Document:

Exhibit 10.1

 

AMENDMENT NO. 2

TO

ENERGYSOLUTIONS THIRD AMENDED AND RESTATED CREDIT AGREEMENT

AND

DURATEK AMENDED AND RESTATED CREDIT AGREEMENT

 

AMENDMENT NO. 2, dated as of July 12, 2010 (this “Amendment”),
to each of (a) the Third Amended and Restated Credit Agreement, dated as
of September 23, 2009 (as amended by Amendment No. 1, dated as of January 14,
2010, and as further amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “EnergySolutions Credit Agreement”;
capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed to such terms in the EnergySolutions Credit
Agreement or the Duratek Credit Agreement (as defined below), as applicable),
by and among ENERGYSOLUTIONS, LLC, a Utah limited liability company (“EnergySolutions”),
ENERGYSOLUTIONS, INC., a Delaware corporation (“Parent”), the other
Loan Parties from time to time signatory thereto, CITICORP NORTH AMERICA, INC.,
as administrative agent (in such capacity, the “Administrative Agent”)
and the other Agents and Lenders from time to time party thereto and (b) the
Amended and Restated Credit Agreement, dated as of September 23, 2009 (as
amended by Amendment No. 1, dated as of January 14, 2010, and as
further amended, restated, amended and restated, supplemented or otherwise
modified from time to time, the “Duratek Credit Agreement” and together
with the EnergySolutions Credit Agreement, the “Credit Agreements”), by
and among DURATEK, INC., a Delaware corporation (“Duratek”), the
other Loan Parties from time to time signatory thereto, the Administrative
Agent and the other Agents and Lenders from time to time party thereto.

 

WHEREAS, notwithstanding that EnergySolutions and Duratek, as of the
date hereof, do not yet know the results of operations of Parent and its
Subsidiaries for the fiscal quarter ending June 30, 2010 and, as such, may
or may not be in compliance with the First Lien Leverage Ratio set forth in Section 7.7(b) of
each Credit Agreement (the “Specified Covenant”), EnergySolutions and
Duratek have requested that the Lenders and the Administrative Agent agree to
amend the Credit Agreements to effect the changes described below; and

 

WHEREAS, Section 11.12 of each Credit Agreement permits each
Credit Agreement to be amended from time to time.

 

NOW, THEREFORE, in consideration of the premises and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:

 

1.                                      Amendments

 

Each Credit Agreement is hereby amended, as of the Second Amendment
Effective Date (as defined below), as follows:

 

(a)                                  The definition
of “Base Rate” in Section 1.1 of each Credit Agreement is
hereby amended by adding the following immediately before the period at the end
of the first sentence thereof: “; provided  however that if the
Base Rate as so calculated would be below 3.25%, it will be deemed to be 3.25%”

 

 

(b)                                 The definition
of “Eurodollar Rate” in Section 1.1 of each Credit Agreement
is hereby amended by adding the following immediately before the period at the
end of the first sentence thereof: “; provided  however that if
the Eurodollar Rate as so calculated would be below 1.75%, it will be deemed to
be 1.75%”

 

(c)                                  Section 2.3(f) of the
EnergySolutions Credit Agreement is hereby replaced in its entirety with the
following:

 

Applicable Margin.  With respect to any Loan hereunder, the
Applicable Margin shall be the rate per annum set forth opposite the relevant
Loan under the applicable rating from S&P and Moody’s below:

 

	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  	
   

  	
  Level 4

  	
   

  
	
  Loan

  	
   

  	
  BB- /

  Ba3

  	
   

  	
  B+ / B1

  	
   

  	
  B / B2

  	
   

  	
  B- / B3

  	
   

  
	
  Eurodollar Term Loans (when the Leverage Ratio as
  of the most recently completed fiscal quarter is not less than 2.0 to 1.0)

  	
   

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  4.75

  	
  %

  	
  5.00

  	
  %

  
	
  Eurodollar Term Loans (when the Leverage Ratio as
  of the most recently completed fiscal quarter is less than 2.0 to 1.0)

  	
   

  	
  3.75

  	
  %

  	
  4.00

  	
  %

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  
	
  Base Rate Term Loans (when the Leverage Ratio as
  of the most recently completed fiscal quarter is not less than 2.0 to 1.0)

  	
   

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  	
  3.50

  	
  %

  
	
  Base Rate Term Loans (when the Leverage Ratio as
  of the most recently completed fiscal quarter is less than 2.0 to 1.0)

  	
   

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  
	
  Eurodollar Revolving Loans

  	
   

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  4.75

  	
  %

  	
  5.00

  	
  %

  
	
  Base Rate Revolving Loans

  	
   

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  	
  3.50

  	
  %

  
	
  Synthetic Deposits and unreimbursed Disbursements
  (when the Leverage Ratio as of the most recently completed fiscal quarter is
  not less than 2.0 to 1.0)

  	
   

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  4.75

  	
  %

  	
  5.00

  	
  %

  
	
  Synthetic Deposits and unreimbursed Disbursements
  (when the Leverage Ratio as of the most recently completed fiscal quarter is
  less than 2.0 to 1.0)

  	
   

  	
  3.75

  	
  %

  	
  4.00

  	
  %

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  

 

2

 

The ratings referred to
above are the long term credit or corporate family rating, as the case may be,
assigned to EnergySolutions and its Affiliates on a given date by each of
S&P and Moody’s, respectively.  In
the event of split ratings, the lower of the two ratings shall apply. In the
event EnergySolutions and its Affiliates are unable to obtain a rating from one
agency, the rating of the other agency will control. In the event
EnergySolutions and its Affiliates are unable to obtain a rating from either
agency (other than in the event of a change in both ratings systems or a
cessation of both ratings agencies), Level 4 status on the grid will apply. If
the rating system of Moody’s or S&P shall change, or if any such rating
agency shall cease to be in the business of giving such ratings,
EnergySolutions and the Lenders shall negotiate in good faith to amend the
references to specific ratings in this definition to reflect such changed
rating system or the non-availability of ratings from such rating agency, and
pending the effectiveness of any such amendment, the ratings of such rating
agency most recently in effect prior to such change or cessation shall be
employed in determining the Applicable Margin.

 

(d)                                 Section 2.3(f) of the
Duratek Credit Agreement is hereby replaced in its entirety with the following:

 

Applicable Margin.  The Applicable Margin shall be the rate per
annum set forth opposite the relevant Loan under the applicable rating from
S&P and Moody’s below:

 

	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  	
   

  	
  Level 4

  	
   

  
	
  Loan

  	
   

  	
  BB- /

  Ba3

  	
   

  	
  B+ / B1

  	
   

  	
  B / B2

  	
   

  	
  B- / B3

  	
   

  
	
  Eurodollar Loans (when the Leverage Ratio as of
  the most recently completed fiscal quarter is not less than 2.0 to 1.0)

  	
   

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  4.75

  	
  %

  	
  5.00

  	
  %

  
	
  Eurodollar Loans (when the Leverage Ratio as of
  the most recently completed fiscal quarter is less than 2.0 to 1.0)

  	
   

  	
  3.75

  	
  %

  	
  4.00

  	
  %

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  
	
  Base Rate Loans (when the Leverage Ratio as of the
  most recently completed fiscal quarter is not less than 2.0 to 1.0)

  	
   

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  	
  3.50

  	
  %

  
	
  Base Rate Loans (when the Leverage Ratio as of the
  most recently completed fiscal quarter is less than 2.0 to 1.0)

  	
   

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  

 

3

 

The ratings referred to
above are the long term credit or corporate family rating, as the case may be,
assigned to EnergySolutions and its Affiliates on a given date by each of
S&P and Moody’s, respectively.  In
the event of split ratings, the lower of the two ratings shall apply. In the
event EnergySolutions and its Affiliates are unable to obtain a rating from one
agency, the rating of the other agency will control. In the event
EnergySolutions and its Affiliates are unable to obtain a rating from either
agency (other than in the event of a change in both ratings systems or a
cessation of both ratings agencies), Level 4 status on the grid will apply. If
the rating system of Moody’s or S&P shall change, or if any such rating
agency shall cease to be in the business of giving such ratings, Duratek and
the Lenders shall negotiate in good faith to amend the references to specific
ratings in this definition to reflect such changed rating system or the
non-availability of ratings from such rating agency, and pending the
effectiveness of any such amendment, the ratings of such rating agency most
recently in effect prior to such change or cessation shall be employed in
determining the Applicable Margin.

 

(e)                                  Section 5.14 of each Credit
Agreement is hereby replaced in its entirety with the following: “The Loan
Parties shall at all times during the term hereof use commercially reasonable
efforts to maintain from S&P and Moody’s (i) long term credit or
corporate family ratings and (ii) ratings in respect of the Loans. In the
case that a rating obtained by either S&P or Moody’s is a private rating,
the Loan Parties shall use commercially reasonable efforts to ensure that no
more than twelve (12) months elapse between the dates on which such private
rating is obtained.”

 

(f)                                    Section 7.7(b) of each
Credit Agreement is hereby amended by adding the following immediately after
the chart in that section: “Notwithstanding the foregoing, this Section 7.7(b) shall
not apply for the fiscal quarter ending June 30, 2010.”

 

2.                                      Conditions
to Effectiveness.  This Amendment shall become effective on the
date (the “Second Amendment Effective Date”) on which each of the
following conditions is satisfied or waived:

 

(a)                                  The
Administrative Agent (or its counsel) shall have received from Lenders
constituting the Majority Lenders under each of the Credit Agreements and each
of the other parties hereto a counterpart of this Amendment signed on behalf of
such party;

 

(b)                                 All corporate
and other proceedings, if any, taken or to be taken in connection with this
Amendment and all documents incidental thereto, whether or not referred to
herein, shall be satisfactory in form and substance to the Administrative Agent
and its counsel;

 

(c)                                  The
Administrative Agent and Citigroup Global Markets Inc., as arranger,  shall have received all reasonable costs,
fees, expenses and other amounts due and payable on or prior to the Second
Amendment Effective Date, including reimbursement or payment of all reasonable
out-of-pocket expenses (including the reasonable fees, disbursements and other
charges of Cahill Gordon & Reindel LLP, counsel for the Administrative
Agent) required to be reimbursed or paid by EnergySolutions, and for which
invoices have been presented to EnergySolutions on or prior to the business day
prior to the Second Amendment Effective Date;

 

(d)                                 All representations
and warranties set forth in Section 3 hereof shall be true and correct as
of such date; and

 

4

 

(e)                                  The
Administrative Agent shall have received for the account of each Lender who
executes and delivers to the Administrative Agent a counterpart of this
Amendment prior to 5:00 pm Eastern Time on July 12, 2010 an amendment fee
equal to 0.25% of the sum of (i) the aggregate principal amount of Term
Loans and Synthetic Deposits, as applicable, under the Credit Agreements held
by such Lender and (ii) the aggregate amount of Revolving Commitments
(whether used or unused) under the EnergySolutions Credit Agreement held by
such Lender.

 

3.                                      Representations
and Warranties.  Each of
EnergySolutions and Duratek represents and warrants to the Lenders as of the
date hereof that:

 

(a)                                  The execution
and delivery of this Amendment by EnergySolutions and Duratek, as the case may
be, has been duly authorized;

 

(b)                                 Neither the
execution or delivery by EnergySolutions or Duratek of this Amendment, nor
compliance by it with the terms and provisions hereof will, (i) violate
any Applicable Law respecting EnergySolutions, Parent or their Subsidiaries or
(ii) conflict with, result in a breach of or constitute a default under
the certificate or articles of incorporation or bylaws, operating agreement or
the partnership agreement, as the case may be, as such documents are amended,
of EnergySolutions, of Parent or of any of their Subsidiaries, or under any
material indenture, agreement, or other instrument, to which EnergySolutions,
Parent or any of their Subsidiaries is a party or by which any of them or their
respective properties may be bound;

 

(c)                                  Before and
after giving effect to this Amendment, other than in respect of the Specified
Covenant, the representations and warranties set forth in the Credit Agreement
are true and correct in all material respects with the same effect as if made
on the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date in which case they shall be true and
correct in all material respects as of such earlier date; and

 

(d)                                 At the time of
and after giving effect to this Amendment, other than in respect of the
Specified Covenant, no Default or Event of Default has occurred and is
continuing.

 

4.                                      Reference
to the Effect on the Loan Documents

 

(a)                                  As of the
Second Amendment Effective Date, each reference in the EnergySolutions Credit
Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the
other Loan Documents to the EnergySolutions Credit Agreement (including,
without limitation, by means of words like “thereunder”, “thereof” and words of like import), shall mean and be a
reference to the EnergySolutions Credit Agreement, as amended hereby, and this
Amendment and the EnergySolutions Credit Agreement shall be read together and
construed as a single instrument.

 

(b)                                 As of the
Second Amendment Effective Date, each reference in the Duratek Credit Agreement
to “this Agreement,” “hereunder,”
“hereof,” “herein,”
or words of like import, and each reference in the other Loan Documents to the
Duratek Credit Agreement (including, without limitation, by means of words like
“thereunder”, “thereof”
and words of like import), shall mean and be a reference to the Duratek Credit
Agreement, as amended hereby, and this Amendment and the Duratek Credit
Agreement shall be read together and construed as a single instrument.

 

5

 

(c)                                  Except as
expressly amended hereby or specifically waived above, all of the terms and
provisions of the Credit Agreements and all other Loan Documents are and shall
remain in full force and effect and are hereby ratified and confirmed.

 

(d)                                 The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the
Lenders, EnergySolutions, Duratek or the Administrative Agent under any of the
Loan Documents, nor constitute a waiver or amendment of any other provision of
any of the Loan Documents or for any purpose except as expressly set forth
herein.

 

(e)                                  This Amendment
is a Loan Document.

 

5.                                      Counterparts.  This Amendment may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall constitute
a single instrument.  Delivery of an
executed counterpart of a signature page of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.

 

6.                                      Applicable
Law.  THIS AMENDMENT SHALL BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.

 

7.                                      Severability.  The fact that any term or provision of this
Amendment is held invalid, illegal or unenforceable as to any person in any
situation in any jurisdiction shall not affect the validity, enforceability or
legality of the remaining terms or provisions hereof or the validity,
enforceability or legality of such offending term or provision in any other
situation or jurisdiction or as applied to any person.

 

8.                                      Headings.  The headings of this Amendment are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.

 

9.                                      Affirmations.

 

(a)                                  Each of EnergySolutions and
Duratek (i) expressly acknowledges the terms of the Credit Agreement to
which it is a party, as amended by this Amendment, (ii) ratifies and affirms
its obligations under the Loan Documents (including but not limited to security
documents and guarantees) executed by it and (iii) acknowledges, renews
and extends its continued liability under all such Loan Documents and agrees
such Loan Documents remain in full force and effect.

 

(b)                                 Each of EnergySolutions and
Duratek hereby reaffirms, as of the date hereof, (i) the covenants and
agreements contained in each Loan Document to which it is a party, including,
in each case, such covenants and agreements as in effect immediately after
giving effect to this Amendment and the transactions contemplated hereby, and (ii) the
Lien on the Collateral securing payment of the Obligations pursuant to the
Security Documents.

 

[SIGNATURE PAGES FOLLOW]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

 

	
   

  	
  ENERGYSOLUTIONS,
  LLC,

  
	
   

  	
  a
  Utah limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Tooze

  
	
   

  	
   

  	
  Name:
  Richard Tooze

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Treasurer

  

 

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGES]

 

 

[SIGNATURE
PAGE TO ENERGYSOLUTIONS/DURATEK AMENDMENT NO. 2]]

 

 

	
   

  	
  ENERGYSOLUTIONS, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Tooze

  
	
   

  	
   

  	
  Name:
  Richard Tooze

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Treasurer

  

 

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGES]

 

 

[SIGNATURE PAGE TO
ENERGYSOLUTIONS/DURATEK AMENDMENT NO. 2]

 

2

 

	
   

  	
  DURATEK, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Tooze

  
	
   

  	
   

  	
  Name:
  Richard Tooze

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Treasurer

  

 

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGES]

 

 

[SIGNATURE
PAGE TO ENERGYSOLUTIONS/DURATEK AMENDMENT NO. 2]

 

3

 

	
   

  	
  CITICORP
  NORTH AMERICA, INC.,

  
	
   

  	
  as
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jake Fisher

  
	
   

  	
   

  	
  Name:

  	
  Jake
  Fisher

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

[SIGNATURE PAGE TO
ENERGYSOLUTIONS/DURATEK AMENDMENT NO. 2]

 

4Exhibit
4.1

 

VIVUS, INC.

2010 EQUITY INCENTIVE PLAN

 

1.  Purposes of
the Plan.  The purposes of
this Plan are:

 

·                  to attract and
retain the best available personnel for positions of substantial
responsibility,

 

·                  to provide
incentives to individuals who perform services to the Company, and

 

·                  to promote the
success of the Company’s business.

 

The
Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Units and Performance Shares.

 

2.  Definitions.  As used herein, the following definitions
will apply:

 

(a)           “Administrator”
means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

 

(b)           “Affiliate”
means any corporation or any other entity (including, but not limited to,
partnerships and joint ventures) controlling, controlled by, or under common
control with the Company.

 

(c)           “Applicable
Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.

 

(d)           “Award”
means, individually or collectively, a grant under the Plan of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Units or Performance Shares.

 

(e)           “Award
Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.

 

(f)            “Board”
means the Board of Directors of the Company.

 

(g)           “Change
in Control” means the occurrence of any of the following events:

 

(i)  Change in Ownership of the
Company.  A change in the
ownership of the Company which occurs on the date that any one person, or more
than one person acting as a group (“Person”),
acquires ownership of the stock of the Company that, together with the stock
held by such Person, constitutes more than fifty percent (50%) of the total
voting power of the stock of the Company; provided, however, that for purposes
of this subsection (i), the acquisition of additional stock by any one
Person, who is considered to own more than fifty percent (50%) of the total
voting power of the stock of the Company will not be considered a Change in
Control; or

 

(ii)  Change in Effective
Control of the Company.  If
the Company has a class of securities registered pursuant to Section 12 of
the Exchange Act, a change in the effective control of the Company which occurs
on the date that a majority of members of the Board is replaced during any
twelve (12) month period by Directors whose appointment or election is not
endorsed by a majority of the members of the Board prior to the date of the
appointment or election. For purposes of this subsection (ii), if any
Person is considered to be in effective 

 

 

control
of the Company, the acquisition of additional control of the Company by the
same Person will not be considered a Change in Control; or

 

(iii)  Change in Ownership of a
Substantial Portion of the Company’s Assets.  A change in the ownership of a substantial
portion of the Company’s assets which occurs on the date that any Person
acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more than fifty
percent (50%) of the total gross fair market value of all of the assets of the
Company immediately prior to such acquisition or acquisitions; provided,
however, that for purposes of this subsection (iii), the following will
not constitute a change in the ownership of a substantial portion of the
Company’s assets: (A) a transfer to an entity that is controlled by the
Company’s stockholders immediately after the transfer, or (B) a transfer
of assets by the Company to: (1) a stockholder of the Company (immediately
before the asset transfer) in exchange for or with respect to the Company’s
stock, (2) an entity, fifty percent (50%) or more of the total value or
voting power of which is owned, directly or indirectly, by the Company,
(3) a Person, that owns, directly or indirectly, fifty percent (50%) or
more of the total value or voting power of all the outstanding stock of the
Company, or (4) an entity, at least fifty percent (50%) of the total value
or voting power of which is owned, directly or indirectly, by a Person
described in this subsection (iii)(B)(3). For purposes of this
subsection (iii), gross fair market value means the value of the assets of
the Company, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.

 

For
purposes of this Section 2(g), persons will be considered to be acting as
a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business
transaction with the Company.

 

Notwithstanding
the foregoing, a transaction shall not be deemed a Change in Control unless the
transaction qualifies as a change in control event within the meaning of
Section 409A of the Code, as it has been and may be amended from time to
time, and any proposed or final Treasury Regulations and Internal Revenue
Service guidance that has been promulgated or may be promulgated thereunder
from time to time.

 

Further
and for the avoidance of doubt, a transaction shall not constitute a Change in
Control if: (i) its sole purpose is to change the state of the Company’s
incorporation, or (ii) its sole purpose is to create a holding company
that shall be owned in substantially the same proportions by the persons who
held the Company’s securities immediately before such transaction.

 

(h)           “Code”
means the Internal Revenue Code of 1986, as amended. Reference to a specific
section of the Code or Treasury Regulation thereunder will include such section
or regulation, any valid regulation or other official applicable guidance
promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section
or regulation.

 

(i)            “Committee”
means a committee of Directors or of other individuals satisfying Applicable
Laws appointed by the Board in accordance with Section 4 hereof.

 

(j)            “Common
Stock” means the common stock of the Company.

 

(k)           “Company”
means VIVUS, Inc., a Delaware corporation, or any successor thereto.

 

(l)            “Consultant”
means any person, including an advisor, engaged by the Company or its
Affiliates to render services to such entity other than as an Employee.

 

 

(m)          “Determination
Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based
compensation” under Section 162(m) of the Code.

 

(n)           “Director”
means a member of the Board.

 

(o)           “Disability”
means total and permanent disability as defined in Section 22(e)(3) of
the Code, provided that in the case of Awards other than Incentive Stock
Options, the Administrator in its discretion may determine whether a permanent
and total disability exists in accordance with uniform and non-discriminatory
standards adopted by the Administrator from time to time.

 

(p)           “Employee”
means any person, including Officers and Directors, employed by the Company or
its Affiliates. Neither service as a Director nor payment of a director’s fee
by the Company will be sufficient to constitute “employment” by the Company.

 

(q)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

(r)            “Fair
Market Value” means, as of any date, the value of Common Stock
determined as follows:

 

(i)            If the Common Stock
is listed on any established stock exchange or a national market system,
including without limitation the Nasdaq Global Market, the Nasdaq Global Select
Market or the Nasdaq Capital Market, its Fair Market Value shall be the closing
sales price for such stock (or, the closing bid, if no sales were reported) as
quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

 

(ii)           If the Common Stock
is regularly quoted by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean between the high bid and
low asked prices for the Common Stock on the day of determination (or, if no
bids and asks were reported on that date, as applicable, on the last trading
date such bids and asks are reported); or

 

(iii)          In the absence of
an established market for the Common Stock, the Fair Market Value will be
determined in good faith by the Administrator.

 

(s)           “Fiscal
Year” means the fiscal year of the Company.

 

(t)            “Incentive
Stock Option” means an Option that by its terms qualifies and is
otherwise intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code and the regulations promulgated thereunder.

 

(u)           “Nonstatutory
Stock Option” means an Option that by its terms does not qualify or
is not intended to qualify as an Incentive Stock Option.

 

(v)           “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

 

(w)          “Option”
means a stock option granted pursuant to the Plan.

 

(x)            “Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

 

(y)           “Participant”
means the holder of an outstanding Award.

 

(z)            “Performance
Goals” will have the meaning set forth in Section 11 of the
Plan.

 

(aa)         “Performance
Period” means any Fiscal Year of the Company or such longer or
shorter period as determined by the Administrator in its sole discretion.

 

 

(bb)         “Performance
Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of performance goals or other vesting criteria
as the Administrator may determine pursuant to Section 10.

 

(cc)         “Performance
Unit” means an Award which may be earned in whole or in part upon
attainment of performance goals or other vesting criteria as the Administrator
may determine and which may be settled for cash, Shares or other securities or
a combination of the foregoing pursuant to Section 10.

 

(dd)         “Period
of Restriction” means the period during which the transfer of Shares
of Restricted Stock are subject to restrictions and therefore, the Shares are
subject to a substantial risk of forfeiture. Such restrictions may be based on
the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.

 

(ee)         “Plan”
means this 2010 Equity Incentive Plan.

 

(ff)           “Restricted
Stock” means Shares issued pursuant to a Restricted Stock award
under Section 8 of the Plan, or issued pursuant to the early exercise of
an Option.

 

(gg)         “Restricted
Stock Unit” means a bookkeeping entry representing an amount equal
to the Fair Market Value of one Share, granted pursuant to Section 9. Each
Restricted Stock Unit represents an unfunded and unsecured obligation of the
Company.

 

(hh)         “Rule 16b-3”
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

 

(ii)           “Section 16(b)”
means Section 16(b) of the Exchange Act.

 

(jj)           “Service
Provider” means an Employee, Director or Consultant.

 

(kk)         “Share”
means a share of the Common Stock, as adjusted in accordance with Section 15
of the Plan.

 

(ll)           “Stock
Appreciation Right” means an Award, granted alone or in connection
with an Option, that pursuant to Section 7 is designated as a Stock
Appreciation Right.

 

(mm)       “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined
in Section 424(f) of the Code.

 

3.  Stock Subject
to the Plan.

 

(a)           Subject to the provisions of
Section 15 of the Plan, the maximum aggregate number of Shares that may be
issued under the Plan is equal to the sum of (i) 8,400,000 Shares,
(ii) any Shares which have been reserved but not issued pursuant to any
awards granted under the Company’s 2001 Stock Option Plan (the “2001 Plan”) as of the date of stockholder
approval of this Plan, plus (iii) any Shares subject to stock options or
similar awards granted under 2001 Plan that expire or otherwise terminate
without having been exercised in full and Shares issued pursuant to awards
granted under the 2001 Plan that are forfeited to or repurchased by the Company
(up to a maximum of 8,183,199 Shares pursuant to this subsection (iii)).
The Shares may be authorized, but unissued, or reacquired Common Stock.

 

(b)  Full Value Awards.  Any Shares subject to Awards of Restricted
Stock, Restricted Stock Units, Performance Units, and Performance Shares will
be counted against the numerical limits of this Section 3 as 1.22 Shares
for every one Share subject thereto. Further, if Shares acquired pursuant to
any such Award are forfeited or repurchased by the Company and would otherwise
return to the Plan pursuant to Section 3(c), 1.22 times the number of
Shares so forfeited or repurchased will return to the Plan and will again
become available for issuance.

 

 

(c)  Lapsed Awards.  If an Award expires or becomes unexercisable
without having been exercised in full or, with respect to an Award of
Restricted Stock Units, Performance Units or Performance Shares, is terminated
due to failure to vest, the unpurchased Shares (or for Awards other than
Options or Stock Appreciation Rights, the unissued Shares) which were subject
thereto will become available for future grant or sale under the Plan (unless
the Plan has terminated). Upon the exercise of a Stock Appreciation Right
settled in Shares, the gross number of Shares covered by the portion of the Award
so exercised will cease to be available under the Plan. Shares that have
actually been issued under the Plan under any Award will not be returned to the
Plan and will not become available for future distribution under the Plan;
provided, however, that if Shares issued pursuant to Awards of Restricted
Stock, Restricted Stock Units, Performance Shares or Performance Units are
repurchased by the Company or are forfeited to the Company due to failure to
vest, such Shares will become available for future grant under the Plan. Shares
used to pay the exercise or purchase price of an Award and/or to satisfy the
tax withholding obligations related to an Award will not become available for
future grant or sale under the Plan. To the extent an Award under the Plan is
paid out in cash rather than Shares, such cash payment will not result in
reducing the number of Shares available for issuance under the Plan.
Notwithstanding the foregoing and, subject to adjustment as provided in
Section 15, the maximum number of Shares that may be issued upon the
exercise of Incentive Stock Options will equal the aggregate Share number
stated in Section 3(a), plus, to the extent allowable under
Section 422 of the Code and the Treasury Regulations promulgated
thereunder, any Shares that become available for issuance under the Plan under
this Section 3(c).

 

(d)  Share Reserve.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of the Plan.

 

4. 
Administration of the Plan.

 

(a)  Procedure.

 

(i)  Multiple Administrative
Bodies.  Different Committees
with respect to different groups of Service Providers may administer the Plan.

 

(ii)  Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as
“performance-based compensation” within the meaning of Section 162(m) of
the Code, the Plan will be administered by a Committee of two (2) or more
“outside directors” within the meaning of Section 162(m) of the Code.

 

(iii)  Rule 16b-3.  To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.

 

(iv)  Other Administration.  Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which committee
will be constituted to satisfy Applicable Laws.

 

(b)  Powers of the
Administrator.  Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator will have
the authority, in its discretion:

 

(i)            to determine the
Fair Market Value;

 

(ii)           to select the
Service Providers to whom Awards may be granted hereunder;

 

(iii)          to determine the
number of Shares to be covered by each Award granted hereunder;

 

(iv)          to approve forms of
Award Agreements for use under the Plan;

 

 

(v)           to determine the
terms and conditions, not inconsistent with the terms of the Plan, of any Award
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Awards may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Award
or the Shares relating thereto, based in each case on such factors as the
Administrator will determine;

 

(vi)          to construe and
interpret the terms of the Plan and Awards granted pursuant to the Plan;

 

(vii)         to prescribe, amend
and rescind rules and regulations relating to the Plan, including rules and
regulations relating to sub-plans established for the purpose of satisfying
applicable foreign laws or for qualifying for favorable tax treatment under
applicable foreign laws;

 

(viii)        to modify or amend
each Award (subject to Section 20(c) of the Plan), including but not
limited to the discretionary authority to extend the post-termination
exercisability period of Awards and to extend the maximum term of an Option
(subject to Section 6(e) regarding Incentive Stock Options).
Notwithstanding the previous sentence, the Administrator may not modify or
amend an Option or Stock Appreciation Right to reduce the exercise price of
such Option or Stock Appreciation Right after it has been granted (except for
adjustments made pursuant to Section 15), and neither may the
Administrator cancel any outstanding Option or Stock Appreciation Right and
immediately replace it with a new Option or Stock Appreciation Right with a
lower exercise price, unless such action is approved by stockholders prior to
such action being taken;

 

(ix)           to allow
Participants to satisfy withholding tax obligations in such manner as
prescribed in Section 16;

 

(x)            to authorize any
person to execute on behalf of the Company any instrument required to effect
the grant of an Award previously granted by the Administrator;

 

(xi)           to allow a
Participant to defer the receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award pursuant
to such procedures as the Administrator may determine; and

 

(xii)          to make all other
determinations deemed necessary or advisable for administering the Plan.

 

(c)  Effect of Administrator’s
Decision.  The Administrator’s
decisions, determinations and interpretations will be final and binding on all
Participants and any other holders of Awards.

 

(d)  No Liability.  Under no circumstances shall the Company, its
Affiliates, the Administrator, or the Board incur liability for any indirect,
incidental, consequential or special damages (including lost profits) of any
form incurred by any person, whether or not foreseeable and regardless of the
form of the act in which such a claim may be brought, with respect to the Plan
or the Company’s, its Affiliates’, the Administrator’s or the Board’s roles in
connection with the Plan.

 

5.  Eligibility.  Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units, and
Performance Shares may be granted to Service Providers. Incentive Stock Options
may be granted only to employees of the Company or any Parent or Subsidiary of
the Company.

 

6.  Stock
Options.

 

(a)  Grant of Stock Options.  Subject to the terms and conditions of the
Plan, an Option may be granted to Service Providers at any time and from time
to time as will be determined by the 

 

 

Administrator,
in its sole discretion. Each Option will be designated in the Award Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds one
hundred thousand U.S. dollars ($100,000), such Options will be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive
Stock Options will be taken into account in the order in which they were
granted. The Fair Market Value of the Shares will be determined as of the time
the Option with respect to such Shares is granted.

 

(b)  Number of Shares.  The Administrator will have complete
discretion to determine the number of Shares subject to an Option granted to
any Participant, provided that during any Fiscal Year, no Participant will be
granted Options covering more than 1,000,000 Shares. Notwithstanding the
limitation in the previous sentence, in connection with his or her initial
service as an Employee, an Employee may be granted Options covering up to an
additional 1,000,000 Shares. The foregoing limitations will be adjusted
proportionately in connection with any change in the Company’s capitalization
as described in Section 15.

 

(c)  Exercise Price and Other
Terms.  The Administrator,
subject to the provisions of the Plan, will have complete discretion to
determine the terms and conditions of Options granted under the Plan, provided,
however, that the exercise price will not be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant. In addition,
in the case of an Incentive Stock Option granted to an employee of the Company
or any Parent or Subsidiary of the Company 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 Parent or
Subsidiary, the per Share exercise price will be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing provisions of this Section 6(c), Options may
be granted with a per Share exercise price of less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of
the Code and the Treasury Regulations thereunder.

 

(d)  Option Agreement.

 

(i)  Terms and Conditions.  Each Option grant will be evidenced by an
Award Agreement that will specify the exercise price, the term of the Option,
the acceptable forms of consideration for exercise (which may include any form
of consideration permitted by Section 6(d)(ii), the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.

 

(ii)  Form of
Consideration.  The
Administrator will determine the acceptable form(s) of consideration for
exercising an Option, including the method of payment, to the extent permitted
by Applicable Laws. In the case of an Incentive Stock Option, the Administrator
will determine the acceptable form of consideration at the time of grant. Such
consideration to the extent permitted by Applicable Laws may include, but is
not limited to:

 

(1)           cash;

 

(2)           check;

 

(3)           other Shares which
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option will be exercised and
provided that accepting such Shares, in the sole discretion of the
Administrator, will not result in any adverse accounting consequences to the
Company;

 

 

(4)           by net exercise;

 

(5)           consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;

 

(6)           a reduction in the
amount of any Company liability to the Participant, including any liability
attributable to the Participant’s participation in any Company-sponsored
deferred compensation program or arrangement;

 

(7)           such other
consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws; or

 

(8)           any combination of
the foregoing methods of payment.

 

(e)  Term of Option.  An Option granted under the Plan will expire
upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement; provided, however, that the term will be no more
than ten (10) years from the date of grant thereof. 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 total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option will be five
(5) years from the date of grant or such shorter term as may be provided
in the Award Agreement.

 

(f)  Exercise of Option.

 

(i)  Procedure for Exercise;
Rights as a Stockholder.  Any
Option granted hereunder will be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Award Agreement. An Option may not be exercised for a
fraction of a Share.

 

An Option will be deemed exercised when the Company receives:
(i) notice of exercise (in such form as the Administrator specifies from
time to time) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is
exercised (together with applicable tax withholdings). Full payment may consist
of any consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise of
an Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder will exist with
respect to the Shares subject to an Option, notwithstanding the exercise of the
Option. The Company will issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 15 of the Plan.

 

Exercising an Option in any manner will decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

 

(ii)  Termination of
Relationship as a Service Provider. 
If a Participant ceases to be a Service Provider, other than upon the
Participant’s termination as the result of the Participant’s death or
Disability, the Participant may exercise his or her Option within such period
of time as is specified in the Award Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement). In the absence of
a specified time in the Award Agreement, the Option will remain exercisable for
three (3) months following the Participant’s 

 

 

termination.
Unless otherwise provided by the Administrator, if on the date of termination
the Participant is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option will revert to the Plan. If after
termination the Participant does not exercise his or her Option within the time
specified by the Administrator, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.

 

(iii)  Disability of
Participant.  If a Participant
ceases to be a Service Provider as a result of the Participant’s Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent the Option is vested on the date
of termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). In the absence of a specified time
in the Award Agreement, the Option will remain exercisable for twelve
(12) months following the Participant’s termination. Unless otherwise
provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

 

(iv)  Death of Participant.  If a Participant dies while a Service Provider,
the Option may be exercised following the Participant’s death within such
period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of death (but in no event may the Option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided
such beneficiary has been designated prior to Participant’s death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the person(s) to whom the
Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death. Unless otherwise provided by the Administrator,
if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.

 

(v)  Other Termination.  A Participant’s Award Agreement also may
provide that if the exercise of the Option following the termination of
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would result in liability under Section 16(b), then
the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the tenth (10th)
day after the last date on which such exercise would result in such liability
under Section 16(b). Finally, a Participant’s Award Agreement may also
provide that if the exercise of the Option following the termination of the
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would be prohibited at any time solely because the
issuance of Shares would violate the registration requirements under the
Securities Act, then the Option will terminate on the earlier of (A) the
expiration of the term of the Option, or (B) the expiration of a period of
three (3) months after the termination of the Participant’s status as a
Service Provider during which the exercise of the Option would not be in
violation of such registration requirements.

 

 

7.  Stock
Appreciation Rights.

 

(a)  Grant of Stock
Appreciation Rights.  Subject
to the terms and conditions of the Plan, a Stock Appreciation Right may be
granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion.

 

(b)  Number of Shares.  The Administrator will have complete
discretion to determine the number of Stock Appreciation Rights granted to any
Participant, provided that during any Fiscal Year, no Participant will be
granted Stock Appreciation Rights covering more than 1,000,000 Shares.
Notwithstanding the limitation in the previous sentence, in connection with his
or her initial service as an Employee, an Employee may be granted Stock
Appreciation Rights covering up to an additional 1,000,000 Shares. The
foregoing limitations will be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 15.

 

(c)  Exercise Price and Other
Terms.  The Administrator,
subject to the provisions of the Plan, will have complete discretion to
determine the terms and conditions of Stock Appreciation Rights granted under
the Plan, provided, however, that the exercise price will not be less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of
grant. Notwithstanding the foregoing provisions of this Section 7(c),
Stock Appreciation Rights may be granted with a per Share exercise price of
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code and the Treasury
Regulations thereunder.

 

(d)  Stock Appreciation Right
Agreement.  Each Stock
Appreciation Right grant will be evidenced by an Award Agreement that will
specify the exercise price, the term of the Stock Appreciation Right, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.

 

(e)  Expiration of Stock
Appreciation Rights.  A Stock
Appreciation Right granted under the Plan will expire upon the date determined
by the Administrator, in its sole discretion, and set forth in the Award
Agreement; provided, however, that the term will be no more than ten
(10) years from the date of grant thereof. Notwithstanding the foregoing,
the rules of Section 6(f) relating to exercise also will apply
to Stock Appreciation Rights.

 

(f)  Payment of Stock
Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i)            The difference
between the Fair Market Value of a Share on the date of exercise over the
exercise price; times

 

(ii)           The number of
Shares with respect to which the Stock Appreciation Right is exercised.

 

At
the discretion of the Administrator, the payment upon Stock Appreciation Right
exercise may be in cash, in Shares of equivalent value, or in some combination
thereof.

 

8.  Restricted
Stock.

 

(a)  Grant of Restricted Stock.  Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.

 

(b)  Restricted Stock
Agreement.  Each Award of
Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine. Unless
the Administrator determines otherwise, the Company as escrow agent will hold
Shares of 

 

 

Restricted
Stock until the restrictions on such Shares have lapsed. Notwithstanding the
foregoing sentence, for restricted stock intended to qualify as “performance-
based compensation” within the meaning of Section 162(m) of the Code,
during any Fiscal Year no Participant will receive more than an aggregate of
300,000 Shares of Restricted Stock. Notwithstanding the foregoing limitation,
in connection with his or her initial service as an Employee, for restricted
stock intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, an Employee may be granted an
aggregate of up to an additional 300,000 Shares of Restricted Stock. The
foregoing limitations will be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 15.

 

(c)  Transferability.  Except as provided in this Section 8,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 

(d)  Other Restrictions.  The Administrator, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.

 

(e)  Removal of Restrictions.  Except as otherwise provided in this
Section 8, Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan will be released from escrow as soon as practicable
after the last day of the Period of Restriction or at such other time as the
Administrator may determine. The Administrator, in its sole discretion, may
reduce or waive any restrictions for such Award and may accelerate the time at
which any restrictions will lapse or be removed.

 

(f)  Voting Rights.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Administrator
determines otherwise.

 

(g)  Dividends and Other
Distributions.  During the
Period of Restriction, Service Providers holding Shares of Restricted Stock
will be entitled to receive all dividends and other distributions paid with
respect to such Shares, unless the Administrator provides otherwise. If any
such dividends or distributions are paid in Shares, the Shares will be subject
to the same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.

 

(h)  Return of Restricted Stock
to Company.  On the date set
forth in the Award Agreement, the Restricted Stock for which restrictions have
not lapsed will revert to the Company and again will become available for grant
under the Plan.

 

(i)  Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Restricted Stock as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may
set restrictions based upon the achievement of Performance Goals. The
Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock which is intended to qualify
under Section 162(m) of the Code, the Administrator will follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Award under Section 162(m) of the Code
(e.g., in determining the Performance Goals).

 

9.  Restricted
Stock Units.

 

(a)  Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator. After the
Administrator determines that it will grant Restricted Stock Units under the
Plan, it will advise the Participant in an Award Agreement of the terms,
conditions, and restrictions related to the grant, including the number of
Restricted Stock Units. Notwithstanding anything to the contrary in this
subsection (a), for Restricted Stock Units intended 

 

 

to
qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Code, during any Fiscal Year of the Company, no
Participant will receive more than an aggregate of 300,000 Restricted Stock
Units. Notwithstanding the limitation in the previous sentence, for Restricted
Stock Units intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, in connection with his or her
initial service as an Employee, an Employee may be granted an aggregate of up
to an additional 300,000 Restricted Stock Units. The foregoing limitations will
be adjusted proportionately in connection with any change in the Company’s
capitalization as described in Section 15.

 

(b)  Vesting Criteria and Other
Terms.  The Administrator will
set vesting criteria in its discretion, which, depending on the extent to which
the criteria are met, will determine the number of Restricted Stock Units that
will be paid out to the Participant. The Administrator may set vesting criteria
based upon the achievement of Company-wide, business unit, or individual goals
(including, but not limited to, continued employment), or any other basis
determined by the Administrator in its discretion.

 

(c)  Earning Restricted Stock
Units.  Upon meeting the
applicable vesting criteria, the Participant will be entitled to receive a
payout as determined by the Administrator. Notwithstanding the foregoing, at
any time after the grant of Restricted Stock Units, the Administrator, in its
sole discretion, may reduce or waive any vesting criteria that must be met to
receive a payout and may accelerate the time at which any restrictions will
lapse or be removed.

 

(d)  Form and Timing of
Payment.  Payment of earned
Restricted Stock Units will be made as soon as practicable after the date(s) set
forth in the Award Agreement or as otherwise provided in the applicable Award
Agreement or as required by Applicable Laws. The Administrator, in its sole discretion,
may pay earned Restricted Stock Units in cash, Shares, or a combination
thereof. Shares represented by Restricted Stock Units that are fully paid in
cash again will not reduce the number of Shares available for grant under the
Plan.

 

(e)  Cancellation.  On the date set forth in the Award Agreement,
all unearned Restricted Stock Units will be forfeited to the Company.

 

(f)  Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Restricted Stock Units as “performance-based compensation”
under Section 162(m) of the Code, the Administrator, in its
discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock Units which are intended to
qualify under Section 162(m) of the Code, the Administrator will
follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).

 

10.  Performance
Units and Performance Shares.

 

(a)  Grant of Performance
Units/Shares.  Performance
Units and Performance Shares may be granted to Service Providers at any time
and from time to time, as will be determined by the Administrator, in its sole
discretion. The Administrator will have complete discretion in determining the
number of Performance Units and Performance Shares granted to each Participant
provided that during any Fiscal Year, for Performance Units or Performance
Shares intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, (i) no Participant will
receive Performance Units having an initial value greater than $1,000,000, and
(ii) no Participant will receive more than 300,000 Performance Shares.
Notwithstanding the foregoing limitation, for Performance Shares intended to
qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Code, in connection with his or her initial
service, a Service Provider may be granted up to an additional 300,000
Performance Shares 

 

 

and
additional Performance Units having an initial value up to $1,000,000. The
foregoing limitations will be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 15.

 

(b)  Value of Performance
Units/Shares.  Each
Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. Each Performance Share will have
an initial value equal to the Fair Market Value of a Share on the date of
grant.

 

(c)  Performance Objectives and
Other Terms.  The
Administrator will set performance objectives or other vesting provisions
(including, without limitation, continued status as a Service Provider) in its
discretion which, depending on the extent to which they are met, will determine
the number or value of Performance Units/Shares that will be paid out to the
Service Providers. The time period during which the performance objectives or
other vesting provisions must be met will be called the “Performance Period.”
Each Award of Performance Units/Shares will be evidenced by an Award Agreement
that will specify the Performance Period, and such other terms and conditions
as the Administrator, in its sole discretion, will determine. The Administrator
may set performance objectives based upon the achievement of Company-wide,
divisional, or individual goals, applicable federal or state securities laws,
or any other basis determined by the Administrator in its discretion.

 

(d)  Earning of Performance
Units/Shares.  After the
applicable Performance Period has ended, the holder of Performance Units/Shares
will be entitled to receive a payout of the number of Performance Units/Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance objectives or
other vesting provisions have been achieved. After the grant of a Performance
Unit/Share, the Administrator, in its sole discretion, may reduce or waive any
performance objectives or other vesting provisions for such Performance
Unit/Share and may accelerate the time at which any restrictions will lapse or
be removed.

 

(e)  Form and Timing of
Payment of Performance Units/Shares. 
Payment of earned Performance Units/Shares will be made as soon as
practicable after the expiration of the applicable Performance Period, or as
otherwise provided in the applicable Award Agreement or as required by Applicable
Laws. The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares at the
close of the applicable Performance Period) or in a combination thereof.

 

(f)  Cancellation of
Performance Units/Shares.  On
the date set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be available for
grant under the Plan.

 

(g)  Section 162(m) Performance
Restrictions.  For purposes of
qualifying grants of Performance Units/Shares as “performance-based
compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Performance Units/Shares which are intended to
qualify under Section 162(m) of the Code, the Administrator will
follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of
the Code (e.g., in determining the Performance Goals).

 

 

11. 
Performance-Based Compensation Under Code Section 162(m).

 

(a)  General.  If the Administrator, in its discretion,
decides to grant an Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the provisions of
this Section 11 will control over any contrary provision in the Plan;
provided, however, that the Administrator may in its discretion grant Awards
that are not intended to qualify as “performance-based compensation” under
Section 162(m) of the Code to such Participants that are based on
Performance Goals or other specific criteria or goals but that do not satisfy
the requirements of this Section 11.

 

(b)  Performance Goals.  The granting and/or vesting of Awards of
Restricted Stock, Restricted Stock Units, Performance Shares and Performance
Units and other incentives under the Plan may be made subject to the attainment
of performance goals relating to one or more business criteria within the
meaning of Section 162(m) of the Code and may provide for a targeted
level or levels of achievement (“Performance
Goals”) including: (i) attainment of research and development
milestones, (ii) bookings, (iii) business divestitures and
acquisitions, (iv) cash flow, (v) cash position, (vi) contract
awards or backlog, (vii) customer renewals, (viii) customer retention
rates from an acquired company, business unit or division, (ix) earnings
(which may include earnings before interest and taxes, earnings before taxes
and net earnings), (x) earnings per Share, (xi) expenses, (xii) gross
margin, (xiii) growth in stockholder value relative to the moving average
of the S&P 500 Index or another index, (xiv) internal rate of
return, (xv) market share, (xvi) net income, (xvii) net profit,
(xviii) net sales, (xix) new product development, (xx) new
product invention or innovation, (xxi) number of customers,
(xxii) operating cash flow, (xxiii) operating expenses,
(xxiv) operating income, (xxv) operating margin, (xxvi) overhead
or other expense reduction, (xxvii) product defect measures,
(xxviii) product release timelines, (xxix) productivity,
(xxx) profit, (xxxi) return on assets, (xxxii) return on
capital, (xxxiii) return on equity, (xxxiv) return on investment,
(xxxv) return on sales, (xxxvi) revenue, (xxxvii) revenue
growth, (xxxviii) sales results, (xxxix) sales growth, (xl) stock
price, (xli) time to market, (xlii) total stockholder return, (xliii) working
capital. Any criteria used may be (A) measured in absolute terms,
(B) measured in terms of growth, (C) compared to another company or
companies, (D) measured against the market as a whole and/or according to
applicable market indices, (E) measured against the performance of the
Company as a whole or a segment of the Company and/or (F) measured on a
pre-tax or post-tax basis (if applicable). Further, any Performance Goals may
be used to measure the performance of the Company as a whole or a business unit
or other segment of the Company, or one or more product lines or specific
markets and may be measured relative to a peer group or index. The Performance
Goals may differ from Participant to Participant and from Award to Award. Prior
to the Determination Date, the Administrator will determine whether any
significant element(s) will be included in or excluded from the
calculation of any Performance Goal with respect to any Participant. In all
other respects, Performance Goals will be calculated in accordance with the
Company’s financial statements, generally accepted accounting principles, or
under a methodology established by the Administrator prior to the issuance of
an Award and which is consistently applied with respect to a Performance Goal
in the relevant Performance Period.

 

(c)  Procedures.  To the extent necessary to comply with the
performance-based compensation provisions of Section 162(m) of the
Code, with respect to any Award granted subject to Performance Goals and
intended to qualify as “performance-based compensation” under
Section 162(m) of the Code, on or before the Determination Date
(i.e., within the first twenty-five percent (25%) of the Performance
Period, but in no event more than ninety (90) days following the
commencement of any Performance Period or such other time as may be required or
permitted by Section 162(m) of the Code), the Administrator will, in
writing, (i) designate one or more Participants to whom an Award will be
made, (ii) select the Performance Goals applicable to the 

 

 

Performance
Period, (iii) establish the Performance Goals, and amounts of such Awards,
as applicable, which may be earned for such Performance Period, and (iv) specify
the relationship between Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Participant for such Performance Period.

 

(d)  Additional Limitations.  Notwithstanding any other provision of the
Plan, any Award which is granted to a Participant and is intended to constitute
qualified performance-based compensation under Section 162(m) of the
Code will be subject to any additional limitations set forth in the Code
(including any amendment to Section 162(m)) or any regulations and ruling
issued thereunder that are requirements for qualification as qualified
performance-based compensation as described in Section 162(m) of the
Code, and the Plan will be deemed amended to the extent necessary to conform to
such requirements.

 

(e)  Determination of Amounts
Earned.  Following the
completion of each Performance Period, the Administrator will certify in
writing whether the applicable Performance Goals have been achieved for such
Performance Period. A Participant will be eligible to receive payment pursuant
to an Award intended to qualify as “performance-based compensation” under
Section 162(m) of the Code for a Performance Period only if the
Performance Goals for such period are achieved. In determining the amounts
earned by a Participant pursuant to an Award intended to qualified as
“performance-based compensation” under Section 162(m) of the Code,
the Committee will have the right to (a) reduce or eliminate (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the Performance Period,
(b) determine what actual Award, if any, will be paid in the event of a
termination of employment as the result of a Participant’s death or disability
or upon a Change in Control or in the event of a termination of employment
following a Change in Control prior to the end of the Performance Period, and
(c) determine what actual Award, if any, will be paid in the event of a
termination of employment other than as the result of a Participant’s death or
disability prior to a Change of Control and prior to the end of the Performance
Period to the extent an actual Award would have otherwise been achieved had the
Participant remained employed through the end of the Performance Period. A
Participant will be eligible to receive payment pursuant to an Award intended
to qualify as “performance-based compensation” under Section 162(m) of
the Code for a Performance Period only if the Performance Goals for such period
are achieved.

 

12.  Compliance
With Code Section 409A. 
Awards will be designed and operated in such a manner that they are
either exempt from the application of, or comply with, the requirements of Code
Section 409A such that the grant, payment, settlement or deferral will not
be subject to the additional tax or interest applicable under Code
Section 409A, except as otherwise determined in the sole discretion of the
Administrator. The Plan and each Award Agreement under the Plan is intended to
meet the requirements of Code Section 409A and will be construed and
interpreted in accordance with such intent, except as otherwise determined in
the sole discretion of the Administrator. To the extent that an Award or
payment, or the settlement or deferral thereof, is subject to Code
Section 409A the Award will be granted, paid, settled or deferred in a
manner that will meet the requirements of Code Section 409A, such that the
grant, payment, settlement or deferral will not be subject to the additional
tax or interest applicable under Code Section 409A.

 

13.  Leaves of
Absence/Transfer Between Locations. 
Unless the Administrator provides otherwise and except as required by
Applicable Laws, vesting of Awards granted hereunder will be suspended during
any unpaid leave of absence. A Participant will not cease to be an Employee in
the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company, its
Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such
leave may exceed three (3) months, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by 

 

 

the Company is not so
guaranteed, then six (6) months following the first (1st) day of such leave, any
Incentive Stock Option held by the Participant will cease to be treated as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option.

 

14. 
Transferability of Awards. 
Unless determined otherwise by the Administrator, an Award may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant.

 

15.  Adjustments;
Dissolution or Liquidation; Merger or Change in Control.

 

(a)  Adjustments.  In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, will adjust the number
and class of Shares that may be delivered under the Plan and/or the number,
class, and price of Shares covered by each outstanding Award, the numerical
Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 of the Plan.

 

(b)  Dissolution or
Liquidation.  In the event of
the proposed dissolution or liquidation of the Company, the Administrator will
notify each Participant as soon as practicable prior to the effective date of
such proposed transaction. To the extent it has not been previously exercised,
an Award will terminate immediately prior to the consummation of such proposed
action.

 

(c)  Change in Control.  In the event of a merger or Change in
Control, each outstanding Award will be treated as the Administrator determines
without a Participant’s consent, including, without limitation, that
(i) Awards will be assumed, or substantially equivalent Awards will be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) with appropriate adjustments as to the number and kind of shares and
prices; (ii) upon written notice to a Participant, that the Participant’s
Awards will terminate upon or immediately prior to the consummation of such
merger or Change in Control; (iii) outstanding Awards will vest and become
exercisable, realizable, or payable, or restrictions applicable to an Award
will lapse, in whole or in part prior to or upon consummation of such merger or
Change in Control, and, to the extent the Administrator determines, terminate
upon or immediately prior to the effectiveness of such merger of Change in
Control; (iv) (A) the termination of an Award in exchange for an
amount of cash and/or property, if any, equal to the amount that would have
been attained upon the exercise of such Award or realization of the
Participant’s rights as of the date of the occurrence of the transaction (and,
for the avoidance of doubt, if as of the date of the occurrence of the
transaction the Administrator determines in good faith that no amount would
have been attained upon the exercise of such Award or realization of the
Participant’s rights, then such Award may be terminated by the Company without
payment), or (B) the replacement of such Award with other rights or
property selected by the Administrator in its sole discretion; or (v) any
combination of the foregoing. In taking any of the actions permitted under this
subsection 15(c), the Administrator will not be obligated to treat all
Awards, all Awards held by a Participant, or all Awards of the same type,
similarly.

 

In
the event that the successor corporation does not assume or substitute for the
Award (or portion thereof), the Participant will fully vest in and have the
right to exercise all of his or her outstanding Options and Stock Appreciation
Rights that are not assumed or substituted for, including Shares as to which
such Awards would not otherwise be vested or exercisable, all restrictions on
Restricted Stock, Restricted Stock Units, and Performance Shares/Units not
assumed or substituted for will lapse, and, with respect to Awards with
performance-based vesting not assumed or substituted for, 

 

 

all performance goals or
other vesting criteria will be deemed achieved at one hundred percent (100%) of
target levels and all other terms and conditions met. In addition, if an Option
or Stock Appreciation Right is not assumed or substituted for in the event of a
Change in Control, the Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will be fully vested
and exercisable for a period of time determined by the Administrator in its
sole discretion, and the Option or Stock Appreciation Right will terminate upon
the expiration of such period.

 

For
the purposes of this subsection (c), an Award will be considered assumed
if, following the merger or Change in Control, the Award confers the right to
purchase or receive, for each Share subject to the Award immediately prior to
the Change in Control, the consideration (whether stock, cash, or other
securities or property) or, in the case of a Stock Appreciation Right upon the
exercise of which the Administrator determines to pay cash or a Restricted
Stock Unit, Performance Share or Performance Unit which the Administrator can
determine to pay in cash, the fair market value of the consideration received
in the merger or Change in Control by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or Change in Control is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the
payout of a Restricted Stock Unit, Performance Unit or Performance Share, for
each Share subject to such Award (or in the case of an Award settled in cash,
the number of implied shares determined by dividing the value of the Award by
the per share consideration received by holders of Common Stock in the merger
or Change in Control), to be solely common stock of the successor corporation
or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or Change in Control.

 

Notwithstanding
anything in this Section 15(c) to the contrary, an Award that vests,
is earned or paid-out upon the satisfaction of one or more performance
objectives (including any Performance Goals) will not be considered assumed if
the Company or its successor modifies any of such performance objectives
without the Participant’s consent; provided, however, a modification to such
performance objectives only to reflect the successor corporation’s post-Change
in Control corporate structure will not be deemed to invalidate an otherwise
valid Award assumption.

 

Notwithstanding
anything in this Section 15(c) to the contrary, if a payment under an
Award Agreement is subject to Section 409A of the Code and if the change
in control definition contained in the Award Agreement or other agreement
related to the Award does not comply with the definition of “change in control”
for purposes of a distribution under Section 409A of the Code, then any
payment of an amount that is otherwise accelerated under this Section will
be delayed until the earliest time that such payment would be permissible under
Section 409A of the Code without triggering any penalties applicable under
Section 409A of the Code.

 

16.  Tax
Withholding.

 

(a)  Withholding Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or
other taxes (including the Participant’s FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).

 

(b)  Withholding Arrangements.  The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(without limitation) (a) paying cash, (b) electing to have the
Company withhold otherwise deliverable cash or Shares having a Fair Market
Value equal to the amount required to be withheld, (c) delivering to the
Company already-owned Shares 

 

 

having
a Fair Market Value equal to the amount required to be withheld, provided the
delivery of such Shares will not result in any adverse accounting consequences
as the Administrator determines in its sole discretion, (d) selling a
sufficient number of Shares otherwise deliverable to the Participant through
such means as the Administrator may determine in its sole discretion (whether
through a broker or otherwise) equal to the amount required to be withheld, or
(e) retaining from salary or other amounts payable to the Participant cash
having a sufficient value to satisfy the amount required to be withheld. The
amount of the withholding requirement will be deemed to include any amount
which the Administrator agrees may be withheld at the time the election is
made, not to exceed the amount determined by using the maximum federal, state
or local marginal income tax rates applicable to the Participant with respect
to the Award on the date that the amount of tax to be withheld is to be
determined. The Fair Market Value of the Shares to be withheld or delivered
will be determined as of the date that the taxes are required to be withheld.

 

17.  No Effect on
Employment or Service. 
Neither the Plan nor any Award will confer upon a Participant any right
with respect to continuing the Participant’s relationship as a Service Provider
with the Company, nor will they interfere in any way with the Participant’s
right or the Company’s right to terminate such relationship at any time, with
or without cause, to the extent permitted by Applicable Laws.

 

18.  Date of
Grant.  The date of grant of
an Award will be, for all purposes, the date on which the Administrator makes
the determination granting such Award, or such other later date as is
determined by the Administrator. Notice of the determination will be provided
to each Participant within a reasonable time after the date of such grant.

 

19.  Term of Plan.  Subject to Section 23 of the Plan, the
Plan will become effective upon its adoption by the Board. It will continue in
effect for a term of ten (10) years from the date adopted by the Board,
unless terminated earlier under Section 20 of the Plan.

 

20.  Amendment and
Termination of the Plan.

 

(a)  Amendment and Termination.  The Administrator may at any time amend,
alter, suspend or terminate the Plan.

 

(b)  Stockholder Approval.  The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

 

(c)  Effect of Amendment or
Termination.  No amendment,
alteration, suspension or termination of the Plan will impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company. Termination of the Plan will not affect the Administrator’s
ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.

 

21.  Conditions
Upon Issuance of Shares.

 

(a)  Legal Compliance.  Shares will not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect to such
compliance.

 

(b)  Investment
Representations.  As a
condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required.

 

 

22.  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 any Shares hereunder, will relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority will not have been obtained.

 

23.  Stockholder
Approval.  The Plan will be
subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the Board. Such
stockholder approval will be obtained in the manner and to the degree required
under Applicable Laws.

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