Document:

EXHIBIT 10.5

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (the “Agreement”) is made as of October 10,
2006 between Senomyx, Inc.,
a Delaware corporation (the “Company”),
and Nigel R. A. Beeley, Ph.D. (“Employee”).

Whereas,
in order to provide an incentive for Employee to participate actively in the
affairs and maximize the value of the Company, the Company is willing to
provide Employee with certain benefits on the terms and conditions set forth
below.

Now Therefore, for good and valuable consideration,
the sufficiency of which is hereby acknowledged, Employee and the Company
(each, a “Party,” and collectively,
the “Parties”) agree as follows:

1.             Benefits in the
Event of a Change in Control.  If
(i) a Change in Control (defined below) occurs and (ii) during the
period beginning one (1) month prior to the effective date of such Change in
Control and ending eighteen (18) months after the effective date of such Change
in Control, Employee’s employment with the Company is terminated either (A) by the
Company without Cause (defined below) (not including death or Disability
(as defined below)) or (B) by Employee for
Good Reason (defined below) (not including death or Disability), then, without
further action by Employee or the Company, Employee shall be entitled to the
benefits set forth below:

(a)           The vesting
applicable to all options to purchase shares of the Company’s capital stock (“Options”) and all shares of the
Company’s capital stock which are subject to the Company’s right to repurchase
such shares (“Restricted Stock”) held by
Employee as of the effective date of such termination shall be accelerated in
full such that Employee shall have the right to exercise in accordance with the
terms thereof all or any portion of such Options (notwithstanding any vesting
schedule set forth in such Options) and any such Company repurchase rights with
respect to such Restricted Stock shall lapse in full; and

(b)           Employee shall be
entitled to receive a lump sum cash payment in an amount equal to one hundred
percent (100%) of Employee’s Annual Pay (as defined below), payable on the
Effective Date specified in the Release (as defined below) delivered by
Employee to the Company following such Change in Control.  The foregoing payments shall be subject to
standard deductions and withholdings.

(c)           Assuming the
Employee timely and accurately elects to continue his health insurance benefits
under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company
shall reimburse the Employee for the COBRA expenses he pays on behalf of
himself and his family until the earliest of (i) the end of the 12 month period
following Employee’s termination, (ii) the expiration of the Employee’s
continuation coverage under COBRA and any applicable state COBRA-like statute
that provides mandated continuation coverage or (iii) the date the Employee
becomes eligible for health insurance benefits of a subsequent employer.

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2.             Release.  Notwithstanding
the foregoing, the Employee shall not receive any of the severance payments or
benefits set forth under Section 1, unless upon Employee’s termination of
employment the Employee furnishes the Company with an effective waiver and
release of claims (the “Release”)
in a form acceptable to the Company and substantially as attached hereto as Exhibit A.  If a majority of the
Board of Directors of the Company (the “Board”)
determines in good faith that the Employee has breached any provision of his
Proprietary Information and Inventions Agreement with the Company or any
provision of this Agreement or the Release, the Company shall be excused from
the obligation to provide any severance payment under Section 1 and the Company
shall be entitled to full recovery of any severance payment already provided to
the Employee under Section 1.

3.             Definitions.  For purposes of this
Agreement, capitalized terms used herein shall have the following meanings:

(a)           “Annual Pay” shall
mean the sum of the Employee’s (i) base salary in effect on the date of
termination and (ii) the last annual bonus paid to the Employee by the Company
prior to the date of termination.

(b)           “Cause” means the occurrence of any of the
following:  (i) the Employee’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) the Employee’s
attempted commission of, or participation in, a fraud or act of dishonesty
against the Company; (iii) the Employee’s intentional and material violation of
any contract or agreement between the Employee and the Company or any statutory
duty owed to the Company; (iv) the Employee’s unauthorized use or disclosure of
the Company’s confidential information or trade secrets or (v) the Employee’s
gross misconduct.  The determination that
a termination is for Cause shall be made by the Company in its discretion.  Any determination by the Company that the
employment of the Employee was terminated by reason of dismissal without Cause
for the purposes of determining benefits under this Agreement shall have no
impact upon any determination of the rights or obligations of the Company or
such Employee for any other purpose.

(c)           “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 (as defined in the Company’s Amended and Restated 2004
Equity Incentive Plan (the “Plan”))
becomes the owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities other than by virtue of a merger,
consolidation or similar transaction. 
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur (A) on account of the acquisition of securities of the Company by an
investor, any affiliate thereof or any other Exchange Act Person from the
Company in a transaction or series of related transactions the primary purpose
of which is to obtain financing for the Company through the issuance of equity
securities or (B) solely because the level of Ownership (as defined in the
Plan) held by any Exchange Act Person (the “Subject Person”) exceeds the designated
percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing
the number of shares outstanding, provided that if a Change in Control would
occur (but for the operation of

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this sentence) as a result of the acquisition of
voting securities by the Company, and after such share acquisition, the Subject
Person becomes the Owner of any additional voting securities that, assuming the
repurchase or other acquisition had not occurred, increases the percentage of
the then outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control shall be deemed to
occur;

(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 (as defined in
the Plan) 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 (as defined in the Plan), 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 of this Agreement, are members of the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if
the appointment or election (or nomination for election) of any new Board
member was approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member shall, for purposes of
this Agreement, be considered as a member of the Incumbent Board.

(d)           “Disability” shall mean Employee’s
failure or inability, for reasons of health, to perform Employee’s usual and
customary duties on behalf of the Company in the usual and customary manner for
a total of more than ninety (90) consecutive business days (excluding
Saturdays, Sundays and holidays (days during which the Company is closed due to
a recognized holiday)).

(e)           “Good Reason” shall mean the
occurrence of any of the following events or conditions:  (i) (A) a change in the Employee’s status,
title, position or responsibilities (including reporting responsibilities)
which represents an adverse change from the Employee’s status, title, position
or responsibilities as in effect at any time within ninety (90) days preceding
the date of a

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Change in Control or at any time thereafter; (B) the
assignment to the Employee of any duties or responsibilities which are
inconsistent with the Employee’s status, title, position or responsibilities as
in effect at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; or (C) any removal of the Employee from or
failure to reappoint or reelect the Employee to any of such offices or
positions (unless such removal or failure to reappoint or reelect is (1) in
connection with the termination of the Employee’s employment for Cause, (2) as
a result of the Employee’s Disability or death, or (3) by the Employee other
than as a result of termination for Good Reason); (ii) a reduction in the
Employee’s annual base compensation; or (iii) the Company’s requiring the
Employee to relocate to any place outside a fifty (50) mile radius of the
Employee’s current work site, excluding in any event reasonably required travel
on the business of the Company or its affiliates. Notwithstanding the
foregoing, in no event shall Good Reason be satisfied solely because the
Employee retains the same position held prior to the Change in Control but in a
distinct legal entity or business unit of a larger entity following the Change
in Control.

4.             Golden Parachute
Taxes.  If any
payment or benefit Employee would receive pursuant to a Change in Control from
the Company or otherwise (“Payments”)
would (i) constitute a “parachute payment” within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the “Excise Tax”),
then such Payments shall be equal to the Reduced Amount.  The “Reduced Amount”
shall be either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment, whichever amount, after
taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable
marginal rate), results in Employee’s receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. If a reduction in payments or
benefits constituting “parachute payments” is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following order unless
Employee elects in writing a different order (provided,
however, that such election shall be subject to Company approval if
made on or after the date on which the event that triggers the Payment
occurs):  reduction of cash payments;
cancellation of accelerated vesting of stock awards; reduction of employee
benefits.  In the event that acceleration
of vesting of stock award compensation is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant of
Employee’s stock awards unless Employee elects in writing a different order for
cancellation.

The accounting firm engaged
by the Company for general audit purposes as of the day prior to the effective
date of the Change in Control shall perform the foregoing calculations.  If the accounting firm so engaged by the
Company is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Company shall appoint a nationally
recognized accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with
respect to the determinations by such accounting firm required to be made
hereunder.

The accounting firm engaged to make the determinations
hereunder shall provide its calculations, together with detailed supporting
documentation, to the Company and Employee within fifteen (15) calendar days
after the date on which Employee’s right to a Payment is

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triggered (if requested at that time by the Company or
Employee) or such other time as requested by the Company or Employee.  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish the Company and Employee
with an opinion reasonably acceptable to Employee that no Excise Tax will be
imposed with respect to such Payment. 
Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and Employee.

5.             Application of Code Section
409A.  If
the Company determines that any of the Payments fail to satisfy the distribution
requirement of Section 409A(a)(2)(A) of the Code as a result of Section
409A(a)(2)(B)(i) of the Code, the Payments shall be accelerated to the minimum
extent necessary so that such Payments are not subject to the provisions of
Section 409A(a)(1) of the Code (It is the intention of the preceding sentence
to apply the short-term deferral provisions of Section 409A of the Code, and
the regulations and other guidance thereunder, to the Payments, and the payment schedule as revised after the
application of the preceding sentence shall be referred to as the “Revised Payment Schedule”).  However, if there is no Revised Payment
Schedule that would avoid the application of Section 409A(a)(1) of the Code,
the payment of such benefits shall not be paid pursuant to a Revised Payment
Schedule and instead shall be delayed to the minimum extent necessary so that
such benefits are not subject to the provisions of Section 409A(a)(1) of the
Code.  The Board may attach conditions to
or adjust the amounts paid pursuant to this Section 5 to
preserve, as closely as possible, the economic consequences that would have
applied in the absence of this Section
5; provided, however, that
no such condition or adjustment shall result in the payments being subject to
Section 409A(a)(1) of the Code.

6.             General
Provisions.

(a)           This Agreement
shall be governed by the laws of the State of California (without regard to
principles of conflict of laws).

(b)           Any notice, demand
or request required or permitted to be given by either the Company or Employee
pursuant to the terms of this Agreement shall be in writing and shall be deemed
given when delivered personally or deposited in the U.S. mail, First Class with
postage prepaid, and addressed to the parties at such addresses as have been
previously furnished by the Parties or such other address as a Party may
request by notifying the other in writing.

(c)           The rights and
obligations of Employee under this Agreement may not be transferred or assigned
without the prior written consent of the Company.

(d)           This Agreement is
meant to supplement the terms of stock option agreement(s) or other
agreement(s) pursuant to which Employee acquired the Options, as well as any
written employment agreement between the Company and Employee.

(e)           Any Party’s failure
to enforce any provision or provisions of this Agreement shall not in any way
be construed as a waiver of any such provision or provisions, nor prevent any
Party from thereafter enforcing each and every other provision of this
Agreement.  The rights

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granted the Parties herein are cumulative and shall
not constitute a waiver of any Party’s right to assert all other legal remedies
available to it under the circumstances.

(f)            Employee agrees upon
request to execute any further documents or instruments necessary or desirable
to carry out the purposes or intent of this Agreement.

(g)           In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.

(h)           This Agreement, in
whole or in part, may be modified, waived or amended upon the written consent
of the Company and Employee.

(i)            This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one instrument.

[THE REMAINDER OF THIS
PAGE INTENTIONALLY LEFT BLANK]

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In
Witness Whereof, the undersigned have set their hand as of
the date first above written.

	
  EMPLOYEE

  	
   

  	
  SENOMYX, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Nigel R. A. Beeley

  	
   

  	
   

  	
  By:

  	
  /s/ Kent Snyder

  	
   

  
	
   

  	
   

  	
   

  
	
  Nigel R. A. Beeley, Ph.D.

  	
   

  	
  Name:

  	
    Kent Snyder

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
    President and Chief Executive Officer

  	
   

  
								

 

[Signature Page to Change in Control Agreement]

 

Exhibit A

RELEASE AND WAIVER OF CLAIMS

In
consideration of the payments and other benefits set forth in the Change in
Control Agreement dated October 10, 2006, between Senomyx, Inc. (the “Company”) and Nigel R. A. Beeley,
Ph.D.  (“Employee”),
to which this form is attached, Employee hereby furnishes the Company with the
following release and waiver.

Employee
hereby releases, and forever discharges the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates, of and
from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys’ fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including Employee’s employment termination date with respect to any claims
relating to Employee’s employment and the termination of Employee’s employment,
including but not limited to, claims pursuant to any federal, state or local
law relating to employment, including, but not limited to, discrimination
claims, claims under the California Fair Employment and Housing Act, and the
Federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the Federal Americans with
Disabilities Act or claims for wrongful termination, breach of the covenant of
good faith, contract claims, tort claims, and wage or benefit claims, including
but not limited to, claims for salary, bonuses, commissions, stock, stock options,
vacation pay, fringe benefits, severance pay or any form of compensation.
Notwithstanding the above, this Release and Waiver does not release any claims
Employee may have (i) for indemnification pursuant to and in accordance with
the applicable statutes and the applicable terms of the charters, articles of
incorporation or bylaws of the Company or under any indemnification agreements
or insurance coverage, (ii) in vested pension and retirement benefits under the
terms of qualified employee pension benefit plans, (iii) for accrued benefits
under the terms of applicable employment agreements or employee benefit plans,
and (iv) for any claims under any state Workers’ Compensation laws and any
state unemployment benefits laws.

Employee
also acknowledges that Employee has read and understood Section 1542 of the
California Civil Code which reads as follows: 
“A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.”  Employee hereby expressly
waives and relinquishes all rights and benefits under that section and any law
of any jurisdiction of similar effect with respect to any claims Employee may
have against the Company.

Employee acknowledges
that, among other rights, Employee is waiving and releasing any rights Employee
may have under ADEA, that this waiver and release is knowing and voluntary, and
that the consideration given for this waiver and release is in addition to
anything of value to which Employee was already entitled as an employee of the
Company.  Employee further acknowledges
that Employee has been advised, as required by the Older Workers Benefit
Protection Act, that:  (a) the
waiver and release granted herein does not relate to claims which may arise
after this release and waiver is executed; (b) Employee has the right to
consult with an attorney prior to executing this release and waiver (although
Employee may choose voluntarily not to do so); and (c) if on the date of
execution of this release and waiver Employee is age 40 or

 

older, then
(I) Employee has twenty-one (21) days from the date Employee receives this
release and waiver, in which to consider this release and waiver (although
Employee may choose voluntarily to execute this release and waiver earlier);
and (II) Employee has seven (7) days following the execution of this
release and waiver to revoke Employee’s consent to this release and
waiver.  This release and waiver shall be
effective as of the date of execution hereof; provided that if on the date of
execution of this release and waiver Employee is age 40 or older, then this
release and waiver shall not be effective until the foregoing seven (7) day
revocation period has expired.  The date
as of which this release and waiver is effective as aforesaid shall be deemed
the “Effective Date” hereof.

	
  Date:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Nigel R. A. Beeley, Ph.D.Exhibit
4.1

SANTA LUCIA BANK

2006 EQUITY BASED COMPENSATION PLAN

I.
THE PLAN

1.1. Purpose. The purpose of this 2006 Equity
Based Compensation Plan (the “Plan”) is to promote the success of the Company
by providing an additional means through the grant of Awards to attract,
motivate, retain and reward key employees, including officers, and directors of
the Company with awards and incentives for high levels of individual
performance and improved financial performance of the Company.

1.2. Definitions

(a) “Award” shall mean an
award of any Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Share Unit, Performance Share Award, Dividend Equivalent, or any
combination thereof (including, but not limited to restricted units or other
deferred Awards), whether alternative or cumulative, authorized by and granted
under this Plan.

(b) “Award Agreement”
shall mean a written agreement signed by the Participant setting forth the
terms and conditions of an Award granted to the Participant as determined by the
Committee.

(c) “Award Date” shall
mean the date upon which the Committee adopts a resolution granting an Award or
such later date as the Committee designates as the Award Date at the time the
Committee adopts a resolution granting the Award.

(d) “Award Period” shall
mean the period beginning on an Award Date and ending on the expiration date of
such Award.

(e) “Beneficiary” shall
mean the person, persons, trust or trusts entitled, by will or the laws of
descent and distribution or pursuant to a valid designation of a beneficiary on
a form acceptable to the Committee, to receive the benefits specified in the
Award Agreement and under this Plan in the event of a Participant’s death, and
shall mean the Participant’s executor or administrator if no other Beneficiary
is identified and able to act under the circumstances.

(f) “Board” shall mean
the Board of Directors of the Company.

(g) “Cash Only Award”
shall mean Stock Appreciation Rights, Performance Share Awards or Restricted
Share Units which are paid in cash.

(h) “Change in Control
Event” shall be deemed to have occurred if:

(A)                              there
shall be consummated (1) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation, or pursuant to
which shares of the Company’s Common Stock would be converted in whole or in
part into cash, securities or other property, other than a merger of the
Company in which the holders of the Company’s Common Stock immediately prior to
the merger have substantially the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, or (2) any sale,
lease, exchange or transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company, or

 

(B)                                the
shareholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company, or

(C)                                any
“person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act), other than the Company or a subsidiary thereof or a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
shall become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, or

(D)                               at
any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
shall cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company’s shareholders of
each new director during such two-year period was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of such two-year period, or

(E)                                 any
other event shall occur that would be required to be reported in response to
Item 6(e) (or any successor provision) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not such filing is required
because the Company is not registered under the Exchange Act.

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

(j) “Commission” shall
mean the Securities and Exchange Commission.

(k) “Committee” shall
mean the Compensation Committee of the Board, or other Committee, regardless of
name, that acts on matters of compensation for eligible employees, which
Committee shall be comprised only of two or more directors or such greater
number of directors as may be required under applicable law, each of whom shall
be a Disinterested and Outside director.

(l) “Common Stock” shall
mean the common stock of the Company, no par value per share, and such other
securities or property as may become the subject of Awards, or become subject
to Awards, pursuant to an adjustment made under Section 6.2 of this Plan.

(m) “Company” shall mean
Santa Lucia Bank and/or any parent company of Santa Lucia Bank or any Subsidiary
thereof.

(n) “Director Stock
Option” means a Nonqualified Stock Option granted to a Non-Employee Director
pursuant to Section 2.1 of this Plan.

(o) “Disinterested and
Outside” shall mean a “Non-Employee Director” within the meaning of the
Securities and Exchange Commission Rule 16b-3, and “outside” within the meaning
of Section 162(m) of the Code.

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(p) “Dividend Equivalent”
shall mean an amount equal to the amount of cash dividends or other cash
distributions paid (or such portion of such dividend or other distribution as
may be designated by the Committee) with respect to each Share after the date
of an Award of a Dividend Equivalent.

(q) “DRO” shall mean a
valid domestic relations order under applicable state law, acceptable to the
Company.

(r) “Eligible Employee”
shall mean any employee of the Company or any of its Subsidiaries as determined
by the Committee in its discretion.

(s) “ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as amended.

(t) “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended from time to time.

(u)  “Executive Officer” shall mean an executive
officer as defined in Rule 3b-7 under the Exchange Act, provided that, if the
Board has designated the executive officers of the Company for purposes of
reporting under the Exchange Act, the designation by the Board shall be
conclusive for purposes of this Plan.

(v) “Fair Market Value”
shall mean, as of a specified date with respect to Common Stock:

(i)          If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market)
on the date at which Fair Market Value is to be determined, then the Fair
Market Value per share will be the closing price on such exchange on such date,
or if there were no reported sales on such date, then the average of the
highest bid and lowest asked price, or, if there is no bid and asked price on
such date, then the Fair Market Value shall be the closing price on the next
preceding day for which there is a reported sale or the next preceding day for
which there is a bid and asked price, whichever most recently occurred; or

(ii)       If the Common Stock is
traded on the OTC Bulletin Board, the Fair Market Value per share shall be the
average of the highest bid and lowest asked price on such date, or, if there is
no bid and asked price on such date, then on the next prior business day on
which there was a bid and asked price. If no such bid and asked price is
available, then the Fair Market Value per Share shall be the fair market value
thereof as determined by the Committee, in its sole and absolute discretion.

(w) “Incentive Stock
Option” shall mean an Option which is designated as an incentive stock option
within the meaning of Section 422 of the Code and which contains such
provisions as are necessary to comply with that section.  Any Option granted hereunder that is intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof initially or upon amendment shall not be nullified because
of such failure and shall be deemed a Nonqualified Stock Option.

(x) “Nonqualified Stock
Option” shall mean an Option that is designated as a nonqualified stock option
and shall include any Option intended as an Incentive Stock Option that fails
to meet the applicable legal requirements thereof. Any Option granted hereunder
that is not designated as an incentive stock option shall be deemed to be
designated a nonqualified stock option under this Plan and not an incentive
stock option under the Code.

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(y) “Non-Employee
Director” shall mean a member of the Board who is not an officer or employee of
the Company, including, but not limited to, a member of the Board who qualifies
as a “Non-Employee Director” within the meaning of Rule 16b-3.

(z) “Option” shall mean
an option to purchase Shares under this Plan. The Committee shall designate any
Option granted to an Eligible Employee as a Nonqualified Stock Option or an
Incentive Stock Option.

(aa) “Participant” shall
mean an Eligible Employee who has been granted an Award under this Plan or Non-Employee
Director who has been granted a Director Stock Option under this Plan.

(bb) “Performance
Criteria” means the attainment of performance goals relating to one or more
business criteria within the meaning of Section 162(m) of the Code, as determined
by the Committee in its sole discretion at the Award Date, including but not
limited to: return on average common shareholders’ equity; return on average
equity; total shareholder return; stock price appreciation; efficiency ratio
(other expense as a percentage of other income plus net interest income); net
operating expense (other income less other expense); earnings per diluted share
of Common Stock; per share earnings before transaction-related expense; per
share earnings after deducting transaction-related expense; return on average
assets; ratio of nonperforming to performing assets; return on an investment in
an affiliate; net interest income; net interest margin; ratio of common equity
to total assets; regulatory compliance metrics; and customer service
metrics.  Performance Criteria may be
stated in absolute terms or relative to comparison companies or indices to be
achieved during a period of time.  Any
Performance Criteria may be used to measure the performance of the Company as a
whole or any business unit of the Company. 
Any Performance Criteria may include or exclude extraordinary items such
as extraordinary, unusual and/or non-recurring items of gain or loss, gains or
losses on the disposition of a business, changes in tax or accounting regulations
or laws, or the effects of a merger or acquisition.  Performance Criteria generally shall be
established by the Committee and shall be derived from the Company’s audited
financial statements, including footnotes, the Management’s Discussion and Analysis
section of the Company’s annual report, or any other measure of performance
desired by the Committee.  The Committee
may not in any event increase the amount of compensation payable to a covered
employee, as defined in Section 162(m) of the Code, upon the satisfaction of
any Performance Criteria.

(cc) “Performance Share
Award” shall mean a Cash Only Award in the form of performance shares made
pursuant to the provisions, and subject to the terms and conditions, of Article
V of the Plan.

(dd) “Personal
Representative” shall mean the person or persons who, upon the Total Disability
or incompetence of a Participant, shall have acquired on behalf of the
Participant, by legal proceeding or otherwise, the power to exercise the rights
or receive benefits under this Plan and who shall have become the legal
representative of the Participant.

(ee) “Plan” shall mean
this 2006 Equity Based Compensation Plan.

(ff) “Restricted Stock”
shall mean Shares awarded to a Participant subject to payment of such
consideration, if any, and such conditions on vesting and transfer and other
restrictions as are established in or pursuant to this Plan, for so long as
such shares remain unvested under the terms of the applicable Award Agreement.

 4
 

 

(gg) “Restricted Share
Unit” shall mean an Award payable in cash or Shares and represented by a
bookkeeping credit where the amount represented by the bookkeeping credit for
each Restricted Share Unit equals the Fair Market Value of a Share on the Award
Date and which amount shall be subsequently increased or decreased to reflect
the Fair Market Value of a Share on any date from the Award Date up to the date
the Restricted Share Unit is settled in cash or Shares.

(hh) “Rule 16b-3” shall
mean Rule 16b-3, as amended from time to time, as promulgated by the Commission
pursuant to the Exchange Act.

(ii) “Section 16 Person”
shall mean a person subject to Section 16(a) of the Exchange Act.

(jj) “Securities Act”
shall mean the Securities Act of 1933, as amended from time to time.

(kk) “Shares” shall mean
shares of Common Stock of the Company.

(ll) “Stock Appreciation
Right” shall mean a right to receive a number of Shares or an amount of cash,
or a combination of Shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Shares,
that is authorized under this Plan.

(mm) “Subsidiary” shall
mean any company or other entity a majority of whose outstanding voting stock
or voting power is beneficially owned directly or indirectly by the Company.

(nn) “Total Disability”
shall mean a “permanent and total disability” within the meaning of Section
22(e)(3) of the Code and such other disabilities, infirmities, afflictions or
conditions as the Committee by rule may include.

1.3. Administration and Authorization; Power and
Procedure.

(a) Committee. This Plan
shall be administered by, and all Awards to Eligible Employees shall be
authorized by, the Committee, or by the Board. Action of the Committee with
respect to the administration of this Plan shall be taken pursuant to a
majority vote or by unanimous written consent of its members.

(b) Plan Awards;
Interpretation; Powers of Committee. Subject to the express provisions of this
Plan, the Committee shall have the authority:

(i) To
determine, from among those persons eligible, the particular Eligible Employees
who will receive any Awards;

(ii)
To grant Awards to Eligible Employees, determine the price at which securities
will be offered or awarded and the amount of securities to be offered or
awarded to any of such persons, and determine the other specific terms and
conditions of such Awards consistent with the express limits of this Plan, and
establish the installments (if any) in which such Awards shall become
exercisable or shall vest (including establishing Performance Criteria for
vesting of Awards, regardless of the form of the Award), or determine that no
delayed exercisability or vesting is required, and establish the events of
termination or reversion (if any) of such Awards;

(iii)
To approve the forms of Award Agreements (which need not be identical either as
to type of Award or among Participants);

 5
 

 

(iv)
To construe and interpret this Plan and any agreements defining the rights and
obligations of the Company and Participants under this Plan, further define the
terms used in this Plan, and prescribe, amend and rescind rules and regulations
relating to the administration of this Plan;

(v) To
cancel, modify, or waive the Company’s rights with respect to, or modify,
discontinue, suspend, or terminate, any or all outstanding Awards held by
Participants, subject to any required consent under Section 6.6;

(vi)
To accelerate or extend the exercisability or vesting or extend the term of any
or all outstanding Awards within the maximum ten-year term of Awards under
Section 1.7; and

(vii)
To make all other determinations and take such other action as contemplated by
this Plan or as may be necessary or advisable for the administration of this
Plan and the effectuation of its purposes.

(c) Binding
Determinations. Any action taken by, or inaction of, the Company, the Board or
the Committee relating or pursuant to this Plan shall be within the absolute
discretion of that entity or body and shall be conclusive and binding upon all
persons. No member of the Board or Committee, or officer of the Company, shall
be liable for any such action or inaction of the entity or body, of another
person or, except in circumstances involving bad faith, of himself or herself.
Subject only to compliance with the express provisions hereof, the Board and
Committee may act in their absolute discretion in matters within their
authority related to this Plan.

(d) Reliance on Experts.
In making any determination or in taking or not taking any action under this
Plan, the Committee or the Board, as the case may be, may obtain and may rely
upon the advice of experts, including professional advisors to the Company. No
director, officer or agent of the Company shall be liable for any such action
or determination taken or made or omitted in good faith.

(e) Delegation. The
Committee may delegate ministerial, non-discretionary functions to individuals
who are officers or employees of the Company.

(f)
Notices; Signature; Delivery.  Whenever
a signature, notice or delivery of a document is required or appropriate under
the Plan or pursuant to an Award Agreement, signature, notice or delivery may
be accomplished by paper or written format, or to the extent authorized by the
Committee, subject to Section 6.4, by electronic means.  In the event the Committee authorizes
electronic means for the signature, notice or delivery of a document hereunder,
the electronic record or confirmation of that signature, notice or delivery
maintained by or on behalf of the Committee shall for purposes of this Plan and
any applicable Award Agreement be treated as if it was a written signature or
notice and was delivered in the manner provided herein for a written document.

1.4. Participation. Awards may be granted by
the Committee only to those persons that the Committee determines to be
Eligible Employees or Non-Employee Directors. An Eligible Employee or
Non-Employee Director who has been granted an Award may, if otherwise eligible,
be granted additional Awards if the Committee shall so determine.  Non-Employee Directors shall be eligible to
receive all Awards except Incentive Stock Options under this Plan.

 6
 

 

1.5. Shares Available for Awards. Subject to
the provisions of Section 6.2, the capital stock that may be delivered under
this Plan shall be Shares of the Company’s authorized but unissued Common
Stock. The Shares may be issued (subject to Section 6.4) for any lawful
consideration.

(a) Number of Shares. The
maximum number of Shares of Common Stock that may be delivered pursuant to
Awards granted under this Plan shall not exceed 200,000 Shares, including
38,200 Shares rolled over from the Company’s 2000 Stock Option Plan pursuant to
Section 6.13(b),  subject to the reissue
of Awards pursuant to Sections 1.5(d) and 6.13(b) and the adjustments
contemplated by Section 6.2. For every Share of Restricted Stock issued under
this Plan, the maximum number of Shares that may be delivered pursuant to
Awards hereunder shall be reduced by 1 Share. 
The maximum number of Shares of Common Stock subject to Incentive Stock
Options that may be granted pursuant to this Plan is 200,000.

(b) Reservation of
Shares. Common Stock subject to outstanding Awards (other than Cash Only
Awards) shall be reserved for issuance. If a Stock Appreciation Right is
exercised and paid in Shares, the number of Shares to which such exercise
relates under the applicable Award shall be charged against the maximum amount
of Shares that may be delivered pursuant to Awards under this Plan and, if
applicable, such Award. If the Company withholds Shares pursuant to Section 2.2(b)
or 6.5, the number of Shares that would have been deliverable with respect to
an Award shall be reduced by the number of Shares withheld, and such Shares
shall not be available for additional Awards under this Plan.

(c) Cash Only Award
Limit. Awards payable solely in cash under the Plan and Awards payable either
in cash or Shares that are actually paid in cash shall constitute and be
referred to as “Cash Only Awards”. The number of Cash Only Awards shall be
determined by reference to the number of Shares by which the Award is measured.

(d) Reissue of Awards.
Subject to any restrictions under Rule 16b-3, the Shares which are subject to
any unexercised, unvested or undistributed portion of any expired, canceled,
terminated or forfeited Award, or any alternative form of consideration under
an Award that is not paid in connection with the settlement of an Award or any
portion of an Award, shall again be available for Award under subsection (a) or
(c) above, as applicable, provided the Participant has not received dividends
or Dividend Equivalents during the period in which the Participant’s ownership
was not vested. Shares that are issued pursuant to Awards and subsequently
reacquired by the Company pursuant to the terms and conditions of the Awards
also shall be available for reissuance under the Plan. Nothing in this
paragraph shall be interpreted to allow Shares which are in the possession of
the Company pursuant to either Section 2.2(b) or 6.5 to be available for
reissuance under the Plan. Only Shares which were originally awarded as
Restricted Stock (including restricted units which are payable in Shares) or
Director Stock Options may be reissued as Restricted Stock (including
restricted units which are payable in Shares) or Director Stock Options.

(e) Interpretive
Issues.  Additional rules for determining
the number of Shares or Cash Only Awards authorized under the Plan may be
adopted by the Committee as it deems necessary or appropriate; provided that
such rules are consistent with Rule 16b-3.

1.6. Grant of Awards.  Subject to the express provisions of this
Plan, the Committee shall determine the type of Award, the number of Shares
subject to each Award, and the price (if any) to be paid for the Shares or the
Award and, in the case of Performance Share Awards or, in its discretion, any
other Awards, in addition to matters addressed in Section 1.3(b), the specific
Performance Criteria, that further define the terms of the Performance Share
Award or other

 7
 

 

Award.  Subject to the provisions of
Section 1.3(f), no Award shall be enforceable until the Award Agreement or
an acknowledgement of receipt has been signed by the Participant and on behalf
of the Company by an Executive Officer (other than the recipient) or his or her
delegate.  By executing the Award Agreement
or an acknowledgement of receipt, a Participant shall be deemed to have
accepted and consented to the terms of this Plan and any action taken in good
faith under this Plan by and within the discretion of the Committee, the Board
of Directors or their delegates.  Unless
the Award Agreement otherwise expressly provides, there shall be no third party
beneficiaries of the obligations of the Company to the Participant under the
Award Agreement.

1.7. Award Period.   Each Award and all executory rights or obligations
under the related Award Agreement shall expire on such date (if any) as shall
be determined by the Committee, but, in the case of Options or other rights to
acquire Shares, not later than ten (10) years after the Award Date.

1.8. Limitations on Exercise and Vesting of Awards.

(a) Provisions for
Exercise. Except as may otherwise be provided in an Award Agreement or herein,
no Award shall be exercisable or shall vest until at least six months after the
initial Award Date. Once exercisable an Award shall remain exercisable until
the expiration or earlier termination of the Award, unless the Committee
otherwise provides.

(b) Procedure. Any
exercisable Award shall be deemed to be exercised when the Secretary of the
Company receives written notice of such exercise from the Participant, together
with any required payment made in accordance with Section 2.2(b).

(c) Fractional
Shares/Minimum Issue. Fractional share interests shall be disregarded, but may
be accumulated. The Committee, however, may determine that cash, other
securities or other property will be paid or transferred in lieu of any
fractional share interests. No fewer than 100 Shares may be purchased on
exercise of any Award at one time unless the number purchased is the total
number at the time available for purchase under the Award.

1.9. No Transferability.

(a) Awards may be
exercised only by the Participant or, if the Participant has died, the
Participant’s Beneficiary or, if the Participant has suffered a Total
Disability and the Participant is incapacitated, the Participant’s Personal
Representative, if any, or if there is none, (to the extent permitted by
applicable law and Rule 16b-3) a third party pursuant to such conditions and
procedures as the Committee may establish. Other than upon death or pursuant to
a DRO or other exception to transfer restrictions under Rule 16b-3 (except to
the extent not permitted in the case of an Incentive Stock Option), no right or
benefit under this Plan or any Award shall be transferable by the Participant or
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge (other than to the Company), and any
such attempted action shall be void. The Company shall disregard any attempt at
transfer, assignment or other alienation prohibited by the preceding sentences
and shall pay or deliver such cash or Shares in accordance with the provisions
of this Plan.  Notwithstanding the
foregoing, the Committee, in its discretion, may adopt rules permitting the
transfer, solely as gifts during the grantee’s lifetime, of Awards (other than
Incentive Stock Options) to members of a grantee’s immediate family or to
trusts, family partnerships or similar entities for the benefit of such

 8
 

 

immediate family
members.  For this purpose, immediate family member means the grantee’s
spouse, parent, child, stepchild, grandchild and the spouses of such family
members.  The terms of an Award Agreement shall be final, binding and
conclusive upon the beneficiaries, executors, administrators, heirs and
successors of the grantee.

(b) The restrictions on
exercise and transfer above shall not be deemed to prohibit the authorization
by the Committee of “cashless exercise” procedures with unaffiliated third
parties who provide financing for the purpose of (or who otherwise facilitate)
the exercise of Awards consistent with applicable legal restrictions and Rule
16b-3, nor, to the extent permitted by the Committee, transfers for estate and
financial planning purposes, notwithstanding that the inclusion of such
features may render the particular Awards ineligible for the benefits of Rule
16b-3, nor, in the case of Participants who are not Section 16 Persons,
transfers to such other persons or in such other circumstances as the Committee
may in the Award Agreement or other writing expressly permit.

1.10. Deferred Payments. The Committee may
authorize for the benefit of any Eligible Employee the deferral of any payment
of cash or Shares that may become due or of cash otherwise payable under this
Plan, and provide for accreted benefits thereon based upon such deferment, at
the election or at the request of such Participant, subject to the other terms
of this Plan. Such deferral shall be subject to such further conditions,
restrictions or requirements as the Committee may impose, subject to any then
vested rights of Participants.  Any such
deferral of payment shall comply in all respects with the requirements of Code
Section 409A, including with respect to the timing of election and timing of
distribution, so as to avoid the imposition of any tax in addition to ordinary
income tax or capital gains tax, as applicable.

1.11. Special Performance-Based Awards.  Without limiting the generality of the
foregoing, any of the types of Awards listed in Section 1.2(a) may be
granted as awards that satisfy the requirements for “performance-based
compensation” within the meaning of Code Section 162(m) (“Performance-Based
Awards”), the grant, vesting, exercisability or payment of which depends on the
degree of achievement of the Performance Criteria relative to preestablished
targeted levels for the Company on a consolidated basis.  Notwithstanding anything contained in this
Section 1.11 to the contrary, any Option or Stock Appreciation Right shall
be subject only to the requirements of (a) below and Section 1.5 above in order
for such Awards to satisfy the requirements for Performance-Based Awards under
this Section 1.11 (with such Awards hereinafter referred to as a “Qualifying
Option” or a “Qualifying Stock Appreciation Right,” respectively).  With the exception of any Qualifying Option
or Qualifying Stock Appreciation Right, an Award that is intended to satisfy
the requirements of this Section 1.11 shall be designated as a Performance-Based
Award at the time of grant.  Nothing in
this Plan shall limit the ability of the Committee to grant Options or Stock
Appreciation Rights with an exercise price or a base price greater than Fair
Market Value on the Date of Grant or to make the vesting of the Options or
Stock Appreciation Rights subject to Performance Goals or other business
objectives.

(a)  Eligible
Class.  The eligible class of
persons for Awards under this Section 1.11 shall be all Eligible Employees
and Non-Employee Directors.

(b)  Performance
Goals.  The performance goals for
any Awards under this Section 1.11 (other than Qualifying Options and
Qualifying Stock Appreciation Rights) shall be, on an absolute or relative
basis, one or more of the Performance Criteria. 
The specific performance target(s) with respect to Performance Criteria
must be established by the Committee in advance of the

 9
 

 

deadlines
applicable under Code Section 162(m) and while the performance relating to
the Performance Criteria remains substantially uncertain.

(c)  Committee
Certification.  Before any
Performance-Based Award under this Section 1.11 (other than Qualifying
Options and Qualifying Stock Appreciation Rights) is paid, the Committee must
certify in writing (by resolution or otherwise) that the applicable Performance
Criteria and any other material terms of the Performance-Based Award were
satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Criteria in
the event of a Change in Control as provided in Section 6.2(b).

(d)  Terms
and Conditions of Awards; Committee Discretion to Reduce Performance Awards.  The Committee shall have discretion to
determine the conditions, restrictions or other limitations, in accordance with
and subject to the terms of this Plan and Code Section 162(m), on the
payment of individual Performance-Based Awards under this
Section 1.11.  To the extent set
forth in an Award Agreement, the Committee may reserve the right to reduce the
amount payable in accordance with any standards or on any other basis
(including the Committee’s discretion), as the Committee may determine.

(e)  Adjustments
for Material Changes.  In the
event of (i) a change in corporate capitalization, a corporate transaction
or a complete or partial corporate liquidation, or (ii) any extraordinary
gain or loss or other event that is treated for accounting purposes as an
extraordinary item under generally accepted accounting principles, or
(iii) any material change in accounting policies or practices affecting
the Company and/or the Performance Criteria or targets, then, to the extent any
of the foregoing events (or a material effect thereof) was not anticipated at
the time the targets were set, the Committee may make adjustments to the
Performance Criteria and/or targets, applied as of the date of the event, and
based solely on objective criteria, so as to neutralize, in the Committee’s
judgment, the effect of the event on the applicable Performance-Based Award.

(f)  Interpretation.  Except as specifically provided in this
Section 1.11, the provisions of this Section 1.11 shall be
interpreted and administered by the Committee in a manner consistent with the
requirements for exemption of Performance-Based Awards granted to Executive
Officers as “performance-based compensation” under Code Section 162(m) and
the regulations thereunder.

(g)  Individual Limits.

(i)                                     Share-Based Awards.  The maximum number of Shares that are
issuable under the Plan pursuant to Options, Stock Appreciation Rights payable
in Shares, Restricted Stock or Stock Units payable in Shares that are granted
as Performance-Based Awards during any calendar year to any Participant shall
not exceed the maximum number of shares available in the Plan, subject to
adjustment as provided in Section 6.2(a); provided, that the maximum
number of Shares that may be granted as Restricted Stock Awards during any
calendar year to any Participant under the Plan (including as Performance-Based
Awards) shall not exceed the maximum number of shares available in the Plan,
subject to adjustment as provided in Section 6.2(a).  Awards that are canceled during the year
shall be counted against this limit.

(ii)  Restricted Share
Awards.  The maximum number of Restricted
Share Units payable in cash only or Stock Appreciation Rights payable in cash
only that may be granted during any calendar year to any Participant as
Performance-Based Awards shall not exceed the maximum number of shares
available in the Plan, subject to adjustment as provided in
Section 6.2(a).  Awards that are
canceled due to expiration or forfeiture during the year shall be counted
against this limit.

 10
 

 

II.
OPTIONS

2.1. Grants. One or more Options may be granted
under this Article to any Eligible Employee, subject to the provisions of
Section 1.5. Each Option granted may be either an Option intended to be an
Incentive Stock Option or an Option not so intended, and such intent shall be
indicated in the applicable Award Agreement. 
However, Non-Employee Directors shall only be eligible to receive
Director Stock Options, which shall be Non-Qualified Options.

2.2. Option Price.

(a) Pricing Limits.
Subject to Sections 2.4, the purchase price per Share of the Common Stock
covered by each Option shall be determined by the Committee at the time the
Option is granted, but shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of grant.

(b) Payment Provisions.
The purchase price of any Shares purchased on exercise of an Option granted
under this Article shall be paid in full at the time of each purchase in one or
a combination of the following methods: (i) in cash or by electronic funds
transfer; (ii) by check payable to the order of the Company; (iii) by notice
and third party payment in such manner as may be authorized by the Committee;
(iv) by the delivery of Shares already owned by the Participant which have been
held for at least six months, provided, however, that the Committee may in its
absolute discretion limit the Participant’s ability to exercise an Award by
delivering such Shares; or (v) if authorized by the Committee or specified in
the applicable Award Agreement, by reduction in the number of Shares otherwise
deliverable upon exercise by that number of Shares which have a then Fair
Market Value equal to such purchase price. Previously owned Shares used to
satisfy the exercise price of an Option under clause (iv) shall be valued at
their Fair Market Value on the date of exercise.

2.3. Limitations on Grant and Terms of Incentive Stock
Options

(a) $100,000 Limit. To
the extent that the aggregate “fair market value” of Common Stock with respect
to which Incentive Stock Options first become exercisable by a Participant in
any calendar year exceeds $100,000, taking into account both Common Stock
subject to Incentive Stock Options under this Plan and stock subject to
incentive stock options under all other plans of the Company, such options
shall be treated as Nonqualified Stock Options. For this purpose, the “fair
market value” of the Common Stock subject to Options shall be determined as of
the date the Options were awarded. In reducing the number of Options treated as
Incentive Stock Options to meet the $100,000 limit, the most recently granted
Options shall be reduced first. To the extent a reduction of simultaneously
granted Options is necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate which Shares of Common
Stock are to be treated as Shares acquired pursuant to the exercise of an
Incentive Stock Option.  To the extent
permitted under applicable regulations, as a method of causing an Option
intended to be an Incentive Stock Option to meet the requirements thereof which
fails to do so by reason of the $100,000 limit, the Committee shall have the
discretion to amend the terms of such Option to delay the exercisability of the
Option provided such amendment is made in the same calendar year of grant.

(b) Option Period.
Subject to Section 2.4, each Option and all rights thereunder shall expire no
later than ten years after the Award Date.

 11

 

(c) Other Code Limits.
There shall be imposed in any Award Agreement relating to Incentive Stock
Options such terms and conditions as from time to time are required in order
that the Option be an “incentive stock option” as that term is defined in
Section 422 of the Code.

2.4. Limits on 10% Holders. No Incentive Stock
Option may be granted to any person who, at the time the Option is granted,
owns (or is deemed to own under Section 424(d) of the Code) Shares of
outstanding Common Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, unless the exercise price of such
Option with respect to the Common Stock covered by the Option is at least 110%
of the Fair Market Value of the Common Stock subject to the Option and such
Option by its terms is not exercisable after the expiration of five years from
the date such Option is granted.

2.5. No Option Repricing. Subject to Section
6.2 and Section 6.6 and the specific limitations on Awards granted in this
Plan, the Committee may not reduce the exercise price of any Option or Stock
Appreciation Right granted pursuant to the Plan following the date of the Award
or accept the surrender of outstanding Options or Stock Appreciation Rights as
consideration for the grant of a new Award with a lower per-share exercise
price.

2.6. Surrender of Stock Options The Committee,
in its sole discretion, shall have the authority under the circumstances set
forth herein to agree mutually with a Participant to grant such Participant the
right, on such terms and conditions as the Committee may prescribe, to
surrender such Participant’s Options to the Company for cancellation and to
receive upon such surrender a cash payment equal to the Spread applicable to
such surrendered Options. Such right shall be made available only in the event
of an Offer (as defined in the following paragraph).

The term “Offer” as used
in this Section means any tender offer or exchange offer for Shares, other than
one made by the Company, provided that the company, person or other entity
making the Offer acquires Shares pursuant to such Offer.

The term “Offer Price per
Share” as used in this Section means the highest price per Share paid on any
Offer which is in effect at any time during the period beginning on the sixtieth
day prior to the date on which the Option is surrendered pursuant to this
Section and ending on such date of surrender. Any securities or property which
are part or all of the consideration paid for Shares in the Offer shall be
valued in determining the Offer Price per Share at the higher of (a) the
valuation placed on such securities or property by any other company, person or
entity making the Offer or (b) the valuation placed on such securities or
property by the Committee.

The term “Spread” as used
in this Section means with respect to any surrendered Option and associated
right, if any, an amount equal to the product computed by multiplying (i) the
excess of (A) the Offer Price per Share or the highest market price per Share
of the Company’s Common Stock during the period beginning on the sixtieth day
prior to the date on which the Stock Option is surrendered pursuant to this
Section and ending on such date of surrender over (B) the purchase price per
Share at which the surrendered Option is then exercisable, by (ii) the number
of Shares subject to such Option with respect to which it has not theretofore
been exercised.

2.7.  Exercise of Option Granted
in Tandem with Stock Appreciation Right

(a)  Exercisability. An Option related to another
Stock Appreciation Right shall be exercisable at such time or times, and to the
extent, as set forth in the Award Agreement.

(b)  Effect on Available Shares.  In the event that an Option related to
another Stock Appreciation Right is exercised, the number of Shares subject to
the Award shall be charged

 12
 

 

against the number of
Shares subject to the Option and the related Stock Appreciation Right of the
Participant.

III.
STOCK APPRECIATION RIGHTS

3.1. Grants In its discretion, the Committee
may grant to any Eligible Employee Stock Appreciation Rights either
concurrently with the grant of another Option Award or in respect of an
outstanding Option Award, in whole or in part, or independently of any other
Award. Any Stock Appreciation Right granted in connection with an Incentive
Stock Option shall contain such terms as may be required to comply with the
provisions of Section 422 of the Code and the regulations promulgated
thereunder.

 3.2. Exercise
of Stock Appreciation Rights

(a) Exercisability. A
Stock Appreciation Right related to another Option Award shall be exercisable
at such time or times, and to the extent, that the related Option Award shall
be exercisable.

(b) Effect on Available
Shares. In the event that a Stock Appreciation Right related to another Option
Award is exercised, the number of Shares subject to the Award shall be charged
against the number of Shares subject to the Stock Appreciation Right and the
related Option Award of the Participant.

(c) Stand-Alone SARs. A
Stock Appreciation Right granted independently of any other Award shall be
exercisable pursuant to the terms of the Award Agreement, but, unless the
Committee determines otherwise, in no event earlier than six months after the
Award Date.

3.3. Payment

(a) Amount. Unless the
Committee otherwise provides, upon exercise of a Stock Appreciation Right, the
Participant shall be entitled to receive payment of an amount determined by
multiplying:

(i)
The difference obtained by subtracting the exercise price per Share under the
related Award (if applicable) or the initial Share value specified in the Award
from the Fair Market Value of a Share on the date of exercise of the Stock
Appreciation Right, by

(ii)
The number of Shares with respect to which the Stock Appreciation Right shall
have been exercised. Notwithstanding the above, the Committee may place a
maximum limitation on the amount payable upon exercise of a Stock Appreciation
Right. Such limitation, however, must be determined as of the date of the grant
and noted on the instrument evidencing the Stock Appreciation Right granted
hereunder.

(b) Form of Payment.  Unless otherwise provided in the Award
Agreement granting a Stock Appreciation Right, the form of payment shall be
solely in Shares.  The Committee, in its sole
discretion, shall determine the form in which payment shall be made of the
amount determined under paragraph (a) above, either solely in cash, solely in
Shares (valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right), or partly in such Shares and partly in cash, provided that
the Committee shall have determined that such exercise and payment are
consistent with applicable law. If the Committee permits the Participant to
elect to receive cash or Shares

 13
 

 

(or a combination
thereof) on such exercise, any such election shall be subject to such
conditions as the Committee may impose and, in the case of any Section 16
Person, any election to receive cash shall be subject to any applicable
limitations under Rule 16b-3.

IV.
RESTRICTED STOCK AWARDS

4.1. Restricted
Stock. The Committee
may, in its discretion, grant one or more Restricted Stock Awards to any
Eligible Employee. Each Restricted Stock Award Agreement shall specify the
number of Shares to be issued, the date of such issuance, the consideration for
such Shares (but not less than the minimum lawful consideration, the value of
which equals the par value of the Shares or such greater or lesser value as the
Committee, consistent with Section 6.4, may require) to be paid, if any, by the
Participant and the restrictions imposed on such Shares, including but not
limited to, any Performance Criteria and the conditions of release or lapse of
such restrictions. Stock certificates evidencing shares of Restricted Stock
pending the lapse of the restrictions (“restricted shares”) shall bear a legend
making appropriate reference to the restrictions imposed hereunder and shall be
held by the Company or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.8. Upon issuance
of the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.

4.2. Restrictions

(a) Pre-Vesting
Restraints. Except as provided in Section 1.9 and 4.1, restricted shares
comprising any Restricted Stock Award may not be sold, assigned, transferred,
pledged or otherwise disposed of or encumbered either voluntarily or involuntarily,
until such shares have vested.

(b) Dividend and Voting
Rights. Unless otherwise provided in the applicable Award Agreement, a
Participant receiving a Restricted Stock Award shall be entitled to cash
dividend and voting rights for all shares issued even though they are not
vested, provided that such rights shall terminate immediately as to any
restricted shares which cease to be eligible for vesting.

(c) Cash Payments. If the
Participant shall have paid or received cash (including any dividends) in
connection with the Restricted Stock Award, the Award Agreement shall specify
whether and to what extent such cash shall be returned (with or without an
earnings factor) as to any restricted shares which cease to be eligible for
vesting.

(d) Lapse of Restrictions.  In no case shall restrictions lapse within
the six months following the grant of an Award of Restricted Stock.

4.3. Return to the Company. Unless the
Committee otherwise expressly provides, shares of Restricted Stock that are
subject to restrictions at the time of termination of employment or are subject
to other conditions to vest that have not been satisfied by the time specified
in the applicable Award Agreement shall not vest and shall be returned to the
Company in such manner and on such terms as the Committee shall therein
provide.

4.4 Restricted Share Units. The Committee may,
in its discretion, grant to any Eligible Employee a Restricted Share Unit
Award  which will be payable in Shares of
Common Stock (a “Share Award”) and/or in Cash Only Awards on such terms as the
Committee may determine in its sole discretion (including but not limited to
Performance Criteria), but subject to the vesting restrictions contained in
Section 4.2(d) in the case of restricted units which will be payable in

 14
 

 

Shares, and subject to
the requirements of Code Section 409A where applicable. Such Awards may be made
as additional compensation for services or may be in lieu of other compensation
which the Eligible Employee is entitled to receive from the Company. All such
Share Awards and Cash Only Awards shall constitute Awards for all purposes of
the Plan, and shall be subject to the limits on Awards which are payable in
Shares and in cash which are contained in the Plan. Restricted Share Units
shall not entitle a Participant to voting or other rights with respect to
Shares, provided, however, that the Committee may also grant Dividend
Equivalents in connection with any Restricted Share Unit Award which is made
under the Plan on such terms as the Committee may determine in its sole
discretion.

V.
PERFORMANCE SHARE CASH ONLY AWARDS

5.1. Grants of Performance Share Cash Only Awards.
The Committee may, in its discretion, grant Cash Only Awards in the form of
Performance Share Awards to any Eligible Employee based upon such factors as
the Committee shall deem relevant in light of the specific type and terms of
the Award. An Award Agreement shall specify the maximum number of Shares (if
any) subject to the Performance Share Award, the duration of the Award and the
conditions upon which payment of the Award to the Participant shall be based,
and the terms thereof shall comply with the requirements of Code Section 409A
where applicable. The cash amount that may be deliverable pursuant to such
Award shall be based upon the fair market value of the number of Shares of
Common Stock specified in the Award, subject to any maximum determined by the
Committee, and the degree of attainment of any Performance Criteria over a
specified period (a “performance cycle”) as may be established by the
Committee.  The Committee may provide for
full or partial credit, prior to completion of such performance cycle or the
attainment of the performance achievement specified in the Award, in the event
of the Participant’s death, retirement, or Total Disability, a Change in
Control Event or in such other circumstances as the Committee, consistent with
Section 6.10(c)(ii), if applicable, may determine.

VI.
OTHER PROVISIONS

6.1. Rights of Eligible Employees, Participants and
Beneficiaries

(a) Employment Status.
Status as an Eligible Employee shall not be construed as a commitment that any
Award will be made under this Plan to an Eligible Employee or to Eligible
Employees generally.

(b) No Employment
Contract. Nothing contained in this Plan (or in any other documents related to
this Plan or to any Award) shall confer upon any Eligible Employee or
Participant any right to continue in the employ or other service of the Company
or constitute any contract or agreement of employment or other service, nor
shall interfere in any way with the right of the Company to change such person’s
compensation or other benefits or to terminate the employment of such person,
with or without cause, but nothing contained in this Plan or any document
related hereto shall adversely affect any independent contractual right of such
person without his or her consent thereto.

(c) Plan Not Funded.
Awards payable under this Plan shall be payable in Shares or from the general
assets of the Company, and no special or separate reserve, fund or deposit
shall be made to assure payment of such Awards. No Participant, Beneficiary or
other person shall have any right, title or interest in any fund or in any
specific asset (including Shares of Common Stock

 15
 

 

except as expressly
otherwise provided) of the Company by reason of any Award hereunder. Neither
the provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a
fiduciary relationship between the Company and any Participant, Beneficiary or
other person. To the extent that a Participant, Beneficiary or other person
acquires a right to receive payment pursuant to any Award hereunder, such right
shall be no greater than the right of any unsecured general creditor of the
Company.

6.2. Adjustments; Accelerations

(a) Adjustments. If the
outstanding Shares of Common Stock are changed into or exchanged for cash,
other property or a different number or kind of shares or securities of the
Company, or if additional shares or new or different securities are distributed
with respect to the outstanding Shares of Common Stock, through a
reorganization or merger in which the Company is the surviving entity, or
through a combination, consolidation, recapitalization, reclassification, stock
split, stock dividend, reverse stock split, stock consolidation, without
consideration, or if there shall occur any other extraordinary corporate
transaction or event in respect of the Common Stock or a sale of substantially
all the assets of the Company as an entirety which in the judgment of the
Committee materially affects the Common Stock, then (1) the number of Shares
available for Awards, and any limit on the number of Shares that may be subject
to Awards to an Eligible Employee in a calendar year, as set forth in Section
1.5(a), shall be adjusted proportionately, and (2) the Committee shall, in such
manner and to such extent (if any) as it deems appropriate and equitable,
proportionately adjust any or all terms of outstanding Awards including, but
not limited to, (A) the number and kind of shares of Common Stock or other
consideration that is subject to or may be delivered under this Plan and
pursuant to outstanding Awards, (B) the consideration payable with respect to
Awards granted prior to any such change and the prices, if any, paid in
connection with Restricted Stock Awards, or (C) the performance standards
appropriate to any outstanding Awards. 
In the case of an extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, the Committee shall, in such manner and to such extent (if any) as
it deems appropriate and equitable, make provision for a cash payment or for
the substitution or exchange of any or all outstanding Awards or the cash,
securities or property deliverable to the holder of any or all outstanding
Awards based upon the distribution or consideration payable to holders of
Common Stock upon or in respect of such event; provided, however, in each case,
that with respect to Awards of Incentive Stock Options, no such adjustment
shall be made which would cause the Plan to violate Section 422 or 424(a) of
the Code or any successor provisions thereto. Corresponding adjustments shall
be made with respect to any Stock Appreciation Rights based upon the
adjustments made to the Options to which they are related. In any of such
events, the Committee may take such action sufficiently prior to such event if
necessary to permit the Participant to realize the benefits intended to be
conveyed with respect to the underlying Shares in the same manner as is
available to shareholders generally.

(b) Effect of
Change in Control.  As soon as possible
after the Board of Directors has approved a Change in Control Event described
in Section 1.2(h)(A) or (C), the Board shall send notice (the “Notice”) to each
Participant thereof.  Notice shall be
deemed given on the date it is personally delivered to the Participant, or on
the third business day after it is mailed, with first-class postage prepaid, to
the Participant’s last known address.

Except as
otherwise determined by the Committee at the time of grant of an Award and
specified in the applicable Award Agreement, unless the continuing or survivor
corporation, or the

 16
 

 

purchaser of
assets of the Company (the “successor”) agrees to assume the obligations of the
Company with respect to all outstanding Awards or to substitute such Awards
with equivalent awards with respect to the common stock of the successor, upon
the giving of Notice (i) each Option and Stock Appreciation Right shall become
immediately exercisable, (ii) each Restricted Stock Award (including restricted
units) shall immediately vest free of restrictions, and (iii) all Performance
Criteria with respect to any Award (including each Performance Share Award)
shall be deemed achieved at target levels and all other terms and conditions
met, and such Award shall become immediately payable to the Participant. Any
acceleration of Awards shall comply with applicable regulatory requirements,
including without limitation Section 422 of the Code.

No Awards may be
made after the Board of Directors has approved a Change in Control, unless the
Change in Control is cancelled or terminated before becoming effective, in
which event the Plan shall not terminate, and Awards not exercised while the
Change in Control was pending shall resume the status they had prior to the
announcement of the Change in Control and delivery of the Notice.

The provisions of this
subsection (b) shall not apply if the Company is the surviving entity in any
such Change in Control.

(c) Possible Early
Termination of Awards. If any Option or other right to acquire Shares or cash
under this Plan has not been exercised prior to a Change of Control event
described in Section 1.2(h)(B) or (E) approved by the Board and no provision
has been made for the survival, substitution, exchange or other settlement of
such Option or right, such Option or right shall thereupon terminate.

6.3. Effect of Termination of Employment. The
Committee shall establish in respect of each Award granted to an Eligible
Employee the effect of a termination of employment on the rights and benefits
thereunder and in so doing may make distinctions based upon the cause of
termination, e.g., retirement, early retirement, termination for cause,
disability or death. Notwithstanding any terms to the contrary in an Award
Agreement or this Plan, the Committee may decide in its complete discretion to
extend the exercise period of an Award (although not beyond the period
described in Section 2.3(b)) and to accelerate vesting with respect to some or
all of the number of Shares covered by the Award with respect to which the
Award is not then exercisable or vested.

6.4. Compliance with Laws. This Plan, the
granting and vesting of Awards under this Plan and the offer, issuance and
delivery of Shares and/or the payment of money under this Plan or under Awards
granted hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including, but not limited to, state and
federal securities laws and federal margin requirements) 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 this 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. The administration of the Plan and all determinations and
discretionary actions by the Committee shall comply with all applicable federal
and state laws, rules and regulations (including, but not limited to, the
Sarbanes-Oxley Act of 2002) and, to the extent applicable, with the Nasdaq
Marketplace Rules and other applicable listing standards.

 17
 

 

6.5. Tax Withholding.  Upon any exercise, vesting, or payment of any
Award, the Company shall have the right at its option to (i) require the
Participant (or Personal Representative or Beneficiary, as the case may be) to
pay or provide for payment of the amount of any taxes which the Company may be
required to withhold with respect to such transaction or (ii) deduct from any
amount payable in cash the amount of any taxes which the Company may be
required to withhold with respect to such cash amount. In any case where a tax
is required to be withheld in connection with the delivery of Shares under this
Plan, the Committee may grant (either at the time of the Award or thereafter)
to the Participant the right to elect, or the Committee may require (either at
the time of the Award or thereafter), pursuant to such rules and subject to
such conditions as the Committee may establish, to have the Company reduce the
number of Shares to be delivered by the appropriate number of Shares valued at
their then Fair Market Value, to satisfy the minimum withholding
obligation.  The Committee may require a
Participant to pay or  make arrangements
for payment of any applicable tax withholding as a condition to the exercise of
an Award and as a condition to the delivery of any Shares or payment of any
amount with respect to the exercise of an Award, and shall not be obligated to
deliver any Shares or make any payment with respect to exercise of an Award
until the Committee is satisfied that the Participant has done so.

6.6. Plan Amendment, Termination and Suspension

(a) Board Authorization.
The Board may, at any time, terminate or, from time to time, amend, modify or
suspend this Plan, in whole or in part. No Awards may be granted during any
suspension of this Plan or after termination of this Plan, but the Committee
shall retain jurisdiction as to Awards then outstanding in accordance with the
terms of this Plan. Any suspension will not affect the expiration of the Plan
set forth in Section 6.9.

(b) Shareholder Approval.
If any amendment would materially increase the aggregate number of Shares or
other securities that may be issued under this Plan or materially modify the
requirements as to eligibility for participation in this Plan or would
otherwise require shareholder approval to comply with any applicable federal or
state law or applicable exchange listing standard (including listing standards
of the NYSE and or Nasdaq), then to the extent then required by Rule 16b-3 to
secure benefits thereunder or to avoid liability under Section 16 of the
Exchange Act (and Rules thereunder) or required under the Code or any other
applicable law or listing standard, or deemed necessary or advisable by the
Board, such amendment shall be subject to shareholder approval.

(c) Amendments to Awards.
Without limiting any other express authority of the Committee under, but
subject to the express limits of, this Plan, the Committee by agreement or
resolution may waive conditions of or limitations on Awards that the Committee
in the prior exercise of its discretion has imposed, without the consent of the
Participant, and may make other changes to the terms and conditions of Awards
that do not affect in any manner materially adverse to the Participant his or
her rights and benefits under an Award.

(d) Limitations on
Amendments to Plan and Awards. No amendment, suspension or termination of the
Plan or change of or affecting any outstanding Award shall, without written
consent of the Participant, affect in any manner materially adverse to the
Participant any rights or benefits of the Participant or obligations of the
Company under any Award granted under this Plan prior to the effective date of
such change. Changes contemplated by Section 6.2 shall not be deemed to
constitute changes or amendments for purposes of this Section 6.6.  Notwithstanding the foregoing, the Committee
shall have the right to amend any Award without the consent of the

 18
 

 

Participant and
notwithstanding any adverse effect to the rights or benefits of the Participant
if the Committee determines that such amendment is necessary to avoid adverse
accounting consequences to the Company not anticipated at the time of the
granting of the Award.

6.7. Privileges of Stock Ownership. Except as
otherwise expressly authorized by the Committee or this Plan, a Participant
shall not be entitled to any privilege of stock ownership as to any Shares not
actually delivered to and held of record by him or her. No adjustment will be
made for dividends or other rights as a shareholder for which a record date is prior
to such date of delivery.

6.8. Effective Date of the Plan. This Plan
shall be effective as of January 12, 2006 the date of Board approval, subject
to shareholder approval within 12 months thereafter effected by the affirmative
vote of the holders of a majority of the Common Stock of the Company
represented at a shareholders meeting at which a quorum is present. If
shareholder approval for this Plan is not obtained prior to January 11, 2007,
this Plan shall have no force or effect. 
No Award granted under the Plan shall become exercisable until the Plan
such shareholder approval and all Awards granted under the Plan prior to such
shareholder approval shall be conditioned on and subject to such shareholder
approval.

6.9. Term of the Plan.  The Plan shall continue in effect until all
Shares available for issuance under the Plan have been issued and all
restrictions on such Shares have lapsed. 
Notwithstanding any language in this Plan to the contrary, no Incentive
Stock Option shall be granted under this Plan more than ten years after the
date the Plan is approved by the shareholders of the Company.  The Board of Directors may suspend or
terminate the Plan at any time except with respect to Options and Shares
subject to restrictions then outstanding under the Plan.  Termination shall not affect any outstanding
Options, any right of the Company to repurchase Shares or the forfeitability of
Shares issued under the Plan.

6.10. Governing Law; Construction; Severability

(a) Choice of Law. This
Plan, the Awards, all documents evidencing Awards and all other related
documents shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts made and performed within such
State, except as such laws may be supplanted by the laws of the United States
of America, which laws shall then govern its effect and its construction to the
extent they supplant California law.

(b) Severability. If any
provision shall be held by a court of competent jurisdiction to be invalid and
unenforceable, the remaining provisions of this Plan shall continue in effect.

(c) Plan Construction.

(i) It
is the intent of the Company that this Plan and Awards hereunder satisfy and be
interpreted in a manner that in the case of Participants who are or may be
subject to Section 16 of the Exchange Act satisfies the applicable requirements
of Rule 16b-3, so that such persons will be entitled to the benefits of Rule
16b-3 or other exemptive rules under Section 16 of the Exchange Act and will
not be subjected to avoidable liability thereunder. If any provision of this
Plan or of any Award or any prior action by the Committee would otherwise
frustrate or conflict with the intent expressed above, that provision to the
extent possible shall be interpreted and deemed amended so as to avoid such
conflict, but to the extent of any remaining irreconcilable conflict with such
intent as to such persons in the circumstances, such provision shall be deemed
void.

 19
 

 

(ii)
It is the further intent of the Company that Options or Stock Appreciation
Rights with an exercise or base price not less than Fair Market Value on the
date of grant, that are granted to or held by a Section 16 Person, shall
qualify as performance-based compensation under Section 162(m) of the Code, and
this Plan shall be interpreted consistent with such intent.

6.11. Captions Captions and headings are given
to the sections and subsections of this Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision
thereof.

6.12. Non-Exclusivity of Plan Nothing in this
Plan shall limit or be deemed to limit the authority of the Board or the
Committee to grant awards or authorize any other compensation, with or without
reference to the Common Stock, under any other plan or authority, except as
provided in Sections 6.13.

6.13. Relation to 2000 Stock Option Plan.

(a) No New Awards.
Notwithstanding any other provisions to the contrary in this Plan, no new
awards of Shares will be granted under the Company’s 2000 Stock Option Plan.

(b) Rollover of
Shares/Reissue of Awards. Any Shares remaining subject to grant and any
unexercised, unvested or undistributed portion of any expired, cancelled,
terminated or forfeited awards under the Company’s 2000 Stock Option Plan, with
respect to any such expirations, cancellations, terminations or forfeitures
which occur after the action taken at the March 2006 shareholder meeting, or
any adjournment or postponement thereof, shall be added to the number of Shares
available and shall be available for Awards under this Plan, in the same manner
and to the same extent as provided for reissue of Awards under this Plan
pursuant to Section 1.5(d).

 6.14. Substitute Awards.  Notwithstanding any other
provisions of this Plan to the contrary, where the outstanding shares of
another corporation are changed into or exchanged for shares of Common Stock of
the Company in a merger, consolidation, reorganization or similar transaction,
then, subject to the approval of the Board, Awards may be granted in exchange
for unexercised, unexpired similar equity based awards of the other
corporation, and the exercise price of the Shares subject to any Option so
granted may be fixed at a price less than one hundred percent of the Fair
Market Value of the Common Stock at the time such Award is granted if said
exercise price or grant price has been determined to be not less than the
exercise price or grant price set forth in the stock option of the other corporation,
with appropriate adjustment to reflect the exchange ratio of the shares of
stock of the other corporation into the shares of Common Stock of the Company.
The number of shares of the awards of the other corporation shall also be
adjusted in accordance with the exchange ratio so that any substituted Award
shall reflect such adjustment.

 20

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