**Exhibit10.3**

 

**MEDICORLTD. AMENDED AND RESTATED**

1999 STOCK COMPENSATION PROGRAM

 

1.             Purpose.  This MediCor Ltd. Amended and Restated 1999Stock Compensation Program (the “*Program”*) is intended to secure forMediCor Ltd. (the “*Company”*), its subsidiaries, and itsstockholders the benefits arising from ownership of the Company’s common stock(the “*CommonStock”*) by those selected individuals of the Company and itssubsidiaries, who will be responsible for the future growth of suchcorporations.  The Program is designedto help attract and retain superior personnel for positions of substantialresponsibility with the Company and its subsidiaries, and to provideindividuals with an additional incentive to contribute to the success of thecorporations.  Nothing contained hereinshall be construed to amend or terminate any existing options, whether pursuantto any existing plans or otherwise granted by the Company.

 

2.             Elements of theProgram.  In order to maintainflexibility in the award of stock benefits, the Program is composed of sevenparts.  The first part is the IncentiveStock Option Plan (the “*Incentive Plan*”) under which are grantedincentive stock options (the “*Incentive Options”*).  The second part is the Non-Qualified StockOption Plan (the “*Nonqualified Plan”*) under which are granted nonqualifiedstock options (the “*Nonqualified Options*”). The third part isthe Restricted Share Plan (the “*Restricted Plan”*) under which are grantedrestricted shares of Common Stock.  Thefourth part is the Employee Stock Purchase Plan (the “*Stock Purchase Plan”*).  The fifth part is the Non-Employee DirectorStock Option Plan (the “*Directors Plan”*) under which grants ofoptions to purchase shares of Common Stock may be made to non-employeedirectors of the Company.  The sixthpart is the Stock Appreciation Rights Plan (the “*SAR Plan”*) under which SARs(as defined therein) are granted.  Theseventh part is the Other Stock Rights Plan (the “*Stock Rights Plan”*) underwhich (i) units representing the equivalent of shares of Common Stock (the “*PerformanceShares”*) are granted; (ii) payments of compensation in the form ofshares of Common Stock (the “*Stock Payments”*) are granted; and (iii)rights to receive cash or shares of Common Stock based on the value ofdividends paid with respect to a share of Common Stock (the “*DividendEquivalent Rights”*) are granted. The Incentive Plan, the Nonqualified Plan, the Restricted Plan, theStock Purchase Plan, the Directors Plan, the SAR Plan and the Stock Rights Planare included herein as Part I, Part II, Part III, Part IV, Part V, Part VI andPart VII, respectively, and are collectively referred to herein as the “*Plans*.”  The grant of an option, SAR or restrictedshare or rights to purchase shares under one of the Plans shall not beconstrued to prohibit the grant of an option, SAR or restricted share or rightsto purchase shares under any of the other Plans.

 

3.             Applicability ofGeneral Provisions.  Unless any Planspecifically indicates to the contrary, all Plans shall be subject to the GeneralProvisions of the MediCor Ltd. 1999 Stock Compensation Program set forth below.

 

4.             Administration ofthe Plans.  The Plans shall beadministered, construed, governed, and amended in accordance with theirrespective terms.

 

GENERAL PROVISIONSOF STOCK COMPENSATION PROGRAM

 

Article 1.                Administration.  The Program shall be administered by theCompany’s Board of Directors (the “*Board”*). If an award is to be made to an “Executive Officer” as defined in theExchange Act (as hereinafter defined), it must be approved if the Company has aclass of equity securities registered under Section 12 or 15(d) of theExchange Act, by the Board or by a committee of the Board, that is composedsolely of two or more directors who are “Non-Employee Directors” within the meaningof Rule 16b-3 promulgated pursuant to the Securities Exchange Act of 1934, asamended (the “*Exchange Act”*). The members of the Board, such committee ofthe Board or such other persons appointed to administer the Program, whenacting to administer the Program, are herein collectively referred to as the “*ProgramAdministrators*.”  To theextent permitted under the Exchange Act, the Internal Revenue Code of 1986, asamended (the “*Code”*) or any other applicable law, the

 

1

----

 

Program Administrators,shall have the authority to delegate any and all power and authority toadminister and operate the Program hereunder to such person or persons as theProgram Administrators deems appropriate which if formed may be referred to bysuch title specified by the Board. Subject to the foregoing limitations, as applicable, the Board may fromtime to time remove members from the committee, fill all vacancies on thecommittee, however caused, and may select one of the members of the committeeas its Chairman.

 

The ProgramAdministrators shall hold meetings at such times and places as they maydetermine and as necessary to approve all grants and other transactions underthe Program as required under Rule 16b-3(d) of the Exchange Act, shall keepminutes of their meetings, and shall adopt, amend, and revoke such rules andprocedures as they may deem proper with respect to the Program.  Any action of the Program Administratorsshall be taken by majority vote or the unanimous written consent of the ProgramAdministrators.

 

Article 2.                Authority ofProgram Administrators.  Subject tothe other provisions of this Program, and with a view to effecting its purpose,the Program Administrators shall have sole authority, in their absolute discretion,(a) to construe and interpret the Program; (b) to define the terms used herein;(c) to determine the individuals to whom options and restricted shares andrights to purchase shares shall be granted under the Program; (d) to determinethe time or times at which options and restricted shares or rights to purchaseshares shall be granted under the Program; (e) to determine the number ofshares subject to each option, restricted share and purchase right, theduration of each option granted under the Program, and the price of any sharepurchase; (f) to determine all of the other terms and conditions of options andrestricted shares and purchase rights granted under the Program; and (g) tomake all other determinations necessary or advisable for the administration ofthe Program and to do everything necessary or appropriate to administer theProgram;  *provided, however,*that theBoard shall establish the price for all shares issued hereunder.  All decisions, determinations, andinterpretations made by the Program Administrators shall be binding andconclusive on all participants in the Program (the “*Plan Participants”*) and ontheir legal representatives, heirs and beneficiaries.

 

Article 3.                Maximum Numberof Shares Subject to the Program. The maximum aggregate number of shares of Common Stock subject to thePlans shall be 1,242,680 shares.  Theshares of Common Stock to be issued upon exercise of an option, to the extentexercised for shares of Common Stock, issued as restricted shares or issuedupon stock purchases may be authorized but unissued shares, shares issued andreacquired by the Company or shares purchased by the Company on the openmarket.  If any of the options grantedunder the Program expire or terminate for any reason before they have been exercisedin full, the unpurchased shares subject to those expired or terminated optionsshall cease to reduce the number of shares available for purposes of theProgram.  If the conditions associatedwith the grant of restricted shares are not achieved within the periodspecified for satisfaction of the applicable conditions, or if the restrictedshare grant terminates for any reason before the date on which the conditionsmust be satisfied, the shares of Common Stock associated with such restrictedshares shall cease to reduce the number of shares available for purposes of theProgram.

 

The proceeds received bythe Company from the sale of its Common Stock pursuant to the exercise ofoptions, transfer of restricted shares or issuance of stock purchased under theProgram, if in the form of cash, shall be added to the Company’s general fundsand used for general corporate purposes.

 

Article 4.                Eligibility andParticipation.  Officers, employees,directors (whether employee directors or non-employee directors), andindependent contractors or agents of the Company or its subsidiaries who areresponsible for or contribute to the management, growth or profitability of thebusiness of the Company or its subsidiaries shall be eligible for selection bythe Program Administrators to participate in the Program.  However, Incentive Options may be grantedunder the Incentive Plan only to a person who is an employee of the Company orits subsidiaries.  An employee may begranted Nonqualified Options under the Program; *provided, however,*that thegrant of Nonqualified Options and Incentive Options to an employee shall be thegrant of separate options and each Nonqualified Option and each IncentiveOption shall be specifically designated as such in

 

2

----

 

accordance withapplicable provisions of the Treasury Regulations.

The term “subsidiary” asused herein means any company, other than the Company, in an unbroken chain ofcompanies, beginning with the Company if, at the time of any grant hereunder,each of the companies, other than the last company in the unbroken chain, ownsstock possessing more than 50% of the total combined voting power of allclasses of stock in one of the other companies in such chain.

 

Article 5.                Effective Dateand Term of Program.  The Programbecame effective upon its adoption by the Board of Directors of the Company onSeptember 10, 1999 and subsequent approval of the Program by a majority ofthe voting shares of the Company voting in person or by proxy at a meeting ofstockholders or by written consent and as amended by action of the Board ofDirectors of the Company effective as of February 7, 2003.  The Program shall continue in effect for aterm of 10 years unless sooner terminated under Article 7 of these GeneralProvisions.

 

Article 6.                Adjustments.  If the outstanding shares of Common Stockare increased, decreased, changed into, or exchanged for a different number orkind of shares or securities through merger, consolidation, combination,exchange of shares, other reorganization, recapitalization, reclassification,stock dividend, stock split or reverse stock split, an appropriate andproportionate adjustment shall be made in the maximum number and kind of sharesas to which options and restricted shares may be granted under thisProgram.  A corresponding adjustmentchanging the number and kind of shares allocated to unexercised options,restricted shares, or portions thereof, which shall have been granted prior toany such change, shall likewise be made. Any such adjustment in outstanding options shall be made without changein the aggregate purchase price applicable to the unexercised portion of theoption, but with a corresponding adjustment in the price for each share orother unit of any security covered by the option.

 

Article 7.                Termination andAmendment of Program.  The Programshall terminate 10 years from the date the Program is adopted by the Board ofDirectors, or, if applicable, the date a particular Plan is approved by thestockholders, whichever is earlier, or shall terminate at such earlier time asthe Board of Directors may so determine. No options or restricted shares shall be granted and no stock shall besold and purchased under the Program after that date.  Subject to the limitation contained in Article 8 of theseGeneral Provisions, the Program Administrators may at any time amend or revisethe terms of the Program, including the form and substance of the option,restricted share and stock purchase agreements to be used hereunder; *provided,however,*that without approval by the stockholders of the Companyrepresenting a majority of the voting power (as contained in Article 5 ofthese General Provisions) no amendment or revision shall (a) increase themaximum aggregate number of shares that may be sold or distributed pursuant tooptions granted or stock sold and purchased under Part 1 or Part IV, except aspermitted under Article 6 of these General Provisions; (b) change theminimum purchase price for shares under Section 4 of Part I or thePurchase Price for shares under Part IV; (c) increase the maximum termestablished under Parts I or IV for any option or restricted share; (d) permitthe granting of an option, or right to purchase shares under Parts I or IV toanyone other than as provided in Article 4 of the General Provisions; (e)change the term of Parts I or IV described in Article 5 of these GeneralProvisions; or (f) materially increase the benefits accruing to PlanParticipants under Parts I or IV of the Program.

 

Article 8.                Prior Rightsand Obligations.  No amendment,suspension, or termination of the Program shall, without the consent of theindividual who has received an option or restricted share or who has purchaseda specified share or shares under Part IV, alter or impair any of that person’srights or obligations under any option or restricted share granted or sharessold and purchased under the Program prior to that amendment, suspension, ortermination.

 

Article 9.                Privileges ofStock Ownership.  Notwithstandingthe exercise of any option granted pursuant to the terms of this Program, theachievement of any conditions specified in any restricted share grantedpursuant to the terms of this Program or the election to purchase any sharespursuant to the terms of this Program,

 

3

----

 

no individual shall haveany of the rights or privileges of a stockholder of the Company in respect ofany shares of stock issuable upon the exercise of his or her option, thesatisfaction of his or her restricted share conditions or the sale, purchaseand issuance of such purchased shares until certificates representing theshares have been issued and delivered. No shares shall be required to be issued and delivered upon exercise ofany option, satisfaction of any conditions with respect to a restricted shareor a purchaser under Part IV unless and until all of the requirements of lawand of all regulatory agencies having jurisdiction over the issuance anddelivery of the securities shall have been fully complied with.

 

Article 10.              Reservation ofShares of Common Stock.  TheCompany, during the term of this Program, will at all times reserve and keepavailable such number of shares of its Common Stock as shall be sufficient tosatisfy the requirements of the Program. In addition, the Company will from time to time, as is necessary toaccomplish the purposes of this Program, seek or obtain from any regulatoryagency having jurisdiction any requisite authority in order to issue and sellshares of Common Stock hereunder.  Theinability of the Company to obtain from any regulatory agency havingjurisdiction the authority deemed by the Company’s counsel to be necessary tothe lawful issuance and sale of any shares of its stock hereunder shall relievethe Company of any liability in respect of the nonissuance or sale of the stockas to which the requisite authority shall not have been obtained.

 

Article 11.              Tax Withholding.  The exercise of any option or restrictedshare granted or the sale and issuance of any shares to be purchased under thisProgram are subject to the condition that if at any time the Company shalldetermine, in its discretion, that the satisfaction of withholding tax or otherwithholding liabilities under any state or federal law is necessary ordesirable as a condition of, or in connection with, such exercise or thedelivery or purchase of shares pursuant thereto, then in such event, theexercise of the option or restricted share or the sale and issuance of anyshares to be purchased shall not be effective unless such withholding shallhave been effected or obtained in a manner acceptable to the Company.  At the Company’s sole and completediscretion, the Company may, from time to time, accept shares of the Company’sstock subject to one of the Plans as the source of payment for suchliabilities.

 

Article 12.              Compliance withLaw.  It is the express intent ofthe Company that this Program complies in all respect with all applicableprovisions of state and federal law, including without limitationSection 25102(o) of the California Corporations Code to the extent suchSection is applicable to the Company. It is the express intent of the Company that when the Company becomespublicly-traded that this Program shall comply in all respects with applicableprovisions of the Rule 16b-3 or Rule 16a-1(c)(3) under the Exchange Act inconnection with any grant of awards to, or other transaction by, a PlanParticipant who is subject to Section 16 of the Exchange Act (except fortransactions exempted under alternative Exchange Act Rules).  Accordingly, if any provision of the Programor any agreement relating to any award thereunder does not comply with Rule16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, suchprovision will be construed or deemed amended to the extent necessary toconform to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) sothat such Plan Participant shall avoid liability under Section 16(b).  Unless otherwise provided in any grant oraware to any person who is or may thereafter be subject to Section 16 ofthe Exchange Act the approval of shall include the approval of the dispositionof the Company of Company equity securities for the purposes of satisfying thepayment of the exercise or purchase price or tax withholding obligationsrelated to such grant or award within the meaning of Section 16b-3(e).

 

Article 13.              Performance-BasedAwards.

(a)           Each agreement for thegrant of Performance Shares shall specify the number of Performance Sharessubject to such agreement, the Performance Period and the Performance Objective(each as defined below), and each agreement for the grant of any other awardthat the Program Administrators determine to make subject to a PerformanceObjective similarly shall specify the applicable number of shares of CommonStock, the period for measuring performance and the Performance Objective.  As used herein, “*Performance Objective”*

 

4

----

 

means a performanceobjective specified in the agreement for a Performance Share, or for any otheraward which the Program Administrators determine to make subject to aPerformance Objective, upon which the vesting or settlement of such award isconditioned and “*Performance Period”* means the period of time specified in anagreement over which Performance Shares, or another award which the ProgramAdministrators determine to make subject to a Performance Objective, are to beearned.  Each agreement for aperformance-based grant shall specify in respect of a Performance Objective theminimum level of performance below which no payment will be made, shalldescribe the method for determining the amount of any payment to be made ifperformance is at or above the minimum acceptable level, but falls short offull achievement of the Performance Objective, and shall specify the maximumpercentage payout under the agreement. Such maximum percentage in no event shall exceed one hundred percent(100%) in the case of performance-based restricted shares and two hundred percent(200%) in the case of Performance Shares or performance-based DividendEquivalent Rights.

(b)           The ProgramAdministrators shall determine and specify, in their discretion, thePerformance Objective in the agreement for a Performance Share or for any otherperformance-based award, which Performance Objective shall consist of:  (i) one or more business criteria, including(except as limited under subparagraph (c) below for awards to Covered Employees(as defined below)) financial, service level and individual performancecriteria; and (ii) a targeted level or levels of performance with respect tosuch criteria.  Performance Objectivesmay differ between Plan Participants and between types of awards from year toyear.

(c)           The PerformanceObjective for Performance Shares and any other performance-based award grantedto a Covered Employee, if deemed appropriate by the Program Administrators,shall be objective and shall otherwise meet the requirements ofSection 162(m)(4)(C) of the Code, and shall be based upon one or more ofthe following performance-based business criteria, either on a business unit orCompany-specific basis or in comparison with peer group performance:  net sales; gross sales; return on netassets; return on assets; return on equity; return on capital; return onrevenues; cash flow; book value; share price performance (including Options andSARs tied solely to appreciation in the Fair Market Value of the shares);earnings per share; stock price earnings ratio; earnings before interest,taxes, depreciation and amortization expenses (“*EBITDA”*); earnings beforeinterest and taxes (“*EBIT”*); or EBITDA, EBIT or earnings beforetaxes and unusual or nonrecurring items as measured either against the annualbudget or as a ratio to revenue. Achievement of any such Performance Objective shall be measured over aperiod of years not to exceed ten (10) as specified by the ProgramAdministrators in the agreement for the performance-based award.  No business criterion other than those namedabove in this Article 13(c) may be used in establishing the PerformanceObjective for an award to a Covered Employee under this Article 13.  For each such award relating to a CoveredEmployee, the Program Administrators shall establish the targeted level orlevels of performance for each such business criterion.  The Program Administrators may, in theirdiscretion, reduce the amount of a payout otherwise to be made in connectionwith an award under this Article 13(c), but may not exercise discretion toincrease such amount, and the Program Administrators may consider otherperformance criteria in exercising such discretion.  All determinations by the Program Administrators as to theachievement of Performance Objectives under this Article 13(c) shall bemade in writing.  The ProgramAdministrators may not delegate any responsibility under thisArticle 13(c).  As used herein, “*CoveredEmployee”* shall mean, with respect to any grant of an award, anexecutive of the Company or any subsidiary who is a member of the executivecompensation group under the Company’s compensation practices (not necessarilyan executive officer) whom the Program Administrators deem may be or become acovered employee as defined in Section 162(m)(3) of the Code for any yearthat such award may result in remuneration over $1 million which would not bedeductible under Section 162(m) of the Code but for the provisions of theProgram and any other “qualified performance-based compensation” plan (asdefined under Section 162(m) of the Code) of the Company; *provided,however,*that the Program Administrators may determine that a PlanParticipant has ceased to be a Covered Employee prior to the settlement of anyaward.

(d)           The ProgramAdministrators, in their sole discretion, may require that one or more awardagreements contain provisions which provide that, in the eventSection 162(m) of the Code, or any successor provision relating toexcessive employee remuneration, would operate to disallow a deduction by theCompany with respect to all or part of any award under the Program, a PlanParticipant’s receipt of the benefit relating to such award that would not bedeductible by the Company shall be deferred until the next succeeding year oryears

 

5

----

 

in which the PlanParticipant’s remuneration does not exceed the limit set forth in suchprovisions of the Code.

 

Article 14.              DeathBeneficiaries.  In the event of aPlan Participant’s death, all of such person’s outstanding awards, includinghis or her rights to receive any accrued but unpaid Stock Payments, willtransfer to the maximum extent permitted by law to such person’s beneficiary(except to the extent a permitted transfer of a Nonqualified Option or SAR waspreviously made pursuant hereto).  EachPlan Participant may name, from time to time, any beneficiary or beneficiaries(which may be named contingently or successively) as his or her beneficiary forpurposes of this Program.  Eachdesignation shall be on a form prescribed by the Program Administrators, willbe effective only when delivered to the Company, and when effective will revokeall prior designations by the Plan Participant.  If a Plan Participant dies with no such beneficiary designationin effect, such person’s beneficiary shall be his or her estate and suchperson’s awards will be transferable by will or pursuant to laws of descent anddistribution applicable to such person.

 

Article 15.              Unfunded Program.  The Program shall be unfunded and theCompany shall not be required to segregate any assets that may at any time berepresented by awards under the Program. Neither the Company, its affiliates, the Program Administrators, nor theBoard shall be deemed to be a trustee of any amounts to be paid under theProgram nor shall anything contained in the Program or any action takenpursuant to its provisions create or be construed to create a fiduciaryrelationship between any such party and a Plan Participant or anyone claimingon his or her behalf.  To the extent aPlan Participant or any other person acquires a right to receive paymentpursuant to an award under the Program, such right shall be no greater than theright of an unsecured general creditor of the Company.

 

Article 16.              Choice of Law andVenue.  The Program and all relateddocuments shall be governed by, and construed in accordance with, the laws ofthe State of Delaware.  Acceptance of anaward shall be deemed to constitute consent to the jurisdiction and venue ofthe courts located in the State of Delaware for all purposes in connection withany suit, action or other proceeding relating to such award, including theenforcement of any rights under the Program or any agreement or other document,and shall be deemed to constitute consent to any process or notice of motion inconnection with such proceeding being served by certified or registered mail orpersonal service within or without the State of Delaware, provided a reasonabletime for appearance is allowed.

 

Article 17.              Arbitration.  Any disputes involving the Program will beresolved by arbitration in the State of Delaware before one (1) arbitrator inaccordance with the Commercial Arbitration Rules of the American ArbitrationAssociation.

 

Article 18.**             **ProgramAdministrators’ Right.  Except asmay be provided in an award agreement, the Program Administrators may, in theirdiscretion, waive any restrictions or conditions applicable to, or acceleratethe vesting of, any award (other than the right to purchase shares pursuant tothe Stock Purchase Plan).

 

Article 19.              Termination ofBenefits Under Certain Conditions. The Program Administrators, in their sole discretion, may cancel anyunexpired, unpaid or deferred award (other than a right to purchase sharespursuant to the Stock Purchase Plan) at any time if the Plan Participant is notin compliance with all applicable provisions of the Program or any awardagreement or if the Plan Participant, whether or not he or she is currentlyemployed by the Company or one of its subsidiaries, acts in a manner contraryto the best interests of the Company and its subsidiaries.

 

Article 20.              Conflicts inProgram.  In case of any conflict inthe terms of the Program, or between the Program and an award agreement, theprovisions in the Program which specifically grant such award shall control,and the provisions in the Program shall control over the provisions in anyaward agreement.

 

6

----

 

Article 21**.**              Optional Deferral.  The right to receive any award under theProgram (other than the right to purchase shares pursuant to the Stock PurchasePlan) may, at the request of the Plan Participant, be deferred to such periodand upon such terms and conditions as the Program Administrators shall, intheir discretion, determine, which may include crediting of interest ondeferrals of cash and crediting of dividends on deferrals denominated in sharesof Common Stock.

 

Article 22.              Information toPlan Participants.  To the extentrequired by applicable law, the Company shall provide Plan Participants withthe Company’s financial statements at least annually.

 

Article 23.              Company’s Rightof First Refusal. Any attempt by any Plan Participant to sell, transfer orotherwise dispose of any securities issued to such Plan Participant hereunderor upon exercise of any other security or other right issued hereunder, that istransferable in accordance with the terms of this Program and applicable law,must also comply with the following provisions:

(a)           The Plan Participantmust have received a bona fide offer to purchase the securities (the “*Offer*”)and the Plan Participant must then give written notice to the Company outliningthe terms of the Offer (including the identity of the maker of the Offer (the “*Offeror*”)).  The Company shall then have the right, for aperiod of sixty (60) days, to repurchase all, but not less than all, of thesecurities offered by the Plan Participant upon the terms contained in theOffer.  If the Offer includes thepayment of non-cash consideration for the securities, the Company shall pay anamount equal to the fair market value of such non-cash consideration;

(b)           If the Company does notexercise its rights hereunder, the Plan Participant may, within sixty (60) daysthereafter, sell the offered securities to the Offeror upon terms not morefavorable to the Offeror than those contained in the Offer.  Any sale of securities by the PlanParticipant after the expiration of the sixty (60) day period referred to inthe preceding sentence shall be deemed a new transaction subject to the Company’sright of first refusal here; and

(c)           The Company’s right offirst refusal shall terminate when the Company’s securities become publiclytraded.

 

Article 24.              Lock-Up.  To the extent requested by any managingunderwriter to the Company, the Plan Participants shall enter into such marketlock-up, escrow or other agreements as may be requested by such underwriter inconnection with any public offering of the Company’s securities.

 

7

----

 

PART I

 

**MEDICOR LTD.**

INCENTIVE STOCK OPTION PLAN

 

Section 1.               Purpose.  The purpose of this MediCor Ltd. IncentiveStock Option Plan (the “*Incentive Plan”*) is to promote the growthand general prosperity of the Company by permitting the Company to grantoptions to purchase shares of its Common Stock.  The Incentive Plan is designed to help attract and retainsuperior personnel for positions of substantial responsibility with the Companyand its subsidiaries, and to provide individuals with an additional incentiveto contribute to the success of the Company. The Company intends that options granted pursuant to the provisions ofthe Incentive Plan will qualify as “*incentive stock options”* within themeaning of Section 422 of the Code. This Incentive Plan is Part I of the Program.  Unless any provision herein indicates to the contrary, thisIncentive Plan shall be subject to the General Provisions of the Program.

 

Section 2.               Maximum Numberof Shares; Option Terms and Conditions. The maximum aggregate number of shares of Common Stock subject to theIncentive Plan should be 1,242,680.  Theterms and conditions of options granted under the Incentive Plan may differfrom one another as the Program Administrators shall, in its discretion,determine as long as all options granted under the Incentive Plan satisfy therequirements of the Incentive Plan.

 

Section 3.               Duration ofOptions.  Each option and all rightsthereunder granted pursuant to the terms of the Incentive Plan shall expire onthe date determined by the Program Administrators, but in no event shall anyoption granted under the Incentive Plan expire later than ten (10) years fromthe date on which the option is granted. However, notwithstanding the above portion of this Section 3, if atthe time the option is granted the grantee (the “*Optionee”*) owns or would beconsidered to own by reason of Code Section 424(d) more than 10% of thetotal combined voting power of all classes of stock of the Company or itssubsidiaries, such option shall expire not more than 5 years from the date theoption is granted.  In addition, each optionshall be subject to early termination as provided in the Incentive Plan.

 

Section 4.               Purchase Price.  The purchase price for shares acquiredpursuant to the exercise, in whole or in part, of any option shall not be lessthan the fair market value of the shares at the time of the grant of theoption.  Fair market value (the “*Fair MarketValue”*) shall be determined by the Program Administrators on thebasis of such factors as they deem appropriate; *provided, however,*that FairMarket Value on any day shall be deemed to be, if the Common Stock is traded ona national securities exchange, the closing price (or, if no reported saletakes place on such day, the mean of the reported bid and asked prices) of theCommon Stock on such day on the principal such exchange, or, if the stock isincluded on the composite tape, the composite tape.  In each case, the Program Administrators’ determination of FairMarket Value shall be conclusive.

 

Notwithstandingthe above portion of this Section 4, if at the time an option is grantedthe Optionee owns or would be considered to own by reason of CodeSection 424(d) more than 10% of the total combined voting power of allclasses of stock of the Company or its subsidiaries, the purchase price of theshares covered by such option shall not be less than 110% of the Fair MarketValue of a share of Common Stock on the date the option is granted.

 

Section 5.               Maximum Amountof Options Exercisable in Any Calendar Year.  Notwithstanding any other provision of this Incentive Plan, the aggregateFair Market Value (determined at the time any Incentive Stock Option isgranted) of the Common Stock with respect to which Incentive Stock Optionsbecome exercisable for the first time by any employee during any calendar yearunder all stock option plans of the Company and its subsidiaries shall notexceed $100,000.

 

8

----

 

Section 6.               Exercise ofOptions.  Each option shall beexercisable in one or more installments during its term as determined by the ProgramAdministrators, and the right to exercise may be cumulative as determined bythe Program Administrators.  Each optionshall be exercisable at a rate of at least twenty percent (20%) per year overfive (5) years from the date the option is granted, subject to such reasonableconditions as determined by the Program Administrators.  No option may be exercised for a fraction ofa share of Common Stock.  The purchaseprice of any shares purchased shall be paid in full in cash or by certified orcashier’s check payable to the order of the Company or by shares of CommonStock, if permitted by the Program Administrators, or by a combination of cash,check, or shares of Common Stock, at the time of exercise of the option.  If any portion of the purchase price is paidin shares of Common Stock, those shares shall be tendered at their then FairMarket Value as determined by the Program Administrators in accordance withSection 4 of this Incentive Plan. Payment in shares of Common Stock includes the automatic application ofshares of Common Stock received upon exercise of an option to satisfy theexercise price for additional options.

 

Section 7.               Reorganization.  In the event of the dissolution orliquidation of the Company, any option granted under the Incentive Plan shallterminate as of a date to be fixed by the Program Administrators; provided thatnot less than 30 days’ written notice of the date so fixed shall be given toeach Optionee and each such Optionee shall have the right during such period(unless such option shall have previously expired) to exercise any option,including any option that would not otherwise be exercisable by reason of aninsufficient lapse of time.

 

In the event of aReorganization (as defined below) in which the Company is not the surviving oracquiring company, or in which the Company is or becomes a subsidiary ofanother company after the effective date of the Reorganization, then:

 

(a)  if there is no plan or agreement respectingthe Reorganization (the “*Reorganization Agreement”*) or if theReorganization Agreement does not specifically provide for the change,conversion or exchange of the outstanding options for options of anothercorporation, then exercise and termination provisions equivalent to thosedescribed in this Section 7 shall apply; or

 

(b)  if there is a Reorganization Agreement andif the Reorganization Agreement specifically provides for the change,conversion, or exchange of the outstanding options for options of anothercorporation, then the Program Administrators shall adjust the outstandingunexercised options (and shall adjust the options remaining under the IncentivePlan which have not yet been granted if the Reorganization Agreement makesspecific provision for such an adjustment) in a manner consistent with theapplicable provisions of the Reorganization Agreement.

 

The term “*Reorganization”*as used in this Section 7 shall mean any statutory merger, statutoryconsolidation, sale of all or substantially all of the assets of the Company ora sale of the Common Stock pursuant to which the Company is or becomes asubsidiary of another company after the effective date of the Reorganization.

 

Adjustments anddeterminations under this Section 7 shall be made by the ProgramAdministrators, whose decisions as to such adjustments or determinations shallbe final, binding, and conclusive.

 

Section 8.               Written NoticeRequired.  Any option grantedpursuant to the terms of the Incentive Plan shall be exercised when writtennotice of that exercise has been given to the Company at its principal officeby the person entitled to exercise the option and full payment for the shareswith respect to which the option is exercised, together with payment ofapplicable income taxes, has been received by the Company.

 

9

----

 

Section 9.               Compliance withSecurities Laws.  Shares shall notbe issued with respect to any option granted under the Incentive Plan, unlessthe exercise of that option and the issuance and delivery of the sharespursuant to that exercise shall comply with all applicable provisions offoreign, state and federal law including, without limitation, the SecuritiesAct of 1933, as amended, and the Exchange Act, and the rules and regulationspromulgated thereunder, and the requirements of any stock exchange upon whichthe shares may then be listed, and shall be further subject to the approval ofcounsel for the Company with respect to such compliance.  The Program Administrators may also require anOptionee to furnish evidence satisfactory to the Company, including a writtenand signed representation letter and consent to be bound by any transferrestriction imposed by law, legend, condition, or otherwise, that the sharesare being purchased only for investment and without any present intention tosell or distribute the shares in violation of any state or federal law, rule,or regulation.  Further, each Optioneeshall consent to the imposition of a legend on the shares of Common Stocksubject to his or her Option and the imposition of stop-transfer instructionsrestricting their transferability as required by law or by this Section 9.

 

Section 10.             Employment ofOptionee.  Each Optionee, ifrequested by the Program Administrators, must agree in writing as a conditionof receiving his or her option, that he or she will remain in the employment ofthe Company or its subsidiary corporations following the date of the grantingof that option for a period specified by the Program Administrators.  Nothing in the Incentive Plan or in anyoption granted hereunder shall confer upon any Optionee any right to continuedemployment by the Company or its subsidiary corporations or limit in any waythe right of the Company or its subsidiary corporations at any time toterminate or alter the terms of that employment.

 

Section 11.             Option Rights UponTermination of Employment.  If anOptionee ceases to be employed by the Company or any subsidiary corporation forany reason other than death or disability, his or her option shall terminatewithin thirty (30) days after the date of termination of employment; *provided,however,*that in the event employment is terminated for cause asdefined buy applicable law, his or her option shall terminate immediately, *provided,further, however,*that the Program Administrators may, in their soleand absolute discretion, allow the option to be exercised (to the extentexercisable on the date of termination of employment) at any time within sixty(60) days after the date of termination of employment, unless either the optionor the Incentive Plan otherwise provides for earlier termination.

 

Section 12.             Option Rights UponDisability.  If an Optionee becomesdisabled within the meaning of Code Section 422(e)(3) while employed bythe Company or any subsidiary corporation, the Program Administrators, in theirdiscretion, may allow the option to be exercised, to the extent exercisable onthe date of termination of employment, at any time within one year after thedate of termination of employment due to disability, unless either the optionor the Incentive Plan otherwise provides for earlier termination.

 

Section 13.             Option Rights UponDeath of Optionee.  Except asotherwise limited by the Program Administrators at the time of the grant of anoption, if an Optionee dies while employed by the Company or any subsidiarycorporation, his or her Option shall expire one year after the date of deathunless by its terms it expires sooner. During this one year or shorter period, the option may be exercised, tothe extent that it remains unexercised on the date of death, by the person orpersons to whom the Optionee’s rights under the option shall pass by will or bythe laws of descent and distribution, but only to the extent that the Optioneeis entitled to exercise the option at the date of death.

 

Section 14.             Options NotTransferable.  Options grantedpursuant to the terms of the Incentive Plan may not be sold, pledged, assigned,or transferred in any manner otherwise than by will or the laws of descent ordistribution and may be exercised during the lifetime of an Optionee only bythat Optionee.  No such options shall bepledged or hypothecated in any way nor shall they be subject to execution,attachment, or similar process.

 

10

----

 

Section 15.             Adjustments toNumber and Purchase Price of Optioned Shares.  All options granted pursuant to the terms of this Incentive Planshall be adjusted in the manner prescribed by Article 6 of the GeneralProvisions of this Program.

 

**MEDICOR LTD.**

**INCENTIVESTOCK OPTION PLAN**

GRANT OF OPTION

 

THIS GRANT, datedas of the date of grant stated on the signature page hereof (the “*Date ofGrant”*), is delivered by, MediCor Ltd., a State of Delawarecorporation (the “*Company”*) to individual identified on the signature pagehereof (the “*Grantee”*), who is an employee of the Company or one of itssubsidiaries (the Grantee’s employer is sometimes referred to herein as the “*Employer”*).

 

WHEREAS, the Boardof Directors of the Company (the “*Board”*) on September 10, 1999,adopted, with subsequent stockholder approval, the MediCor Ltd. Incentive StockOption Plan and adopted the Amended and Restated MediCor Ltd. Incentive StockOption Plan effective as of February 7, 2003 (the “*Plan”*);

 

WHEREAS, the Planprovides for the granting of incentive stock options by the Board or ProgramAdministrators to employees of the Company or any subsidiary of the Company topurchase, or to exercise certain rights with respect to, shares of the CommonStock of the Company, no par value (the “*Stock”*), in accordance with the terms andprovisions thereof; and

 

WHEREAS, theProgram Administrators consider the Grantee to be a person who is eligible fora grant of incentive stock options under the Plan, and has determined that itwould be in the best interest of the Company to grant the incentive stockoptions documented herein.

 

NOW, THEREFORE,the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.             Grant of Option.  Subject to the terms and conditionshereinafter set forth, the Company, with the approval and at the direction ofthe Program Administrators, hereby grants to the Grantee, as of the Date ofGrant, an option to purchase up to the number of shares of Stock identified onthe signature page hereof (the *“Number of Option Shares”*) at a price pershare identified on the signature page hereof (the *“Strike Price”*), the fairmarket value (or, with respect to 10% stockholders, 110% of fair marketvalue).  Such option is hereinafterreferred to as the “*Option”* and the shares of stock purchasableupon exercise of the Option are hereinafter sometimes referred to as the “*OptionShares*.”  The Option isintended by the parties hereto to be, and shall be treated as, an incentivestock option (as such term is defined under Section 422 of the United StatesInternal Revenue Code of 1986).

 

2.             InstallmentExercise.  Subject to such furtherlimitations as are provided herein, the Option shall become exercisable in thenumber of installments identified on the signature page hereof, the Granteehaving the right hereunder to purchase from the Company the following number ofOption Shares upon exercise of the Option, on and after the following dates, incumulative fashion as determined by the Program Administrators and listed onthe signature page hereof.

 

3.             Termination ofOption.

(a)           The Option and allrights hereunder with respect thereto, to the extent such rights shall not havebeen exercised, shall terminate and become null and void after the expirationof the number of years from the Date of Grant identified on the signature pagehereof (the “*Option Term”* [no more than 10 years from Date of Grant or,in the case of a 10% owner, no more than 5 years from Date of Grant]).

(b)           Upon the occurrence ofthe Grantee’s ceasing for any reason to be employed by the Employer (suchoccurrence being a “termination of the Grantee’s employment”), the Option, tothe extent not

 

11

----

 

previouslyexercised, shall terminate and become null and void within thirty (30) daysafter the date of such termination of the Grantee’s employment, except (1) inthe event employment is terminated for cause as defined buy applicable law, inwhich case Grantee’s shall terminate and become null and void immediately or(2) in a case where the Program Administrators may otherwise determine in itssole and absolute discretion for up to sixty (60) days following thetermination of employment.  Asdetermined by the Program Administrators, upon a termination of the Grantee’semployment by reason of disability or death, the Option may be exercised, butonly to the extent that the Option was outstanding and exercisable on such dateof disability or death, up to a one-year period following the date of suchtermination of the Grantee’s employment.

(c)           In the event of thedeath of the Grantee, the Option may be exercised by the Grantee’s legalrepresentative, but only to the extent that the option would otherwise havebeen exercisable by the Grantee.

(d)           A transfer of theGrantee’s employment between the Company and any subsidiary of the Company, orbetween any subsidiaries of the Company, shall not be deemed to be atermination of the Grantee’s employment.

 

4.             Exercise ofOptions.

(a)           The Grantee mayexercise the option with respect to all or any part of the number of optionShares then exercisable hereunder by giving the Secretary of the Companywritten notice of intent to exercise. The notice of exercise shall specify the number of Option Shares as towhich the Option is to be exercised and the date of exercise thereof.

(b)           Full payment (in U.S.dollars) by the Grantee of the option price for the Option Shares purchasedshall be made on or before the exercise date specified in the notice ofexercise in cash, or, with the prior written consent of the Program Administrators,in whole or in part through the surrender of shares of Stock at their fairmarket value on the exercise date.  TheGrantee shall also pay any required income tax withholding taxes which may bepayable in U.S. dollars or Option shares if acceptable to the Company.

(c)           On the exercise datespecified in the Grantee’s notice or as soon thereafter as is practicable, theCompany shall cause to be delivered to the Grantee, a certificate orcertificates for the option Shares then being purchased (out of theretoforeunissued stock or reacquired Stock, as the Company may elect) upon full paymentfor such option Shares.  However, if (i)the Grantee is subject to Section 16 of the Securities Exchange Act of1934 and (ii) the Grantee exercises the Option before six months have passedfrom the Date of Grant, the Company shall be permitted to hold in its custodyany stock certificate arising from such exercise until six months has passedfrom the Date of Grant.  The obligationof the Company to deliver Stock shall, however, be subject to the conditionthat if at any time the Program Administrators shall determine in itsdiscretion that the listing, registration or qualification of the Option or theOption Shares upon any securities exchange or under any state or federal law,or the consent or approval of any governmental regulatory body, is necessary ordesirable as a condition of, or in connection with, the Option or the issuanceor purchase of Stock thereunder, the Option may not be exercised in whole or inpart unless such listing, registration, qualification, consent or approvalshall have been effected or obtained free of any conditions not acceptable tothe Program Administrators.

(d)           If the Grantee fails topay for any of the Option Shares specified in such notice or fails to acceptdelivery thereof, the Grantee’s right to purchase such Option Shares may beterminated by the Company.  The datespecified in the Grantee’s notice as the date of exercise shall be deemed thedate of exercise of the Option, provided that payment in full for the OptionShares to be purchased upon such exercise shall have been received by suchdate.

 

5.             Adjustment of andChanges in Stock of the Company.  Inthe event of a reorganization, recapitalization, change of shares, stock split,spin-off, stock dividend, reclassification, subdivision or combination ofshares, merger, consolidation, rights offering, or any other change in thecorporate structure or shares of capital stock of the Company, the ProgramAdministrators shall make such adjustment as may be required under theapplicable reorganization agreement in the number and kind of shares of Stocksubject to the Option or in the option price; *provided,however,*that no such adjustment shall give the Grantee anyadditional benefits under the Option. If there is no provision for the treatment of the Option under anapplicable

 

12

----

 

reorganizationagreement, the Option may terminate on a date determined by the ProgramAdministrators following at least 30 days written notice to the Grantee.

 

6.             Fair Market Value.  As used herein, the “fair market value” of ashare of Stock shall be determined by the Board.  However, if the Stock is publicly-traded, fair market value of ashare of Stock shall be based upon the closing or other appropriate tradingprice per share of Stock on a national securities exchange.

 

7.             No Rights ofStockholders.  Neither the Granteenor any personal representative shall be, or shall have any of the rights andprivileges of, a stockholder of the Company with respect to any shares of Stockpurchasable or issuable upon the exercise of the Option, in whole or in part,prior to the date of exercise of the Option.

 

8.             Non-Transferabilityof Option.  During the Grantee’slifetime, the Option hereunder shall be exercisable only by the Grantee or anyguardian or legal representative of the Grantee, and the option shall not betransferable except, in case of the death of the Grantee, by will or the lawsof descent and distribution, nor shall the Option be subject to attachment,execution or other similar process.  Inthe event of (a) any attempt by the Grantee to alienate, assign, pledge,hypothecate or otherwise dispose of the option, except as provided for herein,or (b) the levy of any attachment, execution or similar process upon the rightsor interest hereby conferred, the Company may terminate the Option by notice tothe Grantee and it shall thereupon become null and void.

 

9.             Restriction onExercise.  The Option may not be exercisedif the issuance of the Option Shares upon such exercise would constitute aviolation of any applicable federal or State securities or other law or validregulation.  As a condition to theexercise of the Option, the Company may require the Grantee exercising theOption to make any representation or warranty to the Company as may be requiredby any applicable law or regulation and, specifically, may require the Granteeto provide evidence satisfactory to the Company that the Option Shares are beingacquired only for investment purposes and without any present intention to sellor distribute the shares in violation of any federal or State securities orother law or valid regulation.

 

10.           Employment NotAffected.  The granting of theoption or its exercise shall not be construed as granting to the Grantee anyright with respect to continuance of employment of the Employer.  Except as may otherwise be limited by awritten agreement between the Employer and the Grantee, the right of theEmployer to terminate at will the Grantee’s employment with it at any time(whether by dismissal, discharge, retirement or otherwise) is specificallyreserved by the Company, as the Employer or on behalf of the Employer(whichever the case may be), and acknowledged by the Grantee.

 

11.           Amendment of Option.  The Option may be amended by the ProgramAdministrators at any time (i) if the Program Administrators determine, intheir sole discretion, that amendment is necessary or advisable in the light ofany addition to or change in the Internal Revenue Code of 1986 or in theregulations issued thereunder, or any federal or state securities law or otherlaw or regulation, which change occurs after the Date of Grant and by its termsapplies to the Option; or (ii) other than in the circumstances described inclause (i), with the consent of the Grantee.

 

12.           Notice.  All notices, requests, demands, and othercommunications hereunder shall be in writing and shall be deemed to have beenduly given if delivered personally or by certified mail, return receiptrequested, to the address set forth on the signature page hereof.

 

13.           Incorporation ofPlan by Reference.  The Option isgranted pursuant to the terms of the Plan, the terms of which are incorporatedherein by reference, and the option shall in all respects be interpreted inaccordance with the Plan.  The ProgramAdministrators shall interpret and construe the Plan and this instrument, andits interpretations and determinations shall be conclusive and binding on theparties hereto and any other

 

13

----

 

person claiming aninterest hereunder, with respect to any issue arising hereunder or thereunder.

 

14

----

 

14.           Governing Law.  The validity, construction, interpretationand effect of this instrument shall exclusively be governed by and determinedin accordance with the law of the State of Delaware.

 

IN WITNESSWHEREOF, the Company has caused its duly authorized officers to execute thisGrant of Option, and to apply the corporate seal hereto, and the Grantee hasplaced his or her signature hereon, effective as of the Date of Grant.

 
| **MEDICOR LTD.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | Address for Notices: |
| Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Management Offices |
| Title:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 4560 S. Decatur Blvd. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Suite 300 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Las Vegas, NV. 89103 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **ACCEPTED AND AGREED TO:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **“Grantee”**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Address for Notices: |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Printed Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Phone:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   | Fax: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| E-Mail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | Soc. Sec. #: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **“Date of Grant”**:                                              ,                                                                                                                                                                                                                                                                                                                                                                                                 |   | **“Option Term”**:                           years |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **“Number of Option Shares”:**                                                                                     (                                       ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **“Strike Price”:**                                          per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **Installment Exercise - Vesting of Option Shares:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **Number of Installments**:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **Vesting:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |  |  |  |  |  |  |  |

 

15

----

 

PART II

 

**MEDICORLTD.**

NON-QUALIFIED STOCK OPTION PLAN

 

Section 1.               Purpose.  The purpose of this MediCor Ltd. Non-QualifiedStock Option Plan (the “*Nonqualified Plan”*) is to permit theCompany to grant options to purchase shares of its Common Stock.  The Nonqualified Plan is designed to helpattract and retain superior personnel for positions of substantial responsibilitywith the Company and its subsidiaries, and to provide individuals with anadditional incentive to contribute to the success of the Company.  Any option granted pursuant to theNonqualified Plan shall be clearly and specifically designated as not being anincentive stock option, as defined in Section 422 of the Code.  This Nonqualified Plan is Part II of theProgram.  Unless any provision hereinindicates to the contrary, the Nonqualified Plan shall be subject to theGeneral Provisions of the Program.

 

Section 2.               Option Terms andConditions.  The terms andconditions of options granted under the Nonqualified Plan may differ from oneanother as the Program Administrators shall in their discretion determine aslong as all options granted under the Nonqualified Plan satisfy therequirements of the Nonqualified Plan.

 

Section 3.               Duration ofOptions.  Each option and all rightsthereunder granted pursuant to the terms of the Nonqualified Plan shall expireon the date determined by the Program Administrators, but in no event shall anyoption granted under the Nonqualified Plan expire later than ten (10) yearsfrom the date on which the option is granted. In addition, each option shall be subject to early termination as providedin the Nonqualified Plan.

 

Section 4.               Purchase Price.  The purchase price for shares acquiredpursuant to the exercise, in whole or in part, of any option shall not be lessthan the fair market value of the shares at the time of the grant of theoption.  Fair market value (the “*Fair MarketValue”*) shall be determined by the Program Administrators on thebasis of such factors as they deem appropriate; *provided, however,* that FairMarket Value on any day shall be deemed to be, if the Common Stock is traded ona national securities exchange, the closing price (or, if no reported saletakes place on such day, the mean of the reported bid and asked prices) of theCommon Stock on such day on the principal such exchange, or, if the stock isincluded on the composite tape, the composite tape.  In each case, the Program Administrators’ determination of FairMarket Value shall be conclusive.

 

Notwithstandingthe above portion of this Section 4, if at the time an option is grantedthe Optionee owns or would be considered to own by reason of Code Section 424(d)more than 10% of the total combined voting power of all classes of stock of theCompany or its subsidiaries, the purchase price of the shares covered by suchoption shall not be less than 110% of the Fair Market Value of a share ofCommon Stock on the date the option is granted.

 

Section 5.               Exercise ofOptions.  Each option shall beexercisable in one or more installments during its term and the right toexercise may be cumulative as determined by the Program Administrators.  Each option shall be exercisable a rate ofat least twenty percent (20%) per year over five (5) years from the date theoption is granted, subject to such reasonable conditions as determined by theProgram Administrators.  No option maybe exercised for a fraction of a share of Common Stock.  The purchase price of any shares purchasedshall be paid in full in cash or by certified or cashier’s check payable to theorder of the Company or by shares of Common Stock, if permitted by the ProgramAdministrators, or by a combination of cash, check, or shares of Common Stock,at the time of exercise of the option. If any portion of the purchase price is paid in shares of Common Stock,those shares shall be tendered at their then Fair Market Value as determined bythe Program Administrators in accordance with Section 4 of theNonqualified Plan.  Payment in shares ofCommon Stock includes the automatic application of shares of Common Stockreceived upon exercise of an option to satisfy the exercise price for

 

16

----

 

additional options.

 

Section 6.               Reorganization.  In the event of the dissolution orliquidation of the Company, any option granted under the Nonqualified Planshall terminate as of a date to be fixed by the Program Administrators; providedthat not less than 30 days’ written notice of the date so fixed shall be givento each Optionee and each such Optionee shall have the right during such period(unless such option shall have previously expired) to exercise any option,including any option that would not otherwise be exercisable by reason of aninsufficient lapse of time.

 

In the event of aReorganization (as defined below) in which the Company is not the surviving oracquiring company, or in which the Company is or becomes a subsidiary ofanother company after the effective date of the Reorganization, then:

(a)           if there is no plan oragreement respecting the Reorganization (“*Reorganization Agreement”*) or if theReorganization Agreement does not specifically provide for the change, conversionor exchange of the outstanding options for options of another corporation, thenexercise and termination provisions equivalent to those described in thisSection 6 shall apply; or

(b)           if there is aReorganization Agreement and if the Reorganization Agreement specificallyprovides for the change, conversion, or exchange of the outstanding options foroptions of another corporation, then the Program Administrators shall adjustthe outstanding unexercised options (and shall adjust the options remainingunder the Nonqualified Plan which have not yet been granted if theReorganization Agreement makes specific provision for such an adjustment) in amanner consistent with the applicable provisions of the ReorganizationAgreement.

The term “*Reorganization”*as used in this Section 6 shall mean any statutory merger, statutoryconsolidation, sale of all or substantially all of the assets of the Company ora sale of the Common Stock pursuant to which the Company is or becomes asubsidiary of another company after the effective date of the Reorganization.

Adjustments anddeterminations under this Section 6 shall be made by the ProgramAdministrators, whose decisions as to such adjustments or determinations shallbe final, binding, and conclusive.

 

Section 7.               Written NoticeRequired.  Any option grantedpursuant to the terms of this Nonqualified Plan shall be exercised when writtennotice of that exercise has been given to the Company at its principal officeby the person entitled to exercise the option and full payment for the shareswith respect to which the option is exercised has been received by the Company.

 

Section 8.               Compliance withSecurities Laws.  Shares shall notbe issued with respect to any option granted under the Nonqualified Plan,unless the exercise of that option and the issuance and delivery of the sharespursuant thereto shall comply with all applicable provisions of foreign, stateand federal law, including, without limitation, the Securities Act of 1933, asamended, and the Exchange Act, and the rules and regulations promulgatedthereunder, and the requirements of any stock exchange upon which the sharesmay then be listed, and shall be further subject to the approval of counsel forthe Company with respect to such compliance. The Program Administrators may also require an Optionee to furnishevidence satisfactory to the Company, including a written and signedrepresentation letter and consent to be bound by any transfer restrictionsimposed by law, legend, condition, or otherwise, that the shares are beingpurchased only for investment purposes and without any present intention tosell or distribute the shares in violation of any state or federal law, rule,or regulation.  Further, each Optioneeshall consent to the imposition of a legend on the shares of Common Stocksubject to his or her option and the imposition of stop-transfer instructionsrestricting their transferability as required by law or by this Section 8.

 

17

----

 

Section 9.               Continued Employmentor Service.  Each Optionee, ifrequested by the Program Administrators, must agree in writing as a conditionof receiving his or her Option, to remain in the employment of, or service to,the Company or any of its subsidiaries following the date of the granting ofthat option for a period specified by the Program Administrators.  Nothing in this Nonqualified Plan or in anyoption granted hereunder shall confer upon any Optionee any right to continuedemployment by, or service to, the Company or any of its subsidiaries, or limitin any way the right of the Company or any subsidiary at any time to terminateor alter the terms of that employment or service arrangement.

 

Section 10.             Option Rights UponTermination of Employment or Service. If an Optionee ceases to be employedby the Company or any subsidiary corporation for any reason other than death ordisability, his or her option shall terminate within thirty (30) days after thedate of termination of employment; *provided, however,*that in the event employmentis terminated for cause as defined buy applicable law, his or her option shallterminate immediately, *provided, further, however,*that theProgram Administrators may, in their sole and absolute discretion, allow theoption to be exercised (to the extent exercisable on the date of termination ofemployment) at any time within sixty (60) days after the date of termination ofemployment, unless either the option or the Nonqualified Plan otherwiseprovides for earlier termination.

 

Section 11.             Option Rights UponDisability.  If an Optionee becomesdisabled within the meaning of Code Section 422 (e) (3) while employed bythe Company or any subsidiary corporation, the Program Administrators, in theirdiscretion, may allow the option to be exercised, to the extent exercisable onthe date of termination of employment, at any time within one year after thedate of termination of employment due to disability, unless either the optionor the Nonqualified Plan otherwise provides for earlier termination.

 

Section 12.             Option Rights UponDeath of Optionee.  Except asotherwise limited by the Program Administrators at the time of the grant of anoption, if an Optionee dies while employed by, or providing services to, theCompany or any of its subsidiaries, his or her option shall expire one yearafter the date of death unless by its terms it expires sooner.  During this one year or shorter period, theoption may be exercised, to the extent that it remains unexercised on the dateof death, by the person or persons to whom the Optionee’s rights under theoption shall pass by will or by the laws of descent and distribution, but onlyto the extent that the Optionee is entitled to exercise the option at the dateof death.

 

Section 13.             Options NotTransferable.  Options grantedpursuant to the terms of this Nonqualified Plan may not be sold, pledged,assigned, or transferred in any manner otherwise than by will or the laws ofdescent or distribution and may be exercised during the lifetime of an Optioneeonly by that Optionee.  No such optionsshall be pledged or hypothecated in any way nor shall they be subject toexecution, attachment, or similar process.

 

Section 14.             Adjustments toNumber and Purchase Price of Optioned Shares.  All options granted pursuant to the terms of this NonqualifiedPlan shall be adjusted in a manner prescribed by Article 6 of the GeneralProvisions of the Program.

 

18

----

 

**MEDICORLTD.**

**NON-QUALIFIEDSTOCK OPTION PLAN**

 

GRANT OF OPTION

 

THIS GRANT, datedas of the date of grant indicated on the signature page hereof (the “*Date ofGrant”*), is delivered by MediCor Ltd., a Delaware corporation (the “*Company”*),to the individual or entity indicated on the signature page hereof  (the “*Grantee”*), who is a employee or non-employeeof the Company or one of its subsidiaries (the Grantee’s employer is sometimesreferred to herein as the (“*Employer”*).

 

WHEREAS, the Boardof Directors of the Company (the “*Board”*) on September 10, 1999,adopted the MediCor Ltd. Non-Qualified Stock Option Plan and adopted theAmended and Restated MediCor Ltd. Non-Qualified Stock Option Plan effective asof February 7, 2003 (the “*Plan”*);

 

WHEREAS, the Planprovides for the granting of stock options by the Board or the ProgramAdministrators to employees or non-employees of the Company or any subsidiaryof the Company to purchase, or to exercise certain rights with respect to,shares of the Common Stock of the Company, no par value (the “*Stock”*),in accordance with the terms and provisions thereof; and

 

WHEREAS, theProgram Administrators consider the Grantee to be a person who is eligible fora grant of non-qualified stock options under the Plan, and has determined thatit would be in the best interest of the Company to grant the non-qualified stockoptions documented herein.

 

NOW, THEREFORE,the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.             Grant of Option.  Subject to the terms and conditionshereinafter set forth, the Company, with the approval and at the direction ofthe Program Administrators, hereby grants to the Grantee, as of the Date ofGrant, an option to purchase up to the number of shares indicated on thesignature page hereof (the *“Number of Option Shares”*) of Stock at aprice per share as indicated on the signature page hereof (the *“StrikePrice”*), the fair market value. Such option is hereinafter referred to as the “*Option”* and the shares ofstock purchasable upon exercise of the Option are hereinafter sometimesreferred to as the “*Option Shares*.”  The Option is intended by the parties hereto to be, and shall betreated as, an option not qualified as an incentive stock option (as such termis defined under Section 422 of the Internal Revenue Code of 1986).

 

2.             InstallmentExercise.  Subject to such furtherlimitations as are provided herein, the Option shall become exercisable in thenumber of installments indicated on the signature page hereof, the Granteehaving the right hereunder to purchase from the Company the following number ofOption Shares upon exercise of the Option, on and after the following dates, incumulative fashion as determined by the Program Administrators and indicated onthe signature page hereof (the *“Vesting”*).

 

3.             Termination ofOption.

(a)           The Option and allrights hereunder with respect thereto, to the extent such rights shall not havebeen exercised, shall terminate and become null and void after the expirationof the number of years from the Date of Grant indicated on the signature pagehereof (the “*Option Term”*) [no more than 10 years from Date of Grant].

(b)           Upon the occurrence ofthe Grantee’s ceasing for any reason to be employed by the Employer (suchoccurrence being a “termination of the Grantee’s employment”), the Option, tothe extent not previously exercised, shall terminate and become null and voidwithin thirty (30) days after the date of such termination of the Grantee’semployment, except (1) in the event employment is terminated for cause asdefined

 

19

----

 

buy applicable law,in which case Grantee’s shall terminate and become null and void immediately or(2) in a case where the Program Administrators may otherwise determine in itssole and absolute discretion for up to sixty (60) days following thetermination of employment.  Asdetermined by the Program Administrators, upon a termination of the Grantee’semployment by reason of disability or death, the Option may be exercised, butonly to the extent that the Option was outstanding and exercisable on such dateof disability or death, up to a one-year period following the date of suchtermination of the Grantee’s employment.

(c)           In the event of thedeath of the Grantee, the Option may be exercised by the Grantee’s legalrepresentative, but only to the extent that the Option would otherwise havebeen exercisable by the Grantee.

(d)           A transfer of theGrantee’s employment between the Company and any subsidiary of the Company, orbetween any subsidiaries of the Company, shall not be deemed to be atermination of the Grantee’s employment.

 

4.             Exercise ofOptions.

(a)           The Grantee mayexercise the Option with respect to all or any part of the number of OptionShares then exercisable hereunder by giving the Secretary of the Companywritten notice of intent to exercise. The notice of exercise shall specify the number of Option Shares as towhich the Option is to be exercised and the date of exercise thereof.

(b)           Full payment (in U.S.dollars) by the Grantee of the option price for the Option Shares purchasedshall be made on or before the exercise date specified in the notice ofexercise in cash, or, with the prior written consent of the ProgramAdministrators, in whole or in part through the surrender of shares of Stock attheir fair market value on the exercise date. The Grantee shall also pay any required income tax withholding taxeswhich may be payable in U.S. dollars or Option Shares if acceptable to theCompany.

(c)           On the exercise datespecified in the Grantee’s notice or as soon thereafter as is practicable, theCompany shall cause to be delivered to the Grantee, a certificate orcertificates for the Option Shares then being purchased (out of theretoforeunissued Stock or reacquired Stock, as the Company may elect) upon full paymentfor such Option Shares.  However, if (i)the Grantee is subject to Section 16 of the Securities Exchange Act of1934 and (ii) the Grantee exercises the Option before six months have passedfrom the Date of Grant, the Company shall be permitted to hold in its custodyany stock certificate arising from such exercise until six months has passedfrom the Date of Grant.  The obligationof the Company to deliver Stock shall, however, be subject to the conditionthat if at any time the Program Administrators shall determine in itsdiscretion that the listing, registration or qualification of the Option or theOption Shares upon any securities exchange or under any state or federal law,or the consent or approval of any governmental regulatory body, is necessary ordesirable as a condition of, or in connection with, the Option or the issuanceor purchase of Stock thereunder, the Option may not be exercised in whole or inpart unless such listing, registration, qualification, consent or approvalshall have been effected or obtained free of any conditions not acceptable tothe Program Administrators..

(d)           If the Grantee fails topay for any of the Option Shares specified in such notice or fails to acceptdelivery thereof, the Grantee’s right to purchase such Option Shares may beterminated by the Company.  The date specifiedin the Grantee’s notice as the date of exercise shall be deemed the date ofexercise of the Option, provided that payment in full for the Option shares tobe purchased upon such exercise shall have been received by such date.

 

5.             Adjustment of andChanges in Stock of the Company.  Inthe event of a reorganization, recapitalization, change of shares, stock split,spin-off, stock dividend, reclassification, subdivision or combination ofshares, merger, consolidation, rights offering, or any other change in thecorporate structure or shares of capital stock of the Company, the ProgramAdministrators shall make such adjustment as may be required under theapplicable reorganization agreement in the number and kind of shares of Stocksubject to the Option or in the option price; *provided, however,*that nosuch adjustment shall give the Grantee any additional benefits under theOption.  If there is no provision forthe treatment of the Option under an applicable reorganization agreement, theOption may terminate on a date determined by the Program Administratorsfollowing at least 30 days written notice to the Grantee.

 

20

----

 

6.             Fair Market Value.  As used herein, the “fair market value” of ashare of Stock shall be determined by the Board.  However, if the Stock is publicly-traded, fair market value of ashare of Stock shall be based upon the closing or other appropriate tradingprice per share of Stock on a national securities exchange.

 

7.             No Rights ofStockholders.  Neither the Granteenor any personal representative shall be, or shall have any of the rights andprivileges of, a stockholder of the Company with respect to any shares of Stockpurchasable or issuable upon the exercise of the Option, in whole or in part,prior to the date of exercise of the Option.

 

8.             Non-Transferabilityof Option.  During the Grantee’slifetime, the option hereunder shall be exercisable only by the Grantee or anyguardian or legal representative of the Grantee, and the Option shall not betransferable except, in case of the death of the Grantee, by will or the lawsof descent and distribution, nor shall the Option be subject to attachment,execution or other similar process.  Inthe event of (a) any attempt by the Grantee to alienate, assign, pledge,hypothecate or otherwise dispose of the Option, except as provided for herein,or (b) the levy of any attachment, execution or similar process upon the rightsor interest hereby conferred, the Company may terminate the option by notice tothe Grantee and it shall thereupon become null and void.

 

9.             Restriction onExercise.  The Option may not beexercised if the issuance of the Option Shares upon such exercise wouldconstitute a violation of any applicable federal or state securities or otherlaw or valid regulation.  As a conditionto the exercise of the Option, the Company may require the Grantee exercisingthe Option to make any representation or warranty to the Company as may berequired by any applicable law or regulation and, specifically, may require theGrantee to provide evidence satisfactory to the Company that the Option Sharesare being acquired only for investment purposes and without any presentintention to sell or distribute the shares in violation of any federal or statesecurities or other law or valid regulation.

 

10.           Employment orService Not Affected.  The grantingof the option or its exercise shall not be construed as granting to the Granteeany right with respect to continuance of employment or service relationship withthe Employer.  Except as may otherwisebe limited by a written agreement between the Employer and the Grantee, theright of the Employer to terminate at will the Grantee’s employment or servicerelationship with it at any time (whether by dismissal, discharge, retirementor otherwise) is specifically reserved by the Company, as the Employer or onbehalf of the Employer (whichever the case may be), and acknowledged by theGrantee.

 

11.           Amendment of Option.  The Option may be amended by the ProgramAdministrators at any time (i) if the Program Administrators determine, intheir sole discretion, that amendment is necessary or advisable in the light ofany addition to or change in the Internal Revenue Code of 1986 or in theregulations issued thereunder, or any federal or state securities law or otherlaw or regulation, which change occurs after the Date of Grant and by its termsapplies to the option; or (ii) other than in the circumstances described inclause (i), with the consent of the Grantee.

 

12.           Notice.  All notices, requests, demands, and othercommunications hereunder shall be in writing and shall be deemed to have beenduly given if delivered personally or by certified mail, return receiptrequested, as indicated on the signature page hereof.

 

13.           Incorporation ofPlan by Reference.  The Option isgranted pursuant to the terms of the Plan, the terms of which are incorporatedherein by reference, and the Option shall in all respects be interpreted inaccordance with the Plan.  The ProgramAdministrators shall interpret and construe the Plan and this instrument, andits interpretations and determinations shall be conclusive and binding on theparties hereto and any other person claiming an interest hereunder, withrespect to any issue arising hereunder or thereunder.

 

21

----

 

14.           Governing Law.  The validity, construction, interpretationand effect of this instrument shall exclusively be governed by and determinedin accordance with the law of the State of Delaware.

 

**IN WITNESS WHEREOF**,the Company has caused its duly authorized officers to execute this Grant ofOption, and to apply the corporate seal hereto, and the Grantee has placed hisor her signature hereon, effective as of the Date of Grant.

 
| **MEDICOR LTD.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | Address for Notices: |
| Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Management Offices |
| Title:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 4560 S. Decatur Blvd. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Suite 300 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Las Vegas, NV. 89103 |
| **ACCEPTED AND AGREED TO:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Grantee”**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Address for Notices: |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Printed Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Phone:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | Fax: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| E-Mail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | Soc. Sec. #: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Date of Grant”**  :                                             ,                                                                                                                                                                                                                                                                                                                                                                                              |   | **“Option Term”**:                                years |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Number of Option Shares”:**                                                                                        (                                  )           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Strike Price”:**                                          per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Installment Exercise - Vesting of Option Shares:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Number of Installments**:                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **“Vesting”:**                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |  |  |  |  |  |  |  |  |

 

22

----

 

PART III

 

**MEDICORLTD.**

RESTRICTED SHARE PLAN

 

Section 1.               Purpose.  The purpose of this Restricted Share Plan(the “*RestrictedPlan”*) is to promote the growth and general prosperity of theCompany by permitting the Company to grant restricted shares to help attract andretain superior personnel for positions of substantial responsibility with theCompany and its subsidiaries and to provide individuals with an additionalincentive to contribute to the success of the Company.  The Restricted Plan is Part III of the Program.Unless any provision herein indicates to the contrary, the Restricted Planshall be subject to the General Provisions of the Program.

 

Section 2.               Terms andConditions.  The terms andconditions of restricted shares granted under the Restricted Plan may differfrom one another as the Program Administrators shall, in their discretion,determine as long as all restricted shares granted under the Restricted Plansatisfy the requirements of the Restricted Plan.

 

Each restrictedshare grant shall provide to the recipient (the “*Holder”*) the transfer of aspecified number of shares of Common Stock of the Company that shall becomenonforfeitable upon the achievement of specified service or performanceconditions within a specified period or periods (the “*Restriction Period”*) asdetermined by the Program Administrators. At the time that the restricted share is granted, the ProgramAdministrators shall specify the service or performance conditions and theperiod of duration over which the conditions apply.

 

The Holder ofrestricted shares shall not have any rights with respect to such award, unlessand until such Holder has executed an agreement evidencing the terms andconditions of the award (the “*Restricted Share Award Agreement”*).  Each individual who is awarded restrictedshares shall be issued a stock certificate in respect of such shares.  Such certificate shall be registered in thename of the Holder and shall bear an appropriate legend referring to the terms,conditions, and restrictions applicable to such award, substantially in thefollowing form:

 

The transferability of this certificate and the sharesof stock represented hereby are subject to the terms and conditions (includingforfeiture) of the MediCor Ltd., Restricted Share Plan and Restricted Share AwardAgreement entered into between the registered owner and MediCor Ltd..  Copies of such Plan and Agreement are onfile in the offices of MediCor Ltd..

 

The ProgramAdministrators shall require that the stock certificates evidencing such sharesbe held in the custody of the Company until the restrictions thereon shall havelapsed, and that, as a condition of any restricted share award, the Holdershall have delivered a stock power, endorsed in blank, relating to the stockcovered by such award.  At the expirationof each Restriction Period, the Company shall redeliver to the Holdercertificates held by the Company representing the shares with respect to whichthe applicable conditions have been satisfied.

 

Section 3.               Nontransferable.  Subject to the provisions of the RestrictedPlan and the Restricted Share Award Agreements, during the Restriction Periodas may be set by the Program Administrators commencing on the grant date, theHolder shall not be permitted to sell, transfer, pledge, or assign shares of restrictedshares awarded under the Restricted Plan.

 

Section 4.               Restricted ShareRights Upon Employment or Service. If a Holder terminates employment or service with the company prior tothe expiration of the Restriction Period, any restricted shares granted to himsubject to such Restriction Period shall be forfeited by the Holder and shallbe transferred to the Company.  TheProgram Administrators may, in their sole discretion, accelerate the lapsing ofor waive such

 

23

----

 

restrictions inwhole or in part based upon such factors and such circumstances as the ProgramAdministrators may determine, in its sole discretion, including, but notlimited to, the Plan Participant’s retirement, death, or disability.

 

Section 5.               StockholderRights.  The Holder shall have, withrespect to the restricted shares granted, all of the rights of a stockholder ofthe Company, including the right to vote the shares, and the right to receiveany dividends thereon.  Certificates forshares of unrestricted stock shall be delivered to the grantee promptly after,and only after, the Restriction Period shall expire without forfeiture inrespect of such restricted shares.

 

Section 6.               Compliance withSecurities Laws.  Shares shall notbe issued under the Restricted Plan unless the issuance and delivery of theshares pursuant thereto shall comply with all relevant provisions of foreign,state and federal law, including, without limitation, the Securities Act of1933, as amended, and the Exchange Act, and the rules and regulationspromulgated thereunder, and the requirements of any stock exchange upon whichthe shares may then be listed, and shall be further subject to the approval ofcounsel for the Company with respect to such compliance.  The Program Administrators may also require aHolder to furnish evidence satisfactory to the Company, including a written andsigned representation letter and consent to be bound by any transferrestrictions imposed by law, legend, condition, or otherwise, that the sharesare being purchased only for investment purposes and without any presentintention to sell or distribute the shares in violation of any state or federallaw, rule, or regulation.  Further, eachHolder shall consent to the imposition of a legend on the shares of CommonStock issued pursuant to the Restricted Share Plan and the imposition ofstop-transfer instructions restricting their transferability as required by lawor by this Section 6.

 

Section 7.               ContinuedEmployment or Service.  Each Holder,if requested by the Program Administrators, must agree in writing as acondition of the granting of his or her restricted shares, to remain in theemployment of, or service to, the Company or any of its subsidiaries followingthe date of the granting of that restricted share for a period specified by theProgram Administrators.  Nothing in theRestricted Plan or in any restricted share granted hereunder shall confer uponany Holder any right to continued employment by, or service to, the Company orany of its subsidiaries, or limit in any way the right of the Company or anysubsidiary at any time to terminate or alter the terms of that employment orservice arrangement.

 

24

----

 

**MEDICORLTD.**

**RESTRICTEDSHARES PLAN**

 

RESTRICTED SHARE AWARD AGREEMENT

 

THIS AGREEMENT ismade as of the date indicated on the signature page hereof by and betweenMediCor Ltd. (the “*Company”*), and the individual or entityindicated on the signature page hereof (the “*Grantee”*):

 

WHEREAS, theCompany maintains the MediCor Ltd. Restricted Shares Plan (“*RestrictedShares Plan”*) under which the Program Administrators may awardshares of the Company’s common stock, no par value (“*Common Stock”*) to employeesand non-employees as the Program Administrators may determine, subject toterms, conditions, or restrictions as it may deem appropriate; and

 

WHEREAS, pursuantto the Restricted Shares Plan, the Program Administrators has awarded toGrantee a restricted stock award conditioned upon the execution by the Companyand Grantee of a Restricted Share Award Agreement setting forth all the termsand conditions applicable to such award;

 

NOW, THEREFORE, inconsideration of the mutual promise and covenant contained herein, it is herebyagreed as follows:

 

1.             Award of Shares.  Under the terms of the Restricted SharesPlan, the Program Administrators hereby awards and transfers to Grantee arestricted stock award on the date indicated on the signature page hereof  (the “*Grant Date”*), covering shares of CommonStock (“*Shares”*)subject to the terms, conditions, and restrictions set forth in thisAgreement.  This transfer of Sharesshall constitute a transfer of such property in connection with Grantee’sperformance of service to the Company (which transfer is intended to constitutea “transfer” for purposes of Section 83 of the Internal Revenue Code).

 

2.             Share Restrictions.  During the period beginning on the GrantDate and ending on the date(s) specified by the Program Administrators (the “*RestrictionPeriod”*), Grantee’s ownership of the Shares shall be subject to arisk of forfeiture (which risk is intended to constitute a “substantial risk offorfeiture” for purposes of Section 83 of the Internal Revenue Code).  Specifically, if Grantee’s employment orservice with the Company is terminated for any reason, including Grantee’sdeath, disability, or retirement at any time before the Restriction Periodends, Grantee shall forfeit his or her ownership in the Shares.  However, in the event of Grantee’s terminationof employment or service, the Program Administrators may, in its solediscretion, based upon relevant circumstances such as the Grantee’s death,disability, or retirement, waive the minimum employment or service requirementand provide Grantee with a nonforfeitable right to the Shares as of the date ofsuch termination of employment or service.

 

3.             Stock Certificates.  A stock certificate evidencing the Sharesshall be issued in the name of Grantee as of the Grant Date.  Grantee shall thereupon be the shareholderof all the Shares represented by the stock certificate.  As such, Grantee shall be entitled to allrights of a stockholder of the Company, including the right to vote the Sharesand receive dividends and/or other distributions declared on such Shares.

Physicalpossession or custody of the stock certificate shall be retained by the Companyuntil such time as the Restriction Period lapses without the occurrence of anyforfeiture of the Shares in a manner described in the above Paragraph 2. Upon theexpiration of the Restriction Period without the occurrence of such aforfeiture, the Company shall cause the stock certificate covering the Sharesto be delivered to Grantee.  In theevent that Grantee’s employment or service with the Company is terminated priorto the lapse of the Restriction Period and there occurs a forfeiture of theShares, the stock certificate representing such Shares shall be then canceledand revert to the Company.

 

25

----

 

4.             Nontransferable.  During the Restriction Period, the Sharescovered by the restricted stock award shall not be transferable by Grantee bymeans of sale, assignment, sale, pledge, encumbrance, or otherwise.  During the Restriction Period, the Companyshall place a legend on the stock certificate restricting the transferabilityof such certificate and referring to the terms and conditions applicable to theShares pursuant to the Restricted Shares Plan and this Agreement.

Upon the lapse ofthe Restriction Period, the Shares shall not be delivered to Grantee if suchdelivery would constitute a violation of any applicable federal or statesecurities or other law or valid regulation. As a condition to the delivery of the Shares to Grantee, the Company mayrequire Grantee to make any representation or warranty as may be required byany applicable law or regulation and, specifically, may require Grantee toprovide evidence satisfactory to the Company that the Shares are being acquiredonly for investment purposes and without any present intention to sell ordistribute the shares in violation of any federal or state securities or otherlaw or valid regulation.

 

5.             Administration.  The Program Administrators shall have fullauthority and discretion (subject only to the express provisions of theRestricted Shares Plan) to decide all matters relating to the administrationand interpretation of the Restricted Shares Plan and this Agreement.  All such Program Administratorsdeterminations shall be final, conclusive, and binding upon the Company,Grantee, and any and all interested parties.

 

6.             Right to ContinuedEmployment or Service.  Nothing inthe Restricted Shares Plan or this Agreement shall confer on a Grantee anyright to continue in the employ of or service to the Company or, except as mayotherwise be limited by a written agreement between the Company and theGrantee, in any way affect the Company’s right to terminate Grantee’semployment or service, at will, at any time without prior notice at any timefor any or no reason (whether by dismissal, discharge, retirement orotherwise).

 

7.             Amendment.  This Agreement shall be subject to the termsof the Restricted Shares Plan as amended, the terms of which are incorporatedherein by reference.  However, therestricted stock award that is the subject of this Agreement may not in any waybe restricted or limited by any Restricted Shares Plan amendment or terminationapproved after the date of the award without Grantee’s written consent.

 

8.             Force and Effect.  The various provisions of this Agreement areseverable in their entirety.  Anydetermination of invalidity or unenforceability of any one provision shall haveno effect on the continuing force and effect of the remaining provisions.

 

9.             Governing Law.  This Agreement shall be construed andenforced in accordance with and governed by the laws of the State of Delaware.

 

10.           Successors.  This Agreement shall be binding upon andinure to the benefit of the successors, assigns, and heirs of the respectiveparties.

 

11.           Notice.  All notices, requests, demands, and othercommunications hereunder shall be in writing and shall be deemed to have beenduly given if delivered personally or by certified mail, return receiptrequested, as indicated on the signature page hereof.

 

12.           Incorporation ofPlan by Reference.  The Option isgranted pursuant to the terms of the Plan, the terms of which are incorporatedherein by reference, and the Option shall in all respects be interpreted inaccordance with the Plan.  The ProgramAdministrators shall interpret and construe the Plan and this instrument, andits interpretations and determinations shall be conclusive and binding on theparties hereto and any other person claiming an interest hereunder, withrespect to any issue arising hereunder or thereunder.

 

26

----

 

IN WITNESS WHEREOF, the parties hereto have signedthis Agreement as of the date hereof.

 
| **MEDICOR LTD.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | Address for Notices: |
| Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Management Offices |
| Title:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 4560 S. Decatur Blvd.  Suite 300 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Las Vegas, NV. 89103 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ACCEPTED AND AGREED TO:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Grantee”**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Address for Notices: |
| By:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Printed Name:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Phone:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | Fax: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| E-Mail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | Soc. Sec. #: |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Grant Date”**  :                                                ,                                                                                                                                                                                                                                                                                                     |   | **“Restricted Period”:**                               years |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **“Number of Restricted Shares”:**                                                                (                                             ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  |  |

 

27

----

 

PART IV

 

**MEDICORLTD.**

EMPLOYEE STOCK PURCHASE PLAN

 

Section 1.               Purpose.  The purpose of the MediCor Ltd. EmployeeStock Purchase Plan (the “*Stock Purchase Plan”*) is to promote thegrowth and general prosperity of the Company by permitting the Company to sellto employees of the Company and its subsidiaries shares of the Company’s stockin accordance with Section 423 of the Code (“*Section 423”*), and itis the intention of the Company to have the Stock Purchase Plan qualify as anEmployee Stock Purchase Plan in accordance with Section 423, and the StockPurchase Plan shall be construed to administer stock purchases and to extendand limit participation consistent with the requirements ofSection 423.  The Stock PurchasePlan will be administered by the Program Administrators.

 

Section 2.               Maximum Numberof Shares; Terms and Conditions. The maximum aggregate number of shares ofCommon Stock subject to the Stock Purchase Plan shall be One Hundred TwentyFour Thousand Two Hundred Sixty Eight (124,268).  The terms and conditions of shares to be offered to be sold toemployees of the Company and its subsidiaries under the Stock Purchase Planshall comply with Section 423.

 

Section 3.               Offering Periodsand Participation.  The StockPurchase Plan shall be implemented through a series of consecutive fiscalquarters of the Company (the “*Offering Periods”*).  A full-time employee may participate in theStock Purchase Plan and may enroll in an Offering Period by delivering to theCompany’s payroll office an agreement evidencing the terms and conditions ofthe stock subscription in a form prescribed by the Program Administrators (the“*PurchaseAgreement”*) at least thirty (30) business days prior to theEnrollment Date for that Offering Period (or such lesser number of businessdays as the Program Administrators, in their sole discretion, may permit).  Eligible Employees who participate in theStock Purchase Plan may do so in the Offering Period.  Purchases will be made through payroll deductions, unless directpurchases have been approved by the Program Administrators.  The first day of each Offering Period willbe the “Enrollment Date” and the last day of each period will be the “ExerciseDate.”

 

Section 4.               Purchase Price.  The “Purchase Price” means an amount asdetermined by the Program Administrators that is the lesser of:  (a) the Purchase Price Discount from theFair Market Value of a share of Common Stock on the Enrollment Date, or (b) thePurchase Price Discount from the Fair Market Value of a share of Common Stockon the Exercise Date.  The “PurchasePrice Discount” shall mean the amount of the discount from the Fair MarketValue granted to Plan Participants not to exceed fifteen percent (15%) of theFair Market Value as established by the Board from time to time.  “Fair Market Value” of a share of stockshall be determined by the Board. However, if the Stock is publicly-traded, fair market value of a shareof Stock shall be based upon the closing or other appropriate trading price pershare of Stock on a national securities exchange.

 

Section 5.               Grants.

(a)           *Grants.*  On the Enrollment Date for each OfferingPeriod, each Eligible Employee participating in such Offering Period shall begranted the right to purchase on each Exercise Date during such Offering Period(at the Purchase Price) shares of Common Stock in an amount from time to timespecified by the Program Administrators as set forth in Section 5(b)below.  The Program Administrators willalso establish the Purchase Price Discount and the Periodic ExerciseLimit.  The right to purchase shallexpire immediately after the last Exercise Date of the Offering Period.

(b)           *Grant Limitations.*  Any provisions of the Stock Purchase Plan tothe contrary notwithstanding, no Plan Participant shall be granted a right topurchase under the Stock Purchase Plan:

(i)            if, immediately afterthe grant, such Plan Participant would own stock possessing five percent (5%)or more of the total combined voting power or value of all classes of stock ofthe Company or of any subsidiary (applying the constructive ownership rules ofSection 424(d) of the Code and

 

28

----

 

treating stockthat a Plan Participant may acquire under outstanding options as stock owned bythe Plan Participant);

(ii)           that permits such PlanParticipant’s rights to purchase stock under all employee stock purchase plansof the Company and its subsidiaries to accrue at a rate that exceedsTwenty-Five Thousand Dollars ($25,000) worth of stock (determined at the FairMarket Value of the shares at the time such purchase) in any calendar year(computed utilizing the rules of Section 423(b)(8) of the Code); or

(iii)          that permits a PlanParticipant to purchase Stock in excess of twenty percent (20%) of his or herCompensation, which shall include the gross base salary or hourly compensationpaid to a Plan Participant and the gross amount of any targeted bonus, withoutreduction for contributions to any 401(k) plan sponsored by the Company.

(c)           *No Rights in Respect of UnderlyingStock.*  The Plan Participantwill have no interest or voting right in shares covered by a right to purchaseuntil such purchase has been completed.

(d)           *Plan Account. *The Company shall maintain a plan account for the PlanParticipants in the Stock Purchase Plan, to which are credited the payrolldeductions made for such Plan Participant pursuant to Section 6 and fromwhich are debited amounts paid for the purchase of shares.

(e)           *Common Stock Account.*  As a condition of participation in the StockPurchase Plan, each Plan Participant shall be required to receive sharespurchased under the Stock Purchase Plan in a common stock account (the “*Common StockAccount”*) maintained by the Company to hold the Common Stockpurchased under the Stock Purchase Plan.

(f)            *Dividends on Shares.*  Subject to the limitations ofSection 5(a) hereof and Section 423(b)(8) of the Code, all cashdividends, if any, paid with respect to shares of Common Stock purchased underthe Stock Purchase Plan and held in a Plan Participant’s Common Stock Accountshall be automatically invested in shares of Common Stock purchased at 100% ofFair Market Value on the next Exercise Date. All non-cash distributions on Common Stock purchased under the StockPurchase Plan and held in a Plan Participant’s Common Stock Account shall bepaid to the Plan Participant as soon as practicable.

 

Section 6.               PayrollDeductions/Direct Purchases.

(a)           *Plan Participant Designations.*  The Purchase Agreement applicable to anOffering Period shall designate payroll deductions to be made on each paydayduring the Offering Period as a whole number percentage specified by theProgram Administrators of such Eligible Employee’s Compensation for the payperiod preceding such payday.  Directpurchases may be permitted on such terms specified by the ProgramAdministrators.

(b)           *Plan Account Balances. *The Company shall make payrolldeductions as specified in each Plan Participant’s Subscription Agreement oneach payday during the Offering Period and credit such payroll deductions tosuch Plan Participant’s Plan Account.  APlan Participant may not make any additional payments into such PlanAccount.  No interest will accrue on anypayroll deductions.  All payrolldeductions received or held by the Company under the Stock Purchase Plan may beused by the Company for any corporate purpose, and the Company shall not beobligated to segregate such payroll deductions.

(c)           *Plan Participant Changes.*  A Plan Participant may discontinue his orher participation in the Stock Purchase Plan as provided in Section 8, ormay increase or decrease (subject to such limits as the Program Administratormay impose) the rate of his or her payroll deductions during any OfferingPeriod by filing with the Company a new Subscription Agreement authorizing sucha change in the payroll deduction rate. The change in rate shall be effective with the first full payroll periodfollowing fifteen (15) business days after the Company’s receipt of the newSubscription Agreement, unless the Company elects to process a given change inparticipation more quickly.

(d)           *Decreases. *Notwithstanding the foregoing, to the extent necessaryto comply with Section 423(b)(8) of the Code and Section 4(b) herein,a Plan Participant’s payroll deductions shall be decreased to zero percent atsuch time during any Purchase Period that is scheduled to end during a calendaryear (the “*CurrentPurchase Period”*) when the aggregate of all payroll deductionspreviously used to purchase stock under the Stock Purchase Plan in a priorPurchase Period which ended during that calendar year plus all payroll

 

29

----

 

deductionsaccumulated with respect to the Current Purchase Period equal to the maximumpermitted by Section 423(b)(8) of the Code.  Payroll deductions shall recommence at the rate provided in suchPlan Participant’s Subscription Agreement at the beginning of the firstPurchase Period that is scheduled to end in the following calendar year, unlessterminated by the Plan Participant as provided in Section 8.

(e)           *Tax Obligations.*  At the time of the purchase of shares, andat the time any Common Stock issued under the Stock Purchase Plan to a PlanParticipant is disposed of, the Plan Participant must adequately provide forthe Company’s federal, state or other tax withholding obligations, if any, thatarise upon the purchase of shares or the disposition of the Common Stock.  At any time, the Company may, but will notbe obligated to, withhold from the Plan Participant’s Compensation the amountnecessary for the Company to meet applicable withholding obligations,including, but not limited to, any withholding required to make available tothe Company any tax deductions or benefit attributable to sale or earlydisposition of Common Stock by the eligible employee.

(f)            *Statements of Account.*  The Company shall maintain each PlanParticipant’s Plan Account and shall give each Plan Participant a statement ofaccount at least annually.  Suchstatements will set forth the amounts of payroll deductions, the Purchase Priceapplicable to the Common Stock purchased, the number of shares purchased, theremaining cash balance and the dividends received, if any, for the periodcovered.

 

Section 7.               Purchase ofShares.

(a)           *Automatic Exercise on ExerciseDates. *Unless a PlanParticipant withdraws as provided in Section 8 below, his or her Optionfor the purchase of shares will be exercised automatically on each ExerciseDate within the Offering Period in which such Plan Participant is enrolled forthe maximum whole number of shares of Common Stock as can then be purchased atthe applicable Purchase Price with the payroll deductions accumulated in suchPlan Participant’s Plan Account and not yet applied to the purchase of sharesunder the Stock Purchase Plan, subject to the Periodic Exercise Limit.  All such shares purchased under the StockPurchase Plan shall be credited to the Plan Participant’s Common StockAccount.  During a Plan Participant’slifetime, a Plan Participant’s options to purchase shares under the StockPurchase Plan shall be exercisable only by the Plan Participant.

(b)           *Compliance With Securities Law.*  Shares of Common Stock shall not be issuedwith respect to any purchase of shares granted under the Stock Purchase Plan,unless the purchase of shares and the issuance and delivery of those sharespursuant to that exercise comply with all applicable provisions of foreign,state and federal law including, without limitation, the Securities Act of1933, as amended and the Exchange Act, and the rules and regulationspromulgated thereunder, and the requirements of any stock exchange upon whichthe shares may then be listed, and shall be further subject to the approval ofcounsel for the Company with respect to such compliance.  The Program Administrators may also requirea Plan Participant to furnish evidence satisfactory to the Company, including awritten and signed representation letter and consent to be bound by anytransfer restrictions imposed by law, legend, condition, or otherwise, that theshares are being purchased only for investment purposes and without any presentintention to sell or distribute the shares in violation of any state or federallaw, rule, or regulation.  Further, eachPlan Participant shall consent to the imposition of a legend on the shares ofCommon Stock purchased and the imposition of stop-transfer instructionsrestricting their transferability as required by law or by this Section 7.

(c)           *Excess Plan Account Balances.*  If, due to application of the PeriodicExercise Limit or otherwise, there remains in a Plan Participant’s Plan Accountimmediately following exercise of such Plan Participant’s option to purchaseshares on an Exercise Date any cash accumulated immediately preceding suchExercise Date and not applied to the purchase of shares under the StockPurchase Plan, such cash shall promptly be returned to the Plan Participant; *provided,however,* that if the Plan Participant shall be enrolled in theOffering Period (including, without limitation, by not withdrawing pursuant toSection 8), such cash shall be contributed to the Plan Participant’s PlanAccount for such next Purchase Period.

 

Section 8.               Holding Period.  The Program Administrators may establish, asa condition to

 

30

----

 

participation, aholding period of up to one (1) year.

 

Section 9.               Withdrawal;Termination of Employment.

(a)           *Voluntary Withdrawal.*  A Plan Participant may withdraw from anOffering Period by giving written notice to the Company’s payroll office atleast thirty (30) business days prior to the next Exercise Date.  Such withdrawal shall be effective beginningthirty (30) business days after receipt by the Company’s payroll office ofnotice thereof.  On or promptly followingthe effective date of any withdrawal, all (but not less than all) of the withdrawingPlan Participant’s payroll deductions credited to his or her Plan Account andnot yet applied to the purchase of shares under the Stock Purchase Plan will bepaid to such Plan Participant, and on the effective date of such withdrawalsuch Plan Participant’s option to purchase shares for the Offering Period willbe automatically terminated and no further payroll deductions for the purchaseof shares will be made during the Offering Period.  If a Plan Participant withdraws from an Offering Period, payrolldeductions will not resume at the beginning of any succeeding Offering Period,unless the Plan Participant delivers to the Company a new SubscriptionAgreement with respect thereto.

(b)           *Termination of Employment.*  Promptly after a Plan Participant’s ceasingto be an employee for any reason all shares of Common Stock held in a PlanParticipant’s Common Stock Account and the payroll deductions credited to suchPlan Participant’s Plan Account and not yet applied to the purchase of sharesunder the Stock Purchase Plan will be returned to such Plan Participant or, inthe case of his or her death, to the person or persons entitled thereto, andsuch Plan Participant’s option to purchase shares will be automaticallyterminated, *provided*that, if the Company does not learn of such death more than five (5) businessdays prior to an Exercise Date, payroll deductions credited to such PlanParticipant’s Plan Account may be applied to the purchase of shares under theStock Purchase Plan on such Exercise Date.

 

Section 10.             Non-transferability.  Neither payroll deductions credited to aPlan Participant’s Plan Account nor any rights with regard to the exercise of apurchase of shares or to receive shares under the Stock Purchase Plan may beassigned, transferred, pledged or otherwise disposed of by the Plan Participantin any way other than by will or the laws of descent and distribution, and anypurchase of shares by a Plan Participant shall, during such Plan Participant’slifetime, be exercisable only by such Plan Participant.  Any such attempt at assignment, transfer,pledge or other disposition shall be without effect, except that the ProgramAdministrator may treat such act as an election to withdraw from an offeringperiod in accordance with Section 8.

 

Section 11.             Compliance withSecurities Laws.  Shares shall notbe issued with respect to the Stock Purchase Plan, unless the issuance anddelivery of the shares pursuant thereto shall comply with all applicableprovisions of foreign, state and federal law, including, without limitation,the Securities Act of 1933, as amended, and the Exchange Act, and the rules andregulations promulgated thereunder, and the requirements of any stock exchangeupon which the shares may then be listed, and shall be further subject to theapproval of counsel for the Company with respect to such compliance.  The Program Administrators may also requirea Plan Participant to furnish evidence satisfactory to the Company, including awritten and signed representation letter and consent to be bound by anytransfer restrictions imposed by law, legend, condition, or otherwise, that theshares are being purchased only for investment purposes and without any presentintention to sell or distribute the shares in violation of any state or federallaw, rule, or regulation.  Further, eachPlan Participant shall consent to the imposition of a legend on the shares ofCommon Stock subject to his or her Option and the imposition of stop-transferinstructions restricting their transferability as required by law or by thisSection 11.

 

Section 12.             ContinuedEmployment or Service.  Each PlanParticipant, if requested by the Program Administrators, must agree in writing,to remain in the employment of, or service to, the Company or any of itssubsidiaries following the date of the granting of that option to purchaseshares for a period specified by the Program Administrators.  Nothing in this Stock Purchase Plan shallconfer upon any Plan Participant any right to continued employment by, orservice to, the Company or any of its subsidiaries, or limit in any way theright of the Company or any subsidiary at any time to terminate or alter theterms of that employment or service

 

31

----

 

arrangement.

 

PART V

 

**MEDICORLTD.**

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

 

Section 1.               Purpose; Plan.  The purpose of this MediCor Ltd.,Non-Employee Director Stock Option Plan (the “*Directors Plan”*) is topermit the Company to grant options to purchase shares of its Common Stock tonon-employee directors of the Company. Any option granted pursuant to the Directors Plan shall be clearly andspecifically designated as not being an incentive stock option, as defined inSection 422 of the Code.  ThisDirectors Plan is Part V of the Program. Unless any provision herein indicates to the contrary, the DirectorsPlan shall be subject to the General Provisions of the Program.  On the next to last business day of eachfiscal year of the Company, the Company shall grant to each non-employeedirector of the Company options to purchase that number of shares of CommonStock as determined annually by the Program Administrators. The terms andconditions of options granted under the Directors Plan shall be in duration,form and substance as the Program Administrators shall in their discretiondetermine, but in no event shall any option granted under the Directors Planexpire later than ten (10) years from the date on which the option is granted.

 

Section 2.               Compliance withSecurities Laws.  Shares of Common Stockshall not be issued with respect to any option granted under the DirectorsPlan, unless the exercise of that option and the issuance and delivery of theshares pursuant thereto shall comply with all applicable provisions of foreign,state and federal law, including, without limitation, the Securities Act of1933, as amended, and the Exchange Act, and the rules and regulationspromulgated thereunder, and the requirements of any stock exchange upon whichthe shares may then be listed, and shall be further subject to the approval ofcounsel for the Company with respect to such compliance.  The Program Administrators may also requirean Optionee to furnish evidence satisfactory to the Company, including awritten and signed representation letter and consent to be bound by anytransfer restrictions imposed by law, legend, condition, or otherwise, that theshares are being purchased only for investment purposes and without any presentintention to sell or distribute the shares in violation of any state or federallaw, rule, or regulation.  Further, eachOptionee shall consent to the imposition of a legend on the shares of CommonStock subject to his or her option and the imposition of stop-transferinstructions restricting their transferability as required by law or by thisSection 2.

 

Section 3.               Adjustments toNumber and Purchase Price of Optioned Shares.  All options granted pursuant to the terms of this Directors Planshall be adjusted in a manner prescribed by Article 6 of the GeneralProvisions of the Program.

 

Section 4.               Purchase Price.  The purchase price for shares acquiredpursuant to the exercise, in whole or in part, of any option shall not be lessthan the fair market value of the shares at the time of the grant of theoption.  Fair market value (the “*Fair MarketValue”*) shall be determined by the Program Administrators on thebasis of such factors as they deem appropriate; *provided, however,* that FairMarket Value on any day shall be deemed to be, if the Common Stock is traded ona national securities exchange, the closing price (or, if no reported saletakes place on such day, the mean of the reported bid and asked prices) of theCommon Stock on such day on the principal such exchange, or, if the stock isincluded on the composite tape, the composite tape.  In each case, the Program Administrators’ determination of FairMarket Value shall be conclusive.

 

Notwithstandingthe above portion of this Section 4, if at the time an option is grantedthe Optionee owns or would be considered to own by reason of CodeSection 424(d) more than 10% of the total combined voting power of allclasses of stock of the Company or its subsidiaries, the purchase price of theshares covered by such option shall not be less than 110% of the Fair MarketValue of a share of Common Stock on the date the option is

 

32

----

 

granted.

 

PART VI

 

**MEDICORLTD.**

STOCK APPRECIATION RIGHTS PLAN

 

Section 1.               SAR Terms andConditions.  The purpose of thisStock Appreciation Rights Plan (the “*SAR Plan”*) is to promote the growth andgeneral prosperity of the Company by permitting the Company to grant restrictedshares to help attract and retain superior personnel for positions ofsubstantial responsibility with the Company and its subsidiaries and to provideindividuals with an additional incentive to contribute to the success of theCompany.  The terms and conditions ofSARs granted under the SAR Plan may differ from one another as the ProgramAdministrators shall, in their discretion, determine in each SAR agreement (the“*SARAgreement”*).  Unless anyprovision herein indicates to the contrary, this SAR Plan shall be subject tothe General Provisions of the Program.

 

Section 2.               Duration of SARs.  Each SAR and all rights thereunder grantedpursuant to the terms of the SAR Plan shall expire on the date determined bythe Program Administrators as evidenced by the SAR Agreement, but in no eventshall any SAR expire later than ten (10) years from the date on which the SARis granted. In addition, each SAR shall be subject to early termination asprovided in the SAR Plan.

 

Section 3.               Grant.  Subject to the terms and conditions of theSAR Agreement, the Program Administrators may grant the right to receive apayment upon the exercise of a SAR which reflects the appreciation in the FairMarket Value of the number of shares of Common Stock for which such SAR wasgranted to any person who is eligible to receive Awards either: (i) in tandemwith the grant of an Incentive Option; (ii) in tandem with the grant of a NonqualifiedOption; or (iii) independent of the grant of an Incentive Option orNonqualified Option.  Each grant of aSAR which is in tandem with the grant of an Incentive Option or NonqualifiedOption shall be evidenced by the same agreement as the Incentive Option orNonqualified Option which is granted in tandem with such SAR and such SAR shallrelate to the same number of shares of Common Stock to which such Option shallrelate and such other terms and conditions as the Program Administrators, intheir sole discretion, deem are not inconsistent with the terms of the SARPlan, including conditions on the exercise of such SAR which relate to theemployment of the Plan Participant or any requirement that the Plan Participantexchange a prior outstanding option and/or SAR.

 

Section 4.               Payment atExercise. Upon the settlement of a SAR in accordance with the terms of theSAR Agreement, the Plan Participant shall (subject to the terms and conditionsof the SAR Plan and SAR Agreement) receive a payment equal to the excess, ifany, of the SAR Exercise Price (as defined below) for the number of shares ofthe SAR being exercised at that time over the SAR Grant Price (as definedbelow) for such shares. Such payment may be paid in cash or in shares of theCompany’s Common Stock or by a combination of the foregoing, at the time ofexercise of the SAR, specified by the Program Administrators in the SARAgreement. If any portion of the payment is paid shares of the Company’s CommonStock, such shares shall be valued for this purpose at the SAR Exercise Priceon the date the SAR is exercised and any payment in shares which calls for apayment in fractional share shall automatically be paid in cash based on suchvaluation. As used herein, “SAR Exercise Date” shall mean the date on which theexercise of a SAR occurs under the SAR Agreement, “SAR Exercise Price” shallmean the Fair Market Value of a shares of Common Stock on a SAR Exercise Dateand “SAR Grant Price” shall mean the price which would have been the optionexercise price for one share of Common Stock if the SAR had been granted as anoption, or if the SAR granted in tandem with an option, the option exerciseprice per share for the related option.

 

Section 5.               Special Termsand Conditions.  Each SAR Agreementwhich evidences the grant of a SAR shall incorporate such terms and conditionsas the Program Administrators in their absolute

 

33

----

 

discretion deem are notinconsistent with the terms of the SAR Plan and the agreement for IncentiveOption or Nonqualified Option, if any, granted in tandem with such SAR exceptthat: (i) if a SAR is granted in tandem with an Incentive Option orNonqualified Option, the SAR shall be exercisable only when the relatedIncentive Option or Nonqualified Option is exercisable; and (ii) the PlanParticipant’s right to exercise a SAR granted in tandem with an IncentiveOption or Nonqualified Option shall be forfeited to the extent that the PlanParticipant exercises the related Incentive Option or Nonqualified Option andthe Plan Participant’s right to exercise the Incentive Option or NonqualifiedOption shall be forfeited to the extent the Plan Participant exercises therelated SAR, but any such****forfeiture shall not count as a forfeiturefor purposes of making the shares subject to such option or SAR again availablefor use under the General Provisions of the Plan.

 

Section 6.               Compliance withSecurities Laws.  Shares shall notbe issued with respect to any option granted under the SAR Plan, unless theexercise of that option and the issuance and delivery of the shares pursuantthereto shall comply with all applicable provisions of foreign, state andfederal law, including, without limitation, the Securities Act of 1933, asamended, and the Exchange Act, and the rules and regulations promulgatedthereunder, and the requirements of any stock exchange upon which the sharesmay then be listed, and shall be further subject to the approval of counsel forthe Company with respect to such compliance. The Program Administrators may also require an Optionee to furnishevidence satisfactory to the Company, including a written and signedrepresentation letter and consent to be bound by any transfer restrictionsimposed by law, legend, condition, or otherwise, that the shares are beingpurchased only for investment purposes and without any present intention tosell or distribute the shares in violation of any state or federal law, rule,or regulation.  Further, each Optioneeshall consent to the imposition of a legend on the shares of Common Stocksubject to his or her option and the imposition of stop-transfer instructionsrestricting their transferability as required by law or by this Section 6.

 

Section 7.               ContinuedEmployment or Service.  EachOptionee, if requested by the Program Administrators, must agree in writing asa condition of receiving his or her option, to remain in the employment of, orservice to, the Company or any of its subsidiaries following the date of thegranting of that option for a period specified by the ProgramAdministrators.  Nothing in this SARPlan or in any option granted hereunder shall confer upon any Optionee anyright to continued employment by, or service to, the Company or any of itssubsidiaries, or limit in any way the right of the Company or any subsidiary atany time to terminate or alter the terms of that employment or servicearrangement.

 

Section 8.               Option RightsUpon Termination of Employment or Service. If an Optionee under this SARPlan ceases to be employed by, or provide services to, the Company or any ofits subsidiaries for any reason other than death or disability, his or heroption shall immediately terminate; *provided, however,*that the ProgramAdministrators may, in their sole and absolute discretion, allow the option tobe exercised, to the extent exercisable on the date of termination ofemployment or service, at any time within sixty (60) days after the date oftermination of employment or service, unless either the option or thisNonqualified Plan otherwise provides for earlier termination.

 

Section 9.               Option RightsUpon Disability.  If an Optioneebecomes disabled within the meaning of Code Section 422 (e) (3) whileemployed by the Company or any subsidiary corporation, the ProgramAdministrators, in their discretion, may allow the option to be exercised, tothe extent exercisable on the date of termination of employment, at any timewithin one year after the date of termination of employment due to disability,unless either the option or the SAR Plan otherwise provides for earliertermination.

 

34

----

 

PART VII

 

**MEDICOR LTD.**

OTHER STOCK RIGHTSPLAN

 

Section 1.               Terms andConditions.  The purpose of theOther Stock Rights Plan (the “*Stock Rights Plan”*) is to promote thegrowth and general prosperity of the Company by permitting the Company to grantrestricted shares to help attract and retain superior personnel for positionsof substantial responsibility with the Company and its subsidiaries to provideindividuals with an additional incentive to the success of the Company.  The terms and conditions of PerformanceShares, Stock Payments or Dividend Equivalent Rights granted under the StockRights Plan may differ from one another as the Program Administrators shall, intheir discretion, determine in each stock rights agreement (the*“StockRights Agreement”*)*.*Unless any provision herein indicates tothe contrary, this Stock Rights Plan shall be subject to the General Provisionsof the Program.

 

Section 2.               Duration.Each Performance Share or Dividend Equivalent Right and all rights thereundergranted pursuant to the terms of the Stock Rights Plan shall expire on the datedetermined by the Program Administrators as evidenced by the Stock RightsAgreement, but in no event shall any Performance Shares or Dividend EquivalentRights expire later than ten (10) years from the date on which the PerformanceShares or Dividend Equivalent Rights are granted. In addition, each PerformanceShare, Stock Payment or Dividend Equivalent Right shall be subject to earlytermination as provided in the Stock Rights Plan.

 

Section 3.               Grant.Subject to the terms and conditions of the Stock Rights Agreement, the ProgramAdministrators may grant Performance Shares, Stock Payments or DividendEquivalent Rights as provided under the Stock Rights Plant. Each grant ofPerformance Shares, Dividend Equivalent Rights and Stock Payments shall beevidenced by a Stock Rights Agreement, which shall state the terms andconditions of each as the Program Administrators, in their sole discretion,deem are not inconsistent with the terms of the Stock Rights Plan.

 

Section 4.               PerformanceShares.  Performance Shares shallbecome payable to a Plan Participant based upon the achievement of specifiedPerformance Objectives and upon such other terms and conditions as the ProgramAdministrators may determine and specify in the Stock Rights Agreementevidencing such Performance Shares. Each grant shall satisfy the conditions for performance-based awardshereunder and under the General Provisions. A grant may provide for theforfeiture of Performance Shares in the event of termination of employment orother events, subject to exceptions for death, disability, retirement or otherevents, all as the Program Administrators may determine and specify in theStock Rights Agreement for such grant. Payment may be made for the PerformanceShares at such time and in such form as the Program Administrators shalldetermine and specify in the Stock Rights Agreement and payment for anyPerformance Shares may be made in full in cash or by certified cashier’s checkpayable to the order of the Company or, if permitted by the ProgramAdministrators, by shares of the Company’s Common Stock or by the surrender ofall or part of an Award, or in other property, rights or credits deemedacceptable by the Program Administrators or, if permitted by the ProgramAdministrators, by a combination of the foregoing. If any portion of thepurchase price is paid in shares of the Company’s Common Stock, those shares shallbe tendered at their then Fair Market Value as determined by the ProgramAdministrators in accordance herewith. Payment in shares of Common Stock includes the automatic application ofshares of Common Stock received upon the exercise or settlement of PerformanceShares or other option or Award to satisfy the exercise or settlement price.

 

Section 5.               Stock Payments.  The Program Administrators may grant StockPayments to a person eligible to receive the same as a bonus or additionalcompensation or in lieu of the obligation of the Company or a subsidiary to paycash compensation under other compensatory arrangements, with or without theelection of the eligible person, provided that the Plan Participant will berequired to pay an amount equal to the aggregate par value of any newly issuedStock Payments. A Plan Participant shall have all the voting, dividend,

 

35

----

 

liquidation and otherrights with respect to shares of Common Stock issued to the Plan Participant asa Stock Payment upon the Plan Participant becoming holder of record of suchshares of Common Stock; provided, however, the Program Administrators mayimpose such restrictions on the assignment or transfer of such shares of CommonStock as they deem appropriate and as are evidenced in the Stock RightsAgreement for such Stock Payment.

 

Section 6.               DividendEquivalent Rights.  The ProgramAdministrators may grant Dividend Equivalent Rights in tandem with the grant ofIncentive Option or Nonqualified Option, SARs, Restricted Shares or PerformanceShares that otherwise do not provide for the payment of dividends on the sharesof Common Stock subject to such awards for the period of time to which suchDividend Equivalent Rights apply, or may grant Dividend Equivalent Rights thatare independent of any other such award. A Dividend Equivalent Right granted in tandem with another award may beevidenced by the agreement for such other award; otherwise, a Dividend EquivalentRight shall be evidenced by a separate Stock Rights Agreement.  Payment may be made by the Company in cashor by shares of the Company’s Common Stock or by a combination of theforegoing, may be immediate or deferred and may be subject to such employment,performance objectives or other conditions as the Program Administrators maydetermine and specify in the Stock Rights Agreement for such DividendEquivalent Rights. The total payment attributable to a share of Common Stocksubject to a Dividend Equivalent Right shall not exceed one hundred percent(100%) of the equivalent dividends payable with respect to an outstanding shareof Common Stock during the term of such Dividend Equivalent Right, taking intoaccount any assumed investment (including assumed reinvestment in shares ofCommon Stock) or interest earnings on the equivalent dividends as determinedunder the Stock Rights Agreement in the case of a deferred payment, providedthat such percentage may increase to a maximum of two hundred percent (200%) ifa Dividend Equivalent Right is subject to a Performance Objective.

 

Section 7.               Compliance withSecurities Laws.  Shares shall notbe issued with respect to any option granted under the Stock Rights Plan,unless the exercise of that option and the issuance and delivery of the sharespursuant thereto shall comply with all applicable provisions of foreign, stateand federal law, including, without limitation, the Securities Act of 1933, asamended, and the Exchange Act, and the rules and regulations promulgatedthereunder, and the requirements of any stock exchange upon which the sharesmay then be listed, and shall be further subject to the approval of counsel forthe Company with respect to such compliance. The Program Administrators may also require an Optionee to furnishevidence satisfactory to the Company, including a written and signedrepresentation letter and consent to be bound by any transfer restrictionsimposed by law, legend, condition, or otherwise, that the shares are beingpurchased only for investment purposes and without any present intention tosell or distribute the shares in violation of any state or federal law, rule,or regulation.  Further, each Optioneeshall consent to the imposition of a legend on the shares of Common Stock subjectto his or her option and the imposition of stop-transfer instructionsrestricting their transferability as required by law or by this Section 7.

 

Section 8.               ContinuedEmployment or Service.  EachOptionee, if requested by the Program Administrators, must agree in writing asa condition of receiving his or her option, to remain in the employment of, orservice to, the Company or any of its subsidiaries following the date of thegranting of that option for a period specified by the ProgramAdministrators.  Nothing in this StockRights Plan in any option granted hereunder shall confer upon any Optionee anyright to continued employment by, or service to, the Company or any of itssubsidiaries, or limit in any way the right of the Company or any subsidiary atany time to terminate or alter the terms of that employment or servicearrangement.

 

Section 9.               Option RightsUpon Termination of Employment or Service. If an Optionee under this Stock Rights Plan an ceases to be employed by,or provide services to, the Company or any of its subsidiaries for any reasonother than death or disability, his or her option shall immediately terminate; *provided,however,*that the Program Administrators may, in their sole andabsolute discretion, allow the option to be exercised, to the

 

36

----

 

extent exercisable on thedate of termination of employment or service, at any time within sixty (60)days after the date of termination of employment or service, unless either theoption or this Stock Rights Plan otherwise provides for earlier termination.

 

Section 10.             Option Rights UponDisability.  If an Optionee becomesdisabled within the meaning of Code Section 422 (e) (3) while employed bythe Company or any subsidiary corporation, the Program Administrators, in theirdiscretion, may allow the option to be exercised, to the extent exercisable onthe date of termination of employment, at any time within one year after thedate of termination of employment due to disability, unless either the optionor the Stock Rights Plan otherwise provides for earlier termination.

 

37

----