Document:

Exhibit 10.17

 

ACCELRYS, INC.

 

2004 NEW-HIRE EQUITY INCENTIVE
PLAN

 

ADOPTED:  JULY 26, 2004

 

1.              PURPOSES.

 

(a)                                  General
Purpose.  The Company, by means of
the Plan, seeks to retain the services of persons not previously an employee or
director of the Company, or following a bona
fide period of non-employment, as an inducement material to the
individual’s entering into employment with the Company within the meaning of
Rule 4350(i)(1)(A) of the NASD Marketplace Rules, and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.

 

(b)                                  Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards
are Employees.

 

(c)                                  Available Stock Awards.  The Plan provides for the grant of the
following Stock Awards:  (i) Options,
(ii) Stock Purchase Awards, (iii) Stock Bonus Awards, (iv) Stock Appreciation
Rights, (v) Stock Unit Awards and (vi) Other Stock Awards.

 

2.              DEFINITIONS.

 

(a)                                  “Affiliate” means any Parent or Subsidiary of the
Company.

 

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

 

(c)                                  “Capitalization Adjustment” has the meaning ascribed to
that term in Section 11(a).

 

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

 

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

 

 

(i)                                    any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then
outstanding securities other than
by virtue of a merger, consolidation or similar transaction;

 

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

 

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

 

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

 

(v)                                   individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the members of the Board; provided, however,
that any new Board member shall, for purposes of this Plan,  be considered as a member of the Incumbent
Board if the appointment or election (or nomination for election) of such new
Board member was approved or recommended by at least fifty percent (50%) of the
members of the Incumbent Board, provided that the members of the Incumbent
Board, at the time of such election or nomination, constitute a majority of the
Board.

 

The term Change in Control
shall not include a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of the Company.

 

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

 

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

 

(g)                                 “Committee” means a committee of one (1) or more members
of the Board appointed by the Board in accordance with Section 3(c).

 

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

 

(i)                                    “Company” means Accelrys, Inc., a Delaware corporation.

 

(j)                                    “Consultant”
means any person, including an advisor, who (i) is engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such
services or (ii) is serving as a member of the Board of Directors of an
Affiliate and is compensated for such services. 
However, service solely as a Director, or payment of a fee for such
service, shall not cause a Director to be considered a “Consultant” for
purposes of the Plan.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(n)                                 “Disability” means the permanent and total disability of
a person within the meaning of Section 22(e)(3) of the Code.

 

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

 

(p)                                  “Entity” means a corporation, partnership or other
entity.

 

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

 

(r)                                   “Exchange Act Person” means any natural person, Entity
or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that “Exchange Act Person” shall not include (i) the Company or any
Subsidiary of the Company, (ii) any employee benefit plan of the Company or any
Subsidiary of the Company or any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any Subsidiary of the Company,
(iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) an Entity Owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
Ownership of stock of the Company.

 

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

 

(i)                                    If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the last market trading day prior to the day of determination, as reported
in The Wall Street Journal or
such other source as the Board deems reliable.

 

(ii)                                In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined by the Board in good faith.

 

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

 

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(u)                                  “Option” means an option to purchase shares of Common
Stock granted pursuant to the Plan that is not intended to qualify as an
incentive stock option under Section 422 of the Code and the regulations
promulgated thereunder.

 

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

 

(w)                                “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(x)                                  “Other Stock Award”
means an award based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of Section 7(e).

 

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

 

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

 

(aa)                            “Parent”
means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken
chain (other than the Company) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

 

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

 

(cc)                            “Plan” means this Accelrys, Inc. 2004 New-Hire Equity
Incentive Plan.

 

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

 

(ee)                            “Securities Act” means the Securities Act of 1933, as
amended.

 

(ff)                                    “Stock Appreciation Right”
means a right to receive the appreciation on Common Stock that is granted
pursuant to the terms and conditions of Section 7(d).

 

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

 

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(hh)                          “Stock Award”
means any right granted under the Plan, including an Option, a Stock Purchase
Award, Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award or any
Other Stock Award.

 

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

 

(jj)                                “Stock Bonus Award”
means an award of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(b).

 

(kk)                        “Stock Bonus Award
Agreement” means a written agreement between the Company and a
holder of a Stock Bonus Award evidencing the terms and conditions of a Stock
Bonus Award grant.  Each Stock Bonus
Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ll)                                “Stock Purchase Award”
means an award of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(a).

 

(mm)                    “Stock Purchase Award
Agreement” means a written agreement between the Company and a
holder of a Stock Purchase Award evidencing the terms and conditions of a Stock
Purchase Award grant.  Each Stock
Purchase Award Agreement shall be subject to the terms and conditions of the
Plan.

 

(nn)                          “Stock Unit Award” means
a right to receive shares of Common Stock which is granted pursuant to the
terms and conditions of Section 7(c).

 

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

 

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

 

3.              ADMINISTRATION.

 

(a)                                  Administration
by Board.  The Board shall administer
the Plan unless and until the Board delegates administration of the Plan to a
Committee, as provided in Section 3(c).

 

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

 

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(i)                                    Subject
to Section 5 herein, to determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

 

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

 

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

 

(iv)                               To
amend the Plan or a Stock Award as provided in Section 12.

 

(v)                                   To
terminate or suspend the Plan as provided in Section 13.

 

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

 

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

 

(c)                                  Delegation to
Committee.

 

(i)                                    General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees of one (1) or more
members of the Board, and the term “Committee” shall apply to any person or
persons to whom such authority has been delegated.  If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that have been delegated
to the Committee, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references
in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time 

 

7

 

by the Board.  The Board may
retain the authority to concurrently administer the Plan with the Committee and
may, at any time, revest in the Board some or all of the powers previously
delegated.

 

(ii)                                Rule 16b-3 Compliance.  In the sole discretion of the Board, the
Committee may consist solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3.

 

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

 

(e)                                  
Arbitration.  Any and all disputes,
claims, or causes of action, in law or equity, concerning any Stock Awards
granted (or not granted) pursuant to the Plan or any disputes or claims
relating to or arising out of the Plan shall be resolved, to the fullest extent
permitted by law, by final, binding arbitration in San Diego County, California
conducted by the Judicial Arbitration and Mediation Services (“JAMS”), or
its successors, under the then current rules of JAMS; provided that the
arbitrator shall:  (a) have the authority
to compel adequate discovery for the resolution of the dispute and to award
such relief as would otherwise be permitted by law; and (b) issue a written
arbitration decision including the arbitrator’s essential findings and
conclusions and a statement of the award. 
Both the Participant and the Company shall be entitled to all rights and
remedies that either the Participant or the Company would be entitled to pursue
in a court of law.

 

4.              SHARES
SUBJECT TO THE PLAN.

 

(a)                                  Share
Reserve.  Subject to the provisions
of Section 11(a) relating to Capitalization Adjustments, the Common Stock that
may be issued pursuant to Stock Awards shall not exceed in the aggregate Seven
Hundred Fifty Thousand (750,000) shares of Common Stock.

 

(b)                                  Reversion
of Shares to the Share Reserve.  If
any Stock Award shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, or if any shares of Common
Stock issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required
for the vesting of such shares, then the shares of Common Stock not issued
under such Stock Award, or forfeited to or repurchased by the Company, shall
revert to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld for the payment
of taxes or the Stock Award is exercised through a reduction of shares subject
to the Stock Award (i.e., “net
exercised”), the number of shares that are not delivered to the Participant
shall remain available for issuance under the Plan.  If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the Participant (either
by actual delivery or attestation), then the number of shares so tendered shall
remain available for issuance under the Plan.

 

(b)                                  Source
of Shares.  The shares of Common
Stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.

 

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5.              ELIGIBILITY.

 

Stock Awards may be granted only to persons not
previously an Employee or Director of the Company, or following a bona fide period of non-employment, as an
inducement material to the individual’s entering into employment with the
Company within the meaning of Rule 4350(i)(1)(A)(iv) of the NASD Marketplace
Rules.  In addition, notwithstanding any
other provision of the Plan to the contrary, all Stock Awards must be granted
either by a majority of the Company’s independent directors or by a committee
comprised of a majority of independent directors.

 

6.              OPTION
PROVISIONS.

 

Each Option shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  The provisions of separate Options need not
be identical, provided, however, that
each Option Agreement shall include (through incorporation of provisions hereof
by reference in the Option or otherwise) the substance of each of the following
provisions:

 

(a)                                  Term.  The Board shall determine the term of an
Option.

 

(b)                                  Exercise
Price of an Option.  The Board, in
its discretion, shall determine the exercise price of each Option.

 

(c)                                  Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is
exercised or (ii) at the sole discretion of the Board (1) by delivery to the
Company (either by actual delivery or attestation) of other Common Stock at the
time the Option is exercised, (2) by a “net exercise” of the Option (as further
described below), (3) pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board that, prior to the issuance of Common Stock,
results in either the receipt of cash (or check) by the Company or the receipt
of irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds or (4) in any other form of legal consideration that
may be acceptable to the Board.  Unless
otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of
other Common Stock acquired, directly or indirectly from the Company, shall be
paid only by shares of the Common Stock of the Company that have been held for
more than six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).  At any time that the Company is incorporated
in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

 

In the case of a “net exercise” of an Option, the
Company will not require a payment of the exercise price of the Option from the
Participant but will reduce the number of shares of Common Stock issued upon
the exercise by the largest number of whole shares that has a Fair Market Value
that does not exceed the aggregate exercise price.  With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant.  Shares of Common Stock will
no longer be outstanding under an Option (and will 

 

9

 

therefore not thereafter be exercisable) following the exercise of such
Option to the extent of (i) shares used to pay the exercise price of an Option
under the “net exercise”, (ii) shares actually delivered to the Participant as
a result of such exercise and (iii) shares withheld for purposes of tax
withholding.

 

(d)                                  Transferability
of an Option.  An Option shall be
transferable pursuant to a domestic relations order and to such further extent
provided in the Option Agreement.  If the
Option does not provide for transferability, then the Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

 

(e)                                  Vesting
Generally.  The total number of
shares of Common Stock subject to an Option may vest and therefore become
exercisable in periodic installments that may be equal.  The Option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be
based on performance or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options
may vary.  The provisions of this Section
6(g) are subject to any Option provisions governing the minimum number of
shares of Common Stock as to which an Option may be exercised.

 

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

 

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

 

(h)                                 Disability of Optionholder.  In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of termination
of Continuous Service), but only within such period of time ending on the
earlier of 

 

10

 

(i) the expiration of the term of the Option as set forth in the Option
Agreement or (ii) the date twelve (12) months following such termination of
Continuous Service (or such longer or shorter period specified in the Option
Agreement).  If, after termination of
Continuous Service, the Optionholder does not exercise his or her Option within
the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.

 

(i)                                    Death of Optionholder.  In the event that (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder’s Continuous Service, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death pursuant
to Section 6(e) or 6(f), but only within the period ending on the earlier of
(i) the expiration of the term of such Option as set forth in the Option
Agreement or (ii) the date eighteen (18) months following the date of death (or
such longer or shorter period specified in the Option Agreement).  If, after the Optionholder’s death, the
Option is not exercised within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.

 

(j)                                    Termination for Cause.  In the event that an Optionholder’s
Continuous Service is terminated for Cause, the Option shall terminate upon the
termination date of such Optionholder’s Continuous Service, and the
Optionholder shall be prohibited from exercising his or her Option from and
after the time of such termination of Continuous Service.

 

(k)                                Early Exercise.  The Option may include a provision whereby
the Optionholder may elect at any time before the Optionholder’s Continuous
Service terminates to exercise the Option as to any part or all of the shares
of Common Stock subject to the Option prior to the full vesting of the
Option.  Any unvested shares of Common
Stock so purchased may be subject to a repurchase option in favor of the
Company or to any other restriction the Board determines to be
appropriate.  The Company shall not be required
to exercise its repurchase option until at least six (6) months (or such longer
or shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.

 

7.              PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

 

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

 

11

 

(i)                                    Purchase Price.  At the time of the grant of a Stock Purchase
Award, the Board will determine the price to be paid by the Participant for
each share subject to the Stock Purchase Award. 
To the extent required by applicable law, the price to be paid by the
Participant for each share of the Stock Purchase Award will not be less than
the par value of a share of Common Stock.

 

(ii)                                Consideration.  At the time of the grant of a Stock Purchase
Award, the Board will determine the consideration permissible for the payment
of the purchase price of the Stock Purchase Award.  The purchase price of Common Stock acquired
pursuant to the Stock Purchase Award shall be paid either: (i) in cash at the
time of purchase or (ii) in any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible under applicable
law.

 

(iii)                            Vesting. Shares of Common Stock
acquired under a Stock Purchase Award may be subject to a share repurchase
right or option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.

 

(iv)                               Termination of Participant’s Continuous
Service. In the event that a Participant’s Continuous Service
terminates, the Company shall have the right, but not the obligation, to
repurchase or otherwise reacquire, any or all of the shares of Common Stock
held by the Participant that have not vested as of the date of termination
under the terms of the Stock Purchase Award Agreement.  At the Board’s election, the repurchase right
may be at the lesser of: (i) the Fair Market Value on the relevant date or (ii)
the Participant’s original cost.  The
Company shall not be required to exercise its repurchase option until at least
six (6) months (or such longer or shorter period of time required to avoid a
charge to earnings for financial accounting purposes) have elapsed following
the purchase of the restricted stock unless otherwise determined by the Board
or provided in the Stock Purchase Award Agreement.

 

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

 

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

 

(i)                                    Consideration.  A Stock Bonus Award may be awarded in
consideration for (i) past services actually rendered to the Company or an
Affiliate or (ii) any other form of 

 

12

 

legal consideration that may be acceptable to the Board in its sole
discretion and permissible under applicable law.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                   Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her Stock Appreciation
Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the 

 

14

 

date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the
Participant’s Continuous Service (or such longer or shorter period specified in
the Stock Appreciation Right Agreement) or (ii) the expiration of the term of
the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination, the Participant does
not exercise his or her Stock Appreciation Right within the time specified
herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.

 

(e)                                  Other Stock Awards.  Other forms of Stock Awards valued in whole
or in part by reference to, or otherwise based on, Common Stock may be granted
either alone or in addition to Stock Awards provided for under Section 6 and
the preceding provisions of this Section 7. 
Subject to the provisions of the Plan, the Board shall have sole and
complete authority to determine the persons to whom and the time or times at
which such Other Stock Awards will be granted, the number of shares of Common
Stock (or the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock Awards.

 

8.              COVENANTS
OF THE COMPANY.

 

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

 

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

 

9.              USE
OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.

 

10.       MISCELLANEOUS.

 

(a)                                  Acceleration
of Exercisability and Vesting.  The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

 

15

 

(b)                                  Stockholder
Rights.  No Participant shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.

 

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

 

(d)                                  Investment
Assurances.  The Company may require
a Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award; and
(ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the Stock Award
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

 

(e)                                  Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Company may in its sole
discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: 
(i) causing the Participant to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise
issuable to the Participant in connection with the Stock Award; or (iii) by
such other method as may be set forth in the Stock Award Agreement.

 

16

 

(f)                                    Electronic
Delivery.  Any reference herein to a “written”
agreement or document shall include any agreement or document delivered
electronically or posted on the Company’s intranet.

 

11.       ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)                                  Capitalization
Adjustments.  If any change is made
in, or other event occurs with respect to, the Common Stock subject to the Plan
or subject to any Stock Award without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a “Capitalization Adjustment”), the Plan
will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to Sections 4(a) and 4(b) and the
maximum number of securities subject to award to any person pursuant to Section
5(c), and the outstanding Stock Awards will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final,
binding and conclusive.  (Notwithstanding
the foregoing, the conversion of any convertible securities of the Company
shall not be treated as a transaction “without receipt of consideration” by the
Company.)

 

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

 

(c)                                  Corporate
Transaction.  In the event of a
Corporate Transaction, any surviving corporation or acquiring corporation may
assume or continue any or all Stock Awards outstanding under the Plan or may
substitute similar stock awards for Stock Awards outstanding under the Plan
(including but not limited to, awards to acquire the same consideration paid to
the stockholders of the Company, as the case may be, pursuant to the Corporate
Transaction), and any reacquisition or repurchase rights held by the Company in
respect of Common Stock issued pursuant to Stock Awards may be assigned by the
Company to the successor of the Company (or the successor’s parent company), if
any, in connection with such Corporate Transaction.  A surviving corporation or acquiring
corporation may not choose to assume or continue only a portion of a Stock
Award or substitute a similar stock award for only a portion of a Stock
Award.  The terms of any assumption,
continuation or substitution shall be set by the Board in accordance with the
provisions of Section 3.  In the event
that any surviving corporation or acquiring corporation does not assume or
continue all such outstanding Stock Awards or substitute similar stock awards
for all such outstanding Stock Awards, then with respect to Stock Awards that
have been not assumed, continued or substituted and that are held by
Participants whose Continuous 

 

17

 

Service has not terminated prior to the effective time of the Corporate
Transaction, the vesting of such Stock Awards (and, if applicable, the time at
which such Stock Awards may be exercised) shall (contingent upon the
effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is
five (5) days prior to the effective time of the Corporate Transaction), and
such Stock Awards shall terminate if not exercised (if applicable) at or prior
to such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall (contingent upon the
effectiveness of the Corporate Transaction) lapse.  With respect to any other Stock Awards
outstanding under the Plan that have not been assumed, continued or substituted,
the vesting of such Stock Awards (and, if applicable, the time at which such
Stock Award may be exercised) shall not be accelerated, unless otherwise
provided in a written agreement between the Company or any Affiliate and the
holder of such Stock Award, and such Stock Awards (other than Stock Awards consisting of vested
and outstanding shares of Common Stock not subject to the Company’s right of
repurchase) shall terminate if not exercised (if applicable) prior to
the effective time of the Corporate Transaction.

 

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

 

12.       AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment
of Plan.  Subject to the limitations,
if any, of applicable law, the Board at any time, and from time to time, may
amend the Plan.  However, except as
provided in Section 11(a) relating to Capitalization Adjustments, no amendment
shall be effective unless approved by the stockholders of the Company to the
extent stockholder approval is necessary to satisfy applicable law.

 

(b)                                  No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

 

(c)                                  Amendment
of Stock Awards.  The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards, including, but not limited to, amendments to provide terms more
favorable than previously provided in the agreement evidencing a Stock Award,
subject to any specified limits in the Plan that are not subject to Board
discretion; provided, however, that the rights under
any Stock Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the Participant and (ii) the Participant consents in
writing.

 

13.       TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan
Term.  The Board may suspend or
terminate the Plan at any time.  No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

 

18

 

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

 

14.       EFFECTIVE
DATE OF PLAN.

 

The Plan shall become effective as determined by the
Board.

 

15.       CHOICE
OF LAW.

 

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

 

19Exhibit 10.1

 

PRAECIS PHARMACEUTICALS INCORPORATED

 

Form of

Incentive Stock Option Agreement

 

PRAECIS
PHARMACEUTICALS INCORPORATED, a Delaware corporation (the “Company”), hereby
grants as of this [DATE], to [NAME] (the “Employee”), an option to purchase a maximum
amount of [NUMBER OF SHARES] shares of its common
stock, par value $.01 per share (“Common Stock”), at the price of $[EXERCISE PRICE] per share. 
To the extent the option granted hereby is exercisable pursuant to the
terms hereof, such option may be exercised for a period of up to ten years from
the date granted.  The option granted
hereby is subject to the following terms and conditions:

 

1.                                       Grant Under Third Amended and Restated 1995
Stock Plan.  This option is granted pursuant to and is
governed by the Company’s Third Amended and Restated 1995 Stock Plan (as it may
be amended from time to time, the “Plan”) and, unless the context otherwise
requires, terms used herein shall have the same meaning as in the Plan.

 

2.                                       Grant as Incentive Stock Option; Other
Options.  This option is intended to qualify as an
incentive stock option under Section 422(b) of the Internal Revenue Code
of 1986, as amended (the “Code”), to the full extent permitted thereunder and
is otherwise a non-qualified stock option. 
This option is in addition to any other options heretofore or hereafter
granted to the Employee by the Company.

 

3.                                       Extent of Option If Employment Continues.  So
long as the Employee continues to be employed by the Company, this option shall
become fully exercisable after a period of [NUMBER OF
YEARS] years in accordance with the incentive stock option vesting schedule set
forth in Annex A to this Agreement.

 

[INSERT FOR
ALL EXECUTIVE OFFICER GRANTS AND EMPLOYEE  ANNUAL RELOAD GRANTS - Notwithstanding
the foregoing, this option shall automatically become fully vested and
exercisable immediately upon the termination of the Employee’s employment upon,
or within a one-year period following, a “Change of Control” either by (i) the
Company, other than for “Cause” or (ii) the Employee for “Good Reason” (as such
terms are defined herein).

 

A
“Change of Control” shall occur or be deemed to have occurred if:

 

(i)
any individual, entity or “person” (within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), other than the Company, any trustee or other fiduciary
holding securities under an employee 

 

 

benefit
plan of the Company, or any corporation owned directly or indirectly by the
stockholders of Company in substantially the same proportion as their ownership
of stock of the Company, is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing more than 50% of the combined voting power of the
Company’s then outstanding securities entitled to vote generally for the
election of directors;

 

(ii)
individuals who, as of the date hereof, constitute the Company’s Board of
Directors (as of the date hereof, the “Incumbent Board”) cease for any reason
to constitute a majority of the Company’s Board of Directors, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board;

 

(iii)
the stockholders of the Company approve a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
entity or entities (whether or not the Company would be the surviving
corporation), other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to such merger
or consolidation representing (either by remaining outstanding or by being
converted into or exchanged for voting securities of the surviving entity or
any parent thereof), immediately after such merger or consolidation, more than
50% of the combined voting power of the voting securities of such surviving
entity or any parent thereof entitled to vote generally for the election of
directors; or

 

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

 

“Cause”
shall mean: (i) the Employee’s substantial and continuing willful failure to
perform his or her assigned duties (other than any such failure resulting from
incapacity due to injury or physical or mental illness), which failure is not
cured within 30 days after a written demand for substantial performance is
delivered to the Employee by the Company at the direction of the Company’s
Board of Directors which specifically identifies the manner in which the
Employee has not substantially performed his or her assigned duties, and
provided the Employee has had a reasonable opportunity, after receipt of such
written demand, to be heard (and to be represented by counsel) at a meeting of
the Company’s Board of Directors, or (ii) (A) the Employee’s conviction of a
felony (other than unintentional motor vehicle felonies) or (B) the Employee’s
engaging in gross misconduct 

 

2

 

which
is materially and demonstrably injurious to the Company, provided (in the case
of this clause (B)) the Employee has received written notice from the Company
at the direction of the Board of Directors specifically identifying the acts or
omissions constituting such gross misconduct and the Employee has had a
reasonable opportunity, after receipt of such notice, to be heard (and to be
represented by counsel) at a meeting of the Company’s Board of Directors.  For purposes of this definition, no act or
failure to act shall be considered “willful” unless it is done, or omitted to
be done, in bad faith or without reasonable belief that the action or omission
was in the best interests of the Company.

 

“Good Reason” shall mean: (i) any adverse and material alteration or diminution in the Employee’s position, title or responsibilities as they existed immediately prior to the Change of Control, if the Company does not remedy such alteration or diminution within 30 days following notice from the Employee; (ii) the Company’s material reduction of the Employee’s annual base salary or targeted bonus opportunity, in each case as in effect immediately prior to the Change of Control; or (iii) relocation of the Company’s offices at which the Employee is employed immediately prior to the Change of Control which increases the Employee’s daily commute by more than 50 miles on a round trip basis.]
 

All
of the foregoing rights are subject to Articles 4 and 5, as appropriate, if the
Employee ceases to be employed by the Company [(except as
provided above in connection with certain terminations of employment upon or
after a Change of Control of the Company)] or dies or becomes
disabled while in the employ of the Company.

 

4.                                       Termination of Employment.  If
the Employee ceases to be employed by the Company, [except as
provided in Article 3,] no further installments of this option
shall become exercisable and, except as provided in Article 5, this option
shall terminate after the passage of ninety (90) days from the date employment
ceases, but in no event later than the scheduled expiration date.  In such a case, the Employee’s only rights
hereunder shall be those which are properly exercised before the termination of
the option.

 

5.                                       Death; Disability.  If
the Employee dies while in the employ of the Company, this option may be
exercised, to the extent of the number of shares with respect to which the
Employee could have exercised it on the date of his or her death, by his or her
estate, personal representative or beneficiary to whom this option has been
assigned pursuant to Article 9, at any time within 180 days after the date
of death, but not later than the scheduled expiration date.  If the Employee ceases to be employed by the
Company by reason of his or her disability (as defined in the Plan), this
option may be exercised, to the extent of the number of shares with respect to
which the Employee could have exercised it on the date of the termination of
his or her employment, at any time within 180 days after such termination, but
not later than the scheduled expiration date. 
At the expiration of such 180-day period or the scheduled expiration
date, whichever is the earlier, this option 

 

3

 

shall
terminate and the only rights hereunder shall be those as to which the option
was properly exercised before such termination.

 

6.                                       Partial Exercise. 
Exercise of this option up to the extent above stated may be made in
part at any time and from time to time within the above limits, except that
this option may not be exercised for a fraction of a share unless such exercise
is with respect to the final installment of stock subject to this option and,
absent the provisions of this Article 6, a fractional share would be
required to be issued to permit the Employee to exercise completely such final
installment.  Any fractional share with
respect to which an installment of this option cannot be exercised because of
the limitation contained in the preceding sentence shall remain subject to this
option and shall be available for later purchase by the Employee in accordance
with the terms hereof.  No fractional share
shall be issued under the Plan and the Employee shall receive from the Company
cash in lieu of such fractional shares.

 

7.                                       Payment of Price.  The
option price is payable in United States dollars and may be paid (i) in cash,
(ii) by check, (iii) at the discretion of the committee, by delivery of shares
of Common Stock (the value of which for this purpose shall be determined by the
Committee), (iv) at the discretion of the Committee, by delivery of the
Employee’s personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (v) subject to clauses (iii) and (iv),
by any combination of the foregoing, equal in amount to the option price.

 

Notwithstanding
the foregoing, the Employee may not pay any part of the exercise price hereof
by transferring Common Stock to the Company if such Common Stock is both
subject to a substantial risk of forfeiture and not transferable within the
meaning of Section 83 of the Code. 
If the Employee delivers a personal recourse note as provided above, the
Employee shall concurrently execute and deliver to the Company a pledge
agreement in a form reasonably satisfactory to the Company, together with a
stock certificate or certificates representing shares of Common Stock (having
an aggregate fair market value (as determined by the Committee) equal as of the
date of exercise to at least the value of the principal amount of the note),
duly endorsed or accompanied by a stock power or powers duly endorsed, to secure
the Employee’s obligations under such personal recourse note.

 

8.                                       Method of Exercising Option. 
Subject to the terms and conditions of this Agreement, this option may
be exercised by written notice to the Company, at the principal executive
office of the Company at 830 Winter Street, Waltham, MA 02451-1420, or such
other address at which the principal executive offices of the Company are
located, or to such transfer agent as the Company shall designate.  Such notice shall state the election to
exercise this option and the number of shares in respect of which it is being
exercised and shall be signed by the person or persons so exercising this
option.  Such 

 

4

 

notice
shall be accompanied by payment of the full purchase price of such shares, and
the Company shall deliver a certificate or certificates representing such
shares as soon as practicable after the notice shall be received.  The certificate or certificates for the
shares as to which this option shall have been so exercised shall be registered
in the name of the person or persons so exercising this option (or, if this
option shall be exercised by the Employee and if the Employee shall so request
in the notice exercising this option, shall be registered in the name of the
Employee and another person jointly, with right of survivorship) and shall be
delivered as provided above to or upon the written order of the person or
persons exercising this option.  In the
event this option shall be exercised pursuant to Article 5 hereof by any
person or persons other than the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise this
option.  All shares that shall be
purchased upon the exercise of this option as provided herein shall be fully
paid and non-assessable.

 

9.                                       Option Not Transferable.  This
option is not transferable or assignable except by will or by the laws of
descent and distribution, or as otherwise permitted by the Committee in its
sole discretion.  During the Employee’s
lifetime, only the Employee or his or her guardian or legal representative can
exercise this option.

 

10.                                 No Obligation to Exercise Option.  The
grant and acceptance of this option imposes no obligation on the Employee to
exercise it.

 

11.                                 No Obligation to Continue Employment.  The
Company and any Related Corporation (as defined in the Plan) are not by the
Plan or this option obligated to continue the Employee in employment.

 

12.                                 No Rights as Stockholder until Exercise.  The
Employee shall have no rights as a stockholder with respect to shares subject
to this Agreement until a stock certificate therefore has been issued to the
Employee and is fully paid for.  Except
as is expressly provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date is prior to the date such stock
certificate is issued.

 

13.                                 Capital Changes and Business Successions.  The
Plan contains provisions covering the treatment of options in a number of
contingencies such as stock splits and mergers. 
Provisions in the Plan for adjustment with respect to stock subject to
options and the related provisions with respect to successors to the business
of the Company are hereby made applicable hereunder and are incorporated herein
by reference.  In general, you should not
assume that options necessarily would survive the acquisition of the Company.  In particular, without affecting the
generality of the foregoing, it is understood that for the purposes of Articles
3 through 5 hereof, both inclusive, employment by the Company includes
employment by a Related Corporation as defined in the Plan.

 

5

 

14.                                 Early Disposition.  The
Employee agrees to notify the Company in writing immediately after the Employee
makes a Disqualifying Disposition of any Common Stock received pursuant to the
exercise of this option.  A Disqualifying
Disposition is any disposition (including any sale) of such Common Stock before
the later of (a) two years after the date the Employee was granted this
option or (b) one year after the date the Employee acquired Common Stock by
exercising this option.  If the Employee
has died before such stock is sold, these holding period requirements do not
apply and no Disqualifying Disposition can occur thereafter.  The Employee also agrees to provide the
Company with any information which it shall request concerning any such
disposition.  The Employee acknowledges
that he or she will forfeit the favorable income tax treatment otherwise
available with respect to the exercise of this incentive stock option if he or
she makes a Disqualifying Disposition of the stock received on exercise of this
option.

 

15.                                 Withholding Taxes.  If
the Company in its discretion determines that it is obligated to withhold tax
with respect to a Disqualifying Disposition (as defined in Article 14) of
Common Stock received by the Employee on exercise of this option, the Employee
hereby agrees that the Company may withhold from the Employee’s wages the
appropriate amount of federal, state and local withholding taxes attributable
to such Disqualifying Disposition.  If
any portion of this option is treated as a Non-Qualified Option, the Employee
hereby agrees that the Company may withhold from the Employee’s wages the
appropriate amount of federal, state and local withholding taxes attributable
to the Employee’s exercise of such Non-Qualified Option.  At the Company’s discretion, the amount
required to be withheld may be withheld in cash from such wages, or (with
respect to compensation income attributable to the exercise of this option) in
kind from the Common Stock otherwise deliverable to the optionee on exercise of
this Option.  The Employee further agrees
that, if the Company does not withhold an amount from the Employee’s wages
sufficient to satisfy the Company’s withholding obligation, the Employee will
reimburse the Company on demand, in cash, for the amount underwithheld.

 

16.                                 No Exercise of Option if Employment
Terminated for Misconduct.  If the employment of the Employee is
terminated for “Misconduct,” this option shall terminate on the date of such
termination of employment and shall thereupon not be exercisable to any extent
whatsoever.  “Misconduct” is conduct, as
determined by the Company’s Board of Directors, involving one or more of the
following:  (i) the substantial and
continuing failure of the Employee to render services to the Company in
accordance with his or her assigned duties; (ii) disloyalty, gross negligence,
dishonesty or breach of fiduciary duty to the Company; (iii) the commission of
an act of embezzlement, fraud, disloyalty, dishonesty or deliberate disregard
of the rules or policies of the Company which results in loss, damage or injury
to the Company, whether directly or indirectly; (iv) the unauthorized
disclosure of any trade secret or confidential information of the Company; or
(v) the commission of an act which constitutes unfair competition with the
Company or 

 

6

 

which
induces any customer of the Company to break a contract with the Company.  In making such determination, the Board of
Directors shall act fairly and in utmost good faith and shall give the Employee
an opportunity to appear and to be heard at a hearing before the Board of
Directors and present evidence on his or her behalf.  For the purposes of this Article 16,
termination of employment shall be deemed to occur when the Employee receives
notice that his or her employment is terminated.  [Notwithstanding the
foregoing, immediately upon a Change of Control, this Section 16 shall
automatically cease to be of any force or effect, and, accordingly, no
termination of the Employee’s employment with the Company upon or after a
Change of Control will be, or will be deemed to be, a termination for
Misconduct for the purposes of this Article 16.]

 

17.                                 Lock-up Agreement.  In
the event of an underwritten public offering of the Company’s securities, the
Employee (or any permitted transferee pursuant to Article 9), whether or
not such Employee’s shares issuable upon exercise of the option granted herein
are included in such registration, hereby agrees not to effect any public sale
or distribution, including any sale pursuant to Rule 144 under the Act, of any
shares (other than as part of such underwritten offering), without the consent
of the managing underwriter(s) for such offering (the “Managing Underwriter”),
during a period commencing on the effective date of such registration and
ending 180 calendar days thereafter, or such lesser period as the Company and
the Managing Underwriter shall reasonably determine is required to effect a
successful offering.

 

18.                                 Incorporation of Plan.  The
Plan is hereby incorporated herein by reference and made a part hereof and the
option and this Agreement are subject to all terms and conditions of the Plan.

 

19.                                 Provision of Documentation to Employee.  By
signing this Agreement or a counterpart hereof, the Employee acknowledges receipt
of a copy of this Agreement and a copy of the Plan.

 

20.                                 Failure to Enforce Not a Waiver.  The
failure of the Company to enforce at any time any provision of this Agreement
shall in no way be construed to be a waiver of such provision or of any other
provision hereof.

 

21.                                 Governing Law.  This
Agreement shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to the conflicts of laws
provisions thereof.

 

22.                                 Counterparts.  This
Agreement may be executed in counterparts, each of which shall be an original
but all of which shall represent one and the same agreement.

 

7

 

 

IN
WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be
executed, and the Employee whose signature appears below acknowledges receipt
of a copy of the Plan incorporated herein by reference and acceptance of an
original copy of the Agreement.

 

 

	
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