Document:

Exhibit 10.1 Amended and Restated Plains Exploration & Production Company 2004 Stock Incentive Plan

    EXHIBIT
      10.1

    
 

    AMENDED
      AND RESTATED

     

    PLAINS
      EXPLORATION & PRODUCTION COMPANY

     

    2004
      STOCK INCENTIVE PLAN

     

    (As
      Amended May 3, 2007)

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	1.  	
              Purpose.

            

    

     

    The
      purpose of this Plan is to strengthen Plains Exploration & Production
      Company, a Delaware corporation (the “Company”), by providing an incentive to
      its employees, officers, consultants and directors and thereby encouraging
      them
      to devote their abilities and industry to the success of the Company’s business
      enterprise. It is intended that this purpose be achieved by extending to
      employees (including future employees who have received a formal written offer
      of employment), officers, consultants and directors of the Company and its
      Subsidiaries and Affiliates an added long-term incentive for high levels of
      performance and unusual efforts through the grant of Incentive Stock Options,
      Nonqualified Stock Options, SARs, Performance Units and Performance Shares,
      Share Awards, Restricted Stock and Restricted Stock Units (as each term is
      herein defined).

     

    
      	2.  	
              Definitions.

            

    

     

    For
      purposes of the Plan:

     

    2.1  “Adjusted
      Appreciation Value” means, in the event of a Change in Control, the appreciation
      in the Adjusted Fair Market Value of a Share for purposes of determining
      payments to be made to a Grantee, and shall be measured by determining the
      amount equal to the Adjusted Fair Market Value of a Share on the exercise date
      minus the exercise price of the SAR being exercised. 

     

    2.2  “Adjusted
      Fair Market Value” means, in the event of a Change in Control, the greater of
      (a) the highest price per Share paid to holders of the Shares in any transaction
      (or series of transactions) constituting or resulting in a Change in Control
      or
      (b) the highest Fair Market Value of a Share during the ninety (90) day period
      ending on the date of a Change in Control. 

     

    2.3  “Affiliate”
      means any entity, directly or indirectly, controlled by, controlling or under
      common control with the Company or any corporation or other entity acquiring,
      directly or indirectly, all or substantially all the assets and business of
      the
      Company, whether by operation of law or otherwise. 

     

    2.4  “Agreement”
      means the written agreement between the Company and an Optionee or Grantee
      evidencing the grant of an Option or Award and setting forth the terms and
      conditions thereof. 

     

    2.5  “Appreciation
      Value” means the appreciation in the Fair Market Value of a Share for purposes
      of determining payments to be made to a Grantee, and shall be measured by
      determining the amount equal to the Fair Market Value of a Share on the exercise
      date minus the exercise price of the SAR being exercised. 

     

    2.6  “Award”
      means a grant of SARs, Restricted Stock or Restricted Stock Units, a Performance
      Award, a Share Award or any or all of them. 

     

    2.7  “Board”
      means the Board of Directors of the Company. 

     

    
      
        
        

      

      
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    2.8  “Cause”
      means: 

     

    (a)  for
      purposes of Section 6.4, the commission of an act of fraud or intentional
      misrepresentation or an act of embezzlement, misappropriation or conversion
      of
      assets or opportunities of the Company or any of its Subsidiaries; and

     

    (b)  in
      the
      case of an Optionee or Grantee whose employment with the Company, Subsidiary
      or
      Affiliate is subject to the terms of an employment agreement between such
      Optionee or Grantee and the Company, Subsidiary or Affiliate, which employment
      agreement includes a definition of “Cause”, the term “Cause” as used in this
      Plan or any Agreement shall have the meaning set forth in such employment
      agreement during the period that such employment agreement remains in effect;
      and 

     

    (c)  in
      all
      other cases, (i) intentional failure to perform reasonably assigned duties,
      (ii)
      dishonesty or willful misconduct in the performance of duties, (iii) involvement
      in a transaction in connection with the performance of duties to the Company
      or
      any of its Subsidiaries or Affiliates which transaction is adverse to the
      interests of the Company or any of its Subsidiaries or Affiliates and which
      is
      engaged in for personal profit or (iv) willful violation of any law, rule or
      regulation in connection with the performance of duties (other than traffic
      violations or similar minor offenses) provided, however, that following a Change
      in Control clause (i) of this Section 2.8(c) shall not constitute “Cause.”

     

    2.9  “Change
      in Capitalization” means any increase or reduction in the number of Shares, or
      any change (including, but not limited to, in the case of a spin-off, dividend
      or other distribution in respect of Shares, a change in value) in the Shares
      or
      exchange of Shares for a different number or kind of shares or other securities
      of the Company or another corporation, by reason of a reclassification,
      recapitalization, merger, consolidation, reorganization, spin-off, split-up,
      issuance of warrants or rights or debentures, stock dividend, stock split or
      reverse stock split, extraordinary cash dividend, combination or exchange of
      shares, repurchase of shares, change in corporate structure or otherwise.

     

    2.10  A
“Change
      in Control” shall mean the occurrence of any of the following: 

     

    (a)  The
      acquisition by any “Person” (as the term person is used for purposes of Section
      13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934
      Act”)) of “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated
      under the 1934 Act) of any securities of the Company which generally entitles
      the holder thereof to vote for the election of directors of the Company (the
      “Voting Securities”) which, when added to the Voting Securities then
“Beneficially Owned” by such Person, would result in such Person either
“Beneficially Owning” fifty percent (50%) or more of the combined voting power
      of the Company’s then outstanding Voting Securities or having the ability to
      elect fifty percent (50%) or more of the Company’s directors; provided, however,
      that for purposes of this paragraph (a) of Section 2.10, a Person shall not
      be
      deemed to have made an acquisition of Voting Securities if such Person; (i)
      becomes the Beneficial Owner of more than the permitted percentage of Voting
      Securities solely as a result of open market acquisition of Voting Securities
      by
      the Company which, by reducing the number of Voting Securities outstanding,
      increases the proportional number of shares Beneficially Owned by such Person;
      (ii) is the Company or any corporation or other Person of which a majority
      of
      its voting power or its equity securities or equity interest is owned directly
      or indirectly by the Company (a “Controlled Entity”); (iii) acquires Voting
      Securities in connection with a “Non-Control Transaction” (as defined in
      paragraph (c) of this Section 2.10); or (iv) becomes the Beneficial Owner of
      more than the permitted percentage of Voting Securities as a result of a
      transaction approved by a majority of the Incumbent Board (as defined in
      paragraph (b) below); or 

     

    
      
        
        

      

      
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    (b)  The
      individuals who, as of the Effective Date, are members of the Board (the
“Incumbent Board”), cease for any reason to constitute at least a majority of
      the Board; provided, however, that if either the election of any new director
      or
      the nomination for election of any new director by the Company’s stockholders
      was approved by a vote of at least a majority of the Incumbent Board, such
      new
      director shall be considered as a member of the Incumbent Board; provided
      further, however, that no individual shall be considered a member of the
      Incumbent Board if such individual initially assumed office as a result of
      either an actual or threatened “Election Contest” (as described in Rule 14a-11
      promulgated under the 1934 Act) or other actual or threatened solicitation
      of
      proxies or consents by or on behalf of a Person other than the Board (a “Proxy
      Contest”) including by reason of any agreement intended to avoid or settle any
      Election Contest or Proxy Contest; or 

     

    (c)  The
      consummation of a merger, consolidation or reorganization involving the Company
      (a “Business Combination”), unless (i) the stockholders of the Company,
      immediately before the Business Combination, own, directly or indirectly
      immediately following the Business Combination, at least fifty percent (50%)
      of
      the combined voting power of the outstanding voting securities of the
      corporation resulting from the Business Combination (the “Surviving
      Corporation”) in substantially the same proportion as their ownership of the
      Voting Securities immediately before the Business Combination, and (ii) the
      individuals who were members of the Incumbent Board immediately prior to the
      execution of the agreement providing for the Business Combination constitute
      at
      least a majority of the members of the Board of Directors of the Surviving
      Corporation, and (iii) no Person (other than (x) the Company or any Controlled
      Entity, (y) a trustee or other fiduciary holding securities under one or more
      employee benefit plans or arrangements (or any trust forming a part thereof)
      maintained by the Company, the Surviving Corporation or any Controlled Entity,
      or (z) any Person who, immediately prior to the Business Combination, had
      Beneficial Ownership of fifty percent (50%) or more of the then outstanding
      Voting Securities) has Beneficial Ownership of fifty percent (50%) or more
      of
      the combined voting power of the Surviving Corporation’s then outstanding voting
      securities (a Business Combination described in clauses (i), (ii) and (iii)
      of
      this paragraph shall be referred to as a “Non-Control Transaction”);

     

    (d)  A
      complete liquidation or dissolution of the Company; or 

     

    (e)  The
      sale
      or other disposition of all or substantially all of the assets of the Company
      to
      any Person (other than a transfer to a Controlled Entity).

     

    Notwithstanding
      the foregoing, if Optionee’s or Grantee’s employment is terminated and Optionee
      or Grantee reasonably demonstrates that such termination (x) was at the request
      of a third party who has indicated an intention or has taken steps reasonably
      calculated to effect a Change in Control and who effectuates a Change in Control
      or (y) otherwise occurred in connection with, or in anticipation of, a Change
      in
      Control which actually occurs, then for all purposes hereof, the date of a
      Change in Control with respect to Optionee or Grantee shall mean the date
      immediately prior to the date of such termination of employment. 

     

    
      
        
        

      

      
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    A
      Change
      in Control shall not be deemed to occur solely because (A) fifty percent (50%)
      or more of the then outstanding Voting Securities is Beneficially Owned by
      (x) a
      trustee or other fiduciary holding securities under one or more employee benefit
      plans or arrangements (or any trust forming a part thereof) maintained by the
      Company or any Controlled Entity or (y) any corporation which, immediately
      prior
      to its acquisition of such interest, is owned directly or indirectly by the
      stockholders of the Company in substantially the same proportion as their
      ownership of stock in the Company immediately prior to such acquisition or
      (B)
      Plains Resources Inc. distributes to its stockholders all of the capital stock
      of the Company then held by it. 

     

    2.11  “Code”
      means the Internal Revenue Code of 1986, as amended. 

     

    2.12  “Committee”
      means a committee, as described in Section 3.1, appointed by the Board from
      time
      to time to administer the Plan and to perform the functions set forth herein.
      

     

    2.13  “Company”
      means Plains Exploration and Production Company. 

     

    2.14  “Director”
      means a director of the Company. 

     

    2.15  “Disability”
      means: (a) in the case of an Optionee or Grantee whose employment with the
      Company or a Subsidiary is subject to the terms of an employment agreement
      between such Optionee or Grantee and the Company or Subsidiary, which employment
      agreement includes a definition of “Disability”, the term “Disability” as used
      in this Plan or any Agreement shall have the meaning set forth in such
      employment agreement (b) the term “Disability” as used in the Company’s
      long-term disability plan, if any; or (c) in all other cases, the term
“Disability” as used in this Plan or any Agreement shall mean a physical or
      mental infirmity which impairs the Optionee’s or Grantee’s ability to perform
      substantially his or her duties for a period of one hundred eighty (180)
      consecutive days. 

     

    2.16  “Division”
      means any of the operating units or divisions of the Company designated as
      a
      Division by the Committee. 

     

    2.17  “Eligible
      Individual” means any of the following individuals who is designated by the
      Committee as eligible to receive Options or Awards subject to the conditions
      set
      forth herein: (a) any director, officer or employee of the Company, Subsidiary
      or Affiliate, (b) any individual to whom the Company or Subsidiary or Affiliate
      has extended a formal, written offer of employment, or (c) any consultant or
      advisor of the Company, Subsidiary or Affiliate. 

     

    2.18  “Exchange
      Act” means the Securities Exchange Act of 1934, as amended. 

     

    2.19  “Fair
      Market Value” on any date means the closing sales prices of the Shares (i) on
      the day before such date, or (ii) on such date if an Agreement so provides,
      on
      the principal national securities exchange on which such Shares are listed
      or
      admitted to trading, or, if such Shares are not so listed or admitted to
      trading, the average of the per Share closing bid price and per Share closing
      asked price on such date as quoted on the National Association of Securities
      Dealers Automated Quotation System or such other market in which such prices
      are
      regularly quoted, or, if there have been no published bid or asked quotations
      with respect to Shares on such date, the Fair Market Value shall be the value
      established by the Board in good faith and, in the case of an Incentive Stock
      Option, in accordance with Section 422 of the Code. 

     

    
      
        
        

      

      
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    2.20  “Grantee”
      means a person to whom an Award has been granted under the Plan. 

     

    2.21  “Incentive
      Stock Option” means an Option satisfying the requirements of Section 422 of the
      Code and designated by the Committee as an Incentive Stock Option. 

     

    2.22  “Nonemployee
      Director” means a director of the Company who is a “nonemployee director” within
      the meaning of Rule 16b-3 promulgated under the Exchange Act. 

     

    2.23  “Nonqualified
      Stock Option” means an Option which is not an Incentive Stock Option.

     

    2.24  “Option”
      means a Nonqualified Stock Option, an Incentive Stock Option, a Formula Option,
      or any or all of them. 

     

    2.25  “Optionee”
      means a person to whom an Option has been granted under the Plan. 

     

    2.26  “Outside
      Director” means a director of the Company who is an “outside director” within
      the meaning of Section 162(m) of the Code and the regulations promulgated
      thereunder. 

     

    2.27  “Parent”
      means any corporation which is a parent corporation (within the meaning of
      Section 424(e) of the Code) with respect to the Company. 

     

    2.28  “Performance
      Awards” means Performance Units, Performance Shares or either or both of them.

     

    2.29  “Performance-Based
      Compensation” means any Option or Award that is intended to constitute
“performance based compensation” within the meaning of Section 162(m)(4)(C) of
      the Code and the regulations promulgated thereunder. 

     

    2.30  “Performance
      Cycle” means the time period specified by the Committee at the time Performance
      Awards are granted during which the performance of the Company, or a Subsidiary
      Affiliate or Division will be measured. 

     

    2.31  “Performance
      Objectives” has the meaning set forth in Section 11. 

     

    2.32  “Performance
      Shares” means Shares issued or transferred to an Eligible Individual under
      Section 11. 

     

    
      
        
        

      

      
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    2.33  “Performance
      Units” means Performance Units granted to an Eligible Individual under Section
      11. 

     

    2.34  “Plan”
      means the Plains Exploration & Production Company 2004 Stock Incentive Plan,
      as amended and restated from time to time. 

     

    2.35  “Retained
      Distribution” means any securities or other property (other than regular cash
      dividends) distributed by the Company in respect of Restricted Stock during
      any
      Restricted Period. 

     

    2.36  “Restricted
      Period” means the period designated by the Committee during which Restricted
      Stock may not be sold, assigned, pledged or otherwise encumbered. 

     

    2.37  “Restricted
      Stock” means Shares issued or transferred to an Eligible Individual pursuant to
      Section 9. 

     

    2.38  “Restricted
      Stock Unit” means a right to receive one Share or a cash amount equal to the
      Fair Market Value of one Share or a combination thereof, as determined by the
      Committee in its sole discretion, subject to the terms of the Plan and the
      applicable Agreement. 

     

    2.39  “SAR”
      means a right to receive the Appreciation Value of a Share. 

     

    2.40  “Share
      Award” means an Award of Shares granted pursuant to Section 11. 

     

    2.41  “Shares”
      means the common stock, par value $.01 per share, of the Company and any other
      securities into which such shares are changed or for which such shares are
      exchanged. 

     

    2.42  “Subsidiary”
      means (i) except as provided in subsection (ii) below, any corporation which
      is
      a subsidiary corporation within the meaning of Section 424(f) of the Code with
      respect to the Company, and (ii) in relation to the eligibility to receive
      Options or Awards other than Incentive Stock Options and continued employment
      for purposes of Options and Awards (unless the Committee determines otherwise),
      any entity, whether or not incorporated, in which the Company directly or
      indirectly owns 50% or more of the outstanding equity or other ownership
      interests. 

     

    2.43  “Ten-Percent
      Stockholder” means an Eligible Individual, who, at the time an Incentive Stock
      Option is to be granted to him or her, owns (within the meaning of Section
      422(b)(6) of the Code) stock possessing more than ten percent (10%) of the
      total
      combined voting power of all classes of stock of the Company, or of a Parent,
      Subsidiary or Affiliate. 

     

    
      	3.  	
              Administration.

            

    

     

    3.1  The
      Plan
      shall be administered by the Committee, which shall hold meetings at such times
      as may be necessary for the proper administration of the Plan. The Committee
      shall keep minutes of its meetings. A quorum shall be a majority of the members
      of the Committee and a majority of a quorum may authorize any action. Any
      decision or determination reduced to writing and signed by all of the members
      of
      the Committee shall be as fully effective as if made by a vote at a meeting
      duly
      called and held. The Committee shall consist of one (1) or more Directors and
      may consist of the entire Board. If the Committee consists of less than the
      entire Board, then with respect to any Option or Award to an individual who
      is
      subject to Section 16 of the Exchange Act, the Committee shall consist of at
      least two (2) Directors each of whom shall be a Nonemployee Director and to
      the
      extent necessary for any award under the Plan to qualify as performance-based
      compensation for the purposes of Section 162(m) of the Code, the Committee
      shall
      consist of at least two (2) Directors each of whom shall be an Outside Director.
      For purposes of the preceding sentence, if one or more members of the Committee
      is not a Nonemployee Director and an Outside Director but recuses himself or
      herself or abstains from voting with respect to a particular action taken by
      the
      Committee, then the Committee, with respect to that action, shall be deemed
      to
      consist only of the members of the Committee who have not recused themselves
      or
      abstained from voting. Subject to applicable law, the Committee may delegate
      its
      authority under the Plan to any other person or persons. 

     

    
      
        
        

      

      
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    3.2  No
      member
      of the Committee shall be liable for any action, failure to act, determination
      or interpretation made in good faith with respect to this Plan or any
      transaction hereunder. The Company hereby agrees to indemnify each member of
      the
      Committee for all costs and expenses and, to the extent permitted by applicable
      law, any liability incurred in connection with defending against, responding
      to,
      negotiating for the settlement of or otherwise dealing with any claim, cause
      of
      action or dispute of any kind arising in connection with any actions in
      administering this Plan or in authorizing or denying authorization to any
      transaction hereunder. 

     

    3.3  Subject
      to the express terms and conditions set forth herein, the Committee shall have
      the power from time to time to: 

     

    (a)  determine
      those Eligible Individuals to whom Options shall be granted under the Plan
      and
      the number of such Options to be granted and to prescribe the terms and
      conditions (which need not be identical) of each such Option, including the
      exercise price per Share, the vesting schedule and the duration of each Option,
      and make any amendment or modification to any Option Agreement consistent with
      the terms of the Plan; 

     

    (b)  select
      those Eligible Individuals to whom Awards shall be granted under the Plan and
      to
      determine the number of Shares in respect of which each Award is granted, the
      terms and conditions (which need not be identical) of each such Award, and
      make
      any amendment or modification to any Award Agreement consistent with the terms
      of the Plan; 

     

    (c)  to
      construe and interpret the Plan and the Options and Awards granted hereunder
      and
      to establish, amend and revoke rules and regulations for the administration
      of
      the Plan, including, but not limited to, correcting any defect or supplying
      any
      omission, or reconciling any inconsistency in the Plan or in any Agreement,
      in
      the manner and to the extent it shall deem necessary or advisable, including
      so
      that the Plan and the operation of the Plan complies with Rule 16b-3 under
      the
      Exchange Act, the Code to the extent applicable and other applicable law, and
      otherwise to make the Plan fully effective. All decisions and determinations
      by
      the Committee in the exercise of this power shall be final, binding and
      conclusive upon the Company, its Subsidiaries, the Optionees and Grantees,
      and
      all other persons having any interest therein; 

     

    
      
        
        

      

      
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    (d)  to
      determine the duration and purposes for leaves of absence which may be granted
      to an Optionee or Grantee on an individual basis without constituting a
      termination of employment or service for purposes of the Plan; 

     

    (e)  to
      exercise its discretion with respect to the powers and rights granted to it
      as
      set forth in the Plan; and 

     

    (f)  generally,
      to exercise such powers and to perform such acts as are deemed necessary or
      advisable to promote the best interests of the Company with respect to the
      Plan.

     

    
      	4.  	
              Stock
                Subject to the Plan; Grant Limitations.

            

    

     

    4.1  The
      maximum number of Shares that may be made the subject of Options and Awards
      granted under the Plan is 8,400,000: provided, however, that in the aggregate,
      not more than 8,400,000 of the allotted Shares may be made the subject of
      Restricted Stock awards or Restricted Stock Units under Section 9 and 10 of
      the
      Plan respectively (other than Shares of Restricted Stock made in settlement
      of
      Performance Units pursuant to Section 11.1(b)). The maximum number of Shares
      that may be the subject of Options and Awards granted to an Eligible Individual
      in any one calendar year period may not exceed 500,000 Shares; provided,
      however, that pursuant to currently existing agreements, in the event of a
      Change in Control the maximum number of Shares that may be the subject of
      Options and Awards granted to an Eligible Individual in the year in which the
      Change in Control occurs may exceed 500,000 Shares, but may not in any event
      exceed 2,500,000 Shares. The maximum dollar amount of cash or the Fair Market
      Value of Shares that any Eligible Individual may receive in any calendar year
      in
      respect of Performance Units denominated in dollars may not exceed $1,000,000.
      The Company shall reserve for the purposes of the Plan, out of its authorized
      but unissued Shares or out of Shares held in the Company’s treasury, or partly
      out of each, such number of Shares as shall be determined by the Board.

     

    4.2  In
      connection with the grant of an Option or an Award (other than the grant of
      a
      Performance Unit denominated in dollars), the number of Shares shall be reduced
      by the number of Shares in respect of which the Option or Award is granted
      or
      denominated; provided, however, that if any Option is exercised by tendering
      Shares, either actually or by attestation, as full or partial payment of the
      exercise price, the maximum number of Shares available under Section 4.1 shall
      be increased by the number of Shares so tendered. In connection with the
      exercise of an Award of SARs, the maximum number of Shares available under
      Section 4.1 shall be increased by the number of Shares equal to the number
      of
      SARs being exercised minus the number of Shares that are issued upon such
      exercise, provided that if the number of Shares issued is greater than the
      number of SARs being exercised, the amount equal to the difference between
      those
      numbers shall be subtracted from the maximum number of Shares available under
      the Plan. 

     

    
      
        
        

      

      
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    4.3  Whenever
      any outstanding Option or Award or portion thereof expires, is canceled, is
      settled in cash (including the settlement of tax withholding obligations using
      Shares) or is otherwise terminated for any reason without having been exercised
      or payment having been made in respect of the entire Option or Award, the Shares
      allocable to the expired, canceled, settled or otherwise terminated portion
      of
      the Option or Award may again be the subject of Options or Awards granted
      hereunder. 

     

    4.4  In
      no
      event may more than 8,400,000 Shares be issued upon the exercise of Incentive
      Stock Options granted under the Plan. 

     

    
      	5.  	
              Option
                Grants for Eligible Individuals.

            

    

     

    5.1  Authority
      of Committee.
      Subject
      to the provisions of the Plan, the Committee shall have full and final authority
      to select those Eligible Individuals who will receive Options, and the terms
      and
      conditions of the grant to such Eligible Individuals shall be set forth in
      an
      Agreement. Subject to applicable law and regulations, Incentive Stock Options
      may be granted only to Eligible Individuals who are employees of the Company
      or
      any Subsidiary or Affiliate. 

     

    5.2  Exercise
      Price.
      The
      purchase price or the manner in which the exercise price is to be determined
      for
      Shares under each Option shall be determined by the Committee and set forth
      in
      the Agreement; provided, however, that the exercise price per Share under each
      Option shall not be less than 100% of the Fair Market Value of a Share on the
      date the Option is granted (110% in the case of an Incentive Stock Option
      granted to a Ten-Percent Stockholder). 

     

    5.3  Maximum
      Duration.
      Options
      granted hereunder shall be for such term as the Committee shall determine,
      provided that an Incentive Stock Option shall not be exercisable after the
      expiration of ten (10) years from the date it is granted (five (5) years in
      the
      case of an Incentive Stock Option granted to a Ten-Percent Stockholder) and
      a
      Nonqualified Stock Option shall after the expiration of ten (10) years from
      the
      date it is granted; provided, however, that unless the Committee provides
      otherwise an Option (other than an Incentive Stock Option) may, upon the death
      of the Optionee prior to the expiration of the Option, be exercised for up
      to
      one (1) year following the date of the Optionee’s death even if such period
      extends beyond ten (10) years from the date the Option is granted. The Committee
      may, subsequent to the granting of any Option, extend the term thereof, but
      in
      no event shall the term as so extended exceed the maximum term provided for
      in
      the preceding sentence. 

     

    5.4  Vesting.
      Subject
      to Section 7.4, each Option shall become exercisable in such installments (which
      need not be equal) and at such times as may be designated by the Committee
      and
      set forth in the Agreement. To the extent not exercised, installments shall
      accumulate and be exercisable, in whole or in part, at any time after becoming
      exercisable, but not later than the date the Option expires. The Committee
      may
      accelerate the exercisability of any Option or portion thereof at any time.
      

     

     

    
      
        
        

      

      
        9

        
          

        

      

       

      
        5.5  Limitations
          on Incentive Stock Options.
          The
          terms of any Incentive Stock Option granted under the Plan shall comply
          in all
          respects with the provisions of Section 422 of the Code, including but
          not
          limited to the requirement that no Incentive Stock Option shall be granted
          more
          than ten years after the effective date of the Plan. An Option shall be
          treated
          as an Incentive Stock Option only to the extent that the aggregate Fair
          Market
          Value (determined at the time the Option is granted) of the shares with
          respect
          to which all Incentive Stock Options held by an Optionee (under the Plan
          and all
          other plans of the Company, its Parent or any Subsidiary), become exercisable
          for the first time during any calendar year does not exceed $100,000. This
          limitation shall be applied by taking Options into account in the order
          in which
          they were granted. To the extent this limitation is exceeded, an Option
          shall be
          treated as a Nonqualified Stock Option regardless of its designation as
          an
          Incentive Stock Option. Should any Incentive Stock Option remain exercisable
          after three months after employment terminates for any reason other than
          Disability or death, or after one year if employment terminates due to
          Disability, the Option shall immediately be converted to a Nonqualified
          Stock
          Option. In order to obtain the benefits of an Incentive Stock Option under
          the
          Code, no sale or other disposition may be made of any shares upon exercise
          of
          such Option until the later of one year from the date of issuance of the
          shares
          acquired pursuant to the exercise of the Option, or two years from the
          grant
          date of the Option. The Company shall have no liability in the event it
          is
          determined that any Option intended to be an Incentive Stock Option fails
          to
          qualify as such, whether such failure is a result of a disqualifying disposition
          or the terms of this Plan or any governing Agreement. 

      

       

      
        
        

      

    

    
      	6.  	
              Grants
                for Nonemployee Directors and Outside Directors.
                

            

    

     

    6.1  Grant.
      In its
      discretion, the Committee may elect to grant Options (and other Awards) to
      Nonemployee Directors or Outside Directors under any terms or conditions it
      deems reasonable. 

     

    
      	7.  	
              Terms
                and Conditions Applicable to All Options.

            

    

     

    7.1  Non-Transferability.
      No
      Option shall be transferable by the Optionee otherwise than by will or by the
      laws of descent and distribution or, in the case of an Option other than an
      Incentive Stock Option, pursuant to a domestic relations order (within the
      meaning of Rule 16a-12 promulgated under the Exchange Act), and an Option shall
      be exercisable during the lifetime of such Optionee only by the Optionee or
      his
      or her guardian or legal representative. Notwithstanding the foregoing, the
      Committee may set forth in the Agreement evidencing an Option (other than an
      Incentive Stock Option) at the time of grant or thereafter, that the Option
      may
      be transferred to members of the Optionee’s immediate family, to trusts solely
      for the benefit of such immediate family members and to partnerships in which
      such family members and/or trusts are the only partners, and for purposes of
      this Plan, a transferee of an Option shall be deemed to be the Optionee. For
      this purpose, immediate family means the Optionee’s spouse, parents, children,
      stepchildren and grandchildren and the spouses of such parents, children,
      stepchildren and grandchildren. The terms of an Option shall be final, binding
      and conclusive upon the beneficiaries, executors, administrators, heirs and
      successors of the Optionee. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    7.2  Method
      of Exercise.
      The
      exercise of an Option shall be made only by a written notice delivered in person
      or by mail or telecopy to the Secretary of the Company at the Company’s
      principal executive office (or through such other notification method that
      the
      Committee may adopt), specifying the number of Shares to be exercised and,
      to
      the extent applicable, accompanied by payment therefor and otherwise in
      accordance with the Agreement pursuant to which the Option was granted. The
      exercise price for any Shares purchased pursuant to the exercise of an Option
      shall be paid, in either of the following forms (or any combination thereof):
      (a) cash or (b) the transfer, either actually or by attestation, to the Company
      of Shares that have been held by the Optionee for at least six (6) months (or
      such lesser period as may be permitted by the Committee) prior to the exercise
      of the Option, such transfer to be upon such terms and conditions as determined
      by the Committee or (c) a combination of cash and the transfer of Shares;
      provided, however, that the Committee may determine that the exercise price
      shall be paid only in cash. In addition, Options may be exercised through a
      registered broker-dealer pursuant to such cashless exercise procedures which
      are, from time to time, deemed acceptable by the Committee. Any Shares
      transferred to the Company as payment of the exercise price under an Option
      shall be valued at their Fair Market Value on the day preceding the date of
      exercise of such Option. If requested by the Committee, the Optionee shall
      deliver the Agreement evidencing the Option to the Secretary of the Company
      who
      shall endorse thereon a notation of such exercise and return such Agreement
      to
      the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued
      upon exercise of an Option and the number of Shares that may be purchased upon
      exercise shall be rounded to the nearest number of whole Shares. Notwithstanding
      the foregoing, to the extent that the Committee determines that a cashless
      exercise or other method of exercise hereunder by an Optionee would be deemed
      under applicable law, regulation or exchange requirement, to be an impermissible
      extension of credit or arrangement of credit by the Company for the benefit
      of
      an officer, or to be prohibited for any other reason, such method of exercise
      shall not be permitted with respect to such Optionee. 

     

    7.3  Rights
      of Optionees.
      No
      Optionee shall be deemed for any purpose to be the owner of any Shares subject
      to any Option unless and until (a) the Option shall have been exercised pursuant
      to the terms thereof, (b) the Company shall have issued and delivered Shares
      to
      the Optionee, and (c) the Optionee’s name shall have been entered as a
      stockholder of record on the books of the Company. Thereupon, the Optionee
      shall
      have full voting, dividend and other ownership rights with respect to such
      Shares, subject to such terms and conditions as may be set forth in the
      applicable Agreement. 

     

    7.4  Effect
      of Change in Control.
      In the
      event of a Change in Control, all Options outstanding on the date of such Change
      in Control shall become immediately and fully exercisable. In addition, to
      the
      extent set forth in an Agreement evidencing the grant of an Option, an Optionee
      will be permitted to surrender to the Company for cancellation within ninety
      (90) days after such Change in Control any Option or portion of an Option to
      the
      extent not yet exercised and the Optionee will be entitled to receive a cash
      payment in an amount equal to the excess, if any, of (a) (i) in the case of
      a
      Nonqualified Stock Option, the greater of (A) the Fair Market Value, on the
      day
      preceding the date of surrender, of the Shares subject to the Option or portion
      thereof surrendered or (B) the Adjusted Fair Market Value of the Shares subject
      to the Option or portion thereof surrendered or (ii) in the case of an Incentive
      Stock Option, the Fair Market Value, on the day preceding the date of surrender,
      of the Shares subject to the Option or portion thereof surrendered, over (b)
      the
      aggregate exercise price for such Shares under the Option or portion thereof
      surrendered. The Committee has the discretion to modify an Option to include
      the
      provision set forth in the preceding sentence. In the event that the Committee
      requires exercise of Options at the time of such Change in Control, they shall
      be cancelled effective as of the Change in Control. The Committee may require
      cancellation of Options in the Agreement evidencing the Options or by resolution
      at the time of a Change in Control. Notwithstanding any other provision of
      this
      Plan or any Agreement, the Committee may require such cancellation without
      an
      Optionee’s consent even if the cancellation is a modification of the terms of an
      Option. In the event an Optionee’s employment or service with the Company and
      its Subsidiaries terminates following a Change in Control, each Option held
      by
      the Optionee that remains outstanding after the Change in Control and that
      was
      exercisable as of the date of termination of the Optionee’s employment or
      service shall, notwithstanding any shorter period set forth in the Agreement
      evidencing the Option, remain exercisable for a period ending not before the
      earlier of (x) the first anniversary of the termination of the Optionee’s
      employment or service or (y) the expiration of the stated term of the Option.
      

     

    
      
        
        

      

      
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      	8.  	
              SARs.

            

    

     

    8.1  Grant.
      The
      Committee may in its discretion, either alone or in connection with the grant
      of
      an Option, grant SARs to Eligible Individuals in accordance with the Plan,
      the
      terms and conditions of which shall be set forth in an Agreement. If granted
      in
      connection with an Option, a SAR shall cover the same Shares covered by the
      Option (or such lesser number of Shares as the Committee may determine) and
      shall, except as provided in this Section 8, be subject to the same terms and
      conditions as the related Option. A SAR may be granted (i) at any time if
      unrelated to an Option, or (ii) if related to an Option, at the time of grant.
      

     

    8.2  SAR
      Related to an Option.

     

    (a)  Exercise.
      A SAR
      granted in connection with an Option shall be exercisable at such time or times
      and only to the extent that the related Options are exercisable, and will not
      be
      transferable except to the extent the related Option may be transferable. A
      SAR
      granted in connection with an Option shall be exercisable only if the Fair
      Market Value of a Share on the date of exercise exceeds the purchase price
      specified in the related Option Agreement. 

     

    (b)  Amount
      Payable.
      Upon
      the exercise of SARs related to an Option, the Grantee shall be entitled to
      receive an amount determined by multiplying (A) the Appreciation Value of a
      Share, by (B) the number of SARs being exercised. Notwithstanding the foregoing,
      the Committee may limit in any manner the amount payable with respect to any
      SAR
      by including such a limit in the Agreement evidencing the SAR at the time it
      is
      granted. 

     

    (c)  Treatment
      of Related Options and SARs Upon Exercise.
      Upon
      the exercise of a SAR granted in connection with an Option, the Option shall
      be
      canceled to the extent of the number of Shares as to which the SAR is exercised,
      and upon the exercise of an Option granted in connection with a SAR, the SAR
      shall be canceled to the extent of the number of Shares as to which the Option
      is exercised or surrendered. 

     

    8.3  SAR
      Unrelated to an Option.
      The
      Committee may grant SARs unrelated to Options. SARs unrelated to Options shall
      contain such terms and conditions as to exercisability (subject to Section
      8.7),
      vesting and duration as the Committee shall determine, but in no event shall
      they have a term of greater than ten (10) years. Upon exercise of a SAR
      unrelated to an Option, the Grantee shall be entitled to receive an amount
      determined by multiplying (A) the Appreciation Value of a Share, by (B) number
      of SARs being exercised. Notwithstanding the foregoing, the Committee may limit
      in any manner the amount payable with respect to any SAR by including such
      a
      limit in the Agreement evidencing the SAR at the time it is granted.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    8.4  Method
      of Exercise.
      The
      exercise of an Award of SARs shall be made only by a written notice delivered
      in
      person or by mail or telecopy to the Secretary of the Company at the Company’s
      principal executive office (or through such other notification method that
      the
      Committee may adopt), specifying the number of SARs with respect to which the
      Award is being exercised. If requested by the Committee, the Grantee shall
      deliver the Agreement evidencing the SARs being exercised and the Agreement
      evidencing any related Option to the Secretary of the Company who shall endorse
      thereon a notation of such exercise and return such Agreement to the Grantee.
      

     

    8.5  Form
      of Payment.
      Payment
      of the amount determined under Sections 8.2(b) or 8.3 shall be made solely
      in
      cash. 

     

    8.6  Effect
      of Change in Control.
      In the
      event of a Change in Control, all outstanding SARs shall become immediately
      and
      fully exercisable. In addition, to the extent set forth in an Agreement
      evidencing the grant of a SAR unrelated to an Option (including as such
      Agreement may be amended in the Committee’s sole discretion prior the Change in
      Control), a Grantee will be entitled to receive a payment from the Company
      in
      cash (provided that the SARs have any Appreciation Value), as the Committee
      shall determine, with a value equal to (A) the greater of (x) the aggregate
      Appreciation Value, on the date of exercise, of the unexercised SARS and (y)
      the
      aggregate Adjusted Fair Market Value, on the date of exercise, of the
      unexercised SARs. In the event that the Committee requires exercise of SARs
      at
      the time of such Change in Control (even if they have no Appreciation Value),
      they shall be cancelled effective as of the Change in Control. The Committee
      may
      require cancellation of SARs in the Agreement evidencing the SARs or by
      resolution at the time of a Change in Control. Notwithstanding any other
      provision of this Plan or any Agreement, the Committee may require such
      cancellation without a Grantee’s consent even if the cancellation is a
      modification of the terms of the SARs. In the event a Grantee’s employment or
      other service with the Company terminates following a Change in Control and
      any
      SARs remain outstanding after the Change in Control, each SAR held by the
      Grantee that was exercisable as of the date of termination of the Grantee’s
      employment or other service shall remain exercisable for a period ending not
      before the earlier of the first anniversary of (A) the termination of the
      Grantee’s employment or (B) the expiration of the stated term of the SAR.

     

    8.7  Non-Transferability.
      No SARs
      shall be transferable by the Grantee otherwise than by will or by the laws
      of
      descent and distribution or pursuant to a domestic relations order (within
      the
      meaning of Rule 16a-12 promulgated under the Exchange Act), and SARs shall
      be
      exercisable during the lifetime of such Grantee only by the Grantee or his
      or
      her guardian or legal representative. Notwithstanding the foregoing, the
      Committee may set forth in the Agreement evidencing an Award of SARs at the
      time
      of grant or thereafter, that the SARs may be transferred to members of the
      Grantee’s immediate family, to trusts solely for the benefit of such immediate
      family members and to partnerships in which such family members and/or trusts
      are the only partners, and for purposes of this Plan, a transferee of an Award
      of SARs shall be deemed to be the Grantee. For this purpose, immediate family
      means the Grantee’s spouse, parents, children, stepchildren and grandchildren
      and the spouses of such parents, children, stepchildren and grandchildren.
      The
      terms of an Award shall be final, binding and conclusive upon the beneficiaries,
      executors, administrators, heirs and successors of the Grantee. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
      	9.  	
              Restricted
                Stock.

            

    

     

    9.1  Grant.
      The
      Committee may grant Awards to Eligible Individuals of Restricted Stock, which
      shall be evidenced by an Agreement between the Company and the Grantee. Each
      Agreement shall contain such restrictions, terms and conditions as the Committee
      may, in its discretion, determine and (without limiting the generality of the
      foregoing) such Agreements may require that an appropriate legend be placed
      on
      Share certificates. Awards of Restricted Stock shall be subject to the terms
      and
      provisions set forth below in this Section 9. 

     

    9.2  Rights
      of Grantee.
      Shares
      of Restricted Stock granted pursuant to an Award hereunder shall be issued
      in
      the name of the Grantee as soon as reasonably practicable after the Award is
      granted provided that the Grantee has executed an Agreement evidencing the
      Award, the appropriate blank stock powers and, in the discretion of the
      Committee, an escrow agreement and any other documents which the Committee
      may
      require as a condition to the issuance of such Shares. If a Grantee shall fail
      to execute the Agreement evidencing a Restricted Stock Award, or any documents
      which the Committee may require within the time period prescribed by the
      Committee at the time the Award is granted, the Award shall be null and void.
      At
      the discretion of the Committee, Shares issued in connection with a Restricted
      Stock Award shall be deposited together with the stock powers with an escrow
      agent (which may be the Company) designated by the Committee. Unless the
      Committee determines otherwise and as set forth in the Agreement, upon delivery
      of the Shares to the escrow agent, the Grantee shall have all of the rights
      of a
      stockholder with respect to such Shares, including the right to vote the Shares
      and to receive all dividends or other distributions paid or made with respect
      to
      the Shares (other than Retained Distributions). The Company shall retain custody
      of all Retained Distributions made or declared with respect to the Restricted
      Stock and such Retained Distributions shall be subject to the same restrictions
      on terms and conditions as are applicable to the Restricted Stock. 

     

    9.3  Non-transferability.
      Until
      all restrictions upon the Shares of Restricted Stock awarded to a Grantee shall
      have lapsed in the manner set forth in Section 9.4, such Shares and Retained
      Distribution shall not be sold, transferred or otherwise disposed of and shall
      not be pledged or otherwise hypothecated. 

     

    9.4  Lapse
      of Restrictions.

     

    (a)  Generally.
      Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse
      at
      such time or times and on such terms and conditions as the Committee may
      determine (the “Restricted Period”). The Agreement evidencing the Award shall
      set forth any such restrictions. 

     

    (b)  Effect
      of Change in Control.
      Unless
      the Committee shall determine otherwise at the time of the grant of an Award
      of
      Restricted Stock, the restrictions upon Shares of Restricted Stock shall lapse
      upon a Change in Control. The Agreement evidencing the Award shall set forth
      any
      such provisions. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    9.5  Treatment
      of Dividends.
      At the
      time an Award of Shares of Restricted Stock is granted, the Committee may,
      in
      its discretion, determine that the payment to the Grantee of dividends, or
      a
      specified portion thereof, declared or paid on such Shares by the Company shall
      be (a) deferred until the lapsing of the restrictions imposed upon such Shares
      and (b) held by the Company for the account of the Grantee until such time.
      In
      the event that dividends are to be deferred, the Committee shall determine
      whether such dividends are to be reinvested in Shares (which shall be held
      as
      additional Shares of Restricted Stock) or held in cash. If deferred dividends
      are to be held in cash, there may be credited at the end of each year (or
      portion thereof) interest on the amount of the account at the beginning of
      the
      year at a rate per annum as the Committee, in its discretion, may determine.
      Payment of deferred dividends in respect of Shares of Restricted Stock (whether
      held in cash or as additional Shares of Restricted Stock), together with
      interest accrued thereon, if any, shall be made upon the lapsing of restrictions
      imposed on the Shares in respect of which the deferred dividends were paid,
      and
      any dividends deferred (together with any interest accrued thereon) in respect
      of any Shares of Restricted Stock shall be forfeited upon the forfeiture of
      such
      Shares. 

     

    9.6  Delivery
      of Shares.
      Upon
      the lapse of the restrictions on Shares of Restricted Stock, the Committee
      shall
      cause a stock certificate to be delivered to the Grantee with respect to such
      Shares, free of all restrictions hereunder. 

     

    
      	10.  	
              Restricted
                Stock Units.

            

    

     

    10.1  Grant.
      The
      Committee may grant Awards of Restricted Stock Units to Eligible Individuals,
      which shall be evidenced by an Agreement between the Company and the Grantee.
      Each Agreement shall contain such restrictions, terms and conditions as the
      Committee may, in its discretion, determine, subject to the terms and provisions
      set forth below in this Section 10. 

     

    10.2  Rights
      of Grantees.
      Until
      all restrictions upon the Restricted Stock Units awarded to a Grantee shall
      have
      lapsed in the manner set forth in Section 10.5, the Grantee shall not be a
      shareholder of the Company, nor have any of the rights or privileges of a
      shareholder of the Company, including, without limitation, rights to receive
      dividends and voting rights. 

     

    10.3  Restricted
      Stock Unit Account.
      The
      Company shall establish and maintain a separate account (“Restricted Stock Unit
      Account”) for each Grantee who has received a grant of Restricted Stock Units,
      and such account shall be credited for the number of Restricted Stock Units
      granted to such Grantee. Unless otherwise provided in an applicable Restricted
      Stock Unit Agreement, a Grantee’s Restricted Stock Unit Account shall be
      credited for any securities or other property (including regular cash dividends)
      distributed by the Company in respect of its Shares. Any such property shall
      be
      subject to the same vesting schedule as the Restricted Stock Units to which
      they
      relate. 

     

    10.4  Non-transferability.
      Until
      all restrictions upon the Restricted Stock Units awarded to a Grantee shall
      have
      lapsed in the manner set forth in Section 10.5, such Restricted Stock Units
      and
      any related securities, cash dividends or other property credited to a
      Restricted Stock Unit Account shall not be sold, transferred or otherwise
      disposed of and shall not be pledged or otherwise hypothecated. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    10.5  Vesting.

     

    (a)  Generally.
      Restricted Stock Units awarded hereunder and any related securities, cash
      dividends or other property credited to the Restricted Stock Unit Account shall
      vest at such time or times and on such terms and conditions as the Committee
      may
      determine. The Agreement evidencing the Award of Restricted Stock Units shall
      set forth any such terms and conditions. 

     

    (b)  Effect
      of Change in Control.
      Unless
      the Committee shall determine otherwise at the time of the grant of an Award
      of
      Restricted Stock Units, the Restricted Stock Units and any related securities,
      cash dividends or other property credited to the Restricted Stock Unit Account
      shall vest upon a Change in Control. The Agreement evidencing the Award of
      Restricted Stock Units shall set forth any such provisions. 

     

    10.6  Payment
      or Delivery of Shares and Other Property.
      As soon
      as practicable after each vesting date of an Award of Restricted Stock Units,
      payment shall be made in Shares or in cash or in a combination thereof (based
      upon the Fair Market Value of the Shares on the day all restrictions lapse),
      as
      determined by the Committee in its sole discretion. If payment is made in
      Shares, the Committee shall cause a stock certificate to be delivered to the
      Grantee with respect to such Shares free of all restrictions hereunder. Any
      securities, cash dividends or other property credited to a Restricted Stock
      Unit
      Account other than Restricted Stock Units shall be paid in kind, or, in the
      discretion of the Committee, in cash. 

     

    
      	11.  	
              Performance
                Awards.

            

    

     

    11.1  Performance
      Units.
      The
      Committee, in its discretion, may grant Awards of Performance Units to Eligible
      Individuals, the terms and conditions of which shall be set forth in an
      Agreement between the Company and the Grantee. Performance Units may be
      denominated in Shares or a specified dollar amount and, contingent upon the
      attainment of specified Performance Objectives within the Performance Cycle,
      represent the right to receive payment as provided in Section 11.3(c) of (i)
      in
      the case of Share-denominated Performance Units, the Fair Market Value of a
      Share on the date the Performance Unit was granted, the date the Performance
      Unit became vested or any other date specified by the Committee, (ii) in the
      case of dollar-denominated Performance Units, the specified dollar amount or
      (iii) a percentage (which may be more than 100%) of the amount described in
      clause (i) or (ii) depending on the level of Performance Objective attainment;
      provided, however, that, the Committee may at the time a Performance Unit is
      granted specify a maximum amount payable in respect of a vested Performance
      Unit. Each Agreement shall specify the number of Performance Units to which
      it
      relates, the Performance Objectives which must be satisfied in order for the
      Performance Units to vest and the Performance Cycle within which such
      Performance Objectives must be satisfied. 

     

    (a)  Vesting
      and Forfeiture.
      Subject
      to Sections 11.3(c) and 11.4, a Grantee shall become vested with respect to
      the
      Performance Units to the extent that the Performance Objectives set forth in
      the
      Agreement are satisfied for the Performance Cycle. 

     

    (b)  Payment
      of Awards.
      Subject
      to Section 11.3(c), payment to Grantees in respect of vested Performance Units
      shall be made as soon as practicable after the last day of the Performance
      Cycle
      to which such Award relates unless the Agreement evidencing the Award provides
      for the deferral of payment, in which event the terms and conditions of the
      deferral shall be set forth in the Agreement. Subject to Section 11.4, such
      payments may be made entirely in Shares valued at their Fair Market Value,
      entirely in cash, or in such combination of Shares and cash as the Committee
      in
      its discretion shall determine at any time prior to such payment; provided,
      however, that if the Committee in its discretion determines to make such payment
      entirely or partially in Shares of Restricted Stock, the Committee must
      determine the extent to which such payment will be in Shares of Restricted
      Stock
      and the terms of such Restricted Stock at the time the Award is granted.

     

    
      
        
        

      

      
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    11.2  Performance
      Shares.
      The
      Committee, in its discretion, may grant Awards of Performance Shares to Eligible
      Individuals, the terms and conditions of which shall be set forth in an
      Agreement between the Company and the Grantee. Each Agreement may require that
      an appropriate legend be placed on Share certificates. Awards of Performance
      Shares shall be subject to the following terms and provisions: 

     

    (a)  Rights
      of Grantee.
      The
      Committee shall provide at the time an Award of Performance Shares is made
      the
      time or times at which the actual Shares represented by such Award shall be
      issued in the name of the Grantee; provided, however, that no Performance Shares
      shall be issued until the Grantee has executed an Agreement evidencing the
      Award, the appropriate blank stock powers and, in the discretion of the
      Committee, an escrow agreement and any other documents which the Committee
      may
      require as a condition to the issuance of such Performance Shares. If a Grantee
      shall fail to execute the Agreement evidencing an Award of Performance Shares,
      the appropriate blank stock powers and, in the discretion of the Committee,
      an
      escrow agreement and any other documents which the Committee may require within
      the time period prescribed by the Committee at the time the Award is granted,
      the Award shall be null and void. At the discretion of the Committee, Shares
      issued in connection with an Award of Performance Shares shall be deposited
      together with the stock powers with an escrow agent (which may be the Company)
      designated by the Committee. Except as restricted by the terms of the Agreement,
      upon delivery of the Shares to the escrow agent, the Grantee shall have, in
      the
      discretion of the Committee, all of the rights of a stockholder with respect
      to
      such Shares, including the right to vote the Shares and to receive all dividends
      or other distributions paid or made with respect to the Shares. 

     

    (b)  Non-transferability.
      Until
      any restrictions upon the Performance Shares awarded to a Grantee shall have
      lapsed in the manner set forth in Sections 11.2(c) or 11.4, such Performance
      Shares shall not be sold, transferred or otherwise disposed of and shall not
      be
      pledged or otherwise hypothecated, nor shall they be delivered to the Grantee.
      The Committee may also impose such other restrictions and conditions on the
      Performance Shares, if any, as it deems appropriate. 

     

    (c)  Lapse
      of Restrictions.
      Subject
      to Sections 11.3(c) and 11.4, restrictions upon Performance Shares awarded
      hereunder shall lapse and such Performance Shares shall become vested at such
      time or times and on such terms, conditions and satisfaction of Performance
      Objectives as the Committee may, in its discretion, determine at the time an
      Award is granted. 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (d)  Treatment
      of Dividends.
      At the
      time the Award of Performance Shares is granted, the Committee may, in its
      discretion, determine that the payment to the Grantee of dividends, or a
      specified portion thereof, declared or paid on Shares represented by such Award
      which have been issued by the Company to the Grantee shall be (i) deferred
      until
      the lapsing of the restrictions imposed upon such Performance Shares and (ii)
      held by the Company for the account of the Grantee until such time. In the
      event
      that dividends are to be deferred, the Committee shall determine whether such
      dividends are to be reinvested in shares of Stock (which shall be held as
      additional Performance Shares) or held in cash. If deferred dividends are to
      be
      held in cash, there may be credited at the end of each year (or portion thereof)
      interest on the amount of the account at the beginning of the year at a rate
      per
      annum as the Committee, in its discretion, may determine. Payment of deferred
      dividends in respect of Performance Shares (whether held in cash or in
      additional Performance Shares), together with interest accrued thereon, if
      any,
      shall be made upon the lapsing of restrictions imposed on the Performance Shares
      in respect of which the deferred dividends were paid, and any dividends deferred
      (together with any interest accrued thereon) in respect of any Performance
      Shares shall be forfeited upon the forfeiture of such Performance Shares.

     

    (e)  Delivery
      of Shares.
      Upon
      the lapse of the restrictions on Performance Shares awarded hereunder, the
      Committee shall cause a stock certificate to be delivered to the Grantee with
      respect to such Shares, free of all restrictions hereunder. 

     

    11.3  Performance
      Objectives.

     

    (a)  Establishment.
      Performance Objectives for Performance Awards may be expressed in terms of
      (i)
      revenue, (ii) net income, (iii) operating income; (iv) earnings per Share,
      (v)
      Share price, (vi) pre-tax profits, (vii) net earnings, (viii) return on equity
      or assets, (ix) sales, (x) market share, (xi) total Shareholder return, (xii)
      total Shareholder return relative to peers or (xiii) any combination of the
      foregoing. Performance Objectives may be in respect of the performance of the
      Company, any of its Subsidiaries or Affiliates, any of its Divisions or segments
      or any combination thereof. Performance Objectives may be absolute or relative
      (to prior performance of the Company or to the performance of one or more other
      entities or external indices) and may be expressed in terms of a progression
      within a specified range. The Performance Objectives with respect to a
      Performance Cycle shall be established in writing by the Committee by the
      earlier of (x) the date on which a quarter of the Performance Cycle has elapsed
      or (y) the date which is ninety (90) days after the commencement of the
      Performance Cycle, and in any event while the performance relating to the
      Performance Objectives remain substantially uncertain. 

     

    (b)  Effect
      of Certain Events.
      At the
      time of the granting of a Performance Award, or at any time thereafter, in
      either case to the extent permitted under Section 162(m) of the Code and the
      regulations thereunder without adversely affecting the treatment of the
      Performance Award as Performance-Based Compensation, the Committee may provide
      for the manner in which performance will be measured against the Performance
      Objectives (or may adjust the Performance Objectives), include or exclude items
      to measure specific objectives, such as losses from discontinued operations,
      extraordinary, unusual or nonrecurring gains and losses, the cumulative effect
      of accounting changes, acquisitions or divestitures or other corporate
      transactions, core process redesigns, structural changes/outsourcing, and
      foreign exchange impacts. 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (c)  Determination
      of Performance.
      Prior
      to the vesting, payment, settlement or lapsing of any restrictions with respect
      to any Performance Award that is intended to constitute Performance-Based
      Compensation made to a Grantee who is subject to Section 162(m) of the Code,
      the
      Committee shall certify in writing that the applicable Performance Objectives
      have been satisfied to the extent necessary for such Award to qualify as
      Performance Based Compensation. 

     

    11.4  Effect
      of Change in Control.
      In the
      event of a Change in Control, unless otherwise determined by the Committee
      and
      set forth in the Agreement evidencing the Award: 

     

    (a)  With
      respect to Performance Units, the Grantee shall (i) become vested in all
      outstanding of the Performance Units as if all Performance Objectives had been
      satisfied at the maximum level and (ii) be entitled to receive in respect of
      all
      Performance Units which become vested as a result of a Change in Control a
      cash
      payment within ten (10) days after such Change in Control. 

     

    (b)  With
      respect to Performance Shares, all restrictions shall lapse immediately on
      all
      outstanding Performance Shares as if all Performance Objectives had been
      satisfied at the maximum level. 

     

    (c)  The
      Agreements evidencing Performance Shares and Performance Units shall provide
      for
      the treatment of such Awards (or portions thereof), if any, which do not become
      vested as the result of a Change in Control, including, but not limited to,
      provisions for the adjustment of applicable Performance Objectives.

     

    11.5  Non-transferability.
      Until
      the vesting of Performance Units or the lapsing of any restrictions on
      Performance Shares, as the case may be, such Performance Units or Performance
      Shares shall not be sold, transferred or otherwise disposed of and shall not
      be
      pledged or otherwise hypothecated. 

     

    
      	12.  	
              Other
                Share Based Awards.

            

    

     

    The
      Committee may grant a Share Award to any Eligible Individual on such terms
      and
      conditions as the Committee may determine in its sole discretion. Share Awards
      may be made as additional compensation for services rendered by the Eligible
      Individual or may be in lieu of cash or other compensation to which the Eligible
      Individual is entitled from the Company. 

     

    
      	13.  	
              Effect
                of a Termination of Employment.

            

    

     

    Unless
      set forth in this Plan, the Agreement evidencing the grant of each Option and
      each Award shall set forth the terms and conditions applicable to such Option
      or
      Award upon a termination or change in the status of the employment or other
      service of the Optionee or Grantee by the Company, or a Subsidiary, Affiliate
      or
      Division (including a termination or change by reason of the sale of a
      Subsidiary, Affiliate or Division), which shall be as the Committee may, in
      its
      discretion, determine at the time the Option or Award is granted or thereafter.
      Notwithstanding the foregoing, if the terms of any employment agreement require
      that Options or Awards granted to an individual receive a specific treatment
      upon termination of employment, such terms shall be deemed to have been included
      in the Optionee’s or Grantee’s Agreement evidencing the Option or Award as of
      the date of grant of such Option or Award provided that such terms do not
      conflict with any of the terms of the Plan. 

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
      	14.  	
              Adjustment
                Upon Changes in Capitalization.

            

    

     

    (a)  In
      the
      event of a Change in Capitalization, the aggregate number and class of
      securities available under the Plan and issued pursuant to any outstanding
      Options or Awards shall be equitably adjusted by the Committee as necessary
      to
      ensure that after a Change in Capitalization the shares subject to the Plan
      and
      each Participant’s proportionate interest shall be maintained substantially as
      before the occurrence of such event. Subject to any required action by the
      Board
      or the stockholders, the Committee shall, in such manner as it may deem
      equitable, adjust (i) the number and type of shares of common stock of the
      Company or any Affiliate with respect to which Options or Awards may be granted
      under the Plan, (ii) the maximum number of shares that may be covered by Options
      or Awards granted under the Plan during any period, (iii) the maximum number
      of
      shares that may be covered by Options or Awards to any single individual during
      any calendar year, (iv) the number of shares subject to outstanding Options
      or
      Awards, and (v) the grant or exercise price with respect to an Option or Award.
      Such adjustment in an outstanding Option shall be made (i) without change
      in the total price applicable to the Option or any unexercised portion of the
      Option (except for any change in the aggregate price resulting from rounding-off
      of share quantities or prices) and (ii) with any necessary corresponding
      adjustment in exercise price per share; provided,
      however, the Committee shall not take any action otherwise authorized under
      this
      Section 14(a) to the extent that such action would materially reduce the
      benefit or result in adverse tax consequences to the Participant without the
      consent of the Participant. The
      Committee’s determinations shall be final, binding and conclusive with respect
      to the Company and all other interested persons. 

     

    (b)  Any
      such
      adjustment in the Shares or other stock or securities subject to: (i)
      outstanding Options or Awards that are intended to qualify as Performance-Based
      Compensation shall be made in such a manner as not to adversely affect the
      treatment of the Options or Awards as Performance-Based Compensation, or (ii)
      outstanding Incentive Stock Options (including any adjustments in the exercise
      price) shall be made, to the extent possible, in such manner as not to
      constitute a modification as defined by Section 424(h)(3) of the Code and as
      permitted by Sections 422 and 424 of the Code. 

     

    (c)  If,
      by
      reason of a Change in Capitalization, a Grantee of an Award shall be entitled
      to, or an Optionee shall be entitled to exercise an Option with respect to,
      new,
      additional or different shares of stock or securities of the Company or any
      other corporation, such new, additional or different shares shall thereupon
      be
      subject to all of the conditions, restrictions and performance criteria which
      were applicable to the Shares subject to the Award or Option, as the case may
      be, prior to such Change in Capitalization. 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
      	15.  	
              Effect
                of Certain Transactions.

            

    

     

    Subject
      to Sections 7.4, 8.7, 9.4(b), 10.5(b) and 11.4 or as otherwise provided in
      an
      Agreement, in the event of (a) the liquidation or dissolution of the Company
      or
      (b) a merger or consolidation of the Company (a “Transaction”), the Plan and the
      Options and Awards issued hereunder shall continue in effect in accordance
      with
      their respective terms, except that following a Transaction either (i) each
      outstanding Option or Award shall be treated as provided for in the agreement
      entered into in connection with the Transaction or (ii) if not so provided
      in
      such agreement, each Optionee and Grantee shall be entitled to receive in
      respect of each Share subject to any outstanding Options or Awards, as the
      case
      may be, upon exercise of any Option or payment or transfer in respect of any
      Award, the same number and kind of stock, securities, cash, property or other
      consideration that each holder of a Share was entitled to receive in the
      Transaction in respect of a Share; provided, however, that such stock,
      securities, cash, property, or other consideration shall remain subject to
      all
      of the conditions, restrictions and performance criteria which were applicable
      to the Options and Awards prior to such Transaction. The treatment of any Option
      or Award as provided in this Section 15 shall be conclusively presumed to be
      appropriate for purposes of Section 11. 

     

    
      	16.  	
              Interpretation.

            

    

     

    Following
      the required registration of any equity security of the Company pursuant to
      Section 12 of the Exchange Act: 

     

    (a)  The
      Plan
      is intended to comply with Rule 16b-3 promulgated under the Exchange Act and
      the
      Committee shall interpret and administer the provisions of the Plan or any
      Agreement in a manner consistent therewith. Any provisions inconsistent with
      such Rule shall be inoperative and shall not affect the validity of the Plan.
      

     

    (b)  Unless
      otherwise expressly stated in the relevant Agreement, each Option, and
      Performance Award granted under the Plan is intended to be Performance-Based
      Compensation. The Committee shall not be entitled to exercise any discretion
      otherwise authorized hereunder with respect to such Options or Awards if the
      ability to exercise such discretion or the exercise of such discretion itself
      would cause the compensation attributable to such Options or Awards to fail
      to
      qualify as Performance-Based Compensation. 

     

    
      	17.  	
              Termination
                and Amendment of the Plan or Modification of Options and
                Awards.

            

    

     

    The
      Plan
      shall terminate on the day preceding the tenth anniversary of the date of its
      adoption by the Board and no Option or Award may be granted thereafter. The
      Board may sooner terminate the Plan and the Board may at any time and from
      time
      to time amend, modify or suspend the Plan or any Agreement hereunder; provided,
      however, that: 

     

    (a)  no
      such
      amendment, modification, suspension or termination shall: (i) impair or
      adversely alter any Options or Awards theretofore granted under the Plan, except
      with the consent of the Optionee or Grantee (unless expressly provided for
      and
      only to the extent provided for in Sections 7.4, 8.7, 14(b)(ii), or 15, (ii)
      deprive any Optionee or Grantee of any Shares which he or she may have acquired
      through or as a result of the Plan, or (iii) constitute a repricing of any
      Option or substitute a new Option for a previous Option which substitution
      would
      constitute a repricing, and 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (b)  to
      the
      extent necessary under any applicable law, regulation or exchange requirement,
      no amendment shall be effective unless approved by the stockholders of the
      Company in accordance with applicable law, regulation or exchange requirement.
      

     

    
      	18.  	
              Non-Exclusivity
                of the Plan.

            

    

     

    The
      adoption of the Plan by the Board shall not be construed as amending, modifying
      or rescinding any previously approved incentive arrangement or as creating
      any
      limitations on the power of the Board to adopt such other incentive arrangements
      as it may deem desirable, including, without limitation, the granting of stock
      options otherwise than under the Plan, and such arrangements may be either
      applicable generally or only in specific cases. 

     

    
      	19.  	
              Limitation
                of Liability.

            

    

     

    As
      illustrative of the limitations of liability of the Company, but not intended
      to
      be exhaustive thereof, nothing in the Plan shall be construed to: 

     

    (a)  give
      any
      person any right to be granted an Option or Award other than at the sole
      discretion of the Committee; 

     

    (b)  give
      any
      person any rights whatsoever with respect to Shares except as specifically
      provided in the Plan; 

     

    (c)  limit
      in
      any way the right of the Company or any Subsidiary or Affiliate to terminate
      the
      employment of any person at any time; or 

     

    (d)  be
      evidence of any agreement or understanding, expressed or implied, that the
      Company will employ any person at any particular rate of compensation or for
      any
      particular period of time. 

     

    
      	20.  	
              Regulations
                and Other Approvals; Governing Law.

            

    

     

    20.1  Except
      as
      to matters of federal law, the Plan and the rights of all persons claiming
      hereunder shall be construed and determined in accordance with the laws of
      the
      State of Delaware without giving effect to conflicts of laws principles thereof.
      

     

    20.2  The
      obligation of the Company to sell or deliver Shares with respect to Options
      and
      Awards granted under the Plan shall be subject to all applicable laws, rules
      and
      regulations, including all applicable federal and state securities laws, and
      the
      obtaining of all such approvals by governmental agencies as may be deemed
      necessary or appropriate by the Committee. 

     

    20.3  The
      Board
      may make such changes as may be necessary or appropriate to comply with the
      rules and regulations of any government authority, or to obtain for Eligible
      Individuals granted Incentive Stock Options the tax benefits under the
      applicable provisions of the Code and regulations promulgated thereunder.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    20.4  Each
      Option and Award is subject to the requirement that, if at any time the
      Committee determines, in its discretion, that the listing, registration or
      qualification of Shares issuable pursuant to the Plan is required by any
      securities exchange or under any state or federal law, or the consent or
      approval of any governmental regulatory body is necessary or desirable as a
      condition of, or in connection with, the grant of an Option or Award or the
      issuance of Shares, no Options or Awards shall be granted or payment made or
      Shares issued, in whole or in part, unless listing, registration, qualification,
      consent or approval has been effected or obtained free of any conditions as
      acceptable to the Committee. 

     

    20.5  Notwithstanding
      anything contained in the Plan or any Agreement to the contrary, in the event
      that the disposition of Shares acquired pursuant to the Plan is not covered
      by a
      then current registration statement under the Securities Act of 1933, as amended
      (the “Securities Act”), and is not otherwise exempt from such registration, such
      Shares shall be restricted against transfer to the extent required by the
      Securities Act and Rule 144 or other regulations thereunder. The Committee
      may
      require any individual receiving Shares pursuant to an Option or Award granted
      under the Plan, as a condition precedent to receipt of such Shares, to represent
      and warrant to the Company in writing that the Shares acquired by such
      individual are acquired without a view to any distribution thereof and will
      not
      be sold or transferred other than pursuant to an effective registration thereof
      under said Act or pursuant to an exemption applicable under the Securities
      Act
      or the rules and regulations promulgated thereunder. The certificates evidencing
      any of such Shares shall be appropriately amended or have an appropriate legend
      placed thereon to reflect their status as restricted securities as aforesaid.
      

     

    
      	21.  	
              Miscellaneous.

            

    

     

    21.1  Multiple
      Agreements.
      The
      terms of each Option or Award may differ from other Options or Awards granted
      under the Plan at the same time, or at some other time. The Committee may also
      grant more than one Option or Award to a given Eligible Individual during the
      term of the Plan, either in addition to, or in substitution for, one or more
      Options or Awards previously granted to that Eligible Individual unless such
      substitution would constitute a repricing. 

     

    21.2  Withholding
      of Taxes.

     

    (a)  At
      such
      times as an Optionee or Grantee recognizes taxable income in connection with
      the
      receipt of Shares or cash hereunder (a “Taxable Event”), the Optionee or Grantee
      shall pay to the Company an amount equal to the federal, state and local income
      taxes and other amounts as may be required by law to be withheld by the Company
      in connection with the Taxable Event (the “Withholding Taxes”) prior to the
      issuance, or release from escrow, of such Shares or the payment of such cash.
      The Company shall have the right to deduct from any payment of cash to an
      Optionee or Grantee an amount equal to the Withholding Taxes in satisfaction
      of
      the obligation to pay Withholding Taxes. The Committee may provide in the
      Agreement at the time of grant, or at any time thereafter, that the Optionee
      or
      Grantee, in satisfaction of the obligation to pay Withholding Taxes to the
      Company, may elect to have withheld a portion of the Shares then issuable to
      him
      or her having an aggregate Fair Market Value equal to the Withholding Taxes.
      

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (b)  If
      an
      Optionee makes a disposition, within the meaning of Section 424(c) of the Code
      and the regulations promulgated thereunder, of any Share or Shares issued to
      such Optionee pursuant to the exercise of an Incentive Stock Option within
      the
      two-year period commencing on the day after the date of the grant or within
      the
      one-year period commencing on the day after the date of transfer of such Share
      or Shares to the Optionee pursuant to such exercise, the Optionee shall, within
      ten (10) days of such disposition, notify the Company thereof, by delivery
      of
      written notice to the Company at its principal executive office. 

     

    21.3  Substitute
      Options and Awards.
      The
      Committee shall have the authority to substitute Options and Awards under this
      Plan for any options and awards that are transferred to the Company or an
      Affiliate whether such transfer occurs due to a Change in Control or any other
      corporate action or transaction that the Committee deems appropriate for such
      substitution. The number of Shares covered by such substitute Options or Awards
      shall not reduce the aggregate number of Shares available for grant under the
      Plan; and shall not be subject to the other limitations set forth in Section
      4.1
      unless required by applicable law. The date of grant of any replacement Option
      or Award shall relate back to the initial option or award being assumed or
      replaced, and service with the acquired business shall constitute service with
      the Company or its Affiliates the date it was adopted. 

     

    21.4  Section
      409A Compliance.
      To the
      extent applicable, it is intended that this Plan and any Awards granted
      hereunder comply with the requirements of Section 409A of the Code and any
      related regulations or other guidance promulgated with respect to that section
      by the U.S. Department of the Treasury or the Internal Revenue Service. Any
      provision that would cause the Plan or any Award granted under the Plan to
      fail
      to satisfy Section 409A of the Code will have no force or effect until amended
      to comply with Section 409A of the Code, which amendment may be retroactive
      to
      the extent permitted by Section 409A of the Code.

     

    21.5  Effective
      Date.
      The
      effective date of this Plan shall be the date it was adopted by the Board;
      provided, however, that any Options or Awards granted hereunder prior to the
      date that the Company’s stockholders approve the Plan shall be contingent on
      such approval, and no Incentive Stock Options may be granted hereunder unless
      approval by the Company’s Stockholders occurs within twelve (12) months of
      adoption of the Plan by the Board. Unless the Company determines to submit
      Section 11 of the Plan and the definition of Performance Objectives to the
      Company’s stockholders at the first stockholder meeting that occurs in the fifth
      year following the year in which the Plan was last approved by stockholders
      (or
      any earlier meeting designated by the Board), in accordance with the
      requirements of Section 162(m) of the Code, and such stockholder approval is
      obtained, then no further Performance Awards may be made to Grantees who are
      subject to Section 162(m) of the Code under Section 11 after the date of such
      annual meeting, but the remainder of the Plan will continue in
      effect.

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        24exv10w14

 

Exhibit 10.14

March 29, 2007

Richard M. Ruedy

3062 Dow Drive

San Jose, CA 95136

Re: Offer Letter and Employment Term

Dear Ric:

We are all enthusiastic about the possibility of your joining the Cardica executive team. We are
confident that you will contribute in significant ways to the growth of Cardica, Inc. (the
“Company”). On behalf of the Company, I am pleased to offer you the position of Vice President,
Regulatory, Clinical & Quality Affairs. Your employment terms and other matters are described
below. You will primarily be responsible for all of Cardica’s clinical trials, regulatory
submissions and requirements and managing the quality system. You will report directly to me,
Bernard Hausen, President and CEO. The Company may change your position and responsibilities from
time to time as it deems necessary.

Your base rate of pay will be Sixteen Thousand Six Hundred Sixty Seven Dollars ($16,667) per month
less payroll deductions and all required withholdings. You will also be eligible to receive an
annual bonus at the end of Cardica’s fiscal year of up to 20% of your base salary (or up to
$40,000) less payroll deductions and all required withholdings based on Cardica meeting key goals
and your achievement of pre-determined objectives. You will be paid semi-monthly and will be
eligible for the following Company benefits: health insurance, life insurance, short and long term
disability, employee assistance plan (EAP), flexible spending plan (FSA), 401(k) plan, health club,
paid time off (PTO) and holidays. Your PTO will begin accruing at the rate of 15 days per year.

Upon execution of this offer letter and the Employee Proprietary Information and Inventions
Agreement in the form attached hereto as Exhibit A, and the commencement of your employment with
the Company, it will be recommended to the Board of Directors of the Company that you be granted a
stock option for Sixty Thousand (60,000) shares of the Company’s Common Stock (the “Option”), at an
exercise price equal to the fair market value of Common Stock at the time of grant. The Sixty
Thousand (60,000) shares shall be vested as follows: 25% of the shares shall vest on the one year
anniversary, provided you are still employed by the Company as of such date; thereafter, 1/48 of
the shares shall vest monthly until either (i) you cease to provide services to the Company for any
reason, or (ii) the Options become fully vested.

As a Company employee, you will be expected to abide by Company rules and regulations, and sign and
comply with the attached Proprietary Information and Inventions Agreement attached hereto as
Exhibit A (the “Employee Proprietary Agreement”). As a Cardica employee, you will be required to
sign an acknowledgment

 

 

that you have read and understand the company rules as described in the company handbook and intend
to abide by these rules and regulations. You will also be required to submit an I-9 form and
satisfactory documentation regarding your identification and right to work in the United States no
later than three (3) days after your employment begins.

You may terminate your employment with the Company at any time and for any reason whatsoever simply
by notifying the Company. Likewise, the Company may terminate your employment at any time and for
any reason whatsoever, with or without cause or advance notice. This at-will employment
relationship cannot be changed except in writing signed by a duly authorized officer of the
Company.

Notwithstanding the vesting schedule set forth above, if there is a Change of Control (as defined
below), then the following will apply:

Change of Control

If the Company undergoes a Change of Control (as defined below), then fifty percent (50%) of
the then-unvested shares shall become immediately and fully vested (the “Single Trigger
Acceleration”). If your status as an employee is terminated by the Company other than for Cause
(as defined below) or is a Constructive Termination (as defined below) and such termination occurs
at any time during the period one (1) month prior to or thirteen (13) months subsequent to a Change
of Control (as defined below), then, in addition to the shares that are vested on the date of such
termination, and in addition to the Single Trigger Acceleration, one hundred percent (100%) of the
shares that are unvested on the date of such termination shall become immediately and fully vested.
The following terms referred to above shall have the following meanings:

	 	•	 	“Change of Control” shall mean any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to such
consolidation, merger or reorganization, own less than 50% of the Company’s voting
power immediately after such consolidation, merger or reorganization, or any
transaction or series of related transactions in which in excess of fifty percent
(50%) of the Company’s voting power is transferred.
	 
	 	•	 	“Cause” shall mean (i) a felony or any crime involving moral turpitude or
dishonesty; (ii) participation in a fraud, misappropriation, or embezzlement of
funds or property or act of dishonesty against the Company; (iii) material breach
of Company’s policies, provided Company has given you written notification of the
breach and has provided you with fifteen (15) days’ opportunity to cure the
breach; (iv) willful conduct or gross negligence which is materially injurious to
the reputation, business or business relationships of the Company or results in
material damage to the Company’s property; (v) your breach of the Employee
Proprietary Information and Inventions Agreement; or (vi) conduct which in the
good faith and reasonable determination of the Company demonstrates gross
unfitness to serve.

“Constructive Termination” shall include any termination of status as an employee by Company other
than for Cause or voluntary termination, upon thirty (30) days prior written notice to Company, of
(a) any change in your duties or responsibilities which result in a material diminution or material
adverse change of your position, status or responsibilities of employment, but shall not include a
mere change in title or reporting relationship; (b) reduction by Company in your base salary by
greater than ten percent (10%); (c) a relocation of your place of employment with Company, to a
location more than thirty (30) miles from the location at which you performed duties as an employee
immediately prior to the Change of Control; (d) any

 

 

material breach by Company of any agreement between you and Company concerning your employment; or
(e) any failure by Company to obtain the assumption of any material agreement, including the
material provisions of any option grant, between you and Company concerning your employment by any
successor or assign of the Company (or related employer of same).

Involuntary Termination for Cause. If your employment is terminated for Cause, then you shall
not be entitled to receive severance benefits. Your benefits will be terminated under the
Company’s then existing benefit plans and policies in accordance with such plans and policies in
effect on the date of termination.

Termination Apart from a Change of Control. In the event your employment terminates for any
reason, either prior to one month before the occurrence of a Change of Control or after the
thirteenth month period following the effective date of a Change of Control, then you shall not be
entitled to receive any severance benefits under this Agreement. Your benefits will be terminated
under the terms of the Company’s then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination and in accordance with the terms of this
Offer Letter or as otherwise determined by the Board of Directors of Company.

This letter, together with Exhibit A, forms the complete statement of your employment
agreement with the Company. The employment terms in this letter supersede any other agreements or
promises made to you by anyone, whether oral or written. This offer is subject to and
contingent on the satisfactory completion of a background investigation.

Please sign and date this letter and the attached Employee Proprietary Agreement, and return
it to me by April 6, 2007, if you wish to accept this offer of employment at the Company under the
terms of this letter.

Everyone involved with our enterprise believes Cardica will thrive and grow in the years to come.
We look forward to working with you in this unique growth opportunity and in having you join our
team. If you have any questions regarding this offer, please call me directly at (650) 331-7124.

Sincerely,

	 	 	 
	/s/ Bernard A. Hausen
	 	 
	 

Bernard A. Hausen, M.D., Ph.D.

President & CEO

	 	 
	 
	 	 
	Agreed to and Accepted by:
	 	 
	 
	 	 
	/s/ Richard M. Ruedy
 

Richard M. Ruedy

	 	 
	 
	 	 
	April 3, 2007
 

Date Signed

	 	 
	 
	 	 
	April 16, 2007 Start Date
	 	 

Attachments: Exhibit A: Proprietary Information and Inventions Agreement

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