escrow holder as the Administrator may appoint shall retain physical custody of each certificate representing such shares of Common
Stock until the repurchase right and any and all of the restrictions imposed under the Option
Agreement with respect to the shares evidenced by such certificate terminate, expire or shall have
been removed. In order to enforce the restrictions imposed upon shares of Common Stock hereunder,
the Administrator shall cause a legend or legends to be placed on certificates representing all
shares of Common Stock that are still subject to any repurchase right or restrictions under Option
Agreements, which legend or legends shall make appropriate reference

12

 

to the conditions imposed
thereby. If a Holder makes an election under Section 83(b) of the Code, or any successor section
thereto, to be taxed with respect to the Common Stock as of the date of transfer of the Common
Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue Service.

ARTICLE VI.

EXERCISE OF OPTIONS

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

          6.2. Manner of Exercise. All or a portion of an exercisable Option shall be deemed
exercised upon delivery of all of the following to the Secretary of the Company or his office:

          (a) A written notice complying with the applicable rules established by the
Administrator stating that the Option, or a portion thereof, is exercised. The notice shall
be signed by the Holder or other person then entitled to exercise the Option or such portion
of the Option;

          (b) Such representations and documents as the Administrator, in its absolute
discretion, deems necessary or advisable to effect compliance with all applicable provisions
of the Securities Act and any other federal or state securities laws or regulations. The
Administrator may, in its absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without limitation, placing legends
on share certificates and issuing stop-transfer notices to agents and registrars;

          (c) In the event that the Option shall be exercised pursuant to Section 8.1 by any
person or persons other than the Holder, appropriate proof of the right of such person or
persons to exercise the Option; and

          (d) Full cash payment to the Secretary of the Company for the shares with respect to
which the Option, or portion thereof, is exercised. However, the Administrator, may in its sole and absolute discretion (i) allow a delay in payment up
to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock which have been
owned by the Holder for at least six months, duly endorsed for transfer to the Company with
a Fair Market Value on the date of delivery equal to the aggregate exercise price of the
Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair
Market Value on the date of Option exercise equal to the

13

 

aggregate exercise price of the
Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the
delivery of a notice that the Holder has placed a market sell order with a broker with
respect to shares of Common Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such sale; or (v) allow payment
through any combination of the consideration provided in the foregoing subparagraphs (ii),
(iii) and (iv).

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

          (a) The admission of such shares to listing on all stock exchanges on which such class
of stock is then listed;

          (b) The completion of any registration or other qualification of such shares under any
state or federal law, or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body which the Administrator shall, in its
absolute discretion, deem necessary or advisable;

          (c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion, determine to
be necessary or advisable;

          (d) The lapse of such reasonable period of time following the exercise of the Option as
the Administrator may establish from time to time for reasons of administrative convenience;
and

          (e) The receipt by the Company of full payment for such shares, including payment of
any applicable withholding tax, which in the discretion of the Administrator may be in the
form of consideration used by the Holder to pay for such shares under Section 6.2(d).

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

          6.5. Ownership and Transfer Restrictions. The Administrator, in its absolute
discretion, may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be
set forth in the respective Option Agreement and may be referred to on the certificates evidencing
such shares. The Holder shall give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option within (a) two years from the date
of granting (including the date the Option is modified, extended or renewed for

14

 

purposes of Section
424(h) of the Code) such Option to such Holder or (b) one year after the transfer of such shares to
such Holder.

          6.6. Exercise of Options following Termination. To the extent required by Section
25102(o) of the California Corporations Code and Section 260.140.41 of Title 10 of the California
Code of Regulations (or other applicable law), an Option may be exercised in the event of
Termination of Consultancy, Termination of Directorship or Termination of Employment (other than
for cause as defined by applicable law, the Option Agreement or a contract of employment with the
Holder), to the extent that such Option is exercisable on the date of such Termination:

          (a) for a period of at least six months (or such longer period as is required by
applicable law) from the date of such Termination if such Termination was caused by death or
disability, and

          (b) for a period of at least 30 days (or such longer period as is required by
applicable law) from the date of such Termination if such Termination was caused by reason
other than the death or disability of the Holder.

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

ARTICLE VII.

ADMINISTRATION

          7.1. Committee. Prior to the Company’s initial registration of Common Stock under
Section 12 of the Exchange Act, the Committee shall consist of the entire Board. Following such
registration, the Committee shall be the Compensation Committee of the Board (or another committee
or a subcommittee of the Board assuming the functions of the Committee under the Plan), and the
Compensation Committee (or other committee or subcommittee) shall consist solely of two or more
Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom
is both a “non-employee director” as defined by Rule 16b-3 and an “outside director” for purposes
of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board.

          7.2. Duties and Powers of Committee. It shall be the duty of the Committee to conduct
the general administration of the Plan in accordance with its provisions. The Committee shall have
the power to interpret the Plan and the Option Agreements, and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Option Agreement provided that the
rights or obligations of the Holder of the Option that is the subject of any such Option Agreement
are not affected adversely. Any such interpretations and rules with respect to

15

 

Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time assume any and all rights and duties of
the Committee under the Plan, except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in
the sole discretion of the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of the Plan with
respect to Options granted to Non-Employee Directors.

     7.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a majority
of its members in attendance at a meeting at which a quorum is present or by a memorandum or other
written instrument signed by all members of the Committee.

     7.4. Compensation; Professional Assistance; Good Faith Actions. Members of the
Committee shall receive such compensation, if any, for their services as members as may be
determined by the Board. All expenses and liabilities which members of the Committee incur in
connection with the administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or
other persons. The Committee, the Company and the Company’s officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Committee or the Board in good faith shall
be final and binding upon all Holders, the Company and all other interested persons. No members of
the Committee or Board shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or Options, and all members of the Committee and the
Board shall be fully protected by the Company in respect of any such action, determination or
interpretation.

     7.5. Delegation of Authority to Grant Options. The Committee may, but need not,
delegate from time to time some or all of its authority to grant Options under the Plan to a
committee consisting of one or more members of the Committee or of one or more officers of the
Company; provided, however, that the Committee may not delegate its authority to
grant Options to individuals (a) who are subject on the date of the grant to the reporting rules
under Section 16(a) of the Exchange Act, (b) who are Section 162(m) Employees or (c) who are
officers of the Company who are delegated authority by the Committee hereunder. Any delegation
hereunder shall be subject to the restrictions and limits that the Committee specifies at the time
of such delegation of authority and may be rescinded at any time by the Committee. At all times,
any committee appointed under this Section 7.5 shall serve in such capacity at the pleasure of the
Committee.

ARTICLE VIII.

MISCELLANEOUS PROVISIONS

     8.1. Not Transferable. No Option under the Plan may be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and distribution or, subject to
the consent of the Administrator, pursuant to a DRO, unless and until such Option has been
exercised, or the shares underlying such Option have been issued, and all restrictions applicable
to such shares have lapsed. No Option or interest or right therein shall be liable for

16

 

the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect, except to the extent
that such disposition is permitted by the preceding sentence.

     During the lifetime of the Holder, only he may exercise an Option (or any portion thereof)
granted to him under the Plan, unless it has been disposed of with the consent of the Administrator
pursuant to a DRO. After the death of the Holder, any exercisable portion of an Option may, prior
to the time when such portion becomes unexercisable under the Plan or the applicable Option
Agreement, be exercised by his personal representative or by any person empowered to do so under
the deceased Holder’s will or under the then applicable laws of descent and distribution.

     Notwithstanding the foregoing provisions of this Section 8.1, and subject to the requirements
of Section 260.140.41 of Title 10 of the California Code of Regulations (to the extent applicable),
the Administrator, in its sole discretion, may determine to grant a Non-Qualified Stock Option
which, by its terms as set forth in the applicable Option Agreement, may be transferred by the
Holder, in writing and with prior written notice to the Administrator, to any one or more Permitted
Transferees (as defined below), subject to the following terms and conditions: (a) a Non-Qualified
Stock Option transferred to a Permitted Transferee shall not be assignable or transferable by the
Permitted Transferee other than by will or the laws of descent and distribution; (b) any
Non-Qualified Stock Option which is transferred to a Permitted Transferee shall continue to be
subject to all the terms and conditions of the Non-Qualified Stock Option as applicable to the
original Holder (other than the ability to further transfer the Non-Qualified Stock Option); and
(c) the Holder and the Permitted Transferee shall execute any and all documents requested by the
Administrator, including, without limitation, documents to: (i) confirm the status of the
transferee as a Permitted Transferee, (ii) satisfy any requirements for an exemption for the
transfer under applicable federal and state securities laws and (iii) evidence the transfer. For
purposes of this Section, “Permitted Transferee” shall mean, with respect to a Holder, any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Holder’s household (other than a tenant or
employee), a trust in which these persons (or the Holder) control the management of assets, and any
other entity in which these persons (or the Holder) owns more than fifty percent (50%) of the
voting interests, or any other transferee specifically approved by the Administrator after taking
into account any state or federal tax or securities laws applicable to transferable Non-Qualified
Stock Options.

     8.2. Amendment, Suspension or Termination of the Plan. Except as otherwise provided
in this Section 8.2, the Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Board. However, without approval of the
Company’s stockholders given within twelve months before or after the action by the Board, no
action of the Board may, except as provided in Section 8.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under the Plan.

17

 

No amendment, suspension or termination of the Plan shall, without the consent of the Holder alter or impair any rights or
obligations under any Option theretofore granted or awarded, unless the Option itself otherwise
expressly so provides. No Options may be granted or awarded during any period of suspension or
after termination of the Plan, and in no event may any Option be granted under the Plan after the
first to occur of the following events:

     (a) The expiration of ten years from the date the Plan is adopted by the Board; or

     (b) The expiration of ten years from the date the Plan is approved by the Company’s
stockholders under Section 8.4.

     8.3. Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the
Company and Other Corporate Events.

     (a) Subject to Section 8.3(e), in the event that the Administrator determines that other than
an Equity Restructuring any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), reorganization, merger, consolidation, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase Common Stock or other securities of
the Company, or other similar corporate transaction or event, in the Administrator’s sole
discretion, affects the Common Stock such that an adjustment is determined by the Administrator to
be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Option, then the Administrator
shall, in such manner as it may deem equitable, adjust any or all of

     (i) the number and kind of shares of Common Stock (or other securities or property)
with respect to which Options may be granted (including, but not limited to, adjustments of
the limitations in Section 2.1 on the maximum number and kind of shares which may be issued
and adjustments of the Option Limit),

     (ii) the number and kind of shares of Common Stock (or other securities or property)
subject to outstanding Options, and

     (iii) the exercise price with respect to any Option.

     (b) Subject to Sections 8.3(b)(vii) and 8.3(e), in the event of any transaction or event
described in Section 8.3(a), any Equity Restructuring or any unusual or nonrecurring transactions
or events affecting the Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles,
the Administrator, in its sole and absolute discretion, and on such terms and conditions as it
deems appropriate, either by the terms of the Option or by action taken prior to the occurrence of
such transaction or event (any such action applied to Employees and former Employees to be applied
uniformly) and either automatically or upon the Holder’s request, is hereby authorized to take any
one or more of the following actions whenever the Administrator determines that such action is
appropriate in order to prevent dilution or enlargement of the

18

 

benefits or potential benefits intended to be made available under the Plan or with respect to any Option under the Plan, to
facilitate such transactions or events or to give effect to such changes in laws, regulations or
principles:

     (i) To provide for either the cancellation of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such Option or
realization of the Holder’s rights had such Option been currently exercisable or fully
vested, or the replacement of such Option with other rights or property selected by the
Administrator in its sole discretion;

     (ii) To provide that the Option cannot vest or be exercised after such event;

     (iii) To provide that such Option shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in Section 5.3 or 5.4 or the provisions of
such Option;

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

     (v) To make adjustments in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Options and/or in the terms and conditions of
(including the exercise price), and the criteria included in, outstanding Options and
Options which may be granted in the future.

     (vi) To provide that, for a specified period of time prior to such event, the
restrictions imposed under an Option Agreement upon some or all shares of Common Stock may
be terminated and some or all shares of such Common Stock may cease to be subject to
repurchase after such event.

     (vii) Notwithstanding any other provision of the Plan, in the event of a Change in Control,
each outstanding Option shall, immediately prior to the effective date of the Change in Control,
automatically become fully exercisable for all of the shares of Common Stock at the time subject to
such Option and may be exercised for any or all of those shares as fully-vested shares of Common
Stock.

     (c)
In connection with the occurrence of any Equity Restructuring, and notwithstanding
anything to the contrary in Section 10.3(a) and 10.3(b):

     (i) The number and type of securities subject to each outstanding Award and the
exercise price or grant price thereof, if applicable, will be proportionately adjusted. The
adjustments provided under this Section 10.3(c)(i) shall be nondiscretionary and shall be
final and binding on the affected Holder and the Company.

19

 

     (ii) The Administrator shall make such proportionate adjustments, if any, as the
Administrator in its discretion may deem appropriate to reflect such Equity Restructuring
with respect to the aggregate number and kind of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Section 2 and the Award
Limit).

     (iii) Notwithstanding anything in this Section 10.3(c) to the contrary, this Section
10.3(c) shall not apply to, and instead Section 10.3(a) of the Plan shall apply to, any
Award to which the application of this Section 10.3(c) would (A) result in a penalty tax
under Section 409A of the Code and the Department of Treasury proposed and final regulations
and guidance thereunder or (B) cause any Incentive Stock Option to fail to qualify as an
“incentive stock option” under Section 422 of the Code.

     (d) Subject to Sections 8.3(e), 3.2 and 3.3, the Administrator may, in its discretion, include
such further provisions and limitations in any Option, Option Agreement or certificate, as it may
deem equitable and in the best interests of the Company.

     (e) With respect to Options which are granted to Section 162(m) Employees and are intended
to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action
described in this Section 8.3 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause such Option to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this
Section 8.3 or in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore,
no such adjustment or action shall be authorized to the extent such adjustment or action would
result in short-swing profits liability under Section 16 or violate the exemptive conditions of
Rule 16b-3 unless the Administrator determines that the Option is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any Option shall always be rounded to
the next whole number.

     (f) Notwithstanding the foregoing, in the event that the Company becomes a party to a
transaction that is intended to qualify for “pooling of interests” accounting treatment and, but
for one or more of the provisions of this Plan or any Option Agreement would so qualify, then this
Plan and any Option Agreement shall be interpreted so as to preserve such accounting treatment, and
to the extent that any provision of the Plan or any Option Agreement would disqualify the
transaction from pooling of interests accounting treatment (including, if applicable, an entire
Option Agreement), then such provision shall be null and void. All determinations to be made in
connection with the preceding sentence shall be made by the independent accounting firm whose
opinion with respect to “pooling of interests” treatment is required as a condition to the
Company’s consummation of such transaction.

     (g) The existence of the Plan, the Option Agreement and the Options granted hereunder shall
not affect or restrict in any way the right or power of the Company or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or consolidation of the Company, any
issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or

20

 

affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution
or liquidation of the company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar character or otherwise.

     8.4. Approval of Plan by Stockholders. The Plan shall be submitted for the approval
of the Company’s stockholders within twelve months after the date of the Board’s initial adoption
of the Plan. Options may be granted prior to such stockholder approval; provided,
however, that such Options shall not be exercisable nor shall such Options vest prior to
the time when the Plan is approved by the stockholders; and provided, further, that
if such approval has not been obtained at the end of said twelve-month period, all Options
previously granted or awarded under the Plan shall thereupon be canceled and become null and void.

     8.5. Tax Withholding. The Company shall be entitled to require payment in cash or
deduction from other compensation payable to each Holder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting, exercise or payment of any
Option. The Administrator may in its discretion and in satisfaction of the foregoing requirement
allow such Holder to elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option (or allow the return of shares of Common Stock) having a Fair Market Value equal
to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number
of shares of Common Stock which may be withheld with respect to the issuance, vesting, exercise or
payment of any Option (or which may be repurchased from the Holder of such Option within six months
after such shares of Common Stock were acquired by the Holder from the Company) in order to satisfy
the Holder’s federal and state income and payroll tax liabilities with respect to the issuance,
vesting, exercise or payment of the Option shall be limited to the number of shares which have a
Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal and state tax income and
payroll tax purposes that are applicable to such supplemental taxable income.

     8.6. Forfeiture Provisions. Subject to the limitations of applicable law, pursuant to
its general authority to determine the terms and conditions applicable to Options under the Plan,
the Administrator shall have the right to provide, in the terms of Options made under the Plan, or
to require a Holder to agree by separate written instrument, that if (a)(i) the Holder at any time,
or during a specified time period, engages in any activity in competition with the Company, or
which is inimical, contrary or harmful to the interests of the Company, as further defined by the
Administrator or (ii) the Holder incurs a Termination of Employment, Termination of Consultancy or
Termination of Directorship for cause, then (b) (i) any proceeds, gains or other economic benefit
actually or constructively received by the Holder upon any exercise of the Option, or upon the
receipt or resale of any Common Stock underlying the Option, must be paid to the Company, and (ii)
the Option shall terminate and any unexercised portion of the Option (whether or not vested) shall
be forfeited.

     8.7. Effect of Plan upon Options and Compensation Plans. The adoption of the Plan
shall not affect any other compensation or incentive plans in effect for the Company or any
Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company (a) to

21

 

establish any other forms of incentives or compensation for Employees, Directors or Consultants of
the Company or any Subsidiary or (b) to grant or assume options or other rights or awards otherwise
than under the Plan in connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.

     8.8. Compliance with Laws. The Plan, the granting and vesting of Options under the
Plan and the issuance and delivery of shares of Common Stock and the payment of money under the
Plan or under Options granted hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and federal securities law
and federal margin requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Options granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.

     8.9. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of share of Common Stock hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such shares of Common Stock as
to which such requisite authority shall not have been obtained.

     8.10. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements of the Plan.

     8.11. Information to Holders and Purchasers. To the extent required by Section
25102(o) of the California Corporation Code and Section 260.140.46 of Title 10 of the California
Code of Regulations (or other applicable law), the Company shall provide to each Holder of an
Option and to each person who acquires shares of Common Stock pursuant to the Plan, not less
frequently than annually during the period such Holder holds an Option, and, in the case of a
Holder or other person who acquires shares of Common Stock pursuant to the Plan, during the period
such Holder or person owns such shares, copies of the Company’s annual financial statements.
Notwithstanding the preceding sentence, the Company shall not be required to provide such
statements to Employees, Directors and Consultants whose duties in connection with the Company
assure their access to equivalent information.

     8.12. Repurchase Provisions. The Administrator in its discretion may provide that the
Company may repurchase shares of Common Stock acquired upon exercise of an Option upon a Holder’s
Termination of Consultancy, Termination of Directorship or Termination of Employment;
provided, however, that any such repurchase right shall be set forth in the
applicable Option Agreement or in another agreement entered into pursuant to such Option Agreement;
and, provided, further, that, to the extent required by Section 25102(o) of the

22

 

California Corporation Code and Section 260.140.41 of Title 10 of the California Code of
Regulations (or other applicable law), any such repurchase of shares of Common Stock from a person
who is not an officer of the Company or any Subsidiary, a Director or a Consultant shall be upon
the following terms: (a) if the repurchase option gives the Company the right to repurchase the
shares upon Termination of Employment at not less than the Fair Market Value of the shares to be
purchased on the date of Termination of Employment, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares within ninety (90)
days of Termination of Employment (or in the case of shares issued upon exercise of Options after
such date of termination, within ninety (90) days after the date of the exercise) or such longer
period as may be agreed to by the Administrator and the person and (ii) the right shall terminate
when the shares of Common Stock become publicly traded; and (b) if the repurchase right gives the
Company the right to repurchase the shares upon Termination of Employment at the original purchase
price for such shares, then (i) the right to repurchase at the original purchase price shall lapse
at the rate of at least twenty percent (20%) of the shares per year over five (5) years from the
date the Option is granted (without respect to the date the Option was exercised or became exercisable) and (ii) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares within ninety (90)
days of Termination of Employment (or, in the case of shares issued upon exercise of Options after
such date of Termination of Employment, within ninety (90) days after the date of the exercise) or
such longer period as may be agreed to by the Administrator and the person.

     8.13. Investment Intent. The Company may require a Holder or other person purchasing
shares of Common Stock, as a condition of exercising or acquiring Common Stock under any Option, to
give written assurances satisfactory to the Company as to the Holder’s or other person’s knowledge
and experience in financial and business matters and/or to employ a representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial and business matters
and that such Holder or person is capable of evaluating, alone or together with the representative,
the merits and risks of exercising the Option; and to give written assurances satisfactory to the
Company stating that the person is acquiring the stock subject to the Option for such Holder or
person’s own account and not with any present intention of selling or otherwise distributing the
Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if the issuance of the shares upon the exercise or acquisition of Common Stock
under the applicable Option has been registered under a then currently effective registration
statement under the Securities Act, or as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to, legends restricting the
transfer of the stock.

     8.14. Titles. Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.

23

 

     8.15. Governing Law. The Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of California without regard to
conflicts of laws thereof.

* * *

     I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of
Gen-Probe Incorporated on August 17, 2000 and adopted as amended and restated herein on November
16, 2006.

     Executed on this 28th day of November 2006.

	 	 	 	 	 
	 	 	 
	 	                                                     /s/ R. William Bowen
 	 
	 	R. William Bowen, Jr. 	 
	 	Secretary 	 
	 

* * *

     I hereby certify that the foregoing Plan was duly adopted by the sole shareholder of Gen-Probe
Incorporated on August 17, 2000. The plan as amended and restated herein does not require
additional stockholder approval.

     Executed on this 28th day of November 2006.

	 	 	 	 	 
	 	 	 
	 	                                                     /s/ R. William Bowen
 	 
	 	R. William Bowen, Jr. 	 
	 	Secretary 	 
	 

24

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