Document:

Exhibit 10.3

Employee Stock Option Agreement

This Employee Stock Option
Agreement, dated as of June 12, 2006, between Hertz Global Holdings, Inc.,
a Delaware corporation, and the Employee whose name appears on the signature page hereof,
is being entered into pursuant to the Hertz Global Holdings, Inc. Stock
Incentive Plan. The meaning of capitalized terms may be found in Section 7.

The Company and the Employee hereby
agree as follows:

Section 1.   Grant
of Options

(a)   Confirmation
of Grant. The Company hereby evidences and confirms, effective as of the
date hereof, its grant to the Employee of Options to purchase the number of
Common Shares specified on the signature page hereof. The Options are not
intended to be incentive stock options under the Code. This Agreement is
entered into pursuant to, and the terms of the Options are subject to, the
terms of the Plan. If there is any inconsistency between this Agreement and the
terms of the Plan, the terms of the Plan shall govern.

(b)   Option
Price. Each share covered by an Option shall have the Option Price
specified on the signature page hereof.

Section 2.   Vesting
and Exercisability

(a)   Except
as otherwise provided in Section 6(a) or Section 2(b) of
this Agreement, the Options shall become vested in three equal annual
installments on each of the first through third anniversaries of the Grant
Date, subject to the continuous employment of the Employee with the Company
until January 1, 2007; provided that if the Employee’s employment
with the Company is terminated at any time in a Special Termination (i.e., by
reason of the Employee’s death or Disability), any Options held by the Employee
shall immediately vest as of the effective date of such Special Termination.

(b)   Discretionary
Acceleration. The Board, in its sole discretion, may accelerate the vesting
or exercisability of all or a portion of the Options, at any time and from time
to time.

(c)   Exercise.
Once vested in accordance with the provisions of this Agreement, the Options
may be exercised at any

 

 

 

time and from
time to time prior to the date such Options terminate pursuant to Section 3.
Options may only be exercised with respect to whole Common Shares and must be
exercised in accordance with Section 4.

Section 3.   Termination
of Options

(a)   Normal
Termination Date. Unless earlier terminated pursuant to Section 3(b) or
Section 6, the Options shall terminate on the second anniversary of the
date on which such Options vest (the “Normal Termination Date”), if not
exercised prior to such date.

(b)   Early
Termination. If the Employee’s employment with the Company terminates for
any reason (other than a Special Termination) prior to January 1, 2007,
any Options held by the Employee shall terminate immediately upon such termination
of employment (determined without regard to any statutory or deemed or express
contractual notice period). If the Employee’s employment with the Company
terminates for any reason other than for Cause or a Special Termination on or
after January 1, 2007, any Options held by the Employee shall continue to
vest in accordance with the terms of Section 2 of this Agreement and shall
remain outstanding until the Normal Termination Date. If the Employee’s
employment with the Company terminates, at any time, for Cause, all Options
(whether or not then vested or exercisable) shall automatically terminate
immediately upon such termination. If the Employee’s employment with the
Company terminates, at any time, by reason of a Special Termination, all
unvested Options shall immediately vest upon such Special Termination. All
vested Options held by the Employee following the effective date of a Special
Termination shall remain exercisable until the Normal Termination Date, and if
not exercised within such period the Options shall automatically terminate upon
the expiration of such period.

Section 4.   Manner
of Exercise

(a)   General.
Subject to such reasonable administrative regulations as the Board may adopt
from time to time, the Employee may exercise vested Options by giving at least
15 business days prior written notice to the Secretary of the Company
specifying the proposed date on which the Employee desires to exercise a vested
Option (the “Exercise Date”), the number of whole shares with respect to
which the Options are being exercised (the “Exercise

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Shares”)
and the aggregate Option Price for such Exercise Shares (the “Exercise Price”);
provided that following a Public Offering notice may be given within
such lesser period as the Board may permit. On or before any Exercise Date that
occurs prior to a Public Offering, the Company and the Employee shall enter
into an Employee Stock Subscription Agreement that contains transfer and other
restrictions on the Exercise Shares, a form of which has been provided to the Employee.
Unless otherwise determined by the Board, and subject to such other terms,
representations and warranties as may be provided for in the Employee Stock
Subscription Agreement, (i) on or before the Exercise Date the
Employee shall deliver to the Company full payment for the Exercise Shares in
United States dollars in cash, or cash equivalents satisfactory to the Company,
in an amount equal to the Exercise Price plus any required withholding
taxes or other similar taxes, charges or fees and (ii) the Company
shall register the issuance of the Exercise Shares on its records (or direct
such issuance to be registered by the Company’s transfer agent). The Company
may require the Employee to furnish or execute such other documents as the
Company shall reasonably deem necessary (i) to evidence such
exercise, (ii) to determine whether registration is then required
under the Securities Act or other applicable law or (iii) to comply
with or satisfy the requirements of the Securities Act, applicable state or non-U.S.
securities laws or any other law.

(b)   Restrictions
on Exercise. Notwithstanding any other provision of this Agreement, the
Options may not be exercised in whole or in part, and no certificates
representing Exercise Shares shall be delivered, (i) (A) unless
all requisite approvals and consents of any governmental authority of any kind
shall have been secured, (B) unless the purchase of the Exercise
Shares shall be exempt from registration under applicable U.S. federal and
state securities laws, and applicable non-U.S. securities laws, or the Exercise
Shares shall have been registered under such laws, and (C) unless
all applicable U.S. federal, state and local and non-U.S. tax withholding
requirements shall have been satisfied or (ii) if such exercise
would result in a violation of the terms or provisions of or a default or an
event of default under, any of the Financing Agreements. The Company shall use
its commercially reasonable efforts to obtain any consents or approvals
referred to in clause (i) (A) of the preceding sentence, but shall
otherwise have no obligations to take any steps to prevent or remove any
impediment to exercise described in such sentence.

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Section 5.   Employee’s
Representations; Investment Intention. The Employee represents and warrants
that the Options have been, and any Exercise Shares will be, acquired by the
Employee solely for the Employee’s own account for investment and not with a
view to or for sale in connection with any distribution thereof. The Employee
represents and warrants that the Employee understands that none of the Exercise
Shares may be transferred, sold, pledged, hypothecated or otherwise disposed of
unless the provisions of the related Employee
Stock Subscription Agreement shall have been complied with or have expired.

Section 6.   Change
in Control

(a)   Vesting
and Cancellation. Except as otherwise provided in this Section 6(a),
in the event of a Change in Control, all then-outstanding Options (whether
vested or unvested) shall be canceled in exchange for a payment having a value
equal to the excess, if any, of (i) the product of the Change in Control
Price multiplied by the aggregate number of shares covered by all such Options
immediately prior to the Change in Control over (ii) the aggregate Option
Price for all such shares, to be paid as soon as reasonably practicable, but in
no event later than 30 days following the Change in Control.

(b)   Alternative
Award. Notwithstanding Section 6(a), no cancellation, termination, or
settlement or other payment shall occur with respect to any Option if the Board
reasonably determines prior to the Change in Control that the Employee shall
receive an Alternative Award meeting the requirements of the Plan.

(c)   Limitation
of Benefits. If, whether as a result of accelerated vesting, the grant of
an Alternative Award or otherwise, the Employee would receive any payment,
deemed payment or other benefit as a result of the operation of Section 6(a) or
Section 6(b) that, together with any other payment, deemed payment or
other benefit the Employee may receive under any other plan, program, policy or
arrangement, would constitute an “excess parachute payment” under section 280G
of the Code, then, notwithstanding anything in this Section 6 to the
contrary, the payments, deemed payments or other benefits such Employee would
otherwise receive under Section 6(a) or Section 6(b) shall
be reduced to the extent necessary to eliminate any such excess parachute
payment and such Employee shall have no further rights or claims with respect
thereto. If the preceding sentence would result in a reduction of the payments,

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deemed payments or other benefits the
Employee would otherwise receive on an after-tax basis by more than 5%, the
Company will use its commercially reasonable best efforts to seek the approval
of the Company’s shareholders in the manner provided for in section 280G(b)(5) of
the Code and the regulations thereunder with respect to such reduced payments
or other benefits (if the Company is eligible to do so), so that such payments
would not be treated as “parachute payments” for these purposes (and therefore
would cease to be subject to reduction pursuant to this Section 6(c)).

Section 7.   Certain
Definitions. As used in this Agreement, capitalized terms that are not
defined herein have the respective meaning given in the Plan, and the following
additional terms shall have the following meanings:

“Agreement” means this
Employee Stock Option Agreement, as amended from time to time in accordance
with the terms hereof.

“Code” means the United
States Internal Revenue Code of 1986, as amended, and any successor thereto.

“Company” means Hertz Global
Holdings, Inc., provided that for purposes of determining the
status of Employee’s employment with the “Company,” such term shall include the
Company and its Subsidiaries.

“Employee” means the grantee
of the Options, whose name is set forth on the signature page of this
Agreement; provided that for purposes of Section 4 and Section 8,
following such person’s death “Employee” shall be deemed to include such person’s
beneficiary or estate and following such Person’s Disability, “Employee” shall
be deemed to include such person’s legal representative.

“Employee Stock Subscription
Agreement” means a “Stock Subscription Agreement” as defined in the Plan.

“Exercise Date” has the
meaning given in Section 4(a).

“Exercise Price” has the
meaning given in Section 4(a).

“Exercise Shares” has the
meaning given in Section 4(a).

“Grant Date” means the date
hereof, which is the date on which the Options are granted to the Employee.

“Normal Termination Date”
has the meaning given in Section 3(a).

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“Option” means the right
granted to the Employee hereunder to purchase one Common Share for a purchase
price equal to the Option Price subject to the terms of this Agreement and the
Plan.

“Option Price” means, with
respect to each Common Share covered by an Option, the purchase price specified
in Section 1(b) for which the Employee may purchase such Common Share
upon exercise of an Option.

“Plan” means the Hertz
Global Holdings, Inc. Stock Incentive Plan.

“Securities Act” means the
United States Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations thereunder that are in effect at the time, and
any reference to a particular section thereof shall include a reference to the
corresponding section, if any, of such successor statute, and the rules and
regulations.

“Special Termination” means
a termination of the Employee’s employment as a result of his or her death or
Disability.

Section 8.   Miscellaneous.

(a)   Withholding.
The Company or one of its Subsidiaries may require the Employee to remit to the
Company an amount in cash sufficient to satisfy any applicable U.S. federal,
state and local and non-U.S. tax withholding or other similar charges or fees
that may arise in connection with the grant, vesting, exercise or purchase of
the Options.

(b)   Authorization
to Share Personal Data. The Employee authorizes any Affiliate of the
Company that employs the Employee or that otherwise has or lawfully obtains
personal data relating to the Employee to divulge or transfer such personal
data to the Company or to a third party, in each case in any jurisdiction, if
and to the extent appropriate in connection with this Agreement or the
administration of the Plan.

(c)   No
Rights as Stockholder; No Voting Rights. The Employee shall have no rights
as a stockholder of the Company with respect to any Shares covered by the
Options until the exercise of the Options and delivery of the Shares. No
adjustment shall be made for dividends or other rights for which the record
date is prior to the delivery of the Shares. Any Shares delivered in respect of
the Options shall be subject to the Employee Stock Subscription Agreement and
the Employee shall have no voting rights with respect

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to such Shares
until such time as specified in the Employee Stock Subscription Agreement.

(d)   No
Right to Continued Employment. Nothing in this Agreement shall be deemed to
confer on the Employee any right to continue in the employ of the Company or
any Subsidiary, or to interfere with or limit in any way the right of the
Company or any Subsidiary to terminate such employment at any time.

(e)   Non-Transferability
of Options. The Options may be exercised only by the Employee. The Options
are not assignable or transferable, in whole or in part, and they may not,
directly or indirectly, be offered, transferred, sold, pledged, assigned,
alienated, hypothecated or otherwise disposed of or encumbered (including, but
not limited to, by gift, operation of law or otherwise) other than by will or
by the laws of descent and distribution to the estate of the Employee upon the
Employee’s death or with the Company’s consent.

(f)   Notices.
All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have been given if
delivered personally or sent by certified or express mail, return receipt
requested, postage prepaid, or by any recognized international equivalent of
such delivery, to the Company or the Employee, as the case may be, at the
following addresses or to such other address as the Company or the Employee, as
the case may be, shall specify by notice to the other:

(i)   if
to the Company, to it at:

Hertz Global Holdings, Inc.

c/o The Hertz Corporation

225 Brae Boulevard

Park Ridge, New Jersey  07656

Attention: General Counsel

Fax: (201) 594-3122

(ii)   if
to the Employee, to the Employee at his or her most recent address as shown on
the books and records of the Company or Subsidiary employing the Employee; and

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copies of any notice or other communication
given under this Agreement shall also be given to:

The Carlyle Group

1001 Pennsylvania Avenue, NW

Suite 220 South

Washington DC 20004-2505

Attention:  Mr. Gregory S. Ledford

Fax:  (202) 347-1818

and

Clayton, Dubilier & Rice, Inc. 

375 Park Avenue, 18th Floor

New York, New York

Attention: David Wasserman 

Fax: (212) 407-5252

and

Merrill Lynch Global Private Equity

4 World Financial Center, 23rd Floor

New York, NY 10080

Attention:  Mr. George A. Bitar &
                  Mr. Robert F. End

Fax:  (212) 449-1119

and

Debevoise & Plimpton LLP

919 Third Avenue 

New York, New York 10022

Attention:  John M. Allen

Fax:  (212) 909-6836

All such notices and communications shall be
deemed to have been received on the date of delivery if delivered personally or
on the third business day after the mailing thereof.

(g)   Binding
Effect; Benefits. This Agreement shall be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
assigns. Nothing in this

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Agreement,
express or implied, is intended or shall be construed to give any person other
than the parties to this Agreement or their respective successors or assigns
any legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.

(h)   Waiver;
Amendment.

(i)   Waiver.
Any party hereto or beneficiary hereof may by written notice to the other
parties (A) extend the time for the performance of any of the
obligations or other actions of the other parties under this Agreement, (B) waive
compliance with any of the conditions or covenants of the other parties
contained in this Agreement and (C) waive or modify performance of
any of the obligations of the other parties under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party
or beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by any party
hereto or beneficiary hereof of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any preceding or succeeding
breach and no failure by a party or beneficiary to exercise any right or
privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s
rights or privileges hereunder or shall be deemed a waiver of such party’s or
beneficiary’s rights to exercise the same at any subsequent time or times
hereunder.

(ii)   Amendment.
This Agreement may not be amended, modified or supplemented orally, but only by
a written instrument executed by the Employee and the Company.

(i)   Assignability.
Neither this Agreement nor any right, remedy, obligation or liability arising
hereunder or by reason hereof shall be assignable by the Company or the
Employee without the prior written consent of the other party.

(j)   Applicable
Law. This Agreement shall be governed by and construed in accordance with
the law of the State of Delaware regardless of the application of rules of
conflict of law that would apply the laws of any other jurisdiction.

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(k)    Section and Other Headings, etc.
The section and other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

(l)   Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute
one and the same instrument.

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IN WITNESS WHEREOF, the Company and
the Employee have executed this Agreement as of the date first above written.

	
   

  	
  HERTZ GLOBAL HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Irwin M. Pollack

  
	
   

  	
   

  	
  Name:

  	
  Irwin M. Pollack

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President,

  
	
   

  	
   

  	
   

  	
  Employee Relations,

  
	
   

  	
   

  	
   

  	
  The Hertz Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE EMPLOYEE:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Craig R. Koch

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elizabeth E. Corcoran

  
	
   

  	
   

  	
  as Attorney-in-Fact

  
	
   

  	
   

  	
  Name:

  	
  Elizabeth E. Corcoran

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address of the Employee:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14 Stewart Court

  
	
   

  	
  Old Tappan, NJ 07675

  
	
   

  	
   

  

 

	
  Total Number of Shares

  for the Purchase of Which

  Options have been Granted

  	
   

  	
  Option Price

  
	
   

  	
   

  	
   

  
	
  50,000 Shares

  	
   

  	
  $10.00

  

 

 

 11Exhibit
10.1

ARENA PHARMACEUTICALS, INC.

2006 LONG-TERM INCENTIVE PLAN

Arena Pharmaceuticals, Inc.
(the “Company”), a Delaware corporation, hereby establishes and adopts the
following 2006 Long-Term Incentive Plan (the “Plan”).

1.             PURPOSE
OF THE PLAN

The purpose of the Plan is to assist the
Company and its Subsidiaries in attracting and retaining selected individuals
to serve as directors, employees, consultants and/or advisors of the Company
and its Subsidiaries who are expected to contribute to the Company’s success
and to achieve long-term objectives which will inure to the benefit of all
stockholders of the Company through the additional incentives inherent in the
Awards hereunder.

2.             DEFINITIONS

2.1.         “Award” shall mean any Option, Stock
Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award,
Performance Award or any other right, interest or option relating to Shares or
other property (including cash) granted pursuant to the provisions of the Plan.

2.2.         “Award Agreement” shall mean any written
agreement, contract or other instrument or document evidencing any Award
granted hereunder, including through an electronic medium.

2.3.         “Board” shall mean the board of directors
of the Company.

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

2.5.         “Committee” shall mean the Compensation
Committee of the Board or a subcommittee thereof formed by the Compensation
Committee to act as the Committee hereunder. The Committee shall consist of no
fewer than two Directors, each of whom is (i) a “Non-Employee Director”
within the meaning of Rule 16b-3 of the Exchange Act, (ii) an “outside
director” within the meaning of Section 162(m) of the Code, and (iii) an
“independent director” for purpose of the rules and regulations of the NASDAQ
Stock Market (or such other principal securities market on which the Shares are
traded).

2.6.         “Covered Employee” shall mean a “covered
employee” within the meaning of Section 162(m) of the Code.

2.7.         “Director” shall mean a non-employee member
of the Board.

2.8.         “Dividend Equivalents” shall have the
meaning set forth in Section 12.5.

2.9.         “Employee” shall mean any employee of the
Company or any Subsidiary and any prospective employee conditioned upon, and
effective not earlier than, such person becoming an

 

employee of the Company or any Subsidiary. Solely for purposes of the
Plan, an Employee shall also mean any consultant or advisor who is a natural
person and who provides services to the Company or any Subsidiary, so long as
such person (i) renders bona fide services that are not in connection with
the offer and sale of the Company’s securities in a capital-raising transaction
and (ii) does not directly or indirectly promote or maintain a market for
the Company’s securities.

2.10.       “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.

2.11.       “Fair Market Value” shall mean, with
respect to any property other than Shares, the market value of such property
determined by such methods or procedures as shall be established from time to
time by the Committee. The Fair Market Value of Shares as of any date shall be
the per Share closing price of the Shares as reported on the NASDAQ Stock
Market on that date (or if there was no reported closing price on such date, on the last preceding date
on which the closing price was reported) or, if the Company is not then listed
on the NASDAQ Stock Market, on such other principal securities exchange on
which the Shares are traded, and if the Company is not listed on the NASDAQ
Stock Market or any other securities exchange, the Fair Market Value of Shares
shall be determined by the Committee in its sole discretion using appropriate
criteria.

2.12.       “Limitations” shall have the meaning set
forth in Section 10.5.

2.13.       “Option” shall mean any right granted to a
Participant under the Plan allowing such Participant to purchase Shares at such
price or prices and during such period or periods as the Committee shall
determine.

2.14.       “Participant” shall mean an Employee or
Director who is selected by the Committee to receive an Award under the Plan.

2.15.       “Payee”
shall have the meaning set forth in Section 13.1.

2.16.       “Performance Award” shall mean any Award of
Performance Shares or Performance Units granted pursuant to Article 9.

2.17.       “Performance Period” shall mean that period
established by the Committee at the time any Performance Award is granted or at
any time thereafter during which any performance goals specified by the
Committee with respect to such Award are to be measured.

2.18.       “Performance Share” shall mean any grant
pursuant to Article 9 of a unit valued by reference to a designated number
of Shares, which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance
goals during the Performance Period as the Committee shall establish.

2.19.       “Performance Unit” shall mean any grant
pursuant to Section 9 of a unit valued by reference to a designated amount
of property other than Shares (or cash), which value may be paid to the
Participant by delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish.

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2.20.       “Permitted Assignee” shall have the meaning
set forth in Section 12.3.

2.21.       “Prior Plans” shall mean, collectively, the
Company’s Amended and Restated 1998 Equity Compensation Plan, Amended and
Restated 2000 Equity Compensation Plan and the 2002 Equity Compensation Plan.

2.22.       “Restricted Stock” shall mean any Share
issued with the restriction that the holder may not sell, transfer, pledge or
assign such Share and with such other restrictions as the Committee, in its
sole discretion, may impose (including any restriction on the right to vote
such Share and the right to receive any dividends), which restrictions may
lapse separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.

2.23.       “Restricted Stock Award” shall have the
meaning set forth in Section 7.1.

2.24.       “Restricted Stock Unit Award” shall have
the meaning set forth in Section 8.1.

2.25.       “Shares” shall mean the shares of common
stock, $0.0001 par value, of the Company.

2.26.       “Stock Appreciation Right” shall mean the
right granted to a Participant pursuant to Section 6.

2.27.       “Subsidiary” shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning with
the Company if, at the relevant time, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other corporations
in the chain.

2.28.       “Substitute Awards” shall mean Awards
granted or Shares issued by the Company in assumption of, or in substitution or
exchange for, awards previously granted, or the right or obligation to make
future awards, in each case by a company acquired by the Company or any
Subsidiary or with which the Company or any Subsidiary combines.

2.29.       “Vesting Period” shall have the meaning set
forth in Section 7.1.

3.             SHARES
SUBJECT TO THE PLAN

3.1          Number of
Shares.

(a)           Subject
to adjustment as provided in Section 12.2, a total of 6,000,000 Shares
shall be authorized for issuance under the Plan, as increased if applicable
under this Section.

(b)           If
any Shares subject to an Award or to an award under the Prior Plans are
forfeited, expire or otherwise terminate without issuance of such Shares, or
any Award or award under the Prior Plans is settled for cash or otherwise does
not result in the issuance of all or a portion of the Shares subject to such
Award or award under the Prior Plans (including on

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payment in Shares on the exercise of a Stock Appreciation Right), such Shares
shall, to the extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, be available for issuance under the Plan.

(c)           In
the event that (i) any Award granted hereunder is exercised through the
tendering of Shares (either actually or by attestation) or by the withholding
of Shares by the Company, or (ii) withholding tax liabilities arising from
any Award are satisfied by the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, then the Shares so
tendered or withheld shall be available for issuance under the Plan. In the
event that (i) any award granted under the Prior Plans is exercised
through the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or (ii) withholding tax liabilities
arising from such award are satisfied by the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by the Company, then
the Shares so tendered or withheld shall be available for issuance under the
Plan.

(d)           Shares
issued under Substitute Awards shall not reduce the Shares authorized for issuance
under the Plan or authorized for grant to a Participant under Section 10.5.

3.2.         Character of Shares. Any Shares issued hereunder
may consist, in whole or in part, of authorized and unissued shares, treasury
shares or shares purchased in the open market or otherwise.

4.             ELIGIBILITY
AND ADMINISTRATION

4.1.         Eligibility.
Any Employee or Director shall be eligible to be selected as a Participant.

4.2.         Administration.
(a)  The Plan shall be administered by the Committee. The Committee shall
have full power and authority, subject to the provisions of the Plan and
subject to such orders or resolutions not inconsistent with the provisions of
the Plan as may from time to time be adopted by the Board, to: (i) select
the Employees and Directors to whom Awards may from time to time be granted
hereunder; (ii) determine the type or types of Awards, not inconsistent
with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine
the number of Shares to be covered by each Award granted hereunder; (iv) determine
the terms and conditions, not inconsistent with the provisions of the Plan, of
any Award granted hereunder (including the power to amend outstanding Awards); (v) determine
whether, to what extent and under what circumstances Awards may be settled in
cash, Shares or other property; (vi) determine whether, to what extent,
and under what circumstances cash, Shares, other property and other amounts
payable with respect to an Award made under the Plan shall be deferred either
automatically or at the election of the Participant; (vii) determine
whether, to what extent and under what circumstances any Award shall be
canceled or suspended; (viii) interpret and administer the Plan and any
instrument or agreement entered into under or in connection with the Plan,
including any Award Agreement; (ix) correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent that the Committee shall deem desirable to carry it into
effect; (x) establish such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Plan; (xi)
determine whether any Award, other than an Option or Stock

 4
 

 

Appreciation Right, will have Dividend Equivalents; and (xii) make
any other determination and take any other action that the Committee deems
necessary or desirable for administration of the Plan.

(b)           Decisions
of the Committee shall be final, conclusive and binding on all persons or
entities, including the Company, any Participant, and any Subsidiary. A
majority of the members of the Committee may determine its actions, including fixing
the time and place of its meetings.

(c)           To
the extent not inconsistent with applicable law, including Section 162(m) of
the Code, or the rules and regulations of the NASDAQ Stock Market (or such
other principal securities market on which the Shares are traded), the
Committee may delegate to: (i) a committee of one or more members of the Board
the authority to take action on behalf of the Committee under the Plan
including the right to grant, cancel, suspend or amend Awards and (ii) one
or more “executive officers” within the meaning of Rule 16a-1(f) of
the Exchange Act or a committee of executive officers the right to grant Awards
to Employees who are not Directors or executive officers of the Company, to the
extent permitted by law.

(d)           The
Board in its discretion may ratify and approve actions taken by the Committee. In
addition, to the extent not inconsistent with applicable law or the rules and
regulations of the NASDAQ Stock Market or such other principal securities
market on which the Shares are traded, the Board may take any action under the
Plan that the Committee is authorized to take. In the event the Board takes
such action references to the Committee hereunder shall be understood to refer
to the Board.

5.             OPTIONS

5.1.         Grant of Options. Options may be granted
hereunder to Participants either alone or in addition to other Awards granted
under the Plan. Any Option shall be subject to the terms and conditions of this
Article and to such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall deem desirable.

5.2.         Award Agreements. All Options granted pursuant to
this Article shall be evidenced by a written Award Agreement in such form
and containing such terms and conditions as the Committee shall determine which
are not inconsistent with the provisions of the Plan. The terms of Options need
not be the same with respect to each Participant. Granting an Option pursuant
to the Plan shall impose no obligation on the recipient to exercise such Option.
Any individual who is granted an Option pursuant to this Article may hold
more than one Option granted pursuant to the Plan at the same time.

5.3.         Option Price. Other than in connection with Substitute
Awards, the option price per each Share purchasable under any Option granted
pursuant to this Article shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of such Option. Other than pursuant to Section 12.2,
the Committee shall not without the approval of the Company’s stockholders (a) lower
the option price per Share of an Option after it is granted, (b) cancel an
Option when the option price per Share exceeds the Fair Market Value of the
underlying Shares in exchange for cash or another Award (other than in
connection with  Substitute Awards), and

 5
 

 

(c) take any other action with respect to an Option that may be
treated as a repricing under the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded).

5.4.         Option Term.
The term of each Option shall be fixed by the Committee in its sole discretion;
provided that no Option shall be exercisable after the expiration of ten (10) years
from the date the Option is granted, except in the event of death or
disability.

5.5.         Exercise of
Options. (a)  Vested Options granted under the Plan may be
exercised by the Participant or by a Permitted Assignee thereof (or by the
Participant’s executors, administrators, guardian or legal representative, as
may be provided in an Award Agreement) as to all or part of the Shares covered
thereby, by the giving of notice of exercise to the Company or its designated
agent, specifying the number of Shares to be purchased. The notice of exercise
shall be in such form, made in such manner, and shall comply with such other
requirements consistent with the provisions of the Plan as the Committee may
from time to time prescribe.

(b)           Unless
otherwise provided in an Award Agreement, full payment of such purchase price
shall be made at the time of exercise and shall be made (i) in cash or
cash equivalents (including certified check or bank check or wire transfer of
immediately available funds), (ii) by tendering previously acquired Shares
(either actually or by attestation, valued at their then Fair Market Value), (iii) with
the consent of the Committee, by delivery of other consideration (including,
where permitted by law and the Committee, other Awards) having a Fair Market
Value on the exercise date equal to the total purchase price, (iv) with
the consent of the Committee, by withholding Shares otherwise issuable in
connection with the exercise of the Option, (v) through any other method
specified in an Award Agreement, or (vi) any combination of any of the
foregoing. In no event may any Option granted hereunder be exercised for a
fraction of a Share. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such issuance. Except
under circumstances contemplated by Article 11 or as may be set forth in
an Award Agreement with respect to (x) retirement, death or disability of
a Participant, or (y) special circumstances determined by the Committee (such
as the achievement of performance objectives), Options granted to employees of
the Company or any Subsidiary will not be exercisable before the expiration of
one year from the date the Option is granted (but may become exercisable pro
rata over such time).

5.6.         Incentive Stock Options. The Committee may grant
Options intended to qualify as “incentive stock options” as defined in Section 422
of the Code, to any employee of the Company or any Subsidiary, subject to the
requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1
to the contrary and solely for the purposes of determining whether Shares are
available for the grant of “incentive stock options” under the Plan, the
maximum aggregate number of Shares that may be issued pursuant to “incentive
stock options” granted under the Plan shall be 6,000,000 Shares, as adjusted
pursuant to Section 12.2

 6
 

 

6.             STOCK APPRECIATION RIGHTS

6.1.         Grant and Exercise. The Committee may provide
Stock Appreciation Rights (a) in conjunction with all or part of any
Option granted under the Plan or at any subsequent time during the term of such
Option, (b) in conjunction with all or part of any Award (other than an
Option) granted under the Plan or at any subsequent time during the term of
such Award, or (c) without regard to any Option or other Award, in each
case upon such terms and conditions as the Committee may establish in its sole
discretion.

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

(a)           Upon
the exercise of a Stock Appreciation Right, the holder shall have the right to
receive the excess of (i) the Fair Market Value of one Share on the date
of exercise over (ii) the grant price of the right on the date of grant.

(b)           Upon
the exercise of a Stock Appreciation Right, the Committee shall determine in
its sole discretion whether payment shall be made in cash, in whole Shares or
other property, or any combination thereof.

(c)           The
provisions of Stock Appreciation Rights need not be the same with respect to
each recipient.

(d)           The
Committee may impose such other conditions or restrictions on the terms of
exercise and the grant price of any Stock Appreciation Right, as it shall deem
appropriate. A Stock Appreciation Right shall have (i) a grant price per Share
of not less than Fair Market Value of one Share on the date of grant (subject
to the requirements of Section 409A of the Code with respect to a Stock
Appreciation Right granted in conjunction with, but subsequent to, an Option), and
(ii) a term not greater than ten (10) years. In addition to the
foregoing, but subject to Section 12.2, the Committee shall not without
the approval of the Company’s stockholders (x) lower the grant price per
Share of any Stock Appreciation Right after it is granted, (y) cancel any
Stock Appreciation Right when the grant price per Share exceeds the Fair Market
Value of the underlying Shares in exchange for cash or another Award (other
than in connection with  Substitute
Awards), and (z) take any other action with respect to any Stock
Appreciation Right that may be treated as a repricing under the rules and
regulations of the NASDAQ Stock Market (or such other principal securities market
on which the Shares are traded).

(e)           In
no event may any Stock Appreciation Right granted hereunder be exercised for a
fraction of a Share. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such issuance. Except
under circumstances contemplated by Article 11 or as may be set forth in
an Award Agreement with respect to (x) retirement, death or disability of
a Participant, or (y) special circumstances determined by the Committee
(such as the achievement of performance objectives), Stock Appreciation Rights
granted to employees of the Company or any Subsidiary will not be exercisable
before the

 7
 

 

expiration of one year from the date the Stock Appreciation Right is
granted (but may become exercisable pro rata over such time).

(f)            The
Committee may impose such other terms and conditions on Stock Appreciation
Rights, not inconsistent with the Plan, as the Committee shall determine in its
sole discretion.

7.             RESTRICTED
STOCK AWARDS

7.1.         Grants.
Awards of Restricted Stock may be issued hereunder to Participants either alone
or in addition to other Awards granted under the Plan (a “Restricted Stock
Award”), and such Restricted Stock Awards may also be available as a form of
payment of Performance Awards and other earned cash-based incentive
compensation. A Restricted Stock Award shall be subject to vesting restrictions
imposed by the Committee covering a period of time specified by the Committee
(the “Vesting Period”) consistent with the provisions herein. The Committee has
absolute discretion to determine whether any consideration (other than
services) is to be received by the Company or any Subsidiary as a condition
precedent to the issuance of Restricted Stock.

7.2.         Award Agreements. The terms of any Restricted
Stock Award granted under the Plan shall be set forth in a written Award
Agreement which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The terms of Restricted Stock Awards need not be
the same with respect to each Participant.

7.3.         Rights of Holders of Restricted Stock. Beginning
on the date of grant of the Restricted Stock Award and subject to execution of
the Award Agreement, the Participant shall become a stockholder of the Company
with respect to all Shares subject to the Award Agreement and shall have all of
the rights of a stockholder, including the right to vote such Shares and the
right to receive distributions made with respect to such Shares; provided,
however, that except as otherwise
provided in an Award Agreement any Shares or any other property (other than
cash) distributed as a dividend or otherwise with respect to any Restricted Stock
as to which the restrictions have not yet lapsed shall be subject to the same
restrictions as such Restricted Stock.

7.4.         Minimum Vesting Period. Except for certain
limited situations (including the death, disability or retirement of the
Participant, or a Change in Control as defined in Article 11), or special
circumstances determined by the Committee, such as the achievement of
performance objectives, Restricted Stock Awards subject solely to the continued
employment of employees of the Company or a Subsidiary shall have a Vesting Period
of not less than three (3) years from date of grant (but permitting pro rata
vesting over such time); provided that such minimum Vesting Period shall not be
applicable to (i) grants to new hires to replace forfeited awards from a
prior employer, or (ii) grants of Restricted Stock in payment of
Performance Awards and other earned cash-based incentive compensation. Subject
to the foregoing minimum Vesting Period requirements, the Committee may, in its
sole discretion and subject to the limitations imposed under Section 162(m) of
the Code and the regulations thereunder in the case of a Restricted Stock Award
intended to comply with the performance-based exception under Code Section 162(m),
waive the forfeiture period and any other conditions set forth in any Award
Agreement subject to such terms and conditions as the Committee shall deem
appropriate. The minimum Vesting Period requirements of this Section shall
not apply to Restricted Stock Awards granted

 8
 

 

to Directors or to any consultants or advisors who provide services to
the Company or any Subsidiary.

8.             RESTRICTED STOCK UNIT AWARDS

8.1.         Grants.
Other Awards of units having a value equal to an identical number of Shares (“Restricted
Stock Unit Awards”) may be granted hereunder to Participants either alone or in
addition to other Awards granted under the Plan. Restricted Stock Unit Awards
shall also be available as a form of payment of other Awards granted under the
Plan and other earned cash-based incentive compensation.

8.2.         Award Agreements. The terms of Restricted Stock
Unit Award granted under the Plan shall be set forth in a written Award
Agreement which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The terms of such Awards need not be the same with
respect to each Participant.

8.3.         Vesting. Except for certain limited situations
(including the death, disability or retirement of the Participant, or a Change
in Control as defined in Article 11), or special circumstances determined
by the Committee, such as the achievement of performance objectives, Restricted
Stock Unit Awards subject solely to the continued employment of employees of
the Company or any Subsidiary shall be subject to a vesting period determined
by the Committee of not less than three (3) years from date of grant (but
permitting pro rata vesting over such time); provided, that such minimum
vesting period shall not be applicable to (i) grants to new hires to
replace forfeited awards from a prior employer, or (ii) grants of Restricted
Stock Unit Awards in payment of Performance Awards and other earned cash-based
incentive compensation. Subject to the foregoing minimum vesting period
requirements, the Committee may, in its sole discretion and subject to the
limitations imposed under Section 162(m) of the Code and the
regulations thereunder in the case of a Restricted Stock Unit Award intended to
comply with the performance-based exception under Code Section 162(m),
waive the forfeiture period and any other conditions set forth in any Award
Agreement subject to such terms and conditions as the Committee shall deem
appropriate. The minimum vesting period requirements of this Section shall
not apply to Restricted Stock Unit Awards granted to Directors or to any
consultants or advisors who provide services to the Company or any Subsidiary.

8.4.         Payment. Except as provided in Article 10 or
as may be provided in an Award Agreement, Restricted Stock Unit Awards may be
paid in cash, Shares, other property, or any combination thereof, in the sole
discretion of the Committee. Restricted Stock Unit Awards may be paid in a lump
sum or in installments or, in accordance with procedures established by the
Committee, on a deferred basis subject to the requirements of Section 409A
of the Code.

 9
 

 

9.             PERFORMANCE AWARDS

9.1.         Grants.
Performance Awards in the form of Performance Shares or Performance Units, as
determined by the Committee in its sole discretion, may be granted hereunder to
Participants, for no consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to other Awards granted
under the Plan. The performance goals
to be achieved for each Performance Period shall be conclusively determined by
the Committee and may be based upon the criteria set forth in Section 10.2.

9.2.         Award Agreements. The terms of any Performance Award granted
under the Plan shall be set forth in a written Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with the
Plan, including whether such Awards shall have Dividend Equivalents. The terms
of Performance Awards need not be the same with respect to each Participant.

9.3.         Terms and Conditions. The performance criteria to be achieved during any Performance Period
and the length of the Performance Period shall be determined by the Committee
upon the grant of each Performance Award; provided, however, that a Performance
Period shall not be less than 12 months. The amount of the Award to be
distributed shall be conclusively determined by the Committee.

9.4.         Payment. Except as
provided in Article 11 or as may be provided in an Award Agreement,
Performance Awards will be distributed only after the end of the relevant
Performance Period. Performance Awards may be paid in cash, Shares, other
property, or any combination thereof, in the sole discretion of the Committee. Performance
Awards may be paid in a lump sum or in installments following the close of the
Performance Period or, in accordance with procedures established by the
Committee, on a deferred basis subject to the requirements of Section 409A
of the Code.

10.          CODE SECTION 162(m) PROVISIONS

10.1.       Covered
Employees. Notwithstanding any other provision of the Plan, if the
Committee determines at the time a Restricted Stock Award, a Performance Award
or an Restricted Stock Unit Award is granted to a Participant who is, or is
likely to be, as of the end of the tax year in which the Company would claim a
tax deduction in connection with such Award, a Covered Employee, then the
Committee may provide that this Article 10 is applicable to such Award.

10.2.       Performance
Criteria. If the Committee determines that a Restricted Stock Award,
a Performance Award or an Restricted Stock Unit Award is intended to be subject
to this Article 10, the lapsing of restrictions thereon and the
distribution of cash, Shares or other property pursuant thereto, as applicable,
shall be subject to the achievement of one or more objective performance goals
established by the Committee, which shall be based on the attainment of
specified levels of one or any combination of the following: net sales;
revenue; revenue or product revenue growth; operating income or loss (before or
after taxes); pre- or after-tax income or loss (before or after allocation of
corporate overhead and bonus); net earnings or loss; earnings or loss per
share; net income or loss (before or after taxes); return on

 10
 

 

equity; total stockholder return; return on
assets or net assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Shares or any other
publicly-traded securities of the Company; market share; gross profits;
earnings or losses (including earnings or losses before taxes, earnings or
losses before interest and taxes, earnings or losses before interest, taxes and
depreciation or earnings or losses before interest, taxes, depreciation and
amortization); economic value-added models (or equivalent metrics); comparisons
with various stock market indices; reductions in costs; cash flow or cash flow
per share (before or after dividends); return on capital (including return on
total capital or return on invested capital); cash flow return on investment;
improvement in or attainment of expense levels or working capital levels;
operating margin; gross margin; year-end cash; cash margin; debt reduction;
stockholder’s equity; market share; achievement of drug development milestones;
regulatory achievements including approval of a compound; progress of internal
research or clinical programs; progress of partnered programs; implementation
or completion of projects and processes; partner satisfaction; budget
management; clinical progress including timely completion of clinical trials;
submission of INDs and NDAs and other regulatory achievements; partner or
collaborator achievements; internal controls, including those related to the
Sarbanes-Oxley Act of 2002; research progress, including the development of
programs; financing; investor relations, analysts and communication; in-licensing;  and recruiting and maintaining personnel. Such
performance goals also may be based solely by reference to the Company’s
performance or the performance of a Subsidiary, division, business segment or
business unit of the Company, or based upon the relative performance of other
companies or upon comparisons of any of the indicators of performance relative
to other companies. The Committee may also exclude charges related to an event
or occurrence which the Committee determines should appropriately be excluded,
including (a) restructurings, discontinued operations, extraordinary
items, and other unusual or non-recurring charges, (b) an event either not
directly related to the operations of the Company or not within the reasonable
control of the Company’s management, or (c) the cumulative effects of tax
or accounting changes in accordance with U.S. generally accepted accounting
principles. Such performance goals shall be set by the Committee within the
time period prescribed by, and shall otherwise comply with the requirements of,
Section 162(m) of the Code, and the regulations thereunder.

10.3.       Adjustments. Notwithstanding any provision of the
Plan (other than Article 11), with respect to any Restricted Stock,
Performance Award or Restricted Stock Unit Award that is subject to this Section 10,
the Committee may adjust downwards, but not upwards, the amount payable pursuant
to such Award, and the Committee may not waive the achievement of the
applicable performance goals, except in the case of the death or disability of
the Participant or as otherwise determined by the Committee in special
circumstances.

10.4.       Restrictions. The Committee shall have the power to
impose such other restrictions on Awards subject to this Article as it may
deem necessary or appropriate to ensure that such Awards satisfy all
requirements for “performance-based compensation” within the meaning of Section 162(m) of
the Code.

10.5.       Limitations on
Grants to Individual Participants. Subject to adjustment as provided
in Section 12.2, no Participant may be granted (i) Options or Stock
Appreciation Rights during any 36-month period with respect to more than 1,000,000
Shares or (ii) Restricted Stock, Performance Awards and/or Restricted
Stock Unit Awards that are denominated in Shares in any 36-month period
with respect to more than 500,000 Shares (the “Limitations”). In addition to

 11
 

 

the foregoing, the maximum dollar value that
may be granted by any Participant in any 12-month period with respect to
Performance Awards is $5,000,000. If an Award is cancelled, the cancelled Award
shall continue to be counted toward the applicable Limitations.

11.          CHANGE IN CONTROL PROVISIONS

11.1.       Impact on Certain Awards. The Committee, in its
discretion, may determine that in the event of a Change in Control of the
Company (as defined in Section 11.3) Options and Stock Appreciation Rights
outstanding as of the date of the Change in Control shall be cancelled and
terminated without payment therefore if the Fair Market Value of one Share as
of the date of the Change in Control is less than the Option per Share option
price or Stock Appreciation Right per Share grant price.

11.2.       Assumption or Substitution of Certain Awards. (a) 
To the extent provided in an Award Agreement, in the event of a Change in
Control of the Company  in which the
successor company assumes or substitutes for an Option, Stock Appreciation
Right, Restricted Stock Award or Restricted Stock Unit Award, if a Participant’s
employment with such successor company (or a subsidiary thereof) terminates
within the time period following such Change in Control set forth in the Award
Agreement (or prior thereto if applicable) and under the circumstances
specified in the Award Agreement: (i) Options and Stock Appreciation
Rights outstanding as of the date of such termination of employment will
immediately vest, become fully exercisable, and may thereafter be exercised for
the period of time set forth in the Award Agreement, (ii) restrictions and
deferral limitations on Restricted Stock shall lapse and the Restricted Stock shall
become free of all restrictions and limitations and become fully vested, and (iii) the
restrictions and deferral limitations and other conditions applicable to any Restricted
Stock Unit Awards or any other Awards shall lapse, and such Restricted Stock
Unit Awards or such other Awards shall become free of all restrictions,
limitations or conditions and become fully vested and transferable to the full
extent of the original grant. For the purposes of this Section, an Option,
Stock Appreciation Right, Restricted Stock Award or Restricted Stock Unit Award
shall be considered assumed or substituted for if following the Change in
Control the Award confers the right to purchase or receive, for each Share
subject to the Option, Stock Appreciation Right, Restricted Stock Award or Restricted
Stock Unit Award immediately prior to the Change in Control, the consideration
(whether stock, cash or other securities or property) received in the
transaction constituting a Change in Control by holders of Shares for each
Share held on the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares); provided, however, that if
such consideration received in the transaction constituting a Change in Control
is not solely common stock of the successor company, the Committee may, with
the consent of the successor company, provide that the consideration to be
received upon the exercise or vesting of an Option, Stock Appreciation Right,
Restricted Stock Award or Restricted Stock Unit Award, for each Share subject
thereto, will be solely common stock of the successor company substantially
equal in fair market value to the per share consideration received by holders
of Shares in the transaction constituting a Change in Control. The
determination of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its determination shall be
conclusive and binding.

 12
 

 

(b)           In
the event of a Change in Control of the Company, to the extent that the
successor company does not assume or substitute for an Option, Stock
Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Performance
Award (unless otherwise provided in an Award Agreement), then immediately prior
to the Change in Control: (i) those outstanding Options and Stock
Appreciation Rights that are not assumed or substituted for shall immediately
vest and become fully exercisable, (ii) restrictions and deferral
limitations on Restricted Stock not assumed or substituted for shall lapse and
the Restricted Stock shall become free of all restrictions and limitations and
become fully vested, (iii) the restrictions and deferral limitations and
other conditions applicable to any Restricted Stock Unit Awards or any other
Awards not assumed or substituted for shall lapse, and such Restricted Stock
Unit Awards or such other Awards shall become free of all restrictions,
limitations or conditions and become fully vested and transferable to the full
extent of the original grant, (iv) all Performance Awards assumed or
substituted for shall be considered to be earned and payable in full, and any
deferral or other restriction shall lapse and such Performance Awards shall be
immediately settled or distributed, and (v) all Awards not assumed or
substituted for shall terminate immediately after the Change in Control.

(c)           The
Committee, in its discretion, may determine that, upon the occurrence of a Change
in Control of the Company, each Option and Stock Appreciation Right outstanding
shall terminate within a specified number of days after notice to the
Participant, and/or that each Participant shall receive, with respect to each
Share subject to such Option or Stock Appreciation Right, an amount equal to
the excess (if any) of the Fair Market Value of such Share immediately prior to
the occurrence of such Change in Control over the exercise price per share of
such Option and/or Stock Appreciation Right; such amount to be payable in cash,
in one or more kinds of stock or property (including the stock or property, if
any, payable in the transaction) or in a combination thereof, as the Committee,
in its discretion, shall determine.

11.3.       Change in Control. For purposes of the Plan, unless
otherwise provided in an Award Agreement, Change in Control means the
occurrence of any one of the following events:

(i)            During any twenty-four (24)
month period, individuals who, as of the beginning of such period, constitute
the Board (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the beginning of such period
whose election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation of
proxies by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;

(ii)           Any “person” (as such term is
defined in the Exchange Act and as used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s

 13
 

 

then
outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (ii) shall
not be deemed to be a Change in Control by virtue of any of the following
acquisitions:  (A) by the Company or any subsidiary, (B) by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction, as defined in paragraph (iii), or (E) by any
person of Voting Securities from the Company, if a majority of the Incumbent
Board approves in advance the acquisition of beneficial ownership of 50% or
more of Company Voting Securities by such person;

(iii)          The consummation of a merger,
consolidation, statutory share exchange or similar form of corporate
transaction involving the Company or any of its subsidiaries that requires the
approval of the Company’s stockholders, whether for such transaction or the
issuance of securities in the transaction (a “Business Combination”), unless
immediately following such Business Combination:  (A) more than 60% of the total voting
power of (x) the corporation resulting from such Business Combination (the
“Surviving Corporation”),
or (y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities eligible
to elect directors of the Surviving Corporation (the “Parent Corporation”), is
represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 50% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) and (C) at least a
majority of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (A), (B) and (C) above
shall be deemed to be a “Non-Qualifying Transaction”);

(iv)          The stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or the
consummation of a sale of all or substantially all of the Company’s assets; or

(v)           The occurrence of any other
event that the Board determines by a duly approved resolution constitutes a
Change in Control.

Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 50% of the Company Voting
Securities as a result of the acquisition of Company Voting Securities by the
Company which reduces the

 14
 

 

number of Company Voting
Securities outstanding; provided, that if after such acquisition
by the Company such person becomes the beneficial owner of additional Company
Voting Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the
Company shall then occur.

12.          GENERALLY APPLICABLE PROVISIONS

12.1.       Amendment and Termination of the Plan. The Board
may, from time to time, alter, amend, suspend or terminate the Plan as it shall
deem advisable, subject to any requirement for stockholder approval imposed by
applicable law, including the rules and regulations of the NASDAQ Stock
Market (or such other principal securities market on which the Shares are
traded); provided that the Board may not amend the Plan in any manner that
would result in noncompliance with Rule 16b-3 of the Exchange Act;
and further provided that the Board may not, without the approval of the
Company’s stockholders to the extent required by such applicable law, amend the
Plan to (a) increase the number of Shares that may be the subject of
Awards under the Plan (except for adjustments pursuant to Section 12.2), (b) expand
the types of awards available under the Plan, (c) materially expand the
class of persons eligible to participate in the Plan, (d) amend any
provision of Section 5.3, or (e) increase the maximum permissible
term of any Option specified by Section 5.4 or the maximum permissible
term of a Stock Appreciation Right. The Board may not without the approval of
the Company’s stockholders take any action with respect to an Option or Stock
Appreciation Right that may be treated as a repricing under the rules and
regulations of the NASDAQ Stock Market (or such other principal securities
market on which the Shares are traded), including a reduction of the exercise
price of an Option or Stock Appreciation Right or the exchange of an Option or
Stock Appreciation Right for cash or another Award. In addition, no amendments
to, or termination of, the Plan shall in any way impair the rights of a
Participant under any Award previously granted without such Participant’s
consent.

12.2.       Adjustments.
In the event of any merger, reorganization, consolidation, recapitalization,
dividend or distribution (whether in cash, shares or other property, other than
a regular cash dividend), stock split, reverse stock split, spin-off or similar
transaction or other change in corporate structure affecting the Shares or the
value thereof, such adjustments and other substitutions shall be made to the
Plan and to Awards as the Committee, in its sole discretion, deems equitable or
appropriate taking into consideration the accounting and tax consequences,
including such adjustments in the aggregate number, class and kind of
securities that may be delivered under the Plan and, in the aggregate or to any
one Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Awards granted under the Plan (including, if
the Committee deems appropriate, the substitution of similar options to
purchase the shares of, or other awards denominated in the shares of, another
company) as the Committee may determine to be appropriate in its sole
discretion; provided, however, that the number of Shares subject to any Award
shall always be a whole number.

12.3.       Transferability
of Awards. Except as provided below, and except as otherwise
authorized by the Committee in an Award Agreement, no Award and no Shares
subject to Awards described in Article 8 that have not been issued or as
to which any applicable restriction, performance or deferral period has not
lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution, and such

 15
 

 

Award may be exercised during the life of the Participant only by the
Participant or the Participant’s guardian or legal representative. Notwithstanding
the foregoing, to the extent and under such terms and conditions as determined
by the Committee, a Participant may assign or transfer an Award (each
transferee thereof, a “Permitted Assignee”) to a “family member” as such term
is defined in the General Instructions to Form S-8 (whether by gift
or a domestic relations order);  provided
that such Permitted Assignee shall be bound by and subject to all of the terms
and conditions of the Plan and the Award Agreement relating to the transferred
Award and shall execute an agreement satisfactory to the Company evidencing
such obligations; and provided further that such Participant shall remain bound
by the terms and conditions of the Plan. The Company shall cooperate with any
Permitted Assignee and the Company’s transfer agent in effectuating any
transfer permitted under this Section.

12.4.       Termination of
Employment. The Committee shall determine and set forth in each
Award Agreement whether any Awards granted in such Award Agreement will
continue to be exercisable, and the terms of such exercise, on and after the
date that a Participant ceases to be employed by or to provide services to the
Company or any Subsidiary (including as a Director), whether by reason of
death, disability, voluntary or involuntary termination of employment or
services, or otherwise. The date of termination of a Participant’s employment
or services will be determined by the Committee, which determination will be
final.

12.5.       Deferral; Dividend
Equivalents. The Committee shall be authorized to establish
procedures pursuant to which the payment of any Award may be deferred. Subject
to the provisions of the Plan and any Award Agreement, the recipient of an
Award (including any deferred Award) other than an Option or Stock Appreciation
Right may, if so determined by the Committee, be entitled to receive, currently
or on a deferred basis, cash, stock or other property dividends, or cash
payments in amounts equivalent to cash, stock or other property dividends on
Shares (“Dividend Equivalents”) with respect to the number of Shares covered by
the Award, as determined by the Committee, in its sole discretion. The
Committee may provide that such amounts and Dividend Equivalents (if any) shall
be deemed to have been reinvested in additional Shares or otherwise reinvested
and may provide that such amounts and Dividend Equivalents are subject to the
same vesting or performance conditions as the underlying Award.

13.          MISCELLANEOUS

13.1.       Tax Withholding. The Company shall have the right
to make all payments or distributions pursuant to the Plan to a Participant (or
a Permitted Assignee thereof) (any such person, a “Payee”) net of any
applicable federal, state and local taxes required to be paid or withheld as a
result of (a) the grant of any Award, (b) the exercise of an Option
or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the
lapse of any restrictions in connection with any Award or (e) any other
event occurring pursuant to the Plan. The Company or any Subsidiary shall have
the right to withhold from wages or other amounts otherwise payable to such
Payee such withholding taxes as may be required by law, or to otherwise require
the Payee to pay such withholding taxes. If the Payee shall fail to make such
tax payments as are required, the Company or its Subsidiaries shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Payee or to take such other action as
may be necessary to satisfy such withholding obligations. The Committee shall
be authorized to establish procedures for election by Participants to satisfy
such obligation for

 16
 

 

the payment of such taxes by tendering previously acquired Shares
(either actually or by attestation, valued at their then Fair Market Value), or
by directing the Company to retain Shares (up to the Participant’s minimum
required tax withholding rate or such other rate that will not trigger a
negative accounting impact) otherwise deliverable in connection with the Award.

13.2.       Right of Discharge Reserved; Claims to Awards. Nothing
in the Plan nor the grant of an Award hereunder shall confer upon any Employee
or Director the right to continue in the employment or service of the Company
or any Subsidiary or affect any right that the Company or any Subsidiary may
have to terminate the employment or service of (or to demote or to exclude from
future Awards under the Plan) any such Employee or Director at any time for any
reason. Except as specifically provided by the Committee, the Company shall not
be liable for the loss of existing or potential profit from an Award granted in
the event of termination of an employment or other relationship. No Employee or
Participant shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Employees or Participants
under the Plan.

13.3.       Prospective Recipient. The prospective recipient of
any Award under the Plan shall not, with respect to such Award, be deemed to
have become a Participant, or to have any rights with respect to such Award,
until and unless such recipient shall have executed an agreement or other
instrument evidencing the Award and delivered a copy thereof to the Company,
and otherwise complied with the then applicable terms and conditions.

13.4.       Substitute
Awards. Notwithstanding any other provision of the Plan, the terms
of Substitute Awards may vary from the terms set forth in the Plan to the
extent the Committee deems appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.

13.5.       Cancellation of Award. (a)  Notwithstanding
anything to the contrary contained herein, an Award Agreement may provide that
the Award shall be canceled if the Participant, without the consent of the
Company, while employed by, or providing services to, the Company or any
Subsidiary or after termination of such employment or services, establishes a
relationship with a competitor of the Company or any Subsidiary or engages in
activity that is in conflict with or adverse to the interest of the Company or
any Subsidiary, as determined by the Committee in its sole discretion. The
Committee may provide in an Award Agreement that if within the time period
specified in the Agreement the Participant establishes a relationship with a
competitor or engages in an activity referred to in the preceding sentence, the
Participant will forfeit any gain realized on the vesting or exercise of the
Award and must repay such gain to the Company.

(b)           In
the event the Participant ceases to be employed by, or provide services to, the
Company on account of a termination for “cause” (as defined below) by the
Company, any Award held by the Participant shall terminate as of the date the
Participant ceases to be employed by, or provide services to, the Company. In
addition, notwithstanding any other provisions of this Section, if the
Committee determines that the Participant has engaged in conduct that
constitutes cause at any time while the Participant is employed by, or
providing services to, the Company or after the Participant’s termination of
employment or services, any Awards held by the Participant shall immediately
terminate. In the event a Participant’s employment or services is terminated
for cause, in addition to the immediate termination of all Awards, the Participant
shall automatically forfeit all shares underlying any exercised portion of

 17
 

 

an Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the option price paid by the Participant
for such shares.

(c)  For purposes of this Section, “cause”
shall mean, unless otherwise provided in an Award Agreement or another
agreement between the Participant and 
the Company or a Subsidiary or a plan maintained by the Company or a
Subsidiary in which the Participant participates, a determination by the
Committee that the Participant has breached his or her employment or service
contract with the Company, or has been engaged in disloyalty to the Company,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment or service,
or has disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information, or has breached any written
noncompetition or nonsolicitation agreement between the Participant and the
Company or has engaged in such other behavior detrimental to the interests of
the Company as the Committee determines

13.6.       Stop Transfer Orders. All certificates for Shares
delivered under the Plan pursuant to any Award shall be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Shares are then listed,
and any applicable federal or state securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

13.7.       Nature of Payments. All Awards made pursuant to the
Plan are in consideration of services performed or to be performed for the
Company or any Subsidiary, division or business unit of the Company. Any income
or gain realized pursuant to Awards under the Plan and any Stock Appreciation
Rights constitute a special incentive payment to the Participant and shall not
be taken into account, to the extent permissible under applicable law, as
compensation for purposes of any of the employee benefit plans of the Company
or any Subsidiary except as may be determined by the Committee or by the Board
or board of directors of the applicable Subsidiary.

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

13.9.       Severability. If any provision of the Plan shall be
held unlawful or otherwise invalid or unenforceable in whole or in part by a
court of competent jurisdiction, such provision shall (a) be deemed
limited to the extent that such court of competent jurisdiction deems it
lawful, valid and/or enforceable and as so limited shall remain in full force
and effect, and (b) not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan shall
be held unlawful or otherwise invalid or unenforceable by a court of competent
jurisdiction, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the
Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise invalid
or unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part,

 18
 

 

to the extent that it would not be unlawful, invalid or unenforceable,
and the maximum payment or benefit that would not be unlawful, invalid or
unenforceable shall be made or provided under the Plan.

13.10.     Construction. As used in the Plan, the words “include” and “including,” and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words “without
limitation.”

13.11.     Unfunded Status of the Plan. The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver the Shares or payments in
lieu of or with respect to Awards hereunder; provided, however, that the
existence of such trusts or other arrangements is consistent with the unfunded
status of the Plan.

13.12.     Governing Law. The Plan and all determinations made
and actions taken thereunder, to the extent not otherwise governed by the Code
or the laws of the United States, shall be governed by the laws of the State of
Delaware, without reference to principles of conflict of laws, and construed
accordingly.

13.13.     Effective Date of Plan; Termination of Plan. The Plan
shall be effective on the date of the approval of the Plan by the holders of
the shares entitled to vote at a duly constituted meeting of the stockholders
of the Company. The Plan shall be null and void and of no effect if the
foregoing condition is not fulfilled and in such event each Award shall,
notwithstanding any of the preceding provisions of the Plan, be null and void
and of no effect. Awards may be granted under the Plan at any time and from
time to time on or prior to the tenth anniversary of the effective date of the
Plan, on which date the Plan will expire except as to Awards then outstanding
under the Plan. Such outstanding Awards shall remain in effect until they have
been exercised or terminated, or have expired.

13.14.     Foreign Employees. Awards may be granted to
Participants who are foreign nationals or employed outside the United States,
or both, on such terms and conditions different from those applicable to Awards
to Employees employed in the United States as may, in the judgment of the
Committee, be necessary or desirable in order to recognize differences in local
law or tax policy. The Committee also may impose conditions on the exercise or
vesting of Awards in order to minimize the Company’s obligation with respect to
tax equalization for Employees on assignments outside their home country.

13.15.     Compliance with Section 409A of the Code. This
Plan is intended to comply and shall be administered in a manner that is
intended to comply with Section 409A of the Code and shall be construed
and interpreted in accordance with such intent. To the extent that an Award or
the payment, settlement or deferral thereof is subject to Section 409A of
the Code, the Award shall be granted, paid, settled or deferred in a manner
that will comply with Section 409A of the Code, including regulations or
other guidance issued with respect thereto, except as otherwise determined by
the Committee. Any provision of this Plan that would cause the grant of an
Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A
of the Code

 19
 

 

shall be amended to comply with Section 409A of the Code on a
timely basis, which may be made on a retroactive basis, in accordance with
regulations and other guidance issued under Section 409A of the Code.

13.16.     Captions. The captions in the Plan are for
convenience of reference only, and are not intended to narrow, limit or affect
the substance or interpretation of the provisions contained herein.

 20

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