Document:

EXHIBIT 4.1

 

SUPERGEN, INC.

 

2003 STOCK PLAN

 

(as amended March 11, 2010)

 

1.                                      Purposes of the
Plan.  The purposes of this 2003
Stock Plan are:

 

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

 

·                                          to provide additional
incentive to Employees, Directors and Consultants, and

 

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

 

Options granted under the Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant.  Stock Appreciation
Rights, Restricted Stock Units or Stock Purchase Rights may also be granted
under the Plan.

 

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

 

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

 

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

 

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

 

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

 

(e)                                  “Awarded Stock” means
the Common Stock subject to an Award.

 

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

 

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

 

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(i)                                     Any “person” (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities; or

 

(ii)                                  The consummation of the sale
or disposition by the Company of all or substantially all of the Company’s
assets;

 

(iii)                               A change in the composition
of the Board occurring within a two-year period, as a result of which fewer
than a majority of the directors are Incumbent Directors.  “Incumbent Directors” means directors who
either (A) are Directors as of the effective date of the Plan, or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but will not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company); or

 

(iv)                              The consummation of a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or
consolidation.

 

(h)                                 “Code” means the
Internal Revenue Code of 1986, as amended.

 

(i)                                     “Committee” means a
committee of Directors appointed by the Board in accordance with Section 4
of the Plan.

 

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

 

(k)                                 “Company” means SuperGen, Inc., a Delaware corporation.

 

(l)                                     “Consultant” means
any natural person, including an advisor, engaged by the Company or a Parent or
Subsidiary to render services to such entity.

 

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

 

(n)                                 “Disability” means
total and permanent disability as defined in Section 22(e)(3) of the
Code.

 

(o)                                 “Employee” means any
person, including Officers and Directors, employed by the Company or any Parent
or Subsidiary of the Company.  A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any
successor.  For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless

 

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reemployment upon expiration of such leave is
guaranteed by statute or contract.  If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Stock Option
held by the Participant shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock Option.  Neither service as a Director nor payment of
a director’s fee by the Company shall be sufficient to constitute “employment”
by the Company.

 

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

 

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

 

(i)                                     If the Common
Stock is listed on a stock exchange, the fair market value per Share shall be
the closing price on such exchange, as reported in the Wall Street Journal on
the date of determination or, if the date of determination is not a trading
day, the immediately preceding trading day;

 

(ii)                                  If there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices, or closing price in the event quotations for the Common
Stock are reported on the National Market System, of the Common Stock on the
date of determination, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System); or

 

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

 

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

 

(s)                                   “Incentive
Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

 

(t)                                    “Nonstatutory Stock
Option” means an Option not intended to qualify as an Incentive Stock
Option.

 

(u)                                 “Notice of Grant”
means a written or electronic notice evidencing certain terms and conditions of
an individual Option or Stock Purchase Right grant.  The Notice of Grant is part of the Option
Agreement.

 

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

 

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

 

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(x)                                 “Option Agreement”
means an agreement between the Company and an Participant evidencing the terms
and conditions of an individual Option grant. 
The Option Agreement is subject to the terms and conditions of the Plan.

 

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

 

(z)                                  “Participant” means
the holder of an outstanding Award granted under the Plan.

 

(aa)                          “Performance Goals”
means any one or more of the following objective performance criteria, applied
to either the Company as a whole or, except with respect to stockholder return
metrics, to a region, business unit, affiliate or business segment, and
measured either on an absolute basis or relative to a pre-established target, to
a previous period’s results or to a designated comparison group, and, with
respect to financial metrics, which may be determined in accordance with United
States Generally Accepted Accounting Principles (“GAAP”), in accordance with
accounting principles established by the International Accounting Standards
Board (“IASB Principles”) or which may be adjusted when established to exclude
or include any items otherwise includable or excludable under GAAP or under
IASB Principles including (a) earnings per share, (b) operating cash
flow, (c) operating income, (d) profit (e) return on assets, (f) return
on equity, (g) return on sales, (h)  revenue, (i) stock price,
(j) growth in stockholder value relative to the moving average of the
S&P 500 Index or another index, (k) gross margin, (l) operating
expenses or operating expenses as a percentage of revenue, (m) earnings
(which may include earnings before interest and taxes, earnings before taxes
and net earnings), (n) return on capital, (o) return on assets or net
assets, (p) return on investment, (q) operating margin,
(r) market share, (s) contract awards or backlog, (t) overhead
or other expense reduction, (u) objective customer indicators,
(v) new product invention or innovation, (w) attainment of research
and development milestones, (x) total stockholder return, or (y) objective
employee metrics. Any criteria used may be measured, as applicable (i) in
absolute terms, (ii) against another company or companies, on a per-share
basis, and/or (iii) on a pre-tax or post-tax basis (if applicable).

 

(bb)                          “Plan” means this
2003 Stock Plan.

 

(cc)                            “Restricted Stock”
means shares of Common Stock acquired pursuant to a grant of Stock Purchase
Rights under Section 12 of the Plan.

 

(dd)                          “Restricted Stock
Purchase Agreement” means a written agreement between the Company and the
Participant evidencing the terms and restrictions applying to stock purchased
under a Stock Purchase Right.  The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

 

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

 

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

 

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

 

(hh)                          “Share” means a share
of the Common Stock, as adjusted in accordance with Section 16 of the Plan.

 

(ii)                                  “Stock Appreciation Right”
or “SAR” means an Award granted pursuant to Section 13 hereof.

 

(jj)                                “Stock Purchase Right”
means the right to purchase Common Stock pursuant to Section  12 of
the Plan, as evidenced by a Notice of Grant.

 

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

 

3.                                      Stock Subject to the Plan.  Subject to the provisions of Section 16 of the Plan, the maximum aggregate
number of Shares that may be optioned and sold under the Plan is 11,500,000
Shares plus (a) any Shares which
have been reserved but not issued under the Company’s 1993 Stock Option Plan
(the “1993 Plan”) as of the expiration of the 1993 Plan on December 3,
2003 and (b) following the expiration of the 1993 Plan, any Shares which
would otherwise have been returned to the 1993 Plan as a result of termination
of options or repurchase of Shares issued under the 1993 Plan.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

 

Any
Shares subject to Awards shall be counted against the numerical limits of this
Section 3 as one Share for every Share subject thereto.  If an Award expires or becomes unexercisable
without having been exercised in full, or, with respect to Restricted Stock or
Restricted Stock Units, is forfeited to or repurchased by the Company, the
unpurchased Shares (or for Awards other than Options and SARs, the forfeited or
repurchased shares) which were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has terminated).  With respect to SARs, only Shares actually
issued pursuant to an SAR shall cease to be available under the Plan.  Shares that have actually been issued under
the Plan under any Award shall not be returned to the Plan and shall not become
available for future distribution under the Plan; provided, however, that if
Shares of Restricted Stock or Restricted Stock Units are repurchased by the
Company at their original purchase price or are forfeited to the Company, such
Shares shall become available for future grant under the Plan.  Shares used to pay the exercise price of an
Option shall become available for future grant or sale under the Plan.  Shares used to satisfy tax withholding obligations
shall become available for future grant or sale under the Plan.

 

4.                                      Administration
of the Plan.

 

(a)                                 Procedure.

 

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

 

(ii)                        Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as “performance-based
compensation” within the

 

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meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code.

 

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

 

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

 

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

 

(i)                           to determine the Fair Market
Value;

 

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

 

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

 

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

 

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

 

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

 

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

 

(viii)              to modify or amend each Award (subject to
Section 18(c) of the
Plan), including the discretionary authority to extend the post-termination
exercisability period of Options and SARs longer than is otherwise provided for
in the Plan (but in no event later than the expiration of the original maximum
term of such Award);

 

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(ix)                              to allow
Participants to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise or vesting of an
Award that number of Shares having a Fair Market Value equal to the minimum
amount required to be withheld (but no more). 
The Fair Market Value of any Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined.  All elections by a Participant to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;

 

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

 

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

 

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

 

5.                                      Eligibility.  Awards may be granted to Service Providers;
provided, however, that Incentive Stock Options may be granted only to
Employees.

 

6.                                      Limitations.

 

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

 

(i)                           Neither the
Plan nor any Award shall confer upon an Participant any right with respect to
continuing the Participant’s relationship as a Service Provider with the
Company, nor shall they interfere in any way with the Participant’s right or
the Company’s right to terminate such relationship at any time, with or without
cause.

 

7.                                      Code Section 162(m) Provisions.

 

(a)                     Option and SAR
Annual Share Limit.  No
Participant shall be granted, in any Fiscal Year, Options and Stock
Appreciation Rights to purchase more than 1,000,000  Shares;
provided, however, that such limit shall be 2,000,000  Shares
in connection with the Participant’s initial service.

 

(b)                     Restricted
Stock, Restricted Stock Units and Performance Share Annual Limit.  No Participant shall be granted, in any
Fiscal Year, more than 500,000 Shares of Restricted Stock,

 

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subject to Stock Purchase Rights or
Restricted Stock Units; provided, however, that such limit shall be 1,000,000  Shares in connection with the Participant’s initial
service.

 

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

 

(d)                     Changes in
Capitalization.  The
numerical limitations in Sections 7(a) and (b) shall be adjusted
proportionately in connection with any change in the Company’s capitalization
as described in Section 16(a).

 

8.                                      Term of Plan.  Subject to Section 22 of the Plan, the
Plan shall become effective upon its adoption by the Board.  It shall continue in effect for a term of ten
(10) years unless terminated earlier under Section 18 of the Plan.

 

9.                                      Term of Option.  The term of each Option shall be stated in
the Option Agreement.  In the case of an
Incentive Stock Option, the term shall be ten (10) years from the date of
grant or such shorter term as may be provided in the Option Agreement.  Moreover, in the case of an Incentive Stock
Option granted to an Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant or such shorter term as may be provided in the Option
Agreement.

 

10.                               Option Exercise Price and
Consideration.

 

(a)                                 Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

 

(i)                           In the case of an Incentive
Stock Option

 

(A)                               granted to an Employee who,
at the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.

 

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(B)                               granted to any Employee
other than an Employee described in paragraph (A) immediately above, the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.

 

(ii)                        In the case of a Nonstatutory
Stock Option, the per Share exercise price shall be determined by the
Administrator.  In the case of a
Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the
per Share exercise price shall  be
no less than 100% of the Fair Market Value per Share on the date of grant.

 

(b)                           Notwithstanding
the foregoing, Options may be granted with a per Share exercise price of less
than 100% of the Fair Market Value per Share on the date of grant pursuant to a
merger or other corporate transaction.

 

(c)                            No Repricing.  The exercise price for an Option may not be
reduced without the consent of the Company’s stockholders.  This shall include, without limitation, a
repricing of the Option as well as an Option exchange program whereby the
Participant agrees to cancel an existing Option in exchange for an Option, SAR,
other Award or cash.

 

(d)                                 Waiting Period and Exercise
Dates.  At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.

 

(e)                                  Form of Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant.  Such
consideration may consist entirely of:

 

(i)                           cash;

 

(ii)                        check;

 

(iii)                     promissory note;

 

(iv)                    other Shares which, in the
case of Shares acquired directly or indirectly from the Company, (A) have
been owned by the Participant for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

 

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

 

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

 

9

 

 

(vii)                                         any combination
of the foregoing methods of payment; or

 

(viii)                                      such other
consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

 

11.                                 Exercise of Option.

 

(a)                                  Procedure for Exercise;
Rights as a Stockholder.  Any
Option granted hereunder shall be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement.  Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be suspended during any unpaid leave
of absence.  An Option may not be
exercised for a fraction of a Share.

 

An
Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised.  Full payment may consist of any consideration
and method of payment authorized by the Administrator and permitted by the
Option Agreement and the Plan.  Shares
issued upon exercise of an Option shall be issued in the name of the
Participant or, if requested by the Participant, in the name of the Participant
and his or her spouse.  Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 16 of the Plan.

 

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

 

(b)                                 Termination of Relationship
as a Service Provider.  If
an Participant ceases to be a Service Provider, other than upon the Participant’s
death or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Participant’s termination. 
If, on the date of termination, the Participant is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan.  If, after
termination, the Participant does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

 

(c)                                  Disability of Participant.  If an Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such

 

10

 

period of time as is specified in the Option
Agreement to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement).  In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Participant’s termination.  If, on the date of termination, the
Participant is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall revert to the Plan.  If, after termination, the Participant does
not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the
Plan.

 

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

 

12.                                 Stock Purchase Rights.

 

(a)                                  Rights to Purchase.  Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. 
After the Administrator determines that it will offer Stock Purchase
Rights under the Plan, it shall advise the offeree in writing or
electronically, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time
within which the offeree must accept such offer.  The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the
Administrator.

 

(b)                                 Repurchase Option.  Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser’s service with the Company for any reason (including death or
Disability).  The purchase price for
Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. 
The repurchase option shall lapse at a rate determined by the
Administrator.

 

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(c)                                  Other Provisions.  The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

 

(d)                                 Rights as a Stockholder.  Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Stock Purchase
Right is exercised, except as provided in Section 16 of the Plan.

 

13.                                 Stock
Appreciation Rights.

 

(a)                                  Grant of SARs.  Subject to the terms and conditions of the
Plan, SARs may be granted to Participants at any time and from time to time as
shall be determined by the Administrator, in its sole discretion.  Subject to the provisions of Section 7(a),
the Administrator shall have complete discretion to determine the number of
SARs granted to any Participant.

 

(b)                                 Exercise Price and other
Terms.  The per share exercise price
for the Shares to be issued pursuant to exercise of an SAR shall be determined
by the Administrator and shall be no less than 100% of the Fair Market Value
per share on the date of grant. 
Otherwise, subject to Section 7(a) of the Plan, the
Administrator, subject to the provisions of the Plan, shall have complete
discretion to determine the terms and conditions of SARs granted under the
Plan; provided, however, that no SAR may have a term of more than ten (10) years
from the date of grant.

 

(c)                                  No Repricing.  The exercise price for the Shares or cash to
be issued pursuant to an already granted SAR may not be changed without the
consent of the Company’s stockholders. 
This shall include, without limitation, a repricing of the SAR as well
as an SAR exchange program whereby the Participant agrees to cancel an existing
SAR in exchange for an Option, SAR, other Award or cash.

 

(d)                                 Payment of SAR Amount.  Upon exercise of a SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:

 

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

 

(ii)                                  The number of
Shares with respect to which the SAR is exercised.

 

(e)                                  Payment upon Exercise of SAR.  Payment for a SAR shall only be made in
Shares.

 

(f)                                    SAR Agreement.  Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, whether it may be settled in cash, Shares or a
combination thereof, and such other terms and conditions as the Administrator,
in its sole discretion, shall determine.

 

12

 

(g)                                 Expiration of
SARs.  A SAR granted under the Plan
shall expire upon the date determined by the Administrator, in its sole
discretion, and set forth in the Award Agreement.

 

(h)                                 Termination of
Relationship as a Service Provider.  If a Participant ceases to be a Service
Provider, other than upon the Participant’s death or Disability termination,
the Participant may exercise his or her SAR within such period of time as is
specified in the SAR Agreement to the extent that the SAR is vested on the date
of termination (but in no event later than the expiration of the term of such
SAR as set forth in the SAR Agreement). 
In the absence of a specified time in the SAR Agreement, the SAR shall
remain exercisable for three months following the Participant’s
termination.  If, on the date of
termination, the Participant is not vested as to his or her entire SAR, the
Shares covered by the unvested portion of the SAR shall revert to the Plan.  If, after termination, the Participant does
not exercise his or her SAR within the time specified by the Administrator, the
SAR shall terminate, and the Shares covered by such SAR shall revert to the
Plan.

 

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

 

(j)                                     Death of
Participant.  If a
Participant dies while a Service Provider, the SAR may be exercised following
the Participant’s death within such period of time as is specified in the SAR
Agreement (but in no event may the SAR be exercised later than the expiration
of the term of such SAR as set forth in the SAR Agreement), by the Participant’s
designated beneficiary, provided such beneficiary has been designated prior to
Participant’s death in a form acceptable to the Administrator.  If no such beneficiary has been designated by
the Participant, then such SAR may be exercised by the personal representative
of the Participant’s estate or by the person(s) to whom the SAR is
transferred pursuant to the Participant’s will or in accordance with the laws
of descent and distribution.  In the
absence of a specified time in the SAR Agreement, the SAR shall remain
exercisable for twelve (12) months following Participant’s death.  If the SAR is not so exercised within the
time specified herein, the SAR shall terminate, and the Shares covered by such
SAR shall revert to the Plan.

 

14.                                 Restricted
Stock Units.

 

(a)                                  Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator.  Subject to Section 7(b) hereof, the
Administrator shall have complete discretion to determine (i) the number
of Shares subject to a Restricted Stock Unit award granted to any Participant,
and (ii) the conditions that must be satisfied, which typically will be
based principally or solely on continued service but may include a
performance-based component,

 

13

 

upon which is conditioned the grant or
vesting of Restricted Stock Units. 
Restricted Stock Units shall be granted in the form of units to acquire
Shares.  Each such unit shall be the
equivalent of one Share for purposes of determining the number of Shares
subject to an Award.  Until the Shares
are issued, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the units to acquire Shares.

 

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

 

(c)                                  Earning
Restricted Stock Units.  Upon
meeting the applicable vesting criteria, the Participant shall be entitled to
receive a payout as specified in the Restricted Stock Unit Award Agreement.  Notwithstanding the foregoing, at any time
after the grant of Restricted Stock Units, the Administrator, in its sole
discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.

 

(d)                                 Form and
Timing of Payment.  Payment of
earned Restricted Stock Units shall be made as soon as practicable after the
date(s) set forth in the Restricted Stock Unit Award Agreement.  The Administrator shall pay earned Restricted
Stock Units in Shares.

 

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

 

15.                                 Non-Transferability of
Awards.  Unless determined otherwise by
the Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
recipient, only by the recipient.  If the
Administrator makes an Award transferable, it may only be transferable for no
consideration to transferees permitted pursuant to the Securities &
Exchange Commission’s General Instructions to the Form S-8 Registration
Statement and such Award shall contain such additional terms and conditions as
the Administrator deems appropriate.

 

14

 

16.                                 Adjustments Upon Changes in
Capitalization, Merger or Change in Control.

 

(a)                                  Changes in Capitalization.  Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Award, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Award, as well as the price per share of Common Stock covered by each
such outstanding Award and the 162(m) fiscal year share issuance limits
under Sections 7(a) and (b) hereof shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.”  Such
adjustment shall be made by the Compensation Committee, whose determination in
that respect shall be final, binding and conclusive.  Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.

 

(b)                                 Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed
transaction.  The Administrator in its
discretion may provide for a Participant to have the right to exercise his or
her Option or SAR until ten (10) days prior to such transaction as to all
of the Awarded Stock covered thereby, including Shares as to which the Award
would not otherwise be exercisable.  In
addition, the Administrator may provide that any Company repurchase option or forfeiture
rights applicable to any Award shall lapse 100%, and that any Award vesting
shall accelerate 100%, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated.  To the extent it has not been previously
exercised (with respect to Options and SARs) or vested (with respect to other
Awards), an Award will terminate immediately prior to the consummation of such
proposed action.

 

(c)                                  Merger or Change in Control.

 

(i)                       Stock Options,
Stock Purchase Rights and SARs.  In the event of a merger of the Company with
or into another corporation, or a Change in Control, each outstanding Option,
Stock Purchase Right and SAR shall be assumed or an equivalent option, right or
SAR substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.  In the event that
the successor corporation refuses to assume or substitute for the Option, Stock
Purchase Right or SAR, the Participant shall fully vest in and have the right
to exercise the Option, Stock Purchase Right or SAR as to all of the Awarded
Stock, including Shares as to which it would not otherwise be vested or
exercisable.  If an Option, Stock
Purchase Right or SAR becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or Change of Control, the
Administrator shall notify the Participant in writing or electronically that
the Option, Stock Purchase Right or SAR shall be fully vested and exercisable
for a period of fifteen (15) days

 

15

 

from the date of such notice, and the Option,
Stock Purchase Right or SAR shall terminate upon the expiration of such
period.  For the purposes of this
paragraph, the Option, Stock Purchase Right or SAR shall be considered assumed
if, following the merger or Change of Control, the option, right or stock
appreciation right confers the right to purchase or receive, for each Share of
Awarded Stock subject to the Option, Stock Purchase Right or SAR immediately
prior to the merger or Change of Control, the consideration (whether stock,
cash, or other securities or property) received in the merger or Change of
Control by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger
or Change of Control is not solely common stock of the successor corporation or
its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option, Stock Purchase Right or SAR, for each Share of Awarded Stock
subject to the Option, Stock Purchase Right or SAR, to be solely common stock
of the successor corporation or its Parent equal in fair market value to the
per share consideration received by holders of Common Stock in the merger or
Change of Control.

 

(ii)                    Restricted
Stock and Restricted Stock Units.  In the event of a Change of Control, each
outstanding Restricted Stock and Restricted Stock Unit award shall be assumed
or an equivalent Restricted Stock or Restricted Stock Unit award substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation.  In the event that the
successor corporation refuses to assume or substitute for the Restricted Stock
or Restricted Stock Unit award, the Participant shall fully vest in the
Restricted Stock or Restricted Stock Unit award including as to Shares which
would not otherwise be vested.  For the
purposes of this paragraph, a Restricted Stock, or Restricted Stock Units award
shall be considered assumed if, following the Change of Control, the award
confers the right to purchase or receive, for each Share subject to the Award
immediately prior to the Change of Control, the consideration (whether stock,
cash, or other securities or property) received in the Change of Control by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Change of Control
is not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received, for each Share and each unit/right to acquire
a Share subject to the Award, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change of Control.

 

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

 

16

 

18.                                 Amendment and Termination of
the Plan.

 

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

 

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

 

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

 

19.                                 Conditions Upon Issuance of
Shares.

 

(a)                                  Legal
Compliance.  Shares
shall not be issued pursuant to the exercise of an Award unless the exercise of
the Award or the issuance and delivery of such Shares (or with respect to
Performance Units, the cash equivalent thereof) shall comply with Applicable
Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

 

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

 

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

 

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

 

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

 

17ex10_1.htm

Exhibit 10.1

 

99¢ ONLY STORES

 

2010 EQUITY INCENTIVE PLAN

 

 

Effective September 14, 2010

 

  

  

  

TABLE OF CONTENTS

 

Page

 

	
ARTICLE 1.

	
PURPOSE

	
1

	
ARTICLE 2.

	
DEFINITIONS AND CONSTRUCTION

	
1

	
ARTICLE 3.

	
SHARES SUBJECT TO THE PLAN

	
8

	  	
3.1

	
Number of Shares

	
8

	  	
3.2

	
Stock Distributed

	
8

	
ARTICLE 4.

	
GRANT OF AWARDS

	
9

	  	
4.1

	
Participation

	
9

	  	
4.2

	
Award Agreement

	
9

	  	
4.3

	
Programs

	
9

	  	
4.4

	
Limitations Applicable to Section 16 Persons

	
9

	  	
4.5

	
Fiscal Year Award Limit

	
9

	  	
4.6

	
Minimum Vesting

	
9

	  	
4.7

	
At-Will Employment

	
10

	  	
4.8

	
Stand-Alone and Tandem Awards

	
10

	
ARTICLE 5.

	
PERFORMANCE-BASED COMPENSATION

	
10

	  	
5.1

	
Purpose

	
10

	  	
5.2

	
Applicability

	
10

	  	
5.3

	
Types of Awards

	
10

	  	
5.4

	
Procedures with Respect to Performance-Based Awards

	
10

	  	
5.5

	
Payment of Performance-Based Awards

	
11

	  	
5.6

	
Additional Limitations

	
11

	
ARTICLE 6.

	
OPTIONS

	
11

	  	
6.1

	
Grant of Options to Eligible Individuals

	
11

	  	
6.2

	
Qualification of Incentive Stock Options

	
11

	  	
6.3

	
Option Exercise Price

	
12

	  	
6.4

	
Option Term

	
12

	  	
6.5

	
Option Vesting

	
12

	  	
6.6

	
Substitute Awards

	
12

	  	
6.7

	
Substitution of Stock Appreciation Rights

	
13

	  	
6.8

	
Exercise of Options

	
13

  

-i-

  

TABLE OF CONTENTS

(continued)

Page

 

	  	
6.9

	
Notification Regarding Disposition of Incentive Stock Options

	
13

	
ARTICLE 7.

	
STOCK APPRECIATION RIGHTS

	
14

	  	
7.1

	
Grant of Stock Appreciation Rights

	
14

	  	
7.2

	
Stock Appreciation Right Term

	
14

	  	
7.3

	
Stock Appreciation Right Vesting

	
14

	  	
7.4

	
Manner of Exercise

	
15

	  	
7.5

	
Payment

	
15

	  	
7.6

	
Substitution of Options

	
15

	
ARTICLE 8.

	
RESTRICTED STOCK

	
15

	  	
8.1

	
Award of Restricted Stock

	
15

	  	
8.2

	
Rights as Stockholders

	
16

	  	
8.3

	
Restrictions

	
16

	  	
8.4

	
Repurchase or Forfeiture of Restricted Stock

	
16

	  	
8.5

	
Certificates for Restricted Stock

	
16

	  	
8.6

	
Section 83(b) Election

	
17

	
ARTICLE 9.

	
PERFORMANCE AWARDS, STOCK PAYMENTS AND RESTRICTED STOCK UNITS

	
17

	  	
9.1

	
Performance Awards

	
17

	  	
9.2

	
Stock Payments

	
17

	  	
9.3

	
Restricted Stock Units

	
17

	  	
9.4

	
Term

	
18

	  	
9.5

	
Exercise or Purchase Price

	
18

	
ARTICLE 10.

	
ADDITIONAL TERMS OF AWARDS

	
18

	  	
10.1

	
Payment

	
18

	  	
10.2

	
Tax Withholding

	
18

	  	
10.3

	
Transferability of Awards

	
19

	  	
10.4

	
Conditions to Issuance of Shares

	
20

	  	
10.5

	
Forfeiture Provisions

	
21

	  	
10.6

	
Prohibition on Repricing

	
21

	  	
10.7

	
Permitted Replacement Awards

	
21

  

-ii-

  

TABLE OF CONTENTS

(continued)

Page

 

	  	
10.8

	
Shareholder Approval of Certain Accelerations

	
21

	
ARTICLE 11.

	
ADMINISTRATION

	
22

	  	
11.1

	
Committee

	
22

	  	
11.2

	
Duties and Powers of Committee

	
22

	  	
11.3

	
Action by the Committee

	
22

	  	
11.4

	
Authority of Committee

	
22

	  	
11.5

	
Decisions Binding

	
23

	  	
11.6

	
Delegation of Authority

	
23

	
ARTICLE 12.

	
MISCELLANEOUS PROVISIONS

	
24

	  	
12.1

	
Amendment, Suspension or Termination of the Plan

	
24

	  	
12.2

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

	
24

	  	
12.3

	
No Stockholder Rights

	
27

	  	
12.4

	
Paperless Administration

	
27

	  	
12.5

	
Effect of Plan upon Other Compensation Plans

	
27

	  	
12.6

	
Compliance with Laws

	
27

	  	
12.7

	
Titles and Headings; References to Sections of the Code or the Exchange Act

	
27

	  	
12.8

	
Governing Law

	
27

	  	
12.9

	
Section 409A

	
28

	  	
12.10

	
No Rights to Awards

	
28

	  	
12.11

	
Unfunded Status of Awards

	
28

	  	
12.12

	
Indemnification

	
29

	  	
12.13

	
Term

	
29

  

-iii-

  

99¢ ONLY STORES

2010 EQUITY INCENTIVE PLAN

 

ARTICLE 1.

PURPOSE

 

The purpose of the 99¢ Only Stores 2010 Equity Incentive Plan (the “Plan”) is to attract, motivate and retain the services of Employees, Non-Employee Directors and Consultants by enabling them to participate in the growth and financial success of 99¢ Only Stores (the “Company”) and to align their individual interests to those of the Company’s stockholders.

 

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings specified below:

 

1.             “Affiliate” shall mean a person or entity that directly or indirectly controls or is controlled by, or is under common control with, the Company.

 

2.             “Award” shall mean, as the case may be, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, Performance Awards, Stock Payments or Stock Appreciation Rights.

 

3.             “Award Agreement” shall mean any written notice, terms and conditions, contract or other instrument or document evidencing an Award, including in electronic form, which shall contain any terms and conditions with respect to the Award as the Committee shall determine consistent with the Plan and any applicable Program.

 

4.             “Award Limit” shall mean with respect to Awards payable in Shares or in cash, as the case may be, the respective limit set forth in Section 4.5.

 

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

 

6.             A “Change of Ownership” shall be deemed to have occurred if any of the following has occurred: (a) any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company, as determined in accordance with Section 1.409A-3(i)(5)(v) of the Treasury Regulations; provided, that if a person or group is considered either to own more than 50% of the total fair market value or total voting power of the stock of the Company, or to own more than the market value or total voting power specified in (b) below, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “Change of Ownership”; (b) any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 50% or more of the total voting power of the stock of the Company, as determined in accordance with Section 1.409A-3(i)(5)(vi) of the Treasury Regulations; provided, that if a person or group is considered to possess 50% or more of the total voting power of the stock of the Company, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “Change of Ownership”; (c) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election, as determined in accordance with Section 1.409A-3(i)(5)(vi) of the Treasury Regulations; or (d) any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions, as determined in accordance with Section 1.409A-3(i)(5)(vii) of the Treasury Regulations; provided, that a transfer of assets shall not be treated as a “Change of Ownership” when such transfer is made to an entity that is controlled by the stockholders of the Company, as determined in accordance with Section 1.409A-3(i)(5)(vii)(B) of the Treasury Regulations.

 

  

1

  

7.             “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the Treasury Regulations and official guidance promulgated by the U.S. Department of Treasury.

 

8.             “Committee” shall mean the Compensation Committee of the Board or another committee of the Board designated by the Board that consists solely of Directors meeting the qualifications described in Section 11.1.

 

9.             “Common Stock” shall mean the common stock of the Company, no par value.

 

10.           “Company” shall mean 99¢ Only Stores.

 

11.           “Company Stock Administrator” shall mean the stock administrator of the Company, or such other person or entity designated by the Committee, or his, her or its office, as applicable, whether or not employed by the Company.

 

12.           “Consultant” shall mean any consultant or advisor engaged to provide services to the Company or any Affiliate that qualifies as a consultant or advisor under the instructions for use of a Form S-8 Registration Statement.

 

13.           “Covered Employee” shall mean any Employee who is, or who the Committee believes may become, a “covered employee” within the meaning of Section 162(m) of the Code.

 

14.           “Director” shall mean a member of the Board.

 

15.           “Effective Date” shall mean the date the Plan is first approved by the Company’s stockholders in accordance with the requirements of the applicable Securities Exchange and Sections 162(m) and 422 of the Code.

 

16.           “Eligible Individual” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Committee or the Board.

 

  

2

  

17.           “Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code) of the Company or of any Affiliate.

 

18.           “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the Shares (or other securities of the Company) or the Share price (or the price of other securities), and results upon its implementation in a change in the per-Share value of the Shares underlying outstanding Awards.

 

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

 

20.           “Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:

 

(1)           If the Common Stock is listed on any Securities Exchange, its Fair Market Value shall be the closing sales price for a Share as quoted on such Securities Exchange for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported by The Wall Street Journal or such other source (whether in print or electronic) as the Committee deems reliable;

 

(2)           If the Common Stock is not listed on any Securities Exchange, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported by The Wall Street Journal or such other source (whether in print or electronic) as the Committee deems reliable; or

 

(3)           If the Common Stock is neither listed on any Securities Exchange nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Committee in good faith.

 

21.           “Full Value Award” shall mean any Award other than (i) an Option, (ii) a Stock Appreciation Right or (iii) any other Award for which the Holder must pay the intrinsic value existing as of the date of grant (whether directly or by foregoing a right to receive a payment from the Company or any Affiliate) as a condition to exercising or receiving payment under it.

 

22.           “Greater Than 10% Stockholder” shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation (as defined in Section 424(e) of the Code) thereof.

 

23.           “Holder” shall mean a person who has been granted an Award.

 

24.           “Incentive Stock Option” shall mean an Option that is intended to qualify as an “incentive stock option” under, and conforms to the applicable provisions of, Section 422 of the Code.

 

  

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25.           “Non-Employee Director” shall mean a Director of the Company who is not an Employee.

 

26.           “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.

 

27.           “Option” shall mean a right to purchase Shares at a specified exercise price, granted under ARTICLE 6. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.

 

28.           “Performance Award” shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid in cash, Shares or a combination of both, awarded under Section 9.1.

 

29.           “Performance-Based Compensation” shall mean any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

 

30.           “Performance Criteria” shall mean the criteria that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period.  The Performance Criteria that shall be used to establish Performance Goals are limited to the following: (i)  income/loss (e.g., operating income/loss, EBIT or similar measures, net income/loss, earnings/loss per share, residual or economic earnings), (ii) cash flow (e.g., operating cash flow, total cash flow, EBITDA, cash flow in excess of cost of capital or residual cash flow, cash flow return on investment and cash flow sufficient to achieve financial ratios or a specified cash balance), (iii) returns (e.g., on sales, revenues, investments, assets, capital and equity), (iv) working capital (e.g., working capital divided by revenues), (v) margins (e.g., variable margin, profits divided by revenues, gross margins and margins divided by revenues), (vi) liquidity (e.g., total or net debt, debt reduction, debt-to-capital, debt-to-EBITDA and other liquidity ratios), (vii) revenues, cost initiative and stock price metrics (e.g., revenues, stock price, total shareholder return, expenses, cost structure improvements and costs divided by revenues or other metrics) and (viii) strategic metrics (e.g., market share, sales volume, comparable store sales, customer satisfaction, employee satisfaction, service quality, productivity, operating efficiency, inventory management, shrinkage, safety, workplace diversity, and goals related to acquisitions, divestitures or other transactions).

 

31.           “Performance Goals” shall mean, for a Performance Period, one or more goals established in writing by the Committee for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance, either independently or as compared to one or more companies, performance of specific subsidiaries or business units, either independently or as compared to one or more companies’ subsidiaries or business units, or otherwise as determined by the Committee.  If the Committee believes, in its sole discretion, that an equitable adjustment to any Performance Goal is advisable in light of new developments or circumstances, the Committee may provide for one or more objectively determinable adjustments. Such adjustments may include or arise from one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws or business conditions.  For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

 

  

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32.           “Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder’s right to, and the payment of, an Award.

 

33.           “Permitted Transferee” shall mean, with respect to a Holder, any person entitled to use a Form S-8 Registration Statement to exercise Awards originally granted to the Holder and to sell Shares issued pursuant to Awards originally granted to the Holder.

 

34.           “Plan” shall mean this 99¢ Only Stores 2010 Equity Incentive Plan.

 

35.           “Program” shall mean any program adopted by the Committee pursuant to the Plan containing terms and conditions intended to govern one or more specific types of Awards and/or the manner in which they may be granted.

 

36.           “QDRO” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the regulations or official guidance promulgated thereunder.

 

37.           “Restricted Stock” shall mean Shares awarded under ARTICLE 8 that are subject to certain restrictions and may be subject to risk of forfeiture or repurchase.

 

38.           “Restricted Stock Units” shall mean the right to receive Shares or the value of Shares awarded under Section 9.3.

 

39.           “Retirement” shall mean an Employee’s severance from employment with the Company and its Affiliates for any reason other than a leave of absence, termination for cause, death or disability, at such time as the Employee’s age and years of service with the Company and its Affiliates equals at least 65 or more, provided that the Employee is then at least 55 years of age.  The Company shall have the sole right to determine whether an Employee’s severance from employment constitutes a Retirement.

 

  

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40.           “Securities Exchange” shall mean the New York Stock Exchange or any other securities exchange, national market system or automated quotation system on which the Shares are listed, quoted or traded.

 

41.           “Shares” shall mean shares of Common Stock.

 

42.           “Stock Appreciation Right” shall mean a stock appreciation right as described and granted under ARTICLE 7.

 

43.           “Stock Payment” shall mean (a) a payment in the form of Shares or (b) a right to purchase Shares, however denominated or described, as part of a bonus, deferred compensation or other arrangement, in any such case awarded under Section 9.2.

 

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

 

45.           “Termination of Service” shall mean,

 

(1)           As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or an Affiliate is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Affiliate.

 

(2)           As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, with or without cause, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences employment or service with the Company or any Affiliate.

 

(3)           As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Affiliate is terminated for any reason, with or without cause, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.

 

The Committee, in its sole discretion, shall determine the effect of all matters and questions relating to Terminations of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service; provided, however, that, with respect to Incentive Stock Options, unless the Committee otherwise provides in the terms of the Program, Award Agreement or otherwise, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if and to the extent that any such event interrupts employment for the purposes of Section 422(a)(2) of the Code.  For purposes of the Plan, a Holder’s employee-employer relationship or consultancy relationship shall be deemed to be terminated in the event that the Affiliate employing or contracting with such Holder ceases to remain an Affiliate following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).

 

  

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Notwithstanding the foregoing, with respect to any Award that constitutes “deferred compensation” subject to the requirements of Section 409A of the Code, a Termination of Service shall not be deemed to have occurred until there also has been a “separation from service” within the meaning of Section 409A of the Code, as determined in accordance with Section 1.409A-1(h) of the Treasury Regulations; provided that (i) for a Holder who provides services to the Company as an Employee, a separation from service shall be deemed to occur when the Holder has experienced a termination of employment with the Company and the facts and circumstances indicate that the Holder and the Company reasonably anticipate that either (A) no further services will be performed by the Holder for the Company after a certain date or (B) the level of bona fide services the Holder will perform for the Company after a certain date (whether as an Employee or as an independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed by the Holder (whether as an Employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services performed for the Company if the Holder has been performing services for less than 36 months); and (ii) for a Holder who provides services to the Company as an independent contractor, a separation from service shall be deemed to occur upon expiration or termination of all contracts under which services are performed by the Holder for the Company, provided that such expiration or termination constitutes a good-faith and complete severing of the contractual relationship between the Holder and the Company, and provided, further, that for a Holder who provides services to the Company as both an Employee and an independent contractor, a separation from service shall generally not occur until the Holder has ceased providing services for the Company as both an Employee and an independent contractor pursuant to clauses (i) and (ii) of this sentence.  For purposes of determining whether a separation from service has occurred, services performed for the Company shall include services performed both for the Company and for any other corporation that is a member of the same “controlled group” as the Company under Section 414(b) of the Code or any other trade or business (such as a partnership) that is under common control with the Company as determined under Section 414(c) of the Code, in each case as modified by Section 1.409A-1(h)(3) of the Treasury Regulations and substituting “at least 50 percent” for “at least 80 percent” each place it appears in Section 1563(a) of the Code or Section 1.414(c)-2 of the Treasury Regulations.

 

46.           “Treasury Regulations” shall mean the final, temporary and proposed regulations promulgated by the U.S. Department of Treasury under the Code, as such regulations may be amended from time to time.

 

  

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ARTICLE 3.

SHARES SUBJECT TO THE PLAN

 

3.1           Number of Shares.

 

(a)           Subject to adjustment as provided in Sections 3.1(b) and 12.2, a total of four million, nine hundred ninety nine thousand, nine hundred and ninety nine (4,999,999) Shares shall be authorized for grant under the Plan. This limit includes Shares that were authorized for grant under the Company’s 1996 Stock Option Plan but that were not issued or subject to outstanding awards as of the Effective Date.  Any Share that is subject to an Award that could be settled with Shares shall be deducted from this limit at the ratio of one (1) Share for every one (1) Share subject to the Award.  After the Effective Date, no new awards may be granted under the 1996 Stock Option Plan, but any awards under the 1996 Stock Option Plan that are outstanding as of the Effective Date shall continue to be subject to the terms and conditions of the 1996 Stock Option Plan.

 

(b)           If an Award expires or is canceled, forfeited or settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such expiration, cancellation, forfeiture or cash settlement, again be available as Shares authorized for grant under the Plan, in accordance with Section 3.1(d) below.  Notwithstanding anything to the contrary contained herein, Shares tendered by a Holder or withheld by the Company in payment of the exercise price of an Award or to satisfy any tax withholding obligation with respect to an Award shall not be available as Shares authorized for grant under the Plan.

 

(c)           Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided, that Awards using such available shares shall not be made after the date awards could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.

 

(d)           Each Share that again becomes available for grant pursuant to this Section 3.1 shall be added back as one (1) Share.

 

3.2           Stock Distributed.  Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.

 

  

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ARTICLE 4.

GRANT OF AWARDS

 

4.1           Participation.  The Committee may, from time to time, select from among all Eligible Individuals those to whom an Award shall be granted.

 

4.2           Award Agreement.  Each Award shall be evidenced by an Award Agreement. Award Agreements shall contain such terms and conditions as may be determined by the Committee that are not inconsistent with the Plan, including any terms and conditions that are necessary for Awards to comply with, or be exempt from, the requirements of Section 409A of the Code.  Award Agreements evidencing Awards intended to qualify as Performance-Based Compensation shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.

 

4.3           Programs.  The Board or the Committee may from time to time establish Programs pursuant to the Plan. An Award Agreement evidencing an Award granted pursuant to any Program shall comply with the terms and conditions of such Program and the Plan.

 

4.4           Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan, the Plan, any Award granted to any individual who is then subject to Section 16 of the Exchange Act, and any applicable Program shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and each Program and Award shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

4.5           Fiscal Year Award Limit.  Notwithstanding any provision in the Plan to the contrary, and subject to Section 12.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any fiscal year of the Company shall be four hundred ninety nine thousand, nine hundred and ninety nine (499,999) and the maximum aggregate amount of cash that may be paid to any one person during any fiscal year of the Company with respect to one or more Performance Awards payable in cash shall be nine hundred ninety nine thousand, nine hundred ninety nine Dollars ($999,999).  To the extent required by Section 162(m) of the Code, Shares subject to Awards that are canceled shall continue to be counted against the Award Limit specified in the preceding sentence.

 

4.6           Minimum Vesting.  The minimum time-based vesting period for an Award that is subject to the satisfaction of one or more Performance Goals or other performance-based criteria shall be one (1) year.  With the exception of Stock Payments that are not subject to vesting, each other Award shall be subject to a minimum three (3) year time-based vesting period; provided, however, the Committee may provide for (a) an equal portion of each such Award to vest in annual installments during such three (3) year period, (b) a longer (but not shorter) time-based vesting period for an Award so long as the vesting schedule is not more favorable to the Holder than the default schedule specified above or (c) the acceleration of vesting to the extent permitted by Section 10.8.

 

  

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4.7           At-Will Employment.  Nothing in the Plan, any Program or any Award Agreement shall confer upon any Holder any right to be employed by or to serve as a Director or Consultant for the Company or any Affiliate, or to continue in such employment or service, or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any Affiliate.

 

4.8           Stand-Alone and Tandem Awards.  Awards granted pursuant to the Plan may, in the sole discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or (subject to the requirements of Section 409A of the Code) at a different time from the grant of such other Awards.

 

ARTICLE 5.

PERFORMANCE-BASED COMPENSATION

 

5.1           Purpose.  The Committee, in its sole discretion, may determine at the time an Award is granted whether such Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant such an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this ARTICLE 5 shall control over any contrary provision contained in the Plan.  The Committee may in its sole discretion grant Awards to other Eligible Individuals that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this ARTICLE 5 and that are not intended to qualify as Performance-Based Compensation.

 

5.2           Applicability.  The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such Eligible Individual in any subsequent Performance Period (or entitle such Eligible Individual to any such grant) and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period (or entitle any such other Eligible Individual to any such grant).

 

5.3           Types of Awards.  Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Covered Employee in a manner intended to qualify as Performance-Based Compensation, including, without limitation, Restricted Stock for which the restrictions lapse upon the attainment of specified Performance Goals, and any Performance Awards described in ARTICLE 9 that vest or become exercisable or payable upon the attainment of one or more specified Performance Goals.

 

5.4           Procedures with Respect to Performance-Based Awards.  To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted one or more Covered Employees and that is intended to qualify as Performance-Based Compensation, no later than 90 days following the commencement of any Performance Period (or such earlier time as may be required under Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Eligible Individuals, (b) select the Performance Criteria applicable to the Performance Period, (c) establish objective Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria, and (d) specify an objective relationship between the Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned or payable under such Awards, to the extent provided under any applicable Program or Award Agreement, the Committee shall have the right to reduce or eliminate (but not to increase) the amount earned or payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including, without limitation, the assessment of individual or Company performance for the Performance Period.

 

  

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5.5           Payment of Performance-Based Awards.  Unless otherwise provided in the applicable Program or Award Agreement, as to an Award that is intended to qualify as Performance-Based Compensation, the Holder must be employed by the Company or an Affiliate throughout the Performance Period. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Holder shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such period are achieved.

 

5.6           Additional Limitations.  Notwithstanding any other provision of the Plan and except as otherwise determined by the Committee, any Award that is granted to a Covered Employee and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code that are requirements for qualification as Performance-Based Compensation, and the Plan, any applicable Program and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.

 

ARTICLE 6.

OPTIONS

 

6.1           Grant of Options to Eligible Individuals.  The Committee is authorized to grant Options to Eligible Individuals on such terms and conditions as it may determine that are not inconsistent with the Plan; provided, however, that no Option shall be granted to any Employee or Consultant of an Affiliate unless the Company is an “eligible issuer of service recipient stock” with respect to such person within the meaning of Section 409A of the Code.

 

6.2           Qualification of Incentive Stock Options.  No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any subsidiary corporation of the Company (as defined in Section 424(f) of the Code). No person who is a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code.  Any Incentive Stock Option granted under the Plan may be modified by the Committee, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate Fair Market Value of Shares with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any subsidiary or parent corporation thereof (each as defined in Section 424(f) and (e) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code.  The requirements set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the Fair Market Value of Shares shall be determined as of the time the respective instruments were granted. Subject to adjustment as provided in Sections 3.1(b) and 12.2, no more than four million, nine hundred ninety nine thousand, nine hundred and ninety nine (4,999,999) Shares may be issued pursuant to the exercise of Incentive Stock Options granted under the Plan.

 

  

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6.3           Option Exercise Price.  The exercise price per Share subject to each Option shall be set by the Committee, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or on the date the Option is modified, extended or renewed for purposes of Section 409A of the Code or, as to an Incentive Stock Option, Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).

 

6.4           Option Term.  The term of each Option shall be set by the Committee in its sole discretion; provided, however, that the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder.  The Committee shall determine the time period, including the time period following a Termination of Service, during which a Holder has the right to exercise the vested Options, which time period may not extend beyond the term of the Option.

 

6.5           Option Vesting.  Subject to Section 4.6, the Committee shall determine the period of time and other conditions that must be satisfied before the Holder’s right to exercise an Option, in whole or in part, shall vest.  Such vesting may be based on service with the Company or an Affiliate, any of the Performance Criteria, or any other criterion or condition determined by the Committee. No portion of an Option that cannot be exercised at the Holder’s Termination of Service shall thereafter become exercisable.

 

6.6           Substitute Awards.  Notwithstanding the foregoing provisions of this ARTICLE 6 to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant; provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate Fair Market Value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such Fair Market Value to be determined by the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares, and that the grant of the Substitute Award otherwise satisfies the requirements of Section 1.409A-1(b)(5)(v)(D) of the Treasury Regulations or, in the case of an Incentive Stock Option, Section 1.424-1(a) of the Treasury Regulations.

 

  

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6.7           Substitution of Stock Appreciation Rights.  The Committee may provide in the applicable Program or the Award Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided, that such Stock Appreciation Right shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable and such Stock Appreciation Right shall have the same exercise price and the same remaining vesting schedule and term as such Option.

 

6.8           Exercise of Options.  An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Committee may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of Shares. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Company Stock Administrator:

 

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

 

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

 

(c)            In the event that the Option shall be exercised by any person other than the Holder who is permitted to exercise the Option in accordance with Section 10.3, appropriate proof of the right of such person to exercise the Option, as determined in the sole discretion of the Company Stock Administrator; and

 

(d)           Full payment of the exercise price and applicable withholding taxes to the Company for the Shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Sections 10.1 and 10.2.

 

6.9           Notification Regarding Disposition of Incentive Stock Options.  The Holder shall give the Company Stock Administrator prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such shares to such Holder.

 

  

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ARTICLE 7.

STOCK APPRECIATION RIGHTS

 

7.1           Grant of Stock Appreciation Rights.

 

(a)           The Committee is authorized to grant Stock Appreciation Rights to Eligible Individuals on such terms and conditions as it may determine that are not inconsistent with the Plan; provided, however, that no Stock Appreciation Right shall be granted to any Employee or Consultant of an Affiliate unless the Company is an “eligible issuer of service recipient stock” with respect to such person within the meaning of Section 409A of the Code.

 

(b)           A Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price of the Stock Appreciation Right from the Fair Market Value of a Share on the date of exercise of the Stock Appreciation Right, and multiplying the difference, if positive, by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Committee may impose. Except as described in Section 7.1(c) below, the exercise price of each Stock Appreciation Right shall be set by the Committee, but shall not be less than 100% of the Fair Market Value of a Share on the date the Stock Appreciation Right is granted (or on the date the Stock Appreciation Right is modified, extended or renewed for purposes of Section 409A of the Code).

 

(c)           Notwithstanding the foregoing provisions of Section 7.1(b) to the contrary, in the case of a Stock Appreciation Right that is a Substitute Award, the exercise price of such Stock Appreciation Right may be less than 100% of the Fair Market Value of a Share on the date of grant; provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the Shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares, and that the grant of the Substitute Award otherwise satisfies the requirements of Section 1.409A-1(b)(5)(v)(D) of the Treasury Regulations.

 

7.2           Stock Appreciation Right Term.  The term of each Stock Appreciation Right shall be set by the Committee in its sole discretion; provided, however, that the term shall not be more than ten (10) years from the date the Stock Appreciation Right is granted.  The Committee shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise a vested Stock Appreciation Right, which time period may not extend beyond the term of the Stock Appreciation Right.

 

7.3           Stock Appreciation Right Vesting.  Subject to Section 4.6, the Committee shall determine the period of time and other conditions that must be satisfied before the Holder’s right to exercise a Stock Appreciation Right, in whole or in part, shall vest.  Such vesting may be based on service with the Company or an Affiliate, any of the Performance Criteria, or any other criterion or condition determined by the Committee.  No portion of a Stock Appreciation Right that cannot be exercised at the Holder’s Termination of Service shall thereafter become exercisable.

 

  

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7.4           Manner of Exercise.  All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the Company Stock Administrator, or such other person or entity designated by the Committee, or his, her or its office, as applicable:

 

(a)           A written or electronic notice complying with the applicable rules established by the Company Stock Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised.  The notice must be signed in writing or electronically by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;

 

(b)           Such representations and documents as the Company Stock Administrator, in its sole discretion, deems necessary or advisable to effect compliance with applicable laws and regulations.  The Company Stock Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance; and

 

(c)            In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 7.4 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right.

 

7.5           Payment.  Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this ARTICLE 7 shall be in cash, Shares (based on their Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Committee.

 

7.6           Substitution of Options.  The Committee may provide in the applicable Program or the Award Agreement evidencing the grant of a Stock Appreciation Right that the Committee, in its sole discretion, shall have the right to substitute an Option for such Stock Appreciation Right at any time prior to or upon exercise of such Stock Appreciation Right; provided, that such Option shall be exercisable with respect to the same number of Shares for which such substituted Stock Appreciation Right would have been exercisable and such Option shall have the same exercise price and the same remaining vesting schedule and term as such Stock Appreciation Right.

 

ARTICLE 8.

RESTRICTED STOCK

 

8.1           Award of Restricted Stock.

 

(a)           The Committee is authorized to grant Restricted Stock to Eligible Individuals, and shall determine such terms and conditions, including the restrictions applicable to each Award of Restricted Stock, that are not inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock, as it deems appropriate.

 

  

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(b)           The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value of the Shares to be purchased, unless otherwise permitted by applicable state law. To the extent required by applicable law, legal consideration shall be required for each issuance of Restricted Stock.

 

8.2           Rights as Stockholders.  Subject to Section 8.4, upon the grant of a Restricted Stock Award, the Holder shall have, unless otherwise provided in the terms of the applicable Award Agreement, all the rights of a stockholder with respect to the Shares subject to the Award, subject to the restrictions in the applicable Program or in his or her Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares; provided, however, that if the lifting or lapsing of the restrictions on an Award of Restricted Stock is subject to satisfaction of one or more Performance Goals, the Holder shall not be entitled to receive dividends or other distributions with respect to the Shares subject to the Award unless and until each of the applicable Performance Goals has been satisfied, at which time declared and accrued but unpaid dividends and distributions from and after the date of grant of the Award shall become payable to the Holder as soon as practicable.  Notwithstanding anything in the foregoing to the contrary, dividends and other distributions made with respect to the Shares subject to an Award shall only be payable to the Holder of the Award to the extent provided by the Committee under the applicable Program or Award Agreement.

 

8.3           Restrictions.  All Shares of Restricted Stock (including any Shares received by Holders thereof with respect to Shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, under the terms of the applicable Program or Award Agreement, be subject to such restrictions and vesting requirements as the Committee shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Committee, including, without limitation, criteria based on the Holder’s duration of employment or service with the Company or its Affiliates, applicable Performance Criteria, Company performance or individual performance. Restricted Stock may not be sold or encumbered until all applicable restrictions are satisfied, terminated or expire.

 

8.4           Repurchase or Forfeiture of Restricted Stock.  If no purchase price was paid by a Holder in cash or property for a grant of Restricted Stock, upon a Termination of Service the Holder’s rights in any Shares of Restricted Stock then subject to restrictions shall terminate, and such Shares of Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a purchase price was paid by a Holder in cash or property for a grant of Restricted Stock, upon a Termination of Service the Company shall have the right to repurchase from the Holder the Shares of Restricted Stock then subject to restrictions at a cash price per Share equal to the purchase price paid by the Holder in cash or property for such Shares of Restricted Stock or such other amount as may be specified under the applicable Program or in the applicable Award Agreement.

 

8.5           Certificates for Restricted Stock.  Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Company Stock Administrator shall determine. Certificates, book entries or electronic registration evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, in it sole discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse.

 

  

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8.6           Section 83(b) Election.  If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

 

ARTICLE 9.

PERFORMANCE AWARDS, STOCK

PAYMENTS AND RESTRICTED STOCK UNITS

 

9.1           Performance Awards.

 

(a)           The Committee is authorized to grant Performance Awards to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation.  The number of Shares subject to a Performance Award and the value of a Performance Award may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Performance Awards may be paid in cash, Shares, or both, as determined by the Committee.

 

(b)           Without limiting Section 9.1(a), the Committee may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee.  Any such bonuses paid to a Holder that are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of ARTICLE 5.

 

9.2           Stock Payments.  The Committee is authorized to make Stock Payments to any Eligible Individual.  The number or value of Shares of any Stock Payment shall be determined by the Committee and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company or any Affiliate, determined by the Committee. Shares underlying a Stock Payment that is subject to a vesting schedule or other restrictions, conditions or criteria set by the Committee will not be issued until the restrictions, conditions or criteria have been satisfied. Unless otherwise provided in the applicable Award Agreement, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.

 

9.3           Restricted Stock Units.  The Committee is authorized to grant Restricted Stock Units to any Eligible Individual.  The number and terms and conditions of Restricted Stock Units shall be determined by the Committee.  The Committee shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such vesting restrictions, conditions or criteria as it deems appropriate, including, without limitation, conditions based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, in each case on a specified date or dates or over any period or periods, as the Committee determines.  The Company Stock Administrator shall specify, or permit the Holder to elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units that shall be issued, if applicable, subject to the requirements of Section 409A of the Code. Restricted Stock Units may be paid in cash, Shares, or both, as determined by the Committee. On the distribution dates, the Company shall issue to the Holder one unrestricted, fully transferable Share (or the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.

 

  

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9.4           Term.  The term of a Performance Award, Stock Payment award and/or Restricted Stock Unit award shall be set by the Committee in its sole discretion.

 

9.5           Exercise or Purchase Price.  The Committee may establish an exercise or purchase price for a Performance Award, Shares distributed as a part of a Stock Payment or Shares distributed pursuant to a Restricted Stock Unit Award.

 

ARTICLE 10.

ADDITIONAL TERMS OF AWARDS

 

10.1         Payment.  The Committee shall determine the methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) or Shares not subject to any pledge or security interest and held for such period of time as may be required by the Committee, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided, that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other property or legal consideration acceptable to the Committee.  The Committee shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Holders.  Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company to the extent it would violate Section 13(k) of the Exchange Act.

 

10.2         Tax Withholding.  The Company and any Affiliate shall have the authority and the right to deduct or withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder’s FICA or employment tax obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan.  The Committee may, in its sole discretion and in satisfaction of the foregoing requirement, allow a Holder to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the surrender of Shares).  The number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities not to exceed the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.  The Company Stock Administrator shall determine the Fair Market Value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option exercise or a Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.

 

  

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10.3         Transferability of Awards.

 

(a)           Except as otherwise provided in Section 10.3(b):

 

(i)            No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than to a Permitted Transferee by will or the laws of descent and distribution or, subject to the consent of the Committee, pursuant to a QDRO, unless and until and to the extent such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;

 

(ii)           No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or the Holder’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted imposition of liability thereon or disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted hereunder; and

 

(iii)          During the lifetime of the Holder, only the Holder (or the personal representative of an incompetent Holder) may exercise an Award (or any portion thereof) granted to such Holder under the Plan, unless it has been disposed of pursuant to a QDRO, in which case the beneficiary of the QDRO may exercise the Award; after the death of the Holder, any exercisable portion of an Award may be exercised by a Permitted Transferee, but only prior to the time when such portion expires or becomes unexercisable under the Plan or the applicable Program or Award Agreement.

 

(b)           Notwithstanding Section 10.3(a), the Committee, in its sole discretion and subject to such terms and conditions as it may impose, may permit a Holder to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to any state, federal, local or foreign tax and securities laws applicable to transferable Awards.

 

(c)           A Holder may, in the manner determined by the Committee, designate a Permitted Transferee to exercise the rights of the Holder as his or her beneficiary and to receive any distribution with respect to any Award upon the Holder’s death. Such person shall be subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder, except to the extent the Plan, the Program, the Award Agreement or applicable law otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Holder is married and resides in a community property state, a designation of a person other than the Holder’s spouse as his or her beneficiary with respect to more than 50% of the Holder’s interest in the Award shall not be effective without the prior written or electronic consent of the Holder’s spouse. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time provided the change or revocation is filed with the Committee prior to the Holder’s death. If no beneficiary has been designated in this manner or the beneficiary does not survive the Holder, the rights of the Holder shall be exercisable by the Holder’s executor or administrator.

 

  

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10.4         Conditions to Issuance of Shares.

 

(a)           Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise or vesting of any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such Shares is in compliance with all applicable laws and regulations and, if applicable, the requirements of any Securities Exchange, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Holder make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.

 

(b)           All certificates evidencing Shares delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Committee or the Company Stock Administrator deems necessary or advisable to comply with applicable laws and regulations and the rules of any Securities Exchange.

 

(c)           The Company Stock Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, vesting, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Company Stock Administrator, or because of any other requirement arising from compliance with any applicable laws or regulations, as determined by the Company Stock Administrator, in its sole discretion.

 

(d)           No fractional Shares shall be issued and the Company Stock Administrator shall determine, in its sole discretion, and in accordance with the requirements of Section 409A of the Code and other applicable law, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding.

 

(e)           Notwithstanding any other provision of the Plan, unless otherwise determined by the Company Stock Administrator or required by any applicable laws or regulations, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or the Company Stock Administrator).

 

  

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10.5         Forfeiture Provisions.  Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Committee shall have the right to provide, in the terms or conditions of Programs or Awards made under the Plan or in any policy with respect to the recovery or recoupment of compensation or benefits in the event of financial restatements or the occurrence of other events that are inconsistent with the payment of compensation, as determined by the Committee, or to require a Holder to agree by separate written or electronic instrument, that: (a)(i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee, (iii) the Holder incurs a Termination of Service for “cause” (as such term is defined in the sole discretion of the Committee, or as set forth in a written agreement relating to such Award between the Company and the Holder) or (iv) the Company’s financial results are restated and such proceeds, gains or other economic benefit actually or constructively received by the Holder would have been lower had they been calculated based on such restated results.

 

10.6         Prohibition on Repricing.  Except as provided in Section 12.2, the Committee shall not, without the approval of the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its exercise price, except with respect to any Substitute Award, or (ii) cancel any outstanding Option or Stock Appreciation Right in exchange for cash or another Award that has a lower exercise price or that provides additional value to the Holder, except with respect to any Substitute Award.

 

10.7         Permitted Replacement Awards.  The Committee shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award (or any award granted under another Company plan, subject to the terms of such other plan) to increase the exercise price or to cancel and replace an Award (or any award granted under another Company plan, subject to the terms of such other plan) with the grant of an Award having an exercise price that is greater than or equal to the original price per share and having a vesting schedule and term equal to the remaining vesting schedule and term of the Award (or award granted under another Company plan) being replaced, provided, that such amendment or cancellation and replacement does not cause a violation of Section 409A of the Code.

 

10.8         Shareholder Approval of Certain Accelerations.  The Committee shall not, without the approval of the stockholders of the Company, accelerate the vesting of any Awards except (a) in connection with the death or disability of a Holder or the Retirement of a Holder who is an Employee, or (b) in accordance with Section 12.2(h).

 

  

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ARTICLE 11.

ADMINISTRATION

 

11.1         Committee.  The Committee shall administer the Plan (except as otherwise permitted herein) and shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any Securities Exchange; provided, that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 11.1 or otherwise provided in any charter of the Committee.

 

11.2         Duties and Powers of Committee.  It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions, subject to the Committee’s power to delegate duties under Section 11.6.  The Committee shall have the power to interpret the Plan, any Program and any Award Agreement, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Program or Award Agreement in any manner not inconsistent with the Plan; provided that the rights of the Holder of an Award that is the subject of any such Program or Award Agreement are not affected adversely by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 12.9.  Any such Award under the Plan need not be the same with respect to each Holder.  Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act, Section 162(m) of the Code or the rules of any Securities Exchange require otherwise.

 

11.3         Action by the Committee.  Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee for purposes of the Plan. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any compensation consultant, attorney or other professional retained by the Company to assist in the administration of the Plan.

 

11.4         Authority of Committee.  Subject to any specific designation in the Plan or any applicable Program, the Committee has the exclusive power, authority and sole discretion to:

 

(a)           Designate Eligible Individuals to receive Awards;

 

(b)           Determine the type or types of Awards to be granted to each Eligible Individual;

 

  

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(c)           Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

 

(d)           Determine the terms and conditions of any Award granted pursuant to the Plan (which need not be identical for each Holder), including, but not limited to: the exercise price, grant price, or purchase price; any Performance Criteria; any restrictions or limitations on the Award; any schedule for vesting; lapse of forfeiture restrictions or restrictions on the exercisability of an Award and accelerations or waivers thereof; and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

 

(e)           Determine whether, to what extent, and pursuant to what circumstances (i) an Award may be settled or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property (subject to the requirements of Section 409A of the Code), or (ii) an Award may be canceled, forfeited, or surrendered;

 

(f)           Prescribe the form of each Award Agreement, which need not be identical for each Holder;

 

(g)           Decide all other matters that must be determined in connection with an Award;

 

(h)           Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(i)            Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement; and

 

(j)            Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

 

11.5         Decisions Binding.  The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Program, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

 

11.6         Delegation of Authority.  The Board or Committee may from time to time delegate (a) to a committee of one or more members of the Board the authority to grant or amend Awards and (b) to a committee of one or more members of the Board or to one or more officers of the Company the authority to take administrative actions pursuant to ARTICLE 11; provided that any delegation of authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code, applicable securities laws and the rules of any applicable Securities Exchange.  Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegate. At all times, the delegatee appointed under this Section 11.6 shall serve in such capacity at the pleasure of the Board and the Committee.

 

  

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ARTICLE 12.

MISCELLANEOUS PROVISIONS

 

12.1         Amendment, Suspension or Termination of the Plan.  Except as otherwise provided in this Section 12.1, the Plan, any Program and any Award Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company’s stockholders, no action of the Committee may, except as provided in Section 12.2, (i) increase the limits imposed in Section 3.1 on the maximum number of Shares that may be issued under the Plan, (ii) take any action described in Section 10.6 above, (iii) materially modify the requirements for eligibility to participate in the Plan, (iv) materially increase the benefits accruing to participants in the Plan,  or (v) take any other action that requires the approval of the Company’s stockholders under the rules of any applicable Securities Exchange. Except as provided in Section 12.9, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, adversely affect the rights of the Holder under any Award theretofore granted to such Holder, unless the Award itself otherwise expressly so provides.

 

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

 

(a)           In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the Share price other than an Equity Restructuring, the Committee shall make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of securities that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of securities that may be issued under the Plan, adjustments of the Award Limit, and adjustments of the manner in which securities subject to Full Value Awards will be counted); (ii) the number and kind of securities (or other property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan.

 

(b)           In the event of any transaction or event described in Section 12.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(i)            To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Holder’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12.2 the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Holder’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested;

 

  

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

 

(iii)          To make adjustments in the number and type of securities (or other property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;

 

(iv)          To provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Program or Award Agreement; and/or

 

(v)           To provide that the Award cannot vest, be exercised or become payable after such event.

 

(c)           In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 12.2(a) and 12.2(b):

 

(i)            The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or

 

(ii)           The number and kind of securities that may be issued under the Plan pursuant to new Awards shall be equitably adjusted.

 

(d)           The Committee may, in its sole discretion, include such further provisions and limitations in any Award, Program, Award Agreement or certificate or book-entry evidencing Shares, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.

 

(e)           No adjustment or action described in this Section 12.2 or in any other provision of the Plan, any applicable Program or the Award Agreement shall be authorized to the extent that such adjustment or action would cause such Award to violate the requirements of Section 409A of the Code. With respect to any Award which is granted to a Covered Employee and is intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 12.2 or in any other provision of the Plan, any applicable Program or the Award Agreement shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Committee determines that the Award should not so qualify. No adjustment or action described in this Section 12.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code, unless the Committee determines that Options granted under the Plan are not to qualify as “incentive stock options” under Section 422 of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action could result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Committee determines that the Award is not to comply with such exemptive conditions.

 

  

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(f)           The existence of the Plan, any Program, any Award Agreement and any Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

(g)           In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the Share price, including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.

 

(h)           Without limiting the generality of the foregoing, the vesting of an Award will not automatically accelerate upon the occurrence of a Change of Ownership; provided, however, the Committee may determine that upon the occurrence of a Change of Ownership, (i) the acquirer or surviving entity shall be required to assume an Award or substitute a comparable award with respect to the equity of the acquirer or surviving entity, (ii) the vesting of all or any portion of the Award will accelerate to the time immediately prior to the consummation of the Change of Ownership, or, in the case of an Option or Stock Appreciation Right, all or any portion of the Award shall become immediately exercisable so that the Holder will have the opportunity to exercise the Award (or portion thereof) immediately prior to consummation of the Change of Ownership, and/or (iii) all or any portion of the Award, including any unvested portion should the Committee so determine, shall be purchased for (x) in the case of an Option or Stock Appreciation Right, cash in an amount equal to the excess of the aggregate Fair Market Value of the Shares subject to the Award to be purchased over the aggregate exercise price for such Shares, net of tax withholding, and (y) in the case of any other Award, such consideration as the Committee may in good faith determine to be equitable under the circumstances; provided, further, that any determination of the Committee in this regard shall comply with Sections 409A and 424 of the Code.

 

  

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12.3         No Stockholder Rights.  Except as otherwise provided herein, a Holder shall have none of the rights of a stockholder with respect to Shares subject to any Award until the Holder becomes the record owner of such Shares.

 

12.4         Paperless Administration.  In the event that the Company Stock Administrator establishes, for the Company or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.

 

12.5         Effect of Plan upon Other Compensation Plans.  The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate, except as described in Section 3.1(a) above with respect to the Company’s 1996 Stock Option Plan.  Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Affiliate, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.

 

12.6         Compliance with Laws.  The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded under the Plan are subject to compliance with all applicable laws and regulations, the rules of any Securities Exchange, and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, any Program and any Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

12.7         Titles and Headings; References to Sections of the Code or the Exchange Act.  The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.

 

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

 

  

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12.9         Section 409A.

 

(a)           To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A of the Code.  Notwithstanding any provision of the Plan or the applicable Program or Award Agreement to the contrary, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Code, the Committee may adopt such amendments to the Plan and the applicable Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator 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 and thereby avoid the application of any additional taxes under such Section.

 

(b)           If, at the time of a Holder’s “separation from service” (within the meaning of Section 409A of the Code), (i) such Holder is a “specified employee” (within the meaning of Section 409A of the Code as determined annually by the Committee in accordance with the methodology specified by resolution of the Board or the Committee and in accordance with Section 1.409A-1(i) of the Treasury Regulations) and (ii) the Committee shall make a good-faith determination that an amount payable pursuant to an Award constitutes “deferred compensation” (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the “six-month delay” rule set forth in Section 409A(a)(2)(B) of the Code in order to preserve the tax treatment intended for such payment or to avoid additional tax, interest, or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it on the first business day after the end of such six-month period.  Such amount shall be paid without interest, unless otherwise determined by the Committee, in its sole discretion, or as otherwise provided in any applicable agreement between the Company and the relevant Holder.

 

(c)           The Holder shall be solely responsible and liable for the satisfaction of all taxes, interest, and penalties that may be imposed on such Holder or for such Holder’s account in connection with any Award (including any taxes, interest, and penalties under Section 409A of the Code), and neither the Company nor its Affiliates shall have any obligation to reimburse, indemnify or otherwise hold such Holder harmless from any or all of such taxes, interest, or penalties.

 

12.10       No Rights to Awards.  No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Holders or any other persons uniformly.

 

12.11       Unfunded Status of Awards.  The Plan is intended to be an “unfunded” plan for incentive compensation.  With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Affiliate.

 

  

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12.12       Indemnification.  To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

12.13       Term.  The ability to grant new awards under this Plan shall terminate on the tenth (10th) anniversary of the Effective Date.

 

 

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