Exhibit 10.1

 

VICURON PHARMACEUTICALS INC.

2001 STOCK OPTION PLAN

 

(Composite Plan Document Reflecting 2005 Amendment)

 

1. PURPOSES.

 

(a) The purpose of the Plan is to provide a means by which selected Employees
and Directors of and Consultants to the Company and its Affiliates may be given
an opportunity to benefit from increases in the value of the stock of the
Company through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, (iv) rights to purchase restricted stock,
and (v) stock appreciation rights, all as defined below.

 

(b) The Company, by means of the Plan, seeks to retain the services of persons
who are now Employees or Directors of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees, Directors and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.

 

(c) The Company intends that the Stock Awards issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

 

2. DEFINITIONS.

 

(a) “Affiliate” means any parent corporation or subsidiary corporation, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f)
respectively, of the Code.

 

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

 

(c) “Cause” means (unless otherwise expressly provided in the applicable Stock
Award Agreement, or another applicable contract with the Stock Award holder that
defines such term for purposes of determining the effect that a “for cause”
termination has on the holder’s Stock Awards) that the Company, acting in good
faith based upon the information then known to the Company, determines that the
Stock Award holder has: (1) repeatedly failed to perform in a material respect
his obligations under any employment agreement with the Company without proper
reason and has not cured such failure in a reasonable time after receiving
notice from the Company, (2) willfully engaged in illegal conduct or gross
misconduct that is materially injurious to the Company, or (3) breached the
provisions of any confidentiality agreement or confidentiality provisions of any
employment agreement with the Company.

 

For purposes of this provision, no act or failure to act, on the part of the
Stock Award

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holder, shall be considered “willful” unless it is done, or omitted to be done,
by the Stock Award holder in bad faith or without reasonable belief that the
Stock Award holder’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the chief
executive officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Stock Award holder in good faith and in the best interests of
the Company. No termination of the Stock Award holder for Cause will be
effective unless adopted pursuant to a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for such purpose, and
communicated to the Stock Award holder by written notice that explains the basis
on which Cause has been found.

 

(d) “Change in Control” means any of the following:

 

(i) Approval by the stockholders of the Company of the dissolution or
liquidation of the Company;

 

(ii) Approval by the stockholders of the Company of an agreement to merge or
consolidate, or otherwise reorganize, with or into one or more entities that are
not subsidiaries or other affiliates, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting entity immediately
after the reorganization are, or will be, owned, directly or indirectly, by
stockholders of the Company immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record ownership
of the Company’s securities from the record date for such approval until such
reorganization and that such record owners hold no securities of the other
parties to such reorganization, but including in such determination any
securities of the other parties to such reorganization held by affiliates of the
Company);

 

(iii) Approval by the stockholders of the Company of the sale of substantially
all of the Company’s business and/or assets to a person or entity which is not a
subsidiary or other affiliate;

 

(iv) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”) but excluding any person
described in and satisfying the conditions of Rule 13d-1(b)(1) thereunder),
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than 40% of the combined voting power of the Company’s then outstanding
securities entitled to then vote generally in the election of directors of the
Company; or

 

(v) During any period not longer than two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
cease to constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation’s stockholders, of each new Board
member was approved by a vote of at least three-fourths of the Board members
then still in office who were Board members at the beginning of such period
(including for these purposes, new members whose election or nomination was so
approved.

 

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

 

(f) “Committee” means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.

 

(g) “Company” means Vicuron Pharmaceuticals Inc., a Delaware corporation.

 

(h) “Concurrent Stock Appreciation Right” or “Concurrent Right” means a right
granted pursuant to subsection 8(b)(2) of the Plan.

 

(i) “Consultant” means any person, including an advisor, engaged by the Company
or an Affiliate to render consulting services and who is compensated for such
services, provided that the term “Consultant” shall not include Directors who
are paid only a director’s fee by the Company or who are not compensated by the
Company for their services as Directors.

 

(j) “Continuous Status as an Employee, Director or Consultant” means that the
service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party’s sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.

 

(k) “Covered Employee” means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

 

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

 

(m) “Employee” means any person, including Officers and Directors, employed by
the Company or any Affiliate of the Company. Neither service as a Director nor
payment of a director’s fee by the Company shall be sufficient to constitute
“employment” by the Company.

 

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

 

(o) “Fair Market Value” means the last reported sales price on the relevant date
of a share of the Company’s common stock as listed in the Western Edition of the
Wall Street Journal, or if there are no reported sales on such date, then the
last reported sales price on the next preceding day on which such a sale is
transacted.

 

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

 

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(q) “Independent Stock Appreciation Right” or “Independent Right” means a right
granted pursuant to subsection 8(b)(3) of the Plan.

 

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

 

(s) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option under Section 422 of the Code.

 

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

 

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

 

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

 

(w) “Outside Director” means a Director who either (i) is not a current employee
of the Company or an “affiliated corporation” (within the meaning of the
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an “affiliated corporation” receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an “affiliated corporation”
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an “affiliated corporation” for services in any capacity other
than as a Director, or (ii) is otherwise considered an “outside director” for
purposes of Section 162(m) of the Code.

 

(x) “Plan” means this 2001 Stock Option Plan.

 

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

 

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

 

(aa) “Stock Appreciation Right” means any of the various types of rights which
may be granted under Section 8 of the Plan.

 

(bb) “Stock Award” means any right granted under the Plan, including any Option,
any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.

 

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

 

(dd) “Tandem Stock Appreciation Right” or “Tandem Right” means a right granted
pursuant to subsection 8(b)(1) of the Plan.

 

3. ADMINISTRATION.

 

(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).

 

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

 

(1) To determine from time to time which of the persons eligible under the Plan
shall be granted Stock Awards; when and how each Stock Award will be granted;
whether a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock
Option, a stock bonus, a right to purchase restricted stock, a Stock
Appreciation Right, or a combination of the foregoing; when and how each Stock
Award shall be granted; and the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award and the number of shares
with respect to which a Stock Award shall be granted to each such person.

 

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

 

(3) To amend the Plan or a Stock Award as provided in Section 13; provided,
however, that the Board shall not have the power to reprice any Stock Award once
granted, except for adjustments resulting from a stock split, reverse stock
split, or similar change to the outstanding capital stock, as provided in
Section 12.

 

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

 

(c) The Board may delegate administration of the Plan to a committee of the
Board composed of not fewer than two (2) members (the “Committee”), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more members any of the administrative
powers the Committee is authorized to exercise (any references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time

 

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by the Board. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan. Notwithstanding anything in this Section 3
to the contrary, the Board or the Committee may delegate to a committee of one
or more members of the Board the authority to grant Stock Awards to eligible
persons who (1) are not then subject to Section 16 of the Exchange Act and/or
(2) are either (i) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award,
or (ii) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code.

 

4. SHARES SUBJECT TO THE PLAN.

 

(a) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, the stock that may be issued pursuant to Stock Awards shall not exceed
in the aggregate nine million six hundred thousand seven hundred thirty seven
(9,600,737) shares of the Company’s common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares subject
to Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.

 

(b) The stock subject to the Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.

 

5. ELIGIBILITY.

 

(a) Incentive Stock Options and Stock Appreciation Rights appurtenant thereto
may be granted only to Employees. Stock Awards other than Incentive Stock
Options and Stock Appreciation Rights appurtenant thereto may be granted to
Employees, Directors or Consultants.

 

(b) No person shall be eligible for the grant of an Incentive Stock Option if,
at the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) 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 any of its
Affiliates unless the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of such stock at the date of grant and
the Option is not exercisable after the expiration of five (5) years from the
date of grant.

 

(c) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than nine hundred fifty thousand (950,000)
shares of the Company’s common stock in any twelve (12) month period. Subject to
the provisions of Section 12 relating to adjustments upon changes in stock, no
person shall be eligible to be granted Stock Awards covering in the aggregate
more than nine hundred fifty thousand (950,000) shares of the Company’s common
stock in any twelve (12) month period.

 

6. OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The provisions of separate Options need not be
identical, but each

 

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Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

 

(a) Term. No Option shall be exercisable after the expiration of ten (10) years
from the date it was granted.

 

(b) Price. The exercise price of each Option shall be not less than one hundred
percent (100%) of the fair market value of the stock subject to the Option on
the date the Option is granted. For this purpose, ‘fair market value’ shall mean
Fair Market Value unless, as to any particular Option granted to a non-U.S.
Employee, Director or Consultant, the Board or Committee determines that another
definition of fair market value is necessary or advisable in order to qualify
the option for favorable tax treatment under applicable foreign law (an
alternative definition of fair market value for this purpose could, without
limitation, be based on the closing price of the stock underlying the Option on
a different day than the day relevant for purposes of determining Fair Market
Value, or be based on an average of trading or closing prices of the stock
underlying the Option for a particular day or other period of time).
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than the fair market value of the stock subject to the Option if such
Option is granted pursuant to an assumption or substitution for another option.

 

(c) Consideration. The purchase price of stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and regulations,
either (i) in cash at the time the Option is exercised, or (ii) at the
discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock’s “par value” (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.

 

In the case of any deferred payment arrangement, interest shall be compounded at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement.

 

(d) Transferability. An Incentive Stock Option shall not be transferable except
by will or by the laws of descent and distribution, and shall be exercisable
during the lifetime of the person to whom the Incentive Stock Option is granted
only by such person. A Nonstatutory Stock Option shall only be transferable by
the Optionee upon such terms and conditions as are set forth in the Stock Award
Agreement for such Option, as the Board or the Committee shall determine in its
discretion or pursuant to a domestic relations order. The person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.

 

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(e) Vesting. The total number of shares of stock subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). The Stock Award Agreement may provide that from time to time during each
of such installment periods, the Option may become exercisable (“vest”) with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

 

(f) Termination of Employment or Relationship as a Director or Consultant. In
the event an Optionee’s Continuous Status as an Employee, Director or Consultant
terminates (other than upon the Optionee’s death or disability), the Optionee
may exercise his or her Option (to the extent that the Optionee was entitled to
exercise it as of the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months following the termination
of the Optionee’s Continuous Status as an Employee, Director or Consultant (or
such longer or shorter period, which shall not be less than thirty (30) days,
specified in the Stock Award Agreement), or (ii) the expiration of the term of
the Option as set forth in the Stock Award Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Stock Award Agreement, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

 

An Optionee’s Stock Award Agreement may also provide that if the exercise of the
Option following the termination of the Optionee’s Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee’s death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Stock Award Agreement, or (ii) the tenth (10th)
day after the last date on which such exercise would result in such liability
under Section 16(b) of the Exchange Act. Finally, an Optionee’s Stock Award
Agreement may also provide that if the exercise of the Option following the
termination of the Optionee’s Continuous Status as an Employee, Director or
Consultant (other than upon the Optionee’s death or disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this subsection 6(f), or (ii) the expiration of
a period of three (3) months after the termination of the Optionee’s Continuous
Status as an Employee, Director or Consultant during which the exercise of the
Option would not be in violation of such registration requirements.

 

(g) Disability of Optionee. In the event an Optionee’s Continuous Status as an
Employee, Director or Consultant terminates as a result of the Optionee’s
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, which

 

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in no event shall be less than six (6) months, specified in the Stock Award
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Stock Award Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

 

(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Stock Award Agreement after the termination of,
the Optionee’s Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee’s death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period, which in no event shall be less than six (6) months, specified in the
Stock Award Agreement), or (ii) the expiration of the term of such Option as set
forth in the Stock Award Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

 

(i) Early Exercise. The Option may, but need not, include a provision whereby
the Optionee may elect at any time while an Employee, Director or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased shall
be subject to a repurchase right in favor of the Company, with the repurchase
price to be equal to the original purchase price of the stock, or to any other
restriction the Board determines to be appropriate; provided, however, that (i)
the right to repurchase at the original purchase price shall be exercisable only
within (A) the ninety (90) day period following the termination of employment or
the relationship as a Director or Consultant, or (B) such longer period as may
be agreed to by the Company and the Optionee, and (ii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock’s Fair Market Value if the original purchase price is less
than the stock’s Fair Market Value.

 

(j) Re-Load Options. Without in any way limiting the authority of the Board or
Committee to make or not to make grants of Options hereunder, the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Stock Award Agreement a provision entitling the Optionee to a further Option
(a “Re-Load Option”) in the event the Optionee exercises the Option evidenced by
the Stock Award Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Stock Award Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option

 

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the exercise of which gave rise to such Re-Load Option; and (iii) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Re-Load Option on the date of exercise
of the original Option.

 

Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock
Option, as the Board or Committee may designate at the time of the grant of the
original Option: provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 11(d) of the Plan and in Section 422(d) of the Code.
Notwithstanding anything in the preceding paragraph to the contrary, a Re-Load
Option which is granted to a 10% stockholder (as described in subsection 5(b))
and which is intended as an Incentive Stock Option shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market Value of the
stock subject to the Re-Load Option on the date of exercise of the original
Option and shall have a term which is no longer than five (5) years.

 

There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and the limits on the grants of Options under subsection 5(c) and shall be
subject to such other terms and conditions as the Board or Committee may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

 

7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

 

Each stock bonus or restricted stock purchase agreement shall be in such form
and shall contain such terms and conditions as the Board or the Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:

 

(a) Purchase Price. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such Stock Award Agreement. The Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.

 

(b) Transferability. Rights under a stock bonus or restricted stock purchase
agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.

 

(c) Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Committee, according to a deferred
payment arrangement, except that payment of the common stock’s “par value” (as
defined in the Delaware General Corporation Law) shall not

 

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be made by deferred payment, or other arrangement with the person to whom the
stock is sold; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.

 

(d) Vesting. Shares of stock sold or awarded under the Plan may, but need not,
be subject to a repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board or the Committee.

 

(e) Termination of Employment or Relationship as a Director or Consultant. In
the event a Participant’s Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire,
subject to the limitations described in subsection 7(d), any or all of the
shares of stock held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.

 

8. STOCK APPRECIATION RIGHTS.

 

(a) The Board or Committee shall have full power and authority, exercisable in
its sole discretion, to grant Stock Appreciation Rights under the Plan to
Employees or Directors of or Consultants to, the Company or its Affiliates. To
exercise any outstanding Stock Appreciation Right, the holder must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Award Agreement evidencing such right.

 

(b) Three types of Stock Appreciation Rights shall be authorized for issuance
under the Plan:

 

(1) Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights will be
granted appurtenant to an Option, and shall, except as specifically set forth in
this Section 8, be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. Tandem Stock Appreciation Rights
will require the holder to elect between the exercise of the underlying Option
for shares of stock and the surrender, in whole or in part, of such Option for
an appreciation distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in an equivalent
number of shares of stock based on Fair Market Value on the date of the Option
surrender) in an amount up to the excess of (A) the Fair Market Value (on the
date of the Option surrender) of the number of shares of stock covered by that
portion of the surrendered Option in which the Optionee is vested over (B) the
aggregate exercise price payable for such vested shares.

 

(2) Concurrent Stock Appreciation Rights. Concurrent Rights will be granted
appurtenant to an Option and may apply to all or any portion of the shares of
stock subject to the underlying Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to the particular Option grant to which it pertains. A Concurrent Right shall be
exercised automatically at the same time the underlying Option is exercised with
respect to the particular shares of stock to which the Concurrent Right
pertains. The appreciation distribution payable on an exercised Concurrent Right
shall be in cash (or, if so

 

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provided, in an equivalent number of shares of stock based on Fair Market Value
on tile date of the exercise of the Concurrent Right) in an amount equal to such
portion as shall determined by the Board or the Committee at the time of the
grant of the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Concurrent Right) of the vested shares of stock purchased under
the underlying Option which have Concurrent Rights appurtenant to them over (B)
the aggregate exercise price paid for such shares.

 

(3) Independent Stock Appreciation Rights. Independent Rights will be granted
independently of any Option and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess of (A)
the aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (B) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.

 

9. COVENANTS OF THE COMPANY.

 

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

 

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

 

10. USE OF PROCEEDS FROM STOCK.

 

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

 

11. MISCELLANEOUS.

 

(a) Subject to any applicable provisions of the California Corporate Securities
Law of 1968 and related regulations relied upon as a condition of issuing
securities pursuant to the Plan, the Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during which
a Stock Award or any part thereof will vest pursuant to subsection 6(e), 7(d) or
8(b) notwithstanding the provisions in the Stock Award stating the time at which
it may first be exercised or the time during which it will vest.

 

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(b) Neither an Employee, Director or Consultant nor any person to whom a Stock
Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.

 

(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause the right of the Company’s Board of Directors
and/or the Company’s stockholders to remove any Director as provided in the
Company’s By-Laws and the provisions of the Delaware General Corporation Law, or
the right to terminate the relationship of any Consultant subject to the terms
of such Consultant’s agreement with the Company or Affiliate.

 

(d) To the extent that the aggregate Fair Market Value (determined at the time
of grant) of stock with respect to which Incentive Stock Options are exercisable
for the first time by any Optionee during any calendar year under all plans of
the Company and its Affiliates exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof which exceed such limit (according to the order
in which they were granted) shall be treated as Nonstatutory Stock Options.

 

(e) To the extent provided by the terms of a Stock Award Agreement, the person
to whom a Stock Award is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares from
the shares of the common stock otherwise issuable to the participant as, a
result of the exercise or acquisition of stock under the Stock Award; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.

 

12. ADJUSTMENTS UPON CHANGES IN STOCK.

 

(a) If any change is made in the stock subject to the Plan, or subject to any
Stock Award (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
type(s) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person during any calendar year pursuant to subsection 5(c), and the outstanding
Stock Awards will be appropriately adjusted in the type(s) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall

 

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be final, binding and conclusive. (The conversion of any convertible securities
of the Company shall not be treated as a “transaction not involving the receipt
of consideration by the Company.”)

 

(b) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company’s
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; then: (i) any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 12(b)) for
those outstanding under the Plan, or (ii) in the event any surviving corporation
or acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, (A) with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants and subject to any applicable provisions of the California Corporate
Securities Law of 1968 and related regulations relied upon as a condition of
issuing securities pursuant to the Plan, the vesting of such Stock Awards (and,
if applicable, the time during which such Stock Awards may be exercised) shall
be accelerated prior to such event and the Stock Awards terminated if not
exercised (if applicable) after such acceleration and at or prior to such event,
and (B) with respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall be terminated if not exercised (if applicable) prior to such
event.

 

(c) Change in Control Vesting. Unless otherwise provided in the applicable Stock
Award Agreement, each Stock Award shall be subject to the special change in
control vesting provisions set forth in clause (1) below if the conditions set
forth therein are satisfied (notwithstanding any other Continuous Status as an
Employee, Director or Consultant vesting provisions herein to the contrary, but
subject to any limited exercise period following a termination of such status as
may be provided for herein or in the applicable Stock Award Agreement).

 

(1) If a Stock Award holder’s Continuous Status as an Employee, Director or
Consultant is terminated by the Company or an Affiliate upon or within one year
after a Change in Control, and the termination is not the result of the holder’s
death or disability and is not a termination by the Company or an Affiliate for
Cause, then, subject to the other provisions of this Section 12, all outstanding
Stock Awards held by the holder shall be deemed fully vested immediately prior
to such termination.

 

13. AMENDMENT OF THE PLAN AND STOCK AWARDS.

 

(a) The Board at any time, and from time to time, may amend the Plan. However,
except as provided in Section 12 relating to adjustments upon changes in stock,
no amendment shall be effective unless approved by the stockholders of the
Company to the extent approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.

 

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(b) The Board may in its sole discretion submit any other amendment to the Plan
for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.

 

(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.

 

(d) Rights and obligations under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.

 

(e) The Board at any time, and from time to time, may amend the terms of any one
or more Stock Award; provided, however, that the rights and obligations under
any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing; provided further, that the Board shall
not have the power to reprice any Stock Award once granted, except for
adjustments resulting from a stock split, reverse stock split, or similar change
to the outstanding capital stock, as provided in Section 11.

 

14. TERMINATION OR SUSPENSION OF THE PLAN.

 

(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.

 

(b) Rights and obligations under any Stock Award granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.

 

15. EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective as determined by the Board, but no Stock Awards
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

 

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