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Unassociated Document

    ADAMIS
PHARMACEUTICALS CORPORATION

     

    2009
EQUITY INCENTIVE PLAN

     

    1.     GENERAL.

     

            (a)    Successor
to Prior Plan.    The Plan is intended as the
successor to the Company's 2005 Equity Incentive Plan (the "Prior
Plan"). Following the Effective Date, no additional stock awards shall be
granted under the Prior Plan. Any shares remaining available for issuance
pursuant to the exercise of stock awards under the Prior Plan shall become
available for issuance pursuant to Stock Awards granted hereunder. Any shares
subject to outstanding stock awards granted under the Prior Plan that expire or
terminate for any reason prior to exercise or settlement shall become available
for issuance pursuant to Stock Awards granted hereunder. On the Effective Date,
all outstanding stock awards granted under the Prior Plan shall be deemed to be
stock awards granted pursuant to the Plan, but shall remain subject to the terms
of the Prior Plan with respect to which they were originally granted. All Stock
Awards granted subsequent to the Effective Date shall be subject to the terms of
the Plan.

     

            (b)    Eligible
Award Recipients.    The persons eligible to receive
Awards are Employees, Directors and Consultants.

     

            (c)    Available
Awards.    The Plan provides for the grant of the
following Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit
Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards,
(vii) Performance Cash Awards, and (viii) Other Stock
Awards.

     

            (d)    General
Purpose.    The Company, by means of the Plan, seeks
to secure and retain the services of the group of persons eligible to receive
Awards as set forth in Section 1(b), to provide incentives for such persons
to exert maximum efforts for the success of the Company and any Affiliate and to
provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of
Stock Awards.

     

    2.     ADMINISTRATION.

     

            (a)    Administration
by Board.    The Board shall administer the Plan
unless and until the Board delegates administration of the Plan to a Committee
or Committees, as provided in Section 2(c).

     

            (b)    Powers
of Board.    The Board shall have the power, subject
to, and within the limitations of, the express provisions of the
Plan:

     

            (i)    To
determine from time to time (A) which of the persons eligible under the
Plan shall be granted Awards; (B) when and how each Award shall be granted;
(C) what type or combination of types of Award shall be granted;
(D) the provisions of each Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive cash or
Common Stock pursuant to a Stock Award; and (E) the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

     

            (ii)   To
construe and interpret the Plan and Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in the
Plan or in any Stock Award Agreement or in the written
terms of a Performance Cash Award, in a manner and to the extent it shall deem
necessary or expedient to make the Plan or Award fully
effective.

     

            (iii) To settle all
controversies regarding the Plan and Awards granted under it.

     

    
      
        
        

      

      
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            (iv)  To accelerate
the time at which a Stock Award may first be exercised or the time during which
an Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest.

     

            (v)   To
suspend or terminate the Plan at any time. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the affected
Participant.

     

            (vi)  To amend the
Plan in any respect the Board deems necessary or advisable, including, without
limitation, relating to Incentive Stock Options and certain nonqualified
deferred compensation under Section 409A of the Code and to bring the Plan
and/or Stock Awards granted under the Plan into compliance therewith, subject to
the limitations, if any, of applicable law. However, except as provided in
Section 9(a) relating to Capitalization Adjustments, stockholder approval
shall be required for any amendment of the Plan that either (A) materially
increases the number of shares of Common Stock available for issuance under the
Plan, (B) materially expands the class of individuals eligible to receive
Awards under the Plan, (C) materially increases the benefits accruing to
Participants under the Plan or materially reduces the price at which shares of
Common Stock may be issued or purchased under the Plan, (D) materially
extends the term of the Plan, or (E) expands the types of Awards available
for issuance under the Plan, but in each of (A) to (E) only to the
extent required by applicable law or listing requirements. Except as provided
above, rights under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (1) the Company requests the
consent of the affected Participant, and (2) such Participant consents in
writing.

     

            (vii) To submit any
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of
(A) Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to Covered Employees,
(B) Section 422 of the Code regarding Incentive Stock Options or
(C) Rule 16b-3.

     

            (viii) To approve forms
of Award Agreements for use under the Plan and to amend the terms of any one or
more Awards or stock awards granted under the Prior Plan, including, but not
limited to, amendments to provide terms more favorable to the Participant than
previously provided in the Award Agreement, subject to any specified limits in
the Plan that are not subject to Board discretion; provided however, that the
Participant's rights under any Award shall not be impaired by any such amendment
unless (A) the Company requests the consent of the affected Participant,
and (B) such Participant consents in writing. Notwithstanding the
foregoing, subject to the limitations of applicable law, if any, the Board may
amend the terms of any one or more Awards without the affected Participant's
consent if necessary to maintain the qualified status of the Award as an
Incentive Stock Option or to bring the Award into compliance with
Section 409A of the Code and Department of Treasury regulations and other
interpretive guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued or amended after the Effective
Date.

     

            (ix)  Generally, to
exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan or Awards.

     

            (x)   To adopt
such procedures and sub-plans as are necessary or appropriate to permit or
facilitate participation in the Plan by Employees, Directors or Consultants who
are foreign nationals or employed outside the United States.

     

            (xi)  To effect, at
any time and from time to time, with the consent of any adversely affected
Optionholder, (A) the reduction of the exercise price of any outstanding
Option under the Plan; (B) the cancellation of any outstanding Option under
the Plan and the grant in substitution therefor of (1) a new Option under
the Plan or another equity plan of the Company covering the same or a different
number of shares of Common Stock, (2) a Restricted Stock Award (including a
stock bonus), (3) a Stock Appreciation Right, (4) Restricted Stock
Unit, (5) an Other Stock Award, (6) cash and/or (7) other
valuable consideration (as determined by the Board, in its sole discretion); or
(C) any other action that is treated as a repricing under generally
accepted accounting principles.

     

    
      
        
        

      

      
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            (c)    Delegation
to Committee.    

     

            (i)    General.    The
Board may delegate some or all of the administration of the Plan to a Committee
or Committees. If administration of the Plan is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board that have been delegated to the
Committee, including the power to delegate to a subcommittee of the Committee
any of the administrative powers the Committee is authorized to exercise (and
references in the Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of the powers
previously delegated to the Committee, Committees, subcommittee or
subcommittees.

     

            (ii)    Section 162(m) and
Rule 16b-3 Compliance.    In the sole discretion
of the Board, the Committee may consist solely of two (2) or more Outside
Directors, in accordance with Section 162(m) of the Code, or solely of two
(2) or more Non-Employee Directors, in accordance with Rule 16b-3. In
addition, the Board or the Committee, in its sole discretion, may
(A) delegate to a Committee which need not consist of Outside Directors the
authority to grant Awards to eligible persons who are either (1) not then
Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (2) not persons
with respect to whom the Company wishes to comply with Section 162(m) of
the Code, or (B) delegate to a Committee which need not consist of
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

     

            (d)    Delegation
to an Officer.    The Board may delegate to one or
more Officers the authority to do one or both of the following
(i) designate Employees who are not Officers to be recipients of Options
(and, to the extent permitted by applicable law, other Stock Awards) and the
terms thereof, and (ii) determine the number of shares of Common Stock to
be subject to such Stock Awards granted to such Employees; provided, however, that the
Board resolutions regarding such delegation shall specify the total number of
shares of Common Stock that may be subject to the Stock Awards granted by such
Officer and that such Officer may not grant a Stock Award to himself or herself.
Notwithstanding anything to the contrary in this Section 2(d), the Board
may not delegate to an Officer authority to determine the Fair Market Value
pursuant to Section 13(v)(ii) below.  The Board may delegate
to one of more officers the authority to renew and resolve disputes with respect
to Awards held by Participants who are not an officer or director of the Company
or any other person whose transactions in the Company’s common stock are subject
to Section 16 of the Exchange Act.

     

            (e)    Effect
of Board's Decision.    All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons.

     

    3.     SHARES SUBJECT TO THE
PLAN.

     

            (a)    Share
Reserve.    Subject to the provisions of
Section 9(a) relating to Capitalization Adjustments, the aggregate number
of shares of Common Stock that may be issued pursuant to Stock Awards shall
consist of seven million (7,000,000) shares of Common Stock (the "Share
Reserve").  In addition, the number of shares of Common Stock
available for issuance under Stock Awards pursuant to the Plan shall
automatically increase on January 1st of each year commencing in 2010 and
ending on (and including) January 1, 2019, in an amount equal to the lesser
of (i) five percent (5%) of the total number of shares of Common Stock
outstanding on December 31st of the preceding calendar year, or (ii) a
lesser number of shares of Common Stock determined by the Board before the start
of a calendar year for which an increase applies. For clarity, the limitation in
this Section 3(a) is a limitation in the number of shares of the Company's
common stock that may be issued pursuant to the Plan. Accordingly, this
Section 3(a) does not limit the granting of Stock Awards except as provided
in Section 7(a). Shares may be issued in connection with a merger or
acquisition as permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable,
NYSE Listed Company Manual Section 303A.08, or AMEX Company Guide
Section 711 and such issuance shall not reduce the number of
shares.

     

    
      
        
        

      

      
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            (b)    Reversion
of Shares to the Share Reserve.    If a Stock Award
(i) expires or otherwise terminates without having been exercised in full,
(ii) are forfeited back to the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant or
(iii) is settled in cash (i.e., the holder of the Stock Award receives cash
rather than stock), the shares not issued under such Stock Award shall remain
available for issuance under the Plan, and such expiration, termination,
forfeiture or settlement shall not reduce (or otherwise offset) the number of
shares of the Company's common stock that may be issued pursuant to the Plan.
Also, any shares reacquired by the Company pursuant to subsection 8(g) or as
consideration for the exercise of an Option shall again become available for
issuance under the Plan.

     

            (c)    Incentive
Stock Option Limit.    No more than 70,000,000 shares
of common stock shall be issued pursuant to the exercise of Incentive Stock
Options.

     

            (d)    Section 162(m)
Limitation on Annual Grants.    Subject to the
provisions of Section 9(a) relating to Capitalization Adjustments, at such
time as the Company may be subject to the applicable provisions of
Section 162(m) of the Code, no Employee shall be eligible to be granted
during any calendar year Stock Awards whose value is determined by reference to
an increase over an exercise or strike price of at least one hundred percent
(100%) of the Fair Market Value on the date the Stock Award is granted covering
more than five million (5,000,000) shares of Common Stock.

     

            (e)    Source
of Shares.    The stock issuable under the Plan shall
be shares of authorized but unissued or reacquired shares of Common Stock,
including shares repurchased by the Company on the open market.

     

    4.     ELIGIBILITY.

     

            (a)    Eligibility
for Specific Stock Awards.    Incentive Stock Options
may be granted only to employees of the Company or a parent corporation or
subsidiary corporation thereof (as such terms are defined in Sections 424(e) and
424(f) of the Code). Stock Awards other than Incentive Stock Options may be
granted to Employees, Directors and Consultants.

     

            (b)    Ten
Percent Stockholders.    A Ten Percent Stockholder
shall not be granted an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value on
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.

     

            (c)    Consultants.    A
Consultant shall be eligible for the grant of a Stock Award only if, at the time
of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8")
is available to register either the offer or the sale of the Company's
securities to such Consultant because of the nature of the services that the
Consultant is providing to the Company, because the Consultant is a natural
person, or because of any other rule governing the use of
Form S-8.

     

    5.     OPTION
PROVISIONS.

     

            Each
Option shall be in such form and shall contain such terms and conditions as the
Board shall deem appropriate. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,
if certificates are issued, a separate certificate or certificates shall be
issued for shares of Common Stock purchased on exercise of each type of Option.
If an Option is not specifically designated as an Incentive Stock Option, then
the Option shall be a Nonstatutory Stock Option. The provisions of separate
Options need not be identical; provided, however, that each
Option Agreement shall conform to (through incorporation of provisions hereof by
reference in the Option Agreement or otherwise) the substance of each of the
following provisions:

     

            (a)    Term.
Subject to the provisions of Section 4(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date of its grant or such shorter period specified in
the Option Agreement.

     

            (b)    Exercise
Price.    Subject to the provisions of
Section 4(b) regarding Ten Percent Stockholders, the exercise price of each
Option shall be not less than one hundred percent (100%) of the Fair Market
Value subject to the Option on the date the Option is granted. Notwithstanding
the foregoing, an Option may be granted with an exercise price lower than one
hundred percent (100%) of the Fair Market Value subject to the Option if such
Option is granted pursuant to an assumption or substitution for another option
in a manner consistent with the provisions of Section 424(a) of the Code
(whether or not such options are Incentive Stock Options).

     

    
      
        
        

      

      
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            (c)    Consideration.    The
purchase price of Common Stock acquired pursuant to the exercise of an Option
shall be paid, to the extent permitted by applicable law and as determined by
the Board in its sole discretion, by any combination of the methods of payment
set forth below. The Board shall have the authority to grant Options that do not
permit all of the following methods of payment (or otherwise restrict the
ability to use certain methods) and to grant Options that require the consent of
the Company to utilize a particular method of payment. The methods of payment
permitted by this Section 5(c) are:

     

            (i)    by
cash, check, bank draft or money order payable to the Company;

     

            (ii)   pursuant
to a program developed under Regulation T as promulgated by the Federal
Reserve Board that, prior to the issuance of the stock subject to the Option,
results in either the receipt of cash (or check) by the Company or the receipt
of irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds;

     

            (iii) by delivery to the
Company (either by actual delivery or attestation) of shares of Common
Stock;

     

            (iv)  by a "net
exercise" arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issuable upon exercise by the largest whole number of
shares with a Fair Market Value that does not exceed the aggregate exercise
price; provided,
however, that the Company shall accept a cash or other payment from the
Participant to the extent of any remaining balance of the aggregate exercise
price not satisfied by such reduction in the number of whole shares to be
issued; provided,
further, that shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that (A) shares
issuable upon exercise are reduced to pay the exercise price pursuant to the
"net exercise", (B) shares are delivered to the Participant as a result of
such exercise, and/or (C) shares are withheld to satisfy tax withholding
obligations; or

     

            (v)   in any
other form of legal consideration that may be acceptable to the Board in its
sole discretion and permissible under applicable law.

     

            (d)    Transferability
of Options.    The Board may, in its sole discretion,
impose such limitations on the transferability of Options as the Board shall
determine. In the absence of such a determination by the Board to the contrary,
the following restrictions on the transferability of Options shall
apply:

     

            (i)    Restrictions on
Transfer.    An Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder;
provided, however, that the Board may, in its sole discretion, permit transfer
of the Option in a manner that is not prohibited by applicable tax and/or
securities laws upon the Optionholder's request.

     

            (ii)    Domestic Relations
Orders.    Notwithstanding the foregoing, an Option
may be transferred pursuant to a domestic relations order, provided, however, that if an
Option is an Incentive Stock Option, such Option may be deemed to be a
Nonstatutory Stock Option as a result of such transfer.

     

            (iii)    Beneficiary
Designation.    Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option. In the absence of such a designation, the executor or
administrator of the Optionholder's estate shall be entitled to exercise the
Option.

     

            (e)    Vesting
of Options Generally.    The total number of shares
of Common Stock subject to an Option may vest and therefore become exercisable
in periodic installments that may or may not be equal. The Option may be subject
to such other terms and conditions on the time or times when it may or may not
be exercised (which may be based on the satisfaction of Performance Goals or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this Section 5(e) are
subject to any Option provisions governing the minimum number of shares of
Common Stock as to which an Option may be exercised.

     

    
      
        
        

      

      
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            (f)    Termination
of Continuous Service.    Except as otherwise
provided in the applicable Option Agreement or any other written agreement
between the Optionholder and the Company, in the event that an Optionholder's
Continuous Service terminates (other than for Cause or upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date
of termination of Continuous Service) but only within such period of time ending
on the earlier of (i) the date three (3) months following the
termination of the Optionholder's Continuous Service (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after termination
of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.

     

            (g)    Extension
of Termination Date.    An Optionholder's Option
Agreement may provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than for Cause or
upon the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of a period of three
(3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements, or (ii) the expiration of the term of the Option
as set forth in the Option Agreement.

     

            (h)    Disability
of Optionholder.    In the event that an
Optionholder's Continuous Service terminates as a result of the Optionholder's
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination of Continuous Service), but only within such period of time ending
on the earlier of (i) the date twelve (12) months following such
termination of Continuous Service (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination of Continuous Service,
the Optionholder does not exercise his or her Option within the time specified
herein or in the Option Agreement (as applicable), the Option shall
terminate.

     

            (i)    Death
of Optionholder.    In the event that (i) an
Optionholder's Continuous Service terminates as a result of the Optionholder's
death, or (ii) the Optionholder dies within the period (if any) specified
in the Option Agreement after the termination of the Optionholder's Continuous
Service for a reason other than death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise such Option as of the date of
death) by the Optionholder's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or, if applicable, by a person
designated as the beneficiary of the option upon the Optionholder's death, but
only within the period ending on the earlier of (A) the date eighteen
(18) months following the date of death (or such longer or shorter period
specified in the Option Agreement), or (B) the expiration of the term of
such Option as set forth in the Option Agreement. If, after the Optionholder's
death, the Option is not exercised within the time specified herein or in the
Option Agreement (as applicable), the Option shall terminate. If the
Optionholder designates a third party beneficiary of the Option in accordance
with Section 5(d)(iii), then upon the death of the Optionholder such
designated beneficiary shall have the sole right to exercise the Option and
receive the Common Stock or other consideration resulting from an Option
exercise.

     

            (j)    Termination
for Cause.    Except as explicitly provided otherwise
in an Optionholder's Option Agreement or any other written agreement between the
Optionholder and the Company, in the event that an Optionholder's Continuous
Service is terminated for Cause, the Option shall terminate upon the termination
date of such Optionholder's Continuous Service, and the Optionholder shall be
prohibited from exercising his or her Option from and after the time of such
termination of Continuous Service.

     

            (k)    Non-Exempt
Employees.    No Option granted to an Employee that
is a non-exempt employee for purposes of the Fair Labor Standards Act shall be
first exercisable for any shares of Common Stock until at least six months
following the date of grant of the Option. The foregoing provision is intended
to operate so that any income derived by a non-exempt employee in connection
with the exercise or vesting of an Option will be exempt from his or her regular
rate of pay.

     

    
      
        
        

      

      
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    6.     PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

     

            (a)    Restricted
Stock Awards.    Each Restricted Stock Award
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. To the extent consistent with the Company's
Bylaws, at the Board's election, shares of Common Stock may be (x) held in
book entry form subject to the Company's instructions until any restrictions
relating to the Restricted Stock Award lapse; or (y) evidenced by a
certificate, which certificate shall be held in such form and manner as
determined by the Board. The terms and conditions of Restricted Stock Award
Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Award Agreements need not be identical, provided, however, that each
Restricted Stock Award Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

     

            (i)    Consideration.    A
Restricted Stock Award may be awarded in consideration for (A) past or
future services actually or to be rendered to the Company or an Affiliate, or
(B) any other form of legal consideration that may be acceptable to the
Board in its sole discretion and permissible under applicable law.

     

            (ii)    Vesting.    Shares
of Common Stock awarded under the Restricted Stock Award Agreement may be
subject to forfeiture to the Company in accordance with a vesting schedule to be
determined by the Board.

     

            (iii)    Termination of Participant's
Continuous Service.    In the event a Participant's
Continuous Service terminates, the Company may receive via a forfeiture
condition or a repurchase right, any or all of the shares of Common Stock held
by the Participant which have not vested as of the date of termination of
Continuous Service under the terms of the Restricted Stock Award
Agreement.

     

            (iv)    Transferability.    Rights
to acquire shares of Common Stock under the Restricted Stock Award Agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Restricted Stock Award Agreement, as the Board shall
determine in its sole discretion, so long as Common Stock awarded under the
Restricted Stock Award Agreement remains subject to the terms of the Restricted
Stock Award Agreement.

     

            (b)    Restricted
Stock Unit Awards.    Each Restricted Stock Unit
Award Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of
Restricted Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award Agreements need not
be identical, provided,
however, that each Restricted Stock Unit Award Agreement shall conform to
(through incorporation of the provisions hereof by reference in the Agreement or
otherwise) the substance of each of the following provisions:

     

            (i)    Consideration.    At
the time of grant of a Restricted Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share
of Common Stock subject to the Restricted Stock Unit Award. The consideration to
be paid (if any) by the Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal consideration that
may be acceptable to the Board in its sole discretion and permissible under
applicable law.

     

            (ii)    Vesting.    At
the time of the grant of a Restricted Stock Unit Award, the Board may impose
such restrictions or conditions to the vesting of the Restricted Stock Unit
Award as it, in its sole discretion, deems appropriate.

     

            (iii)    Payment.    A
Restricted Stock Unit Award may be settled by the delivery of shares of Common
Stock, their cash equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the Restricted Stock
Unit Award Agreement.

     

            (iv)    Additional
Restrictions.    At the time of the grant of a
Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of Common Stock
(or their cash equivalent) subject to a Restricted Stock Unit Award to a time
after the vesting of such Restricted Stock Unit Award.

     

    
      
        
        

      

      
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            (v)    Dividend
Equivalents.    Dividend equivalents may be credited
in respect of shares of Common Stock covered by a Restricted Stock Unit Award,
as determined by the Board and contained in the Restricted Stock Unit Award
Agreement. At the sole discretion of the Board, such dividend equivalents may be
converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares
covered by the Restricted Stock Unit Award credited by reason of such dividend
equivalents will be subject to all the terms and conditions of the underlying
Restricted Stock Unit Award Agreement to which they relate.

     

            (vi)    Termination of Participant's
Continuous Service.    Except as otherwise provided
in the applicable Restricted Stock Unit Award Agreement, such portion of the
Restricted Stock Unit Award that has not vested will be forfeited upon the
Participant's termination of Continuous Service.

     

            (vii)    Compliance with Section 409A of
the Code.    Notwithstanding anything to the contrary
set forth herein, any Restricted Stock Unit Award granted under the Plan that is
not exempt from the requirements of Section 409A of the Code shall
incorporate terms and conditions necessary to avoid the consequences of
Section 409A(a)(1) of the Code. Such restrictions, if any, shall be
determined by the Board and contained in the Restricted Stock Unit Award
Agreement evidencing such Restricted Stock Unit Award. For example, such
restrictions may include, without limitation, a requirement that any Common
Stock that is to be issued in a year following the year in which the Restricted
Stock Unit Award vests must be issued in accordance with a fixed pre-determined
schedule.

     

            (c)    Stock
Appreciation Rights.    Each Stock Appreciation Right
Agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. Stock Appreciation Rights may be granted as
stand-alone Stock Awards or in tandem with other Stock Awards. The terms and
conditions of Stock Appreciation Right Agreements may change from time to time,
and the terms and conditions of separate Stock Appreciation Right Agreements
need not be identical; provided, however, that each
Stock Appreciation Right Agreement shall conform to (through incorporation of
the provisions hereof by reference in the Agreement or otherwise) the substance
of each of the following provisions:

     

            (i)    Term.    No
Stock Appreciation Right shall be exercisable after the expiration of ten
(10) years from the date of its grant or such shorter period specified in
the Stock Appreciation Right Agreement.

     

            (ii)    Strike
Price.    Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents. The strike price of each
Stock Appreciation Right shall not be less than one hundred percent (100%) of
the Fair Market Value equivalents subject to the Stock Appreciation Right on the
date of grant.

     

            (iii)    Calculation of
Appreciation.    The appreciation distribution
payable on the exercise of a Stock Appreciation Right will be not greater than
an amount equal to the excess of (A) the aggregate Fair Market Value (on
the date of the exercise of the Stock Appreciation Right) of a number of shares
of Common Stock equal to the number of shares of Common Stock equivalents in
which the Participant is vested under such Stock Appreciation Right, and with
respect to which the Participant is exercising the Stock Appreciation Right on
such date, over (B) the strike price that will be determined by the Board
at the time of grant of the Stock Appreciation Right.

     

            (iv)    Vesting.    At
the time of the grant of a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Stock Appreciation Right as
it, in its sole discretion, deems appropriate.

     

            (v)    Exercise.    To
exercise any outstanding Stock Appreciation Right, the Participant must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Appreciation Right Agreement evidencing such Stock Appreciation
Right.

     

            (vi)    Payment.    The
appreciation distribution in respect to a Stock Appreciation Right may be paid
in Common Stock, in cash, in any combination of the two or in any other form of
consideration, as determined by the Board and set forth in the Stock
Appreciation Right Agreement evidencing such Stock Appreciation
Right.

     

    
      
        
        

      

      
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            (vii)    Termination of Continuous
Service.    In the event that a Participant's
Continuous Service terminates other than for Cause, the Participant may exercise
his or her Stock Appreciation Right (to the extent that the Participant was
entitled to exercise such Stock Appreciation Right as of the date of termination
of Continuous Service) but only within such period of time ending on the earlier
of (A) the date three (3) months following the termination of the
Participant's Continuous Service (or such longer or shorter period specified in
the Stock Appreciation Right Agreement), or (B) the expiration of the term
of the Stock Appreciation Right as set forth in the Stock Appreciation Right
Agreement. If, after termination of Continuous Service, the Participant does not
exercise his or her Stock Appreciation Right within the time specified herein or
in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.

     

            (viii)    Termination for
Cause.    Except as explicitly provided otherwise in
an Participant's Stock Appreciation Right Agreement, in the event that a
Participant's Continuous Service is terminated for Cause, the Stock Appreciation
Right shall terminate upon the termination date of such Participant's Continuous
Service, and the Participant shall be prohibited from exercising his or her
Stock Appreciation Right from and after the time of such termination of
Continuous Service.

     

            (ix)    Compliance with Section 409A of
the Code.    Notwithstanding anything to the contrary
set forth herein, any Stock Appreciation Rights granted under the Plan that are
not exempt from the requirements of Section 409A of the Code shall
incorporate terms and conditions necessary to avoid the consequences specified
in Section 409A(a)(1) of the Code. Such restrictions, if any, shall be
determined by the Board and contained in the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right. For example, such restrictions may
include, without limitation, a requirement that a Stock Appreciation Right that
is to be paid wholly or partly in cash must be exercised and paid in accordance
with a fixed pre-determined schedule.

     

            (d)    Performance
Awards.    

     

            (i)    Performance Stock
Awards.    A Performance Stock Award is a Stock Award
that may be granted, may vest, or may be exercised based upon the attainment
during a Performance Period of certain Performance Goals. A Performance Stock
Award may, but need not, require the completion of a specified period of
Continuous Service. The length of any Performance Period, the Performance Goals
to be achieved during the Performance Period, and the measure of whether and to
what degree such Performance Goals have been attained shall be conclusively
determined by the Committee in its sole discretion. The maximum number of shares
that may be granted to any Participant in a calendar year attributable to
Performance Stock Awards described in this Section 6(d)(i) shall not exceed five million
(5,000,000) shares of Common Stock. In addition, to the extent permitted by
applicable law and the applicable Award Agreement, the Board may determine that
cash may be used in payment of Performance Stock Awards.

     

            (ii)    Performance Cash
Awards.    A Performance Cash Award is a cash award
that may be granted upon the attainment during a Performance Period of certain
Performance Goals. A Performance Cash Award may also require the completion of a
specified period of Continuous Service. The length of any Performance Period,
the Performance Goals to be achieved during the Performance Period, and the
measure of whether and to what degree such Performance Goals have been attained
shall be conclusively determined by the Committee in its sole discretion. The
maximum value that may be granted to any Participant in any calendar year
attributable to cash awards described in this Section 6(d)(ii) shall
not exceed one million dollars ($1,000,000). The Board may provide for or,
subject to such terms and conditions as the Board may specify, may permit a
Participant to elect for, the payment of any Performance Cash Award to be
deferred to a specified date or event. The Committee may specify the form of
payment of Performance Cash Awards, which may be cash or other property, or may
provide for a Participant to have the option for his or her Performance Cash
Award, or such portion thereof as the Board may specify, to be paid in whole or
in part in cash or other property. In addition, to the extent permitted by
applicable law and the applicable Award Agreement, the Board may determine that
Common Stock authorized under the Plan may be used in payment of Performance
Cash Awards, including additional shares in excess of the Performance Cash Award
as an inducement to hold shares of Common Stock.

     

    
      
        
        

      

      
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            (e)    Other Stock
Awards.    Other forms of Stock Awards valued in
whole or in part by reference to, or otherwise based on, Common Stock may be
granted either alone or in addition to Stock Awards provided for under
Section 5 and the preceding provisions of this Section 6. Subject to
the provisions of the Plan, the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Stock
Awards will be granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock Awards and all
other terms and conditions of such Other Stock Awards.

     

    7.     COVENANTS
OF THE COMPANY.

     

            (a)    Availability of
Shares.    During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

     

            (b)    Securities Law
Compliance.    The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority that counsel for the
Company deems necessary for the lawful issuance and sale of Common Stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Stock Awards unless and until such
authority is obtained.

     

            (c)    No Obligation to
Notify.    The Company shall have no duty or
obligation to any holder of a Stock Award to advise such holder as to the time
or manner of exercising such Stock Award. Furthermore, the Company shall have no
duty or obligation to warn or otherwise advise such holder of a pending
termination or expiration of a Stock Award or a possible period in which the
Stock Award may not be exercised. The Company has no duty or obligation to
minimize the tax consequences of a Stock Award to the holder of such Stock
Award.

     

    8.     MISCELLANEOUS.

     

            (a)    Use
of Proceeds from Sales of Common Stock.    Proceeds
from the sale of shares of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

     

            (b)    Corporate
Action Constituting Grant of Stock
Awards.    Corporate action constituting a grant by
the Company of a Stock Award to any Participant shall be deemed completed as of
the date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock
Award is communicated to, or actually received or accepted by, the
Participant.

     

            (c)    Stockholder
Rights.    No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until (i) such
Participant has validly exercised the Stock Award pursuant to its terms and
(ii) the issuance of the Common Stock pursuant to such exercise has been
entered into the books and records of the Company.

     

            (d)    No
Employment or Other Service Rights.    Nothing in the
Plan, any Stock Award Agreement or other instrument executed thereunder or in
connection with any Award granted pursuant to the Plan shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service
of a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate, or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

     

            (e)    Incentive
Stock Option $100,000 Limitation.    To the extent
that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of the
Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options,
notwithstanding any contrary provision of the applicable Option
Agreement(s).

     

    
      
        
        

      

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

     

            (g)    Withholding
Obligations.    Unless prohibited by the terms of a
Stock Award Agreement, the Company may, in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to an Award by any
of the following means (in addition to the Company's right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (i) causing the Participant to tender a cash payment;
(ii) withholding shares of Common Stock from the shares of Common Stock
issued or otherwise issuable to the Participant in connection with the Award;
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such
lower amount as may be necessary to avoid classification of the Stock Award as a
liability for financial accounting purposes); (iii) withholding cash from
an Award settled in cash; (iv) withholding payment from any amounts
otherwise payable to the Participant; or (v) by such other method as may be
set forth in the Award Agreement.

     

            (h)    Electronic
Delivery.    Any reference herein to a "written"
agreement or document shall include any agreement or document delivered
electronically or posted on the Company's intranet.

     

            (i)    Deferrals.    To
the extent permitted by applicable law, the Board, in its sole discretion, may
determine that the delivery of Common Stock or the payment of cash, upon the
exercise, vesting or settlement of all or a portion of any Award may be deferred
and may establish programs and procedures for deferral elections to be made by
Participants. Deferrals by Participants will be made in accordance with
Section 409A of the Code. Consistent with Section 409A of the Code,
the Board may provide for distributions while a Participant is still an
employee. The Board is authorized to make deferrals of Stock Awards and
determine when, and in what annual percentages, Participants may receive
payments, including lump sum payments, following the Participant's termination
of employment or retirement, and implement such other terms and conditions
consistent with the provisions of the Plan and in accordance with applicable
law.

     

            (j)    Compliance
with Section 409A of the Code.    To the extent
that the Board determines that any Award granted under the Plan is subject to
Section 409A of the Code, the Award Agreement evidencing such Award shall
incorporate the terms and conditions necessary to avoid the consequences
described in Section 409A(a)(1) of the Code. To the extent applicable, the
Plan and Award Agreements shall be interpreted in accordance with
Section 409A of the Code and related Department of Treasury guidance.
Notwithstanding any provision of the Plan to the contrary, in the event that
following the Effective Date the Board determines that any Award may be subject
to Section 409A of the Code and related Department of Treasury guidance,
the Board may adopt such amendments to the Plan and the applicable Award
Agreement or adopt other policies and procedures (including amendments, policies
and procedures with retroactive effect), or take any other actions, that the
Board determines are necessary or appropriate to (i) exempt the Award from
Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Award, or (ii) comply with the
requirements of Section 409A of the Code and related Department of Treasury
guidance.

     

    
      
        
        

      

      
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    9.     ADJUSTMENTS
UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

     

            (a)    Capitalization
Adjustments.    In the event of a Capitalization
Adjustment, the Board shall appropriately and proportionately adjust:
(i) the class(es) and maximum number of securities subject to the Plan
pursuant to Section 3(a), (ii) the class(es) and maximum number of
securities that may be issued pursuant to the exercise of Incentive Stock
Options pursuant to Section 3(c), (iii) the class(es) and maximum
number of securities that may be awarded to any person pursuant to
Section 3(d) and 6(d)(i), and (iv) the class(es) and number of
securities and price per share of stock subject to outstanding Stock Awards. The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive.

     

            (b)    Dissolution
or Liquidation.    Except as otherwise provided in
the Stock Award Agreement, in the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards consisting of
vested and outstanding shares of Common Stock not subject to a forfeiture
condition or the Company's right of repurchase) shall terminate immediately
prior to the completion of such dissolution or liquidation, and the shares of
Common Stock subject to the Company's repurchase rights may be repurchased by
the Company notwithstanding the fact that the holder of such Stock Award is
providing Continuous Service, provided, however, that the
Board may, in its sole discretion, cause some or all Stock Awards to become
fully vested, exercisable and/or no longer subject to repurchase or forfeiture
(to the extent such Stock Awards have not previously expired or terminated)
before the dissolution or liquidation is completed but contingent on its
completion.

     

            (c)    Corporate
Transaction.    The following provisions shall apply
to Stock Awards in the event of a Corporate Transaction unless otherwise
provided in the instrument evidencing the Stock Award or any other written
agreement between the Company or any Affiliate and the holder of the Stock
Award.

     

            (i)    Stock Awards May Be
Assumed.    Except as otherwise stated in the Stock
Award Agreement, in the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring
corporation's parent company) may assume or continue any or all Stock Awards
outstanding under the Plan or may substitute similar stock awards for Stock
Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant
to the Corporate Transaction), and any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to Stock Awards may be
assigned by the Company to the successor of the Company (or the successor's
parent company, if any), in connection with such Corporate Transaction. A
surviving corporation or acquiring corporation (or its parent) may choose to
assume or continue only a portion of a Stock Award or substitute a similar stock
award for only a portion of a Stock Award. The terms of any assumption,
continuation or substitution shall be set by the Board in accordance with the
provisions of Section 2.

     

            (ii)    Stock Awards Held by Current
Participants.    Except as otherwise stated in the
Stock Award Agreement, in the event of a Corporate Transaction in which the
surviving corporation or acquiring corporation (or its parent company) does not
assume or continue such outstanding Stock Awards or substitute similar stock
awards for such outstanding Stock Awards in accordance with subsection
(i) above, then with respect to Stock Awards that have not been assumed,
continued or substituted and that are held by Participants whose Continuous
Service has not terminated prior to the effective time of the Corporate
Transaction (referred to as the "Current
Participants"), the vesting of such Stock Awards (and, with respect to
Options and Stock Appreciation Rights, the time at which such Stock Awards may
be exercised) shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Stock Awards shall
terminate if not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction, and any reacquisition or repurchase rights held by
the Company with respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).

     

            (iii)    Stock Awards Held by Persons other
than Current Participants.    Except as otherwise
stated in the Stock Award Agreement, in the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company)
does not assume or continue such outstanding Stock Awards or substitute similar
stock awards for such outstanding Stock Awards in accordance with subsections
(i) or (ii) above, respectively, then with respect to Stock Awards
that have not been assumed, continued or substituted and that are held by
persons other than Current Participants, the vesting of such Stock Awards (and,
if applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of vested
and outstanding shares of Common Stock not subject to a forfeiture condition or
the Company's right of repurchase) shall terminate if not exercised (if
applicable) prior to the effective time of the Corporate Transaction; provided, however, that any
reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall not terminate and may continue to be exercised
notwithstanding the Corporate Transaction.

     

    
      
        
        

      

      
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            (iv)    Payment for Stock Awards in Lieu of
Exercise.    Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the effective time
of a Corporate Transaction, the Board may provide, in its sole discretion, that
the holder of such Stock Award may not exercise such Stock Award but will
receive a payment, in such form as may be determined by the Board, equal in
value to the excess, if any, of (A) the value of the property the holder of
the Stock Award would have received upon the exercise of the Stock Award
(including, at the discretion of the Board, any unvested portion of such Stock
Award), over (B) any exercise price payable by such holder in connection
with such exercise.

     

            (d)    Change
in Control.    A Stock Award may be subject to
additional acceleration of vesting and exercisability upon or after a Change in
Control as may be provided in the Stock Award Agreement for such Stock Award or
as may be provided in any other written agreement between the Company or any
Affiliate and the Participant, but in the absence of such provision, no such
acceleration shall occur.

     

    10.   TERMINATION
OR SUSPENSION OF THE PLAN.

     

            (a)    Plan
Term.    Unless sooner terminated by the Board
pursuant to Section 2, the Plan shall automatically terminate on the day
before the tenth (10th) anniversary of the date the Plan is adopted by the Board
or approved by the stockholders of the Company, whichever is earlier. No Awards
may be granted under the Plan while the Plan is suspended or after it is
terminated.

     

            (b)    No
Impairment of Rights.    Suspension or termination of
the Plan shall not impair rights and obligations under any Award granted while
the Plan is in effect except with the written consent of the affected
Participant.

     

    11.   EFFECTIVE
DATE OF PLAN.

     

            The
Plan shall become effective on the Effective Date. Prior to the Effective Date,
the Prior Plan is unaffected by the Plan, and Stock Awards shall continue to be
granted from the Prior Plan. If the Plan has not been approved by the
stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted by the Board, the adoption of the Plan shall be null
and void and the Prior Plan shall continue unaffected by the adoption of the
Plan.

     

    12.   CHOICE
OF LAW.

     

            The
law of the State of California shall govern all questions concerning the
construction, validity and interpretation of the Plan, without regard to such
state's conflict of laws rules.

     

    13. AUTOMATIC GRANTS TO NON-EMPLOYEE
DIRECTORS.

     

    13.1
Eligibility.
Non-Employee Directors are eligible for Options granted pursuant to this
Section 13. Notwithstanding the foregoing, this Section 13 does not
limit the ability of the Board to grant discretionary Awards to Non-Employee
Directors.

     

    13.2
Initial Grant.
Each Non-Employee Director who has not received an option to purchase Common
Stock in the twelve (12) month period immediately preceding the Effective
Date (the “Initial Twelve Month Period”) and who is or who becomes a member of
the Board on the Effective Date will automatically be granted an Option to
purchase fifty thousand (50,000) Shares on the Effective Date. Each
Non-Employee Director who first becomes a member of the Board after the
Effective Date will automatically be granted an Option to purchase fifty
thousand (50,000) Shares on the date such Non-Employee Director first
becomes a member of the Board. Each Option granted pursuant to this
Section 13.2 shall be called an “Initial Grant.”

     

    
      
        
        

      

      
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    13.3
Succeeding
Grant. On the first business day following the annual meeting of the
Company’s Stockholders, each Non-Employee Director who is continuing in service
as a member of the Board will on the first business day following such annual
meeting of stockholders automatically be granted an Option to purchase twenty
five thousand (25,000) Shares. Each Option granted pursuant to this
Section 13.3 shall be called a “Succeeding Grant”. Notwithstanding the
foregoing, in the event a Non-Employee Director received an Initial Grant within
the twelve (12) month period preceding the annual meeting of the Company’s
stockholders, then the number of Shares subject to such Director’s first
Succeeding Grant shall be the number of Shares equal to the product of
(a) twenty five thousand (25,000) and (b) a fraction, the
numerator of which is the number of full calendar months such Non-Employee
Director has been a member of the Board prior to the Company’s annual meeting of
stockholders and the denominator of which is twelve (12).

     

    13.4
Vesting and
Exercisability.

     

    (a) Initial Grants.
Initial Grants shall vest 50% on the grant date.  The remaining 50%
shall become exercisable as to 1/36 of the remaining Shares on each monthly
anniversary of the date of grant, such that Initial Grants are fully vested and
exercisable on the third anniversary of the date of grant, so long as the
Non-Employee Director continuously remains a director, consultant or employee of
the Company.

     

    (b) Succeeding Grants.
Succeeding Grants shall vest and become exercisable as to 1/36 of the total
Shares subject to the Succeeding Grant on each monthly anniversary of the date
of grant, such that Succeeding Grants are fully vested and exercisable on the
third anniversary of the date of grant, so long as the Non-Employee Director
continuously remains a director, consultant or employee of the
Company.

     

    (c) Change In Control. In
the event of a Change In Control, the vesting of all Options granted to
Non-Employee Directors pursuant to this Section 13 shall accelerate and
such Options will become exercisable in full immediately prior to the
consummation of the Change In Control at such time and on such conditions as the
Committee determines, and if such Options are not exercised on or prior to the
consummation of the Change In Control, they shall terminate immediately
following the consummation of the Change In Control.

     

    13.5
Form of Option
Grant. Each Option granted under this Section 13 shall be a NSO and
shall be evidenced by a Non-Employee Director Stock Award Agreement in such form
as the Board from time to time approve and which shall comply with and be
subject to the terms and conditions of this Plan.

     

    13.6
Exercise Price.
The Exercise Price per Share of each Option granted under this Section 13
shall be the Fair Market Value of the Share on the date the Option is
granted.

     

    13.7
Termination of
Option. Except as provided in Section 13.4(c) or this
Section 13.7, each Option granted under this Section 13 shall expire
ten (10) years after its date of grant. The date on which the Non-Employee
Director ceases to be a member of the Board, a consultant or employee of the
Company shall be referred to as the “Non-Employee Director Termination Date” for
purposes of this Section 13.7. An Option may be exercised after the
Non-Employee Director Termination Date only as set forth below:

     

    (a) Termination
Generally. If the Non-Employee Director ceases to be a member of the
Board, consultant or employee of the Company for any reason except death,
Disability or Change In Control, each Initial Grant and Succeeding Grant, to the
extent then vested pursuant to Section 13.4 above, then held by such
Non-Employee Director may be exercised by the Non-Employee Director within
twelve (12) months after the Non-Employee Director Termination Date, but in no
event later than the Expiration Date.

     

    (b) Death. If the
Non-Employee Director ceases to be a member of the Board, consultant or employee
of the Company because of his or her death, then each Initial Grant and
Succeeding Grant, to the extent then vested pursuant to Section 13.4 above,
then held by such Non-Employee Director, may be exercised by the Non-Employee
Director or his or her legal representative within twelve (12) months after
the Non-Employee Director Termination Date, but in no event later than the
Expiration Date.

     

    (c) Disability. If the
Non-Employee Director ceases to be a member of the Board, consultant or employee
of the Company because of his or her Disability, then each Initial Grant and
Succeeding Grant, to the extent then vested pursuant to Section 13.4 above,
then held by such Non-Employee Director, may be exercised by the Non-Employee
Director or his or her legal representative within twelve (12) months after
the Non-Employee Director Termination Date, but in no event later than the
Expiration Date.

     

    
      
        
        

      

      
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    (d) Change In
Control.  If the Non-Employee Director ceases to be a member of
the Board, consultant or employee of the Company because of a Change In Control,
then each Initial Grant and Succeeding Grant, to the extent then vested pursuant
to Section 13.4 above, then held by such Non-Employee Director, may be
exercised by the Non-Employee Director or his or her legal representative within
twelve (12) months after the Non-Employee Director Termination Date, but in
no event later than the Expiration Date.

     

    14.    DEFINITIONS.    As
used in the Plan, the definitions contained in this Section 14 shall apply
to the capitalized terms indicated below:

     

            (a)    "Affiliate"    means,
at the time of determination, any "parent" or "subsidiary" of the Company as
such terms are defined in Rule 405 of the Securities Act. The Board shall
have the authority to determine the time or times at which "parent" or
"subsidiary" status is determined within the foregoing definition.

     

            (b)    "Award"    means
a Stock Award or a Performance Cash Award.

     

            (c)    "Board"    means
the Board of Directors of the Company.

     

            (d)    "Capitalization
Adjustment"    means any change that is made in, or
other events that occur with respect to, the Common Stock subject to the Plan or
subject to any Stock Award after the Effective Date without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company. Notwithstanding the foregoing, the
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.

     

            (e)    "Cause"    means
with respect to a Participant, the occurrence of any of the following events:
(i) such Participant's commission of any felony or any crime involving
fraud, dishonesty or moral turpitude under the laws of the United States or any
state thereof; (ii) such Participant's attempted commission of, or
participation in, a fraud or act of dishonesty against the Company;
(iii) such Participant's intentional, material violation of any contract or
agreement between the Participant and the Company or of any statutory duty owed
to the Company; (iv) such Participant's unauthorized use or disclosure of
the Company's confidential information or trade secrets; or (v) such
Participant's gross misconduct. The determination that a termination of the
Participant's Continuous Service is either for Cause or without Cause shall be
made by the Company in its sole discretion. Any determination by the Company
that the Continuous Service of a Participant was terminated by reason of
dismissal without Cause for the purposes of outstanding Awards held by such
Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other
purpose.

     

            (f)    "Change in
Control"    means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

     

            (i)    any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (A) on account of the
acquisition of securities of the Company by an investor, any affiliate thereof
or any other Exchange Act Person from the Company in a transaction or series of
related transactions the primary purpose of which is to obtain financing for the
Company through the issuance of equity securities or (B) solely because the
level of Ownership held by any Exchange Act Person (the "Subject Person") exceeds the
designated percentage threshold of the outstanding voting securities as a result
of a repurchase or other acquisition of voting securities by the Company
reducing the number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

     

    
      
        
        

      

      
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            (ii)   there is
consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such
merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either
(A) outstanding voting securities representing more than fifty percent
(50%) of the combined outstanding voting power of the surviving Entity in such
merger, consolidation or similar transaction or (B) more than fifty percent
(50%) of the combined outstanding voting power of the parent of the surviving
Entity in such merger, consolidation or similar transaction, in each case in
substantially the same proportions relative to each other as their Ownership of
the outstanding voting securities of the Company immediately prior to such
transaction;

     

            (iii) the stockholders of
the Company approve or the Board approves a plan of complete dissolution or
liquidation of the Company, or a complete dissolution or liquidation of the
Company shall otherwise occur, except for a liquidation into a parent
corporation;

     

            (iv)  there is
consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries
to an Entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are Owned by stockholders of the Company in
substantially the same proportions relative to each other as their Ownership of
the outstanding voting securities of the Company immediately prior to such sale,
lease, license or other disposition; or

     

            (v)   individuals
who, immediately following the Effective Time, are members of the Board (the
"Incumbent
Board") cease for any reason to constitute at least a majority of the
members of the Board; (provided, however, that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of the Plan, be
considered as a member of the Incumbent Board).

     

            Notwithstanding
the foregoing or any other provision of the Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Awards subject to such agreement; provided, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall apply.

     

            The
Board may, in its sole discretion and without Participant consent, amend the
definition of "Change in Control" to conform to the definition of "Change of
Control" under Section 409A of the Code and related Department of Treasury
guidance.

     

            (g)    "Code"    means
the Internal Revenue Code of 1986, as amended.

     

            (h)    "Committee"    means
a committee of one (1) or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(c).

     

            (i)    "Common
Stock"    means the common stock of the
Company.

     

            (j)    "Company"    means
Adamis Pharmaceuticals Corporation (formerly Cellegy Pharmaceuticals, Inc.), a
Delaware corporation.

     

            (k)    "Consultant"    means
any person, including an advisor, who is (i)  engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such
services, including employees of Cartesian Medical Group, Inc. who provide
bona-fide services to the Company, or (ii) serving as a member of the board
of directors of an Affiliate and is compensated for such services. However,
service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a "Consultant" for purposes of the
Plan.

     

    
      
        
        

      

      
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            (l)    "Continuous
Service"    means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. A change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant's service with the Company or an Affiliate, shall not terminate a
Participant's Continuous Service. For example, a change in status from an
employee of the Company to a Consultant (whether to the Company or to an
Affiliate) or to a Director shall not constitute an interruption of Continuous
Service. To the extent permitted by law, the Board or the chief executive
officer of the Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of
absence approved by that party, including sick leave, military leave or any
other personal leave. Notwithstanding the foregoing, a leave of absence shall be
treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Company's leave of absence policy, in the
written terms of any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.

     

            (m)    "Corporate
Transaction"    means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

     

            (i)    a
sale or other disposition of all or substantially all, as determined by the
Board in its sole discretion, of the consolidated assets of the Company and its
Subsidiaries;

     

            (ii)   a sale
or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;

     

            (iii) the consummation of
a merger, consolidation or similar transaction following which the Company is
not the surviving corporation; or

     

            (iv)  the
consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation or
similar transaction into other property, whether in the form of securities, cash
or otherwise.

     

            (n)    "Covered
Employee"    shall have the meaning provided in
Section 162(m)(3) of the Code and the regulations promulgated
thereunder.

     

            (o)    "Director"    means
a member of the Board.

     

            (p)    "Disability"    means,
with respect to a Participant, the inability of such Participant to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, as
provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the
Code.

     

            (q)    "Effective
Date"    means the date of the closing of the merger
transaction contemplated by the Agreement and Plan of Reorganization dated as of
February 12, 2008, entered into by and among Cellegy Pharmaceuticals, Inc.,
Cellegy Holdings, Inc., and Adamis Pharmaceuticals Corporation.

     

            (r)    "Employee"    means
any person employed by the Company or an Affiliate. However, service solely as a
Director, or payment of a fee for such services, shall not cause a Director to
be considered an "Employee" for purposes of the Plan.

     

            (s)    "Entity"    means
a corporation, partnership, limited liability company or other
entity.

     

            (t)    "Exchange
Act"    means the Securities Exchange Act of 1934, as
amended.

     

            (u)    "Exchange Act
Person"    means any natural person, Entity or
"group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that "Exchange Act Person" shall not include (i) the Company or any
Subsidiary of the Company, (ii) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary of
the Company, (iii) an underwriter temporarily holding securities pursuant
to an offering of such securities, (iv) an Entity Owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or (v) any natural
person, Entity or "group" (within the meaning of Section 13(d) or 14(d) of
the Exchange Act) that, as of the Effective Date, is the Owner, directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company's then outstanding
securities.

     

    
      
        
        

      

      
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            (v)    "Fair Market
Value"    means, as of any date, the value of the
Common Stock determined as follows:

     

            (i)    If
the Common Stock is listed on any established stock exchange or traded on any
established market, the Fair Market Value of a share of Common Stock shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the date of
determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable. Unless otherwise provided by the
Board, if there is no closing sales price (or closing bid if no sales were
reported) for the Common Stock on the date of determination, then the Fair
Market Value shall be the closing selling price (or closing bid if no sales were
reported) on the last preceding date for which such quotation
exists.

     

            (ii)   In the
absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith and in a manner that complies with
Section 409A of the Code.

     

            (w)    "Incentive Stock
Option"    means an Option granted pursuant to
Section 5 of the Plan that is intended to be, and qualifies as, an
"incentive stock option" within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

     

            (x)    "Non-Employee
Director"    means a Director who either (i) is
not a current Employee or Officer of the Company or an Affiliate, does not
receive compensation, either directly or indirectly, from the Company or an
Affiliate for services rendered as a Consultant or in any capacity other than as
a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act ("Regulation S-K")),
does not possess an interest in any other transaction for which disclosure would
be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship for which disclosure would be required pursuant to Item
404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

     

            (y)    "Nonstatutory
Stock Option"    means any Option granted pursuant to
Section 5 of the Plan that does not qualify as an Incentive Stock
Option.

     

            (z)    "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.

     

            (aa)    "Option"    means
an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of
Common Stock granted pursuant to the Plan.

     

            (bb)    "Option
Agreement"    means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

     

            (cc)    "Optionholder"    means
a person to whom an Option is granted pursuant to the Plan or, if permitted
under the terms of the Plan, such other person who holds an outstanding
Option.

     

            (dd)    "Other Stock
Award"    means an award based in whole or in part by
reference to the Common Stock which is granted pursuant to the terms and
conditions of Section 6(e).

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

            (ee)    "Other Stock
Award Agreement"    means a written agreement between
the Company and a holder of an Other Stock Award evidencing the terms and
conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall
be subject to the terms and conditions of the Plan.

     

            (ff)    "Outside
Director"    means a Director who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer
of the Company or an "affiliated corporation," and does not receive remuneration
from the Company or an "affiliated corporation," either directly or indirectly,
in any capacity other than as a Director, or (ii) is otherwise considered
an "outside director" for purposes of Section 162(m) of the
Code.

     

            (gg)    "Own," "Owned,"
"Owner," "Ownership"    A person or Entity shall be
deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired
"Ownership" of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

     

            (hh)    "Participant"    means
a person to whom an Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.

     

            (ii)    "Performance Cash
Award"    means an award of cash granted pursuant to
the terms and conditions of Section 6(d)(ii).

     

            (jj)    "Performance
Criteria"    means the one or more criteria that the
Board shall select for purposes of establishing the Performance Goals for a
Performance Period. The Performance Criteria that shall be used to establish
such Performance Goals may be based on any one of, or combination of, the
following: (i) earnings per share; (ii) earnings before interest,
taxes and depreciation; (iii) earnings before interest, taxes, depreciation
and amortization; (iv) total stockholder return; (v) return on equity;
(vi) return on assets, investment, or capital employed;
(vii) operating margin; (viii) gross margin; (ix) operating
income; (x) net income (before or after taxes); (xi) net operating
income; (xii) net operating income after tax; (xiii) pre-tax profit;
(xiv) operating cash flow; (xv) sales or revenue targets;
(xvi) increases in revenue or product revenue; (xvii) expenses and
cost reduction goals; (xviii) improvement in or attainment of working
capital levels; (xix) economic value added (or an equivalent metric);
(xx) market share; (xxi) cash flow; (xxii) cash flow per share;
(xxiii) share price performance; (xxiv) debt reduction;
(xxv) implementation or completion of projects or processes;
(xxvi) customer satisfaction; (xxvii) completion of regulatory or
development milestones; (xxviii) stockholders' equity; and (xxix) to
the extent that an Award is not intended to comply with Section 162(m) of
the Code, other measures of performance selected by the Board. Partial
achievement of the specified criteria may result in the payment or vesting
corresponding to the degree of achievement as specified in the Stock Award
Agreement or the written terms of a Performance Cash Award. The Board shall, in
its sole discretion, define the manner of calculating the Performance Criteria
it selects to use for such Performance Period.

     

            (kk)    "Performance
Goals"    means, for a Performance Period, the one or
more goals established by the Board for the Performance Period based upon the
satisfaction of the Performance Criteria. Performance Goals may be based on a
Company-wide basis, with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms or relative to
the performance of one or more comparable companies or the performance of one or
more relevant indices. At the time of the grant of any Award, the Board is
authorized to determine whether, when calculating the attainment of Performance
Goals for a Performance Period: (i) to exclude restructuring and/or other
nonrecurring charges; (ii) to exclude exchange rate effects, as applicable,
for non-U.S. dollar denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting standards
required by the Financial Accounting Standards Board; (iv) to exclude the
effects of any statutory adjustments to corporate tax rates; and (v) to
exclude the effects of any "extraordinary items" as determined under generally
accepted accounting principles. In addition, the Board retains the discretion to
reduce or eliminate the compensation or economic benefit due upon attainment of
Performance Goals.

     

            (ll)    "Performance
Period"    means the period of time selected by the
Board over which the attainment of one or more Performance Goals will be
measured for the purpose of determining a Participant's right to and the payment
of a Stock Award or a Performance Cash Award. Performance Periods may be of
varying and overlapping duration, at the sole discretion of the
Board.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

            (mm)    "Performance
Stock Award"    means a Stock Award granted under the
terms and conditions of Section 6(d)(i).

     

            (nn)    "Plan"    means
this Adamis Pharmaceuticals, Inc. 2009 Equity Incentive Plan.

     

            (oo)    "Restricted Stock
Award"    means an award of shares of Common Stock
which is granted pursuant to the terms and conditions of
Section 6(a).

     

            (pp)    "Restricted Stock
Award Agreement"    means a written agreement between
the Company and a holder of a Restricted Stock Award evidencing the terms and
conditions of a Restricted Stock Award grant. Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan.

     

            (qq)    "Restricted Stock
Unit Award"    means an unfunded right to receive
shares of Common Stock at a future date which is granted pursuant to the terms
and conditions of Section 6(b).

     

            (rr)    "Restricted Stock
Unit Award Agreement"    means a written agreement
between the Company and a holder of a Restricted Stock Unit Award evidencing the
terms and conditions of a Restricted Stock Unit Award grant. Each Restricted
Stock Unit Award Agreement shall be subject to the terms and conditions of the
Plan.

     

            (ss)    "Rule 16b-3"    means
Rule 16b-3 promulgated under the Exchange Act or any successor to
Rule 16b-3, as in effect from time to time.

     

            (tt)    "Securities
Act"    means the Securities Act of 1933, as
amended.

     

            (uu)    "Stock
Appreciation Right"    means a right to receive the
appreciation on Common Stock that is granted pursuant to the terms and
conditions of Section 6(c).

     

            (vv)    "Stock
Appreciation Right Agreement"    means a written
agreement between the Company and a holder of a Stock Appreciation Right
evidencing the terms and conditions of a Stock Appreciation Right grant. Each
Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.

     

            (ww)    "Stock
Award"    means any right to receive Common Stock
granted under the Plan, including an Incentive Stock Option, a Nonstatutory
Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock
Appreciation Right, a Performance Stock Award or any Other Stock
Award.

     

            (xx)    "Stock Award
Agreement"    means a written agreement between the
Company and a Participant evidencing the terms and conditions of a Stock Award
grant. Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

     

            (yy)    "Subsidiary"    means,
with respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company, and
(ii) any partnership, limited liability company or other entity in which
the Company has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

     

            (zz)    "Ten Percent
Stockholder"    means a person who Owns (or is deemed
to Own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Affiliate.

     

    
      
        
        

      

      
        20INDEMNIFICATION
AGREEMENT

    

    This
AGREEMENT is made and entered into as of August 19, 2009, between THE QUIGLEY CORPORATION, a
corporation organized under the laws of the State of Nevada (the "Corporation"), and
_____________________
("Indemnitee").

    

    WHEREAS, it is essential to
the Corporation to retain and attract as officers and directors of the
Corporation the most capable persons available; and

     

    WHEREAS, the Corporation has
requested that Indemnitee become or remain an officer and/or director of the
Corporation; and

     

    WHEREAS, both the Corporation
and Indemnitee recognize the increased risk of litigation and other claims being
asserted against officers and directors of companies in today's environment;
and

     

    WHEREAS, the Corporation's
By-Laws provide that the Corporation will indemnify its officers and directors
to the fullest extent permitted by law and will advance expenses in connection
therewith, and Indemnitee's willingness to serve as an officer and/or director
of the Corporation is based in part on Indemnitee's reliance on such provisions;
and

     

    WHEREAS, in recognition of
Indemnitee's need for substantial protection against personal liability in order
to enhance Indemnitee's service to the Corporation in an effective manner, and
Indemnitee's reliance on the aforesaid provisions of the By-Laws, and in part to
provide Indemnitee with specific contractual assurance that the protection
promised by such provisions will be available to Indemnitee regardless of, among
other things, any amendment to or revocation of such provisions or any change in
the composition of the Corporation's Board of Directors or any acquisition or
business combination transaction relating to the Corporation, the Corporation
wishes to provide in this Agreement for the indemnification and advancement of
expenses to Indemnitee as set forth in this Agreement.

     

    NOW, THEREFORE, in
consideration of the mutual agreements herein set forth, the parties hereto
hereby agree as follows:

     

    1.           Indemnity.

    

    (a) To
the fullest extent permitted by law (and regardless of any future provision of
the Articles of Incorporation (the “Articles”) or any
By-Law to the contrary), the Corporation shall indemnify Indemnitee in the event
Indemnitee is made, or threatened to be made, a party or a witness, or is
otherwise a participant in or to, an action, investigation or proceeding,
whether civil, administrative or criminal (including but not limited to an
action, investigation or proceeding by or in the right of the Corporation or by
or in the right of any other corporation or business entity of any type or kind,
domestic or foreign, which any officer and/or director of the Corporation served
in any capacity at the request of the Corporation), by reason of the fact that
Indemnitee is or was an officer and/or director of the Corporation (or served
any other corporation or business entity of any type or kind, domestic or
foreign, in any capacity at the request of the
Corporation).   The foregoing indemnification shall be from and
against all judgments, fines, penalties, amounts paid in settlement and
reasonable expenses, including attorneys’ fees, actually and reasonably incurred
by Indemnitee or on Indemnitee’s behalf in connection with such action, suit,
investigation or proceeding, or any appeal therein.  The Corporation
shall pay, in advance of final disposition of any such action, suit,
investigation or proceeding, expenses (including attorneys’ fees) incurred by
Indemnitee in defending or otherwise responding to such action or proceeding
upon receipt of (1) a written affirmation by the Indemnitee of the Indemnitee’s
good faith belief that Indemnitee has met the standard of conduct necessary for
indemnification by the Corporation, and (2)  a
written undertaking by or on behalf of Indemnitee to repay
the  amounts advanced if it is determined in a final order issued by a
court of competent jurisdiction from which no appeal may be taken that the
Indemnitee did not meet the required standard of conduct. The aforesaid written
affirmation and undertaking shall be consistent with provisions of applicable
law, including but not limited to the Nevada General Corporation
Law.   For purposes of this Agreement, references to "serving at
the request of the Corporation" shall include any service as an officer and/or
director of the Corporation which imposes duties on, or involves services by,
such an officer and/or director with respect to an employee benefit plan or its
participants or beneficiaries, including but not limited to service as a trustee
or administrator of any such benefit plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (b)
Notwithstanding anything to the contrary in Section 1(a), the Corporation shall
indemnify Indemnitee in any action, suit or proceeding initiated by Indemnitee
only if Indemnitee acted with the authorization of the Corporation in initiating
that action, suit investigation or proceeding; provided, however, that any
action or proceeding brought under Section 9 shall not be subject to this
Section 1(b), and it is expressly agreed that the Corporation shall bear any and
all fees and expenses incurred by Indemnitee in seeking to enforce this
agreement.

    

     (c)
Indemnitee shall be presumed to be entitled to indemnification for matters
covered in this Agreement. The burden of proof of establishing that Indemnitee
is not entitled to indemnification shall be on the Corporation.

    

    (d)
Neither the Corporation nor Indemnitee shall unreasonably withhold their consent
to any proposed settlement of an indemnified claim, provided, however, that no
party shall be required to admit liability in connection with any proposed
settlement and Indemnitee shall not be required to bear any cost or expense in
connection with any proposed settlement of an indemnifiable claim.

    

    2. Partial Indemnity; Successful
Defense.

    

    (a) If
Indemnitee is entitled under any provisions of this Agreement to indemnification
by the Corporation for some or a portion of the expenses, judgments, fines,
taxes, penalties and amounts paid in settlement but not for the total amount
thereof, the Corporation shall indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.

    

    (b) To
the extent that Indemnitee has been successful on the merits or otherwise in
defense or settlement of any action, suit, investigation or proceeding or in
defense of any issue or matter therein, including, without limitation, dismissal
without prejudice, Indemnitee shall be indemnified against any and all expenses
(including but not limited to attorneys’ fees), judgments, fines, taxes,
penalties and amounts paid in settlement with respect to such action, suit or
proceeding. Moreover, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any or all claims relating in whole or in part
to an indemnifiable event or in defense of any issue or matter therein,
including, without limitation, dismissal without prejudice, Indemnitee shall be
indemnified against all costs, charges and expenses, including, without
limitation, attorneys' fees and other fees and expenses, incurred in connection
therewith without further action or determination.

     

    
      
         

      

      
        - 2
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    (c) For
purposes of this Agreement, the termination of any action, suit, investigation
or proceeding, by judgment, order, settlement (whether with or without court
approval), shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law or this
Agreement.

    

    3. Notice by
Indemnitee.

    

    Indemnitee
shall notify the Corporation in writing of any matter with respect to which
Indemnitee intends to seek indemnification hereunder as soon as reasonably
practicable following the receipt by Indemnitee of written threat thereof; provided, however, that
failure to so notify the Corporation shall not constitute a waiver by Indemnitee
of his rights hereunder.

    

    4. Advancement of
Expenses.

    

    In the
event of any action, suit, investigation or proceeding against Indemnitee which
may give rise to a right of indemnification from the Corporation pursuant to
this Agreement, following written request to the Corporation by Indemnitee, the
Corporation shall advance to Indemnitee (or, at the request of the Indemnitee,
to such parties as are conducting the defense of any indemnified claim) amounts
to cover expenses incurred by Indemnitee in defending or otherwise responding to
or participating in any such action, suit, investigation or proceeding in
advance of the final disposition thereof upon receipt of (a) an Undertaking by
or on behalf of Indemnitee substantially in the form annexed hereto as Exhibit A
to repay the amount advanced in the event  it shall ultimately be
determined by a court of competent jurisdiction from which no appeal can be
taken that Indemnitee is not entitled to be indemnified by the Corporation (the
“Undertaking”),
and (b) reasonably satisfactory evidence as to the amount of such expenses.
Indemnitee's Undertaking together with a copy of an expense statement billed to
Indemnitee or paid or to be paid by Indemnitee shall constitute satisfactory
evidence as to the amount of expenses to be advanced by the
Corporation.  Following receipt of an Undertaking, the Corporation
shall, within 30 calendar days after receiving expense statements, make payment
of the expenses stated therein.  No security shall be required in
connection with any Undertaking and any Undertaking shall be accepted without
reference to the Indemnitee's ability to make repayment.

    

    5.  Non-Exclusivity
of Right of Indemnification.

    

    (a) The
indemnification rights granted to Indemnitee under this Agreement shall not be
deemed exclusive of, or in limitation of, any other rights that are more
beneficial to Indemnitee to which Indemnitee may be entitled under Nevada law,
the Corporation's articles of incorporation or by-laws, any other agreement, any
vote of shareholders or directors or otherwise. To the extent any applicable
law, the Corporation's articles of incorporation or by-laws, as in effect on the
date hereof or at any time in the future, permit greater or less limited or less
conditional indemnification or advance payment of expenses than is provided
for

    in this
Agreement, Indemnitee shall enjoy such greater or less limited or less
conditional benefits so afforded, and this Agreement shall be deemed amended
without any further action by the Corporation or Indemnitee to grant such
greater benefits.  It is the intention of the parties that nothing in
this Agreement shall limit or abridge the indemnification rights of Indemnitee
as set forth in the Articles, in any by-laws, in any directors’ and officers’
liability insurance coverage, or otherwise. Accordingly, in the event there is a
conflict between any provision in this Agreement and any provision of the
Articles or any by-law provision now in effect or which may be in effect in the
future, the controlling provision shall be that provision which would be more
favorable to Indemnitee and would result in broader and more expansive
indemnification rights in favor of Indemnitee.

     

    
      
         

      

      
        - 3
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    (b)
Indemnitee shall be entitled, in the sole discretion of Indemnitee, to elect to
have Indemnitee's rights hereunder interpreted on the basis of applicable law in
effect (i) at the time of execution of this Agreement, or (ii) at the time of
the occurrence of the indemnifiable event giving rise to a claim, or (iii) at
the time indemnification is sought.

    

    6. Contribution.

    

    If the
indemnification provided for in this Agreement is unavailable to Indemnitee for
any reason whatsoever, the Corporation, in lieu of indemnifying Indemnitee,
shall contribute to the amount incurred by Indemnitee, whether for expenses,
judgments, fines, taxes, penalties and amounts paid in settlement in connection
with any action, suit, investigation or proceeding, in such proportion as is
fair and reasonable in light of  all of the circumstances of such
action by board action, arbitration or by the court before which such action was
brought in order to reflect (a) the relative benefits received by the
Corporation and Indemnitee as a result of the event(s) and/or transaction(s)
giving cause to such action; and/or (b) the relative fault of the Corporation
(and its other directors, officers, employees and agents) and Indemnitee in
connection with such event(s) and/or transaction(s). Indemnitee's right to
contribution under this Section 6 shall be determined in accordance with,
pursuant to and in the same manner as, the provisions in Sections 1 and 2
relating to Indemnitee's right to indemnification under this
Agreement.

    

    7. Liability
Insurance.

    

    (a)  To
the extent the Corporation maintains at any time an insurance policy or policies
providing directors' and officers' liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any other an officer and/or
director of the Corporation under such insurance policy.

    

    (b) The
purchase and maintenance of such insurance shall not in any way limit or affect
the rights and obligations of the parties hereto, and the execution and delivery
of this Agreement shall not in any way be construed to limit or affect the
rights and obligations of the Corporation and/or of the other parties under any
such insurance policy.

    

    (c)  The
provisions of this Section 7 shall neither (i) restrict the Corporation’s right
to purchase any type of Officers’ and/or Directors’ liability coverage (or any
other insurance coverage that is reserved to or benefits solely or primarily
independent or non-executive directors), nor (ii) afford any officer or
non-executive director who is not insured under any such insurance policy a
claim against the Corporation, the Indemnitee, or any other entity arising from
the purchase or existence of such insurance coverage.

     

    
      
         

      

      
        - 4
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    8.
Termination of Agreement and
Survival of Right of Indemnification.

    

    The
Corporation will require any successor (whether direct or indirect, by purchase,
merger, consolidation, reorganization or otherwise) to all or substantially all
of the business or assets of the Corporation, by agreement in form and substance
reasonably satisfactory to the then-current Board of Directors of the
Corporation, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Corporation would be required to perform if no
such succession had taken place.  This Agreement will be binding upon
and inure to the benefit of the Corporation and any successor to the
Corporation, including, without limitation, any person acquiring directly or
indirectly all or substantially all of the business or assets of the Corporation
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor will thereafter be deemed the "Corporation" for purposes of this
Agreement), but this Agreement will not otherwise be assignable, transferable or
delegable by the Corporation.  The rights granted to Indemnitee
hereunder shall continue and survive any termination of this Agreement and any
termination of Indemnitee’s service as an officer and/or director of the
Corporation and shall inure to the benefit of Indemnitee, Indemnitee’s personal
representatives, heirs, executors, administrators and
beneficiaries.

    

    9.  Resolution of All
Disputes Concerning Entitlement.

    

    (a) It is
intent of the Corporation that the Indemnitee not be required to incur the
expenses associated with the enforcement of Indemnitee’s rights under this
Agreement by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Indemnitee hereunder.  Accordingly, if it should appear to the
Indemnitee that the Corporation has failed to comply with any of its obligations
under this Agreement or in the event that the Corporation or any other person
takes any action to declare this Agreement void or unenforceable, or institutes
any action, suit, investigation or proceeding designed (or having the effect of
being designed) to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, the Corporation irrevocably
authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s
choice, at the expense of the Corporation as hereinafter provided, to represent
the Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Corporation or any director,
officer, stockholder or other person affiliated with the Corporation, in any
jurisdiction.  Regardless of the outcome thereof, the Corporation
shall pay and be solely responsible for any and all costs, charges and expenses,
including, without limitation, attorneys' and other fees and expenses,
reasonably incurred by the Indemnitee as a result of the Corporation's failure
to perform this Agreement or any provision thereof.

    

    (b)The
exclusive  forum for resolution of any controversy or claim arising
out of or relating to this Agreement or Indemnitee's entitlement to
indemnification under this Agreement shall be the Federal and State Courts
situated in the County of New York, State of New York, and the parties hereby
consent to the exclusive jurisdiction and venue of said courts and
waive  any claim that said courts do not constitute a convenient or
appropriate venue, and agrees that service of process may be effected in any
such action, suit or proceeding by notice given in accordance with Section
11.

     

    
      
         

      

      
        - 5
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    10. Amendments,
Etc.

    

    Except as
provided in Section 5, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.  No provision of this Agreement
may be waived, modified or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Indemnitee and the
Corporation.  No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.  No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original but all of which together will constitute one and the same
agreement.

    

    11. Notices.

    

    All
notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered by hand or when mailed by certified registered mail, return receipt
requested, with postage prepaid:

    

    (a) If to
Indemnitee, to the corporate address of the Corporation provided directly
below.

    

    (b) If to
the Corporation, to:

    

    The
Quigley Corporation

    Kells
Building,

    621 Shady
Retreat Road, P.O. Box 1349

    Doylestown,
PA  18901

    c/o Chief
Executive Officer

    

    -with
copies to-

    

    The Board
of Directors of The Quigley Corporation

    

    -and-

    

    Herbert
F. Kozlov, Esq.

    Reed
Smith LLP

    599
Lexington Avenue

    NY, NY
10022

    

    or to
such person or address as Indemnitee or the Corporation shall furnish to the
other party in writing pursuant to the above.

     

    
      
         

      

      
        - 6
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    12.
Severability.

    

    If any
provision of this Agreement is determined to be invalid, illegal or
unenforceable, this invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement, and there shall be substituted for the provision at issue a valid and
enforceable provision as similar as possible to the provision at
issue.

    

    IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first above
stated.

    

    

    THE
QUIGLEY CORPORATION:

    

    By:
________________________

    Name: Ted
Karkus

    Title:
Chairman and Chief Executive Officer

    

    INDEMNITEE:

    

    _____________________________

    Name:

     

     

     

     

     

     

     

     

    
      
         

      

      
        - 7
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    EXHIBIT A—GENERAL FORM OF
UNDERTAKING

    

    1.           This
Statement is submitted pursuant to the Indemnity Agreement effective  _____________________,
2009 between THE QUIGLEY
CORPORATION, a corporation organized and existing under the laws of the
State of Nevada, (the "Corporation") and the
undersigned.

    

    2.           I
am requesting indemnification against expenses (including attorneys' fees) and
judgments, fines and amounts paid in settlement, all of which have been or will
be actually and reasonably incurred by me or on my behalf in connection with a
certain action, suit, investigation or other proceeding to which I am a party or
am threatened to be made a party, or in which I am or may be participating, by
reason of the fact that I am or was an officer and/or director of the
Corporation.

    

    3.           With
respect to all matters related to any such action, suit, investigation or other
proceeding, I believe I acted in good faith and in a manner I reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, I had no reason to believe
that my conduct was unlawful.

    

    4.        I
hereby affirm that I believe in good faith belief that I have met the standard
of conduct necessary for indemnification by the Corporation. I hereby undertake
to repay this advancement of expenses if it shall ultimately be determined
pursuant to a final order from which no appeal can be taken of a court of
competent jurisdiction that I am not entitled to be indemnified by the
Corporation under the aforesaid Indemnification Agreement or
otherwise.

     

    5.        I
am requesting indemnification in connection with the following
matter:   [PROVIDE DETAILS]

    

    

     

    
      	      
              ___________________________           

              Name of
      Indemnitee

            	
              Dated:
      _____________

               

            

    

     

    

    
      

    

     

    

     

    
 

    
      
         

      

      
        - 8
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