**Exhibit 10.13**

 

**XTENT, INC.**

**2006 EQUITY INCENTIVE PLAN**

*(as amended)*

 

1.*  Purposes ofthe Plan.*  The purposes ofthis Plan are:

 

·   to attract and retain the best availablepersonnel for positions of substantial responsibility,

 

·   to provide additional incentive to Employees,Directors and Consultants, and

 

·   to promote the success of the Company’sbusiness.

 

The Planpermits the grant of Incentive Stock Options, Nonstatutory Stock Options,Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,Performance Units and Performance Shares.

 

2.*  Definitions.*  As used herein, the following definitionswill apply:

 

(a)  “*Administrator*”means the Board or any of its Committees as will be administering the Plan, inaccordance with Section 4 of the Plan.

 

(b)  “*Applicable Laws*”means the requirements relating to the administration of equity-based awardsunder U.S. state corporate laws, U.S. federal and state securities laws, theCode, any stock exchange or quotation system on which the Common Stock is listedor quoted and the applicable laws of any foreign country or jurisdiction whereAwards are, or will be, granted under the Plan.

 

(c)  “*Award*” means,individually or collectively, a grant under the Plan of Options, StockAppreciation Rights, Restricted Stock, Restricted Stock Units, PerformanceUnits or Performance Shares.

 

(d)  “*Award Agreement*”means the written or electronic agreement setting forth the terms andprovisions applicable to each Award granted under the Plan. The Award Agreementis subject to the terms and conditions of the Plan.

 

(e)  “*Board*” meansthe Board of Directors of the Company.

 

(f)  “*Change in Control*”means the occurrence of any of the following events:

 

(i) Any “person” (as such term is used inSections 13(d) and 14(d) of the Exchange Act) becomes the “beneficialowner” (as defined in Rule 13d-3 of the Exchange Act), directly orindirectly, of securities of the Company representing fifty percent (50%) ormore of the total voting power represented by the Company’s then outstandingvoting securities; or

 

(ii) The consummation of the sale or disposition bythe Company of all or substantially all of the Company’s assets;

 

(iii) A change in the composition of the Boardoccurring within a two-year period, as a result of which fewer than a majorityof the directors are Incumbent Directors. “Incumbent Directors” means directorswho either (A) are Directors as of the effective date of the Plan, or (B) areelected, or nominated for election, to the Board with the affirmative votes ofat least a majority of the Incumbent Directors at the time of such election ornomination (but will not include an individual whose election or nomination isin connection with an actual or threatened proxy contest relating to theelection of directors to the Company); or

 

(iv) The consummation of a merger or consolidationof the Company with any other corporation, other than a merger or consolidationwhich would result in the voting securities of the Company outstandingimmediately prior thereto continuing to represent (either by

 

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remaining outstanding or by being converted into voting securities ofthe surviving entity or its parent) at least fifty percent (50%) of the totalvoting power represented by the voting securities of the Company or suchsurviving entity or its parent outstanding immediately after such merger orconsolidation.

 

(g)  “*Code*” meansthe Internal Revenue Code of 1986, as amended. Any reference to a section ofthe Code herein will be a reference to any successor or amended section of theCode.

 

(h)  “*Committee*”means a committee of Directors or of other individuals satisfying ApplicableLaws appointed by the Board in accordance with Section 4 hereof.

 

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

 

(j)  “*Company*” meansXTENT, Inc., a Delaware corporation, or any successor thereto.

 

(k)  “*Consultant*”means any person, including an advisor, engaged by the Company or a Parent orSubsidiary to render services to such entity.

 

(l)  “*Determination Date*”means the latest possible date that will not jeopardize the qualification of anAward granted under the Plan as “performance-based compensation” under Section 162(m) ofthe Code.

 

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

 

(n)  “*Disability*”means total and permanent disability as defined in Section 22(e)(3) ofthe Code, provided that in the case of Awards other than Incentive StockOptions, the Administrator in its discretion may determine whether a permanentand total disability exists in accordance with uniform and non-discriminatorystandards adopted by the Administrator from time to time.

 

(o)  “*Employee*”means any person, including Officers and Directors, employed by the Company orany Parent or Subsidiary of the Company. Neither service as a Director norpayment of a director’s fee by the Company will be sufficient to constitute “employment”by the Company.

 

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

 

(q)  “*Exchange Program*”means a program under which (i) outstanding Awards are surrendered orcancelled in exchange for Awards of the same type (which may have lowerexercise prices and different terms), Awards of a different type, and/or cash, (ii) Participantswould have the opportunity to transfer any outstanding Awards to a financialinstitution or other person or entity selected by the Administrator, and/or (iii) theexercise price of an outstanding Award is reduced. The Administrator willdetermine the terms and conditions of any Exchange Program in its solediscretion.

 

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

 

(i)  If the Common Stock is listed on anyestablished stock exchange or a national market system, including withoutlimitation the Nasdaq National Market or The Nasdaq SmallCap Market of TheNasdaq Stock Market, its Fair Market Value will be the closing sales price forsuch stock (or the closing bid, if no sales were reported) as quoted on suchexchange or system on the day of determination, as reported in *The Wall Street Journal* or such othersource as the Administrator deems reliable;

 

(ii)  If the Common Stock is regularly quoted by a recognizedsecurities dealer but selling prices are not reported, the Fair Market Value ofa Share will be the mean between the high bid and low asked prices for theCommon Stock on the day of determination, as reported in *The Wall Street Journal* or such othersource as the Administrator deems reliable;

 

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(iii)  In the absence of an established marketfor the Common Stock, the Fair Market Value will be determined in good faith bythe Administrator.

 

(s)  “*Fiscal Year*”means the fiscal year of the Company.

 

(t)  “*Incentive Stock Option*”means an Option intended to qualify as an incentive stock option within themeaning of Section 422 of the Code and the regulations promulgatedthereunder.

 

(u)  “*Inside Director*”means a Director who is an Employee.

 

(v)  “*Nonstatutory Stock Option*”means an Option that by its terms does not qualify or is not intended toqualify as an Incentive Stock Option.

 

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

 

(x)  “*Option*” meansa stock option granted pursuant to the Plan.

 

(y)  “*Outside Director*”means a Director who is not an Employee.

 

(z)  “*Parent*” meansa “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) ofthe Code.

 

(aa) “*Participant*” meansthe holder of an outstanding Award.

 

(bb) “*Performance Goals*”will have the meaning set forth in Section 12 of the Plan.

 

(cc) “*Performance Period*”means any Fiscal Year or such other period as determined by the Administratorin its sole discretion.

 

(dd) “*Performance Share*”means an Award denominated in Shares which may be earned in whole or in partupon attainment of Performance Goals or other vesting criteria as theAdministrator may determine pursuant to Section 10.

 

(ee) “*Performance Unit*”means an Award which may be earned in whole or in part upon attainment ofPerformance Goals or other vesting criteria as the Administrator may determineand which may be settled for cash, Shares or other securities or a combinationof the foregoing pursuant to Section 10.

 

(ff) “*Period of Restriction*”means the period during which the transfer of Shares of Restricted Stock aresubject to restrictions and therefore, the Shares are subject to a substantialrisk of forfeiture. Such restrictions may be based on the passage of time, theachievement of target levels of performance, or the occurrence of other eventsas determined by the Administrator.

 

(gg) “*Plan*” means this2006 Equity Incentive Plan.

 

(hh) “*Restricted Stock*”means Shares issued pursuant to a Restricted Stock award under Section 7of the Plan, or issued pursuant to the early exercise of an Option.

 

(ii) “*Restricted Stock Unit*”means a bookkeeping entry representing an amount equal to the Fair Market Valueof one Share, granted pursuant to Section 8. Each Restricted Stock Unitrepresents an unfunded and unsecured obligation of the Company.

 

(jj) “*Rule 16b-3*”means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,as in effect when discretion is being exercised with respect to the Plan.

 

(kk) “*Section 16(b)*”means Section 16(b) of the Exchange Act.

 

(ll) “*Service Provider*”means an Employee, Director or Consultant.

 

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(mm) “*Share*” means ashare of the Common Stock, as adjusted in accordance with Section 15 ofthe Plan.

 

(nn) “*Stock Appreciation Right*”means an Award, granted alone or in connection with an Option, that pursuant toSection 9 is designated as a Stock Appreciation Right.

 

(oo) “*Subsidiary*” means a“subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) ofthe Code.

 

3.*  Stock Subjectto the Plan.*

 

(a) *Stock Subject to the Plan.*  Subject to the provisions of Section 15of the Plan, the maximum aggregate number of Shares that may be issued underthe Plan is (A) 2,412,762 Shares, plus (B) any Shares subject tostock options or similar awards granted under the Company’s 2002 Stock Plan(the “2002 Plan”) that expire or otherwise terminate without having beenexercised in full and Shares issued pursuant to awards granted under the 2002Plan that are forfeited to or repurchased by the Company, up to a maximum of600,000 Shares. The Shares may be authorized, but unissued, or reacquiredCommon Stock.

 

(b) *Automatic Share ReserveIncrease.*  The number ofShares available for issuance under the Plan shall be increased on the firstday of each Fiscal Year beginning with the 2007 Fiscal Year, in an amount equalto the least of (A) 1,500,000 Shares, (B) four percent (4%) of theoutstanding Shares on the last day of the immediately preceding Fiscal Year or (C) suchnumber of Shares determined by the Board.

 

(c) *Lapsed Awards.*  If an Award expires or becomes unexercisablewithout having been exercised in full, is surrendered pursuant to an ExchangeProgram, or, with respect to Restricted Stock, Restricted Stock Units,Performance Units or Performance Shares, is forfeited to or repurchased by theCompany due to failure to vest, the unpurchased Shares (or for Awards otherthan Options or Stock Appreciation Rights the forfeited or repurchased Shares)which were subject thereto will become available for future grant or sale underthe Plan (unless the Plan has terminated). With respect to Stock AppreciationRights, only Shares actually issued pursuant to a Stock Appreciation Right willcease to be available under the Plan; all remaining Shares under StockAppreciation Rights will remain available for future grant or sale under thePlan (unless the Plan has terminated). Shares that have actually been issuedunder the Plan under any Award will not be returned to the Plan and will notbecome available for future distribution under the Plan; provided, however,that if Shares issued pursuant to Awards of Restricted Stock, Restricted StockUnits, Performance Shares or Performance Units are repurchased by the Companyor are forfeited to the Company, such Shares will become available for futuregrant under the Plan. Shares used to pay the exercise price of an Award or tosatisfy the tax withholding obligations related to an Award will becomeavailable for future grant or sale under the Plan. To the extent an Award underthe Plan is paid out in cash rather than Shares, such cash payment will notresult in reducing the number of Shares available for issuance under the Plan.Notwithstanding the foregoing and, subject to adjustment as provided in Section 15,the maximum number of Shares that may be issued upon the exercise of IncentiveStock Options shall equal the aggregate Share number stated in Section 3(a),plus, to the extent allowable under Section 422 of the Code and theTreasury Regulations promulgated thereunder, any Shares that become availablefor issuance under the Plan pursuant to Section 3(c).

 

(d) *Share Reserve.*  The Company, during the term of this Plan,will at all times reserve and keep available such number of Shares as will besufficient to satisfy the requirements of the Plan.

 

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4.* Administration of the Plan.*

 

(a) *Procedure.*

 

(i)  *MultipleAdministrative Bodies.* Different Committees with respect to different groups of ServiceProviders may administer the Plan.

 

(ii)  *Section 162(m).*  To the extent that the Administratordetermines it to be desirable to qualify Awards granted hereunder as “performance-basedcompensation” within the meaning of Section 162(m) of the Code, thePlan will be administered by a Committee of two or more “outside directors”within the meaning of Section 162(m) of the Code.

 

(iii)  *Rule 16b-3.*  To the extent desirable to qualify transactionshereunder as exempt under Rule 16b-3, the transactions contemplatedhereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iv)  *OtherAdministration.*  Other than asprovided above, the Plan will be administered by (A) the Board or (B) aCommittee, which committee will be constituted to satisfy Applicable Laws.

 

(b) *Powers of theAdministrator.*  Subject to theprovisions of the Plan, and in the case of a Committee, subject to the specificduties delegated by the Board to such Committee, the Administrator will havethe authority, in its discretion:

 

(i)  to determine the Fair Market Value;

 

(ii)  to select the Service Providers to whomAwards may be granted hereunder;

 

(iii)  to determine the number of Shares to becovered by each Award granted hereunder;

 

(iv)  to approve forms of Award Agreements foruse under the Plan;

 

(v)  to determine the terms and conditions, notinconsistent with the terms of the Plan, of any Award granted hereunder. Suchterms and conditions include, but are not limited to, the exercise price, thetime or times when Awards may be exercised (which may be based on performancecriteria), any vesting acceleration or waiver of forfeiture restrictions, andany restriction or limitation regarding any Award or the Shares relatingthereto, based in each case on such factors as the Administrator willdetermine;

 

(vi)  to determine the terms and conditions ofany, and to institute any Exchange Program;

 

(vii)  to construe and interpret the terms ofthe Plan and Awards granted pursuant to the Plan;

 

(viii)  to prescribe, amend and rescind rules andregulations relating to the Plan, including rules and regulations relatingto sub-plans established for the purpose of satisfying applicable foreign laws;

 

(ix)  to modify or amend each Award (subject toSection 20(c) of the Plan), including the discretionary authority toextend the post-termination exercisability period of Awards;

 

(x)  to allow Participants to satisfywithholding tax obligations in such manner as prescribed in Section 16;

 

(xi)  to authorize any person to execute onbehalf of the Company any instrument required to effect the grant of an Awardpreviously granted by the Administrator;

 

(xii)  to allow a Participant to defer thereceipt of the payment of cash or the delivery of Shares that would otherwisebe due to such Participant under an Award; and

 

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(xiii)  to make all other determinations deemednecessary or advisable for administering the Plan.

 

(c) *Effect of Administrator’sDecision.*  The Administrator’sdecisions, determinations and interpretations will be final and binding on allParticipants and any other holders of Awards.

 

5.*  Eligibility.*  Nonstatutory Stock Options, StockAppreciation Rights, Restricted Stock, Restricted Stock Units, PerformanceShares and Performance Units may be granted to Service Providers. IncentiveStock Options may be granted only to Employees.

 

6.*  StockOptions.*

 

(a) *Limitations.*

 

(i)  Each Option will be designated in theAward Agreement as either an Incentive Stock Option or a Nonstatutory StockOption. However, notwithstanding such designation, to the extent that theaggregate Fair Market Value of the Shares with respect to which Incentive StockOptions are exercisable for the first time by the Participant during anycalendar year (under all plans of the Company and any Parent or Subsidiary)exceeds $100,000, such Options will be treated as Nonstatutory Stock Options.For purposes of this Section 6(a), Incentive Stock Options will be takeninto account in the order in which they were granted. The Fair Market Value ofthe Shares will be determined as of the time the Option with respect to suchShares is granted.

 

(ii)  The Administrator will have completediscretion to determine the number of Shares subject to an Option granted toany Participant, provided that during any Fiscal Year, no Participant will begranted an Option covering more than 600,000 Shares. Notwithstanding thelimitation in the previous sentence, in connection with his or her initialservice as an Employee, an Employee may be granted Options covering up to anadditional 1,200,000 Shares.

 

(b) *Term of Option.*  The term of each Option will be stated in theAward Agreement. In the case of an Incentive Stock Option, the term will be ten(10) years from the date of grant or such shorter term as may be providedin the Award Agreement. Moreover, in the case of an Incentive Stock Optiongranted to a Participant who, at the time the Incentive Stock Option isgranted, owns stock representing more than ten percent (10%) of the totalcombined voting power of all classes of stock of the Company or any Parent orSubsidiary, the term of the Incentive Stock Option will be five (5) yearsfrom the date of grant or such shorter term as may be provided in the AwardAgreement.

 

(c) *Option Exercise Price andConsideration.*

 

(i)*  **Exercise Price.*  The per share exercise price for the Sharesto be issued pursuant to exercise of an Option will be determined by theAdministrator, subject to the following:

 

(1)  In the case of an Incentive Stock Option

 

a)  granted to an Employee who,at the time the Incentive Stock Option is granted, owns stock representing morethan ten percent (10%) of the voting power of all classes of stock of theCompany or any Parent or Subsidiary, the per Share exercise price will be noless than 110% of the Fair Market Value per Share on the date of grant.

 

b)  granted to any Employee otherthan an Employee described in paragraph (a) immediately above, theper Share exercise price will be no less than 100% of the Fair Market Value perShare on the date of grant.

 

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(2)  In the case of a Nonstatutory StockOption, the per Share exercise price will be no less than 100% of the FairMarket Value per Share on the date of grant.

 

(3)  Notwithstanding the foregoing, Options maybe granted with a per Share exercise price of less than 100% of the Fair MarketValue per Share on the date of grant pursuant to a transaction described in,and in a manner consistent with, Section 424(a) of the Code.

 

(ii)*  **Waiting Period and Exercise Dates.*  At the time an Option is granted, theAdministrator will fix the period within which the Option may be exercised andwill determine any conditions that must be satisfied before the Option may beexercised.

 

(iii)*  **Form of Consideration.*  The Administrator will determine theacceptable form(s) of consideration for exercising an Option, includingthe method of payment. In the case of an Incentive Stock Option, theAdministrator will determine the acceptable form of consideration at the timeof grant. Such consideration may consist entirely of: (1) cash; (2) check;(3) promissory note; (4) other Shares, provided that such Shares havea Fair Market Value on the date of surrender equal to the aggregate exerciseprice of the Shares as to which said Option will be exercised and provided thataccepting such Shares, in the sole discretion of the Administrator, shall notresult in any adverse accounting consequences to the Company; (5) considerationreceived by the Company under a broker assisted (or other) cashless exerciseprogram implemented by the Company in connection with the Plan; (6) areduction in the amount of any Company liability to the Participant, includingany liability attributable to the Participant’s participation in anyCompany-sponsored deferred compensation program or arrangement; (7) suchother consideration and method of payment for the issuance of Shares to theextent permitted by Applicable Laws; or (8) any combination of theforegoing methods of payment.

 

(d) *Exercise of Option.*

 

(i)*  **Procedure for Exercise; Rights as a Stockholder.*  Any Option granted hereunder will beexercisable according to the terms of the Plan and at such times and under suchconditions as determined by the Administrator and set forth in the AwardAgreement. An Option may not be exercised for a fraction of a Share.

 

An Option will be deemed exercised when the Company receives: (i) noticeof exercise (in such form as the Administrator specifies from time to time)from the person entitled to exercise the Option, and (ii) full payment forthe Shares with respect to which the Option is exercised (together withapplicable withholding taxes). Full payment may consist of any considerationand method of payment authorized by the Administrator and permitted by theAward Agreement and the Plan. Shares issued upon exercise of an Option will beissued in the name of the Participant or, if requested by the Participant, inthe name of the Participant and his or her spouse. Until the Shares are issued(as evidenced by the appropriate entry on the books of the Company or of a dulyauthorized transfer agent of the Company), no right to vote or receivedividends or any other rights as a stockholder will exist with respect to theShares subject to an Option, notwithstanding the exercise of the Option. TheCompany will issue (or cause to be issued) such Shares promptly after theOption is exercised. No adjustment will be made for a dividend or other rightfor which the record date is prior to the date the Shares are issued, except asprovided in Section 15 of the Plan.

 

Exercising an Option in any manner will decrease the number of Sharesthereafter available, both for purposes of the Plan and for sale under theOption, by the number of Shares as to which the Option is exercised.

 

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(ii)  *Terminationof Relationship as a Service Provider.*  If a Participant ceases to be a Service Provider,other than upon the Participant’s death or Disability, the Participant mayexercise his or her Option within such period of time as is specified in theAward Agreement to the extent that the Option is vested on the date oftermination (but in no event later than the expiration of the term of suchOption as set forth in the Award Agreement). In the absence of a specified timein the Award Agreement, the Option will remain exercisable for three (3) monthsfollowing the Participant’s termination. Unless otherwise provided by theAdministrator, if on the date of termination the Participant is not vested asto his or her entire Option, the Shares covered by the unvested portion of theOption will revert to the Plan. If after termination the Participant does notexercise his or her Option within the time specified by the Administrator, theOption will terminate, and the Shares covered by such Option will revert to thePlan.

 

(iii)  *Disabilityof Participant.*  If aParticipant ceases to be a Service Provider as a result of the Participant’sDisability, the Participant may exercise his or her Option within such periodof time as is specified in the Award Agreement to the extent the Option isvested on the date of termination (but in no event later than the expiration ofthe term of such Option as set forth in the Award Agreement). In the absence ofa specified time in the Award Agreement, the Option will remain exercisable fortwelve (12) months following the Participant’s termination. Unlessotherwise provided by the Administrator, if on the date of termination theParticipant is not vested as to his or her entire Option, the Shares covered bythe unvested portion of the Option will revert to the Plan. If aftertermination the Participant does not exercise his or her Option within the timespecified herein, the Option will terminate, and the Shares covered by suchOption will revert to the Plan.

 

(iv)  *Deathof Participant.*  If aParticipant dies while a Service Provider, the Option may be exercisedfollowing the Participant’s death within such period of time as is specified inthe Award Agreement to the extent that the Option is vested on the date ofdeath (but in no event may the option be exercised later than the expiration ofthe term of such Option as set forth in the Award Agreement), by theParticipant’s designated beneficiary, provided such beneficiary has beendesignated prior to Participant’s death in a form acceptable to theAdministrator. If no such beneficiary has been designated by the Participant, thensuch Option may be exercised by the personal representative of the Participant’sestate or by the person(s) to whom the Option is transferred pursuant tothe Participant’s will or in accordance with the laws of descent anddistribution. In the absence of a specified time in the Award Agreement, theOption will remain exercisable for twelve (12) months followingParticipant’s death. Unless otherwise provided by the Administrator, if at thetime of death Participant is not vested as to his or her entire Option, theShares covered by the unvested portion of the Option will immediately revert tothe Plan. If the Option is not so exercised within the time specified herein,the Option will terminate, and the Shares covered by such Option will revert tothe Plan.

 

7.*  RestrictedStock.*

 

(a) *Grant of Restricted Stock.*  Subject to the terms and provisions of thePlan, the Administrator, at any time and from time to time, may grant Shares ofRestricted Stock to Service Providers in such amounts as the Administrator, inits sole discretion, will determine.

 

(b) *Restricted StockAgreement.*  Each Award ofRestricted Stock will be evidenced by an Award Agreement that will specify thePeriod of Restriction, the number of Shares granted, and such other terms andconditions as the Administrator, in its sole discretion, will determine.Notwithstanding the foregoing sentence, for Restricted Stock intended toqualify as “performance- based compensation” within the meaning of Section 162(m) ofthe Code, during any Fiscal Year

 

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no Participantwill receive more than an aggregate of 300,000 Shares of Restricted Stock.Notwithstanding the foregoing limitation, in connection with his or her initialservice as an Employee, for Restricted Stock intended to qualify as “performance-basedcompensation” within the meaning of Section 162(m) of the Code, anEmployee may be granted an aggregate of up to an additional 600,000 Shares ofRestricted Stock. Unless the Administrator determines otherwise, the Company asescrow agent will hold Shares of Restricted Stock until the restrictions onsuch Shares have lapsed.

 

(c) *Transferability.*  Except as provided in this Section 7,Shares of Restricted Stock may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated until the end of the applicable Period ofRestriction.

 

(d) *Other Restrictions.*  The Administrator, in its sole discretion,may impose such other restrictions on Shares of Restricted Stock as it may deemadvisable or appropriate.

 

(e) *Removal of Restrictions.*  Except as otherwise provided in this Section 7,Shares of Restricted Stock covered by each Restricted Stock grant made underthe Plan will be released from escrow as soon as practicable after the last dayof the Period of Restriction or at such other time as the Administrator maydetermine. The Administrator, in its discretion, may accelerate the time atwhich any restrictions will lapse or be removed.

 

(f) *Voting Rights.*  During the Period of Restriction, ServiceProviders holding Shares of Restricted Stock granted hereunder may exercisefull voting rights with respect to those Shares, unless the Administratordetermines otherwise.

 

(g) *Dividends and OtherDistributions.*  During thePeriod of Restriction, Service Providers holding Shares of Restricted Stockwill be entitled to receive all dividends and other distributions paid withrespect to such Shares, unless the Administrator provides otherwise. If anysuch dividends or distributions are paid in Shares, the Shares will be subjectto the same restrictions on transferability and forfeitability as the Shares ofRestricted Stock with respect to which they were paid.

 

(h) *Return of Restricted Stockto Company.*  On the date setforth in the Award Agreement, the Restricted Stock for which restrictions havenot lapsed will revert to the Company and again will become available for grantunder the Plan.

 

(i) *Section 162(m) PerformanceRestrictions.*  For purposes ofqualifying grants of Restricted Stock as “performance-based compensation” underSection 162(m) of the Code, the Administrator, in its discretion, mayset restrictions based upon the achievement of Performance Goals. ThePerformance Goals will be set by the Administrator on or before theDetermination Date. In granting Restricted Stock which is intended to qualifyunder Section 162(m) of the Code, the Administrator will follow anyprocedures determined by it from time to time to be necessary or appropriate toensure qualification of the Award under Section 162(m) of the Code(e.g., in determining the Performance Goals).

 

8.*  RestrictedStock Units.*

 

 (a) *Grant.*  Restricted Stock Units may be granted at anytime and from time to time as determined by the Administrator. After theAdministrator determines that it will grant Restricted Stock Units under thePlan, it shall advise the Participant in an Award Agreement of the terms,conditions, and restrictions related to the grant, including the number ofRestricted Stock Units and the form of payout, which, subject to Section 8(d),may be left to the discretion of the Administrator. Notwithstanding anything tothe contrary in this subsection (a), for Restricted Stock Units intendedto qualify as “performance-based compensation” within the meaning of Section 162(m) ofthe Code, during any Fiscal Year of the Company, no Participant will receive

 

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more than an aggregate of 300,000 Restricted Stock Units.Notwithstanding the limitation in the previous sentence, for Restricted StockUnits intended to qualify as “performance-based compensation” within themeaning of Section 162(m) of the Code, in connection with his or herinitial service as an Employee, an Employee may be granted an aggregate of upto an additional 600,000 Restricted Stock Units.

 

 (b) *Vesting Criteria and Other Terms.* The Administrator shall set vesting criteria in its discretion, which,depending on the extent to which the criteria are met, will determine thenumber of Restricted Stock Units that will be paid out to the Participant. TheAdministrator may set vesting criteria based upon the achievement ofCompany-wide, business unit, or individual goals (including, but not limitedto, continued employment), or any other basis determined by the Administratorin its discretion. The Administrator, in its discretion, may accelerate thetime at which any restrictions will lapse or be removed.

 

 (c) *Earning Restricted Stock Units.* Upon meeting the applicable vesting criteria, the Participant shall beentitled to receive a payout as determined by the Administrator.Notwithstanding the foregoing, at any time after the grant of Restricted StockUnits, the Administrator, in its sole discretion, may reduce or waive anyvesting criteria that must be met to receive a payout.

 

 (d) *Form andTiming of Payment.*  Payment ofearned Restricted Stock Units shall be made as soon as practicable after thedate(s) determined by the Administrator and set forth in the AwardAgreement. The Administrator, in its sole discretion, may only settle earnedRestricted Stock Units in cash, Shares, or a combination of both. Sharesrepresented by Restricted Stock Units that are fully paid in cash again will beavailable for grant under the Plan.

 

 (e) *Cancellation.*  On the date setforth in the Award Agreement, all unearned Restricted Stock Units shall beforfeited to the Company.

 

 (f) *Section 162(m) PerformanceRestrictions.*  For purposes ofqualifying grants of Restricted Stock Units as “performance-based compensation”under Section 162(m) of the Code, the Administrator, in itsdiscretion, may set restrictions based upon the achievement of PerformanceGoals. The Performance Goals will be set by the Administrator on or before theDetermination Date. In granting Restricted Stock Units which are intended toqualify under Section 162(m) of the Code, the Administrator willfollow any procedures determined by it from time to time to be necessary orappropriate to ensure qualification of the Award under Section 162(m) ofthe Code (e.g., in determining the Performance Goals).

 

9.* Stock Appreciation Rights.*

 

 (a) *Grant of Stock Appreciation Rights.* Subject to the terms and conditions of the Plan, a Stock AppreciationRight may be granted to Service Providers at any time and from time to time aswill be determined by the Administrator, in its sole discretion.

 

 (b) *Number of Shares.*  TheAdministrator will have complete discretion to determine the number of StockAppreciation Rights granted to any Participant; provided, however, that noParticipant will be granted, in any Fiscal Year, Stock Appreciation Rightscovering more than 600,000 Shares. Notwithstanding the limitation in theprevious sentence, in connection with his or her initial service as anEmployee, an Employee may be granted Stock Appreciation Rights covering up toan additional 1,200,000 Shares.

 

 (c) *Exercise Price and Other Terms.* The per share exercise price for the Shares to be issued pursuant toexercise of an Stock Appreciation Right shall be determined by theAdministrator and shall be no less than 100% of the Fair Market Value per shareon the date of grant. Otherwise, subject to Section 6(a) of the Plan,the Administrator,subject to the provisions of the Plan, shall

 

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have complete discretion to determine the terms and conditions of StockAppreciation Rights granted under the Plan.

 

(d) *Stock Appreciation Right Agreement.*  Each Stock Appreciation Right grant will beevidenced by an Award Agreement that will specify the exercise price, the termof the Stock Appreciation Right, the conditions of exercise, and such otherterms and conditions as the Administrator, in its sole discretion, willdetermine.

 

(e) *Maximum Term/Expiration of Stock AppreciationRights.*  An Stock AppreciationRight granted under the Plan will expire upon the date determined by theAdministrator, in its sole discretion, and set forth in the Award Agreement.Notwithstanding the foregoing, the rules of Section 6(b) relatingto the maximum term and Section 6(d) relating to exercise also willapply to Stock Appreciation Rights.

 

(f) *Payment of Stock Appreciation Right Amount.*  Upon exercise of an Stock Appreciation Right,a Participant will be entitled to receive payment from the Company in an amountdetermined by multiplying:

 

(i)   The differencebetween the Fair Market Value of a Share on the date of exercise over theexercise price; times

 

(ii)   The number ofShares with respect to which the Stock Appreciation Right is exercised.

 

At the discretion of the Administrator, the payment upon StockAppreciation Right exercise may be in cash, in Shares of equivalent value, orin some combination thereof.

 

10.* Performance Units and Performance Shares.*

 

 (a) *Grant of Performance Units/Shares.* Performance Units and Performance Shares may be granted to ServiceProviders at any time and from time to time, as will be determined by theAdministrator, in its sole discretion. The Administrator will have completediscretion in determining the number of Performance Units and PerformanceShares granted to each Participant provided that during any Fiscal Year, forPerformance Units or Performance Shares intended to qualify as “performance-basedcompensation” within the meaning of Section 162(m) of the Code, (i) noParticipant will receive Performance Units having an initial value greater than$5,000,000, and (ii) no Participant will receive more than 300,000Performance Shares. Notwithstanding the foregoing limitation, for PerformanceShares intended to qualify as “performance-based compensation” within themeaning of Section 162(m) of the Code, in connection with his or herinitial service, a Service Provider may be granted up to an additional 600,000Performance Shares.

 

 (b) *Value of Performance Units/Shares.* Each Performance Unit will have an initial value that is established bythe Administrator on or before the date of grant. Each Performance Share willhave an initial value equal to the Fair Market Value of a Share on the date ofgrant.

 

 (c) *Performance Objectives and Other Terms.*  The Administrator will set performanceobjectives or other vesting provisions (including, without limitation, continuedstatus as a Service Provider) in its discretion which, depending on the extentto which they are met, will determine the number or value of PerformanceUnits/Shares that will be paid out to the Service Providers. Each Award ofPerformance Units/Shares will be evidenced by an Award Agreement that willspecify the Performance Period, and such other terms and conditions as theAdministrator, in its sole discretion, will determine. The Administrator mayset vesting criteria based upon the achievement of Company-wide, divisional, orindividual goals (including, but not limited to, continued employment), or anyother basis determined by the Administrator in its discretion.

 

 (d) *Earning of Performance Units/Shares.* After the applicable Performance Period has ended, the holder ofPerformance Units/Shares will be entitled to receive a payout of the number

 

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of Performance Units/Shares earned by the Participant over thePerformance Period, to be determined as a function of the extent to which thecorresponding performance objectives or other vesting provisions have beenachieved. After the grant of a Performance Unit/Share, the Administrator, inits sole discretion, may reduce or waive any performance objectives or othervesting provisions for such Performance Unit/Share.

 

 (e) *Form andTiming of Payment of Performance Units/Shares.*  Payment of earned Performance Units/Shareswill be made as soon as practicable after the expiration of the applicablePerformance Period. The Administrator, in its sole discretion, may pay earnedPerformance Units/Shares in the form of cash, in Shares (which have anaggregate Fair Market Value equal to the value of the earned PerformanceUnits/Shares at the close of the applicable Performance Period) or in acombination thereof.

 

 (f) *Cancellation of Performance Units/Shares.*  On the date set forth in the Award Agreement,all unearned or unvested Performance Units/Shares will be forfeited to theCompany, and again will be available for grant under the Plan.

 

 (g) *Section 162(m) PerformanceRestrictions.*  For purposes ofqualifying grants of Performance Units/Shares as “performance-basedcompensation” under Section 162(m) of the Code, the Administrator, inits discretion, may set restrictions based upon the achievement of PerformanceGoals. The Performance Goals will be set by the Administrator on or before theDetermination Date. In granting Performance Units/Shares which are intended toqualify under Section 162(m) of the Code, the Administrator willfollow any procedures determined by it from time to time to be necessary orappropriate to ensure qualification of the Award under Section 162(m) ofthe Code (e.g., in determining the Performance Goals).

 

11.* Formula Awards to Outside Directors.*

 

 (a) *General.*  Outside Directorswill be entitled to receive all types of Awards (except Incentive StockOptions) under this Plan, including discretionary Awards not covered under thisSection 11. All grants of Awards to Outside Directors pursuant to this Section willbe automatic and nondiscretionary, except as otherwise provided herein, andwill be made in accordance with the following provisions:

 

 (b) *Type of Option.*  If Optionsare granted pursuant to this Section they will be Nonstatutory StockOptions and, except as otherwise provided herein, will be subject to the otherterms and conditions of the Plan.

 

 (c) *No Discretion.*  No person willhave any discretion to select which Outside Directors will be granted Awardsunder this Section or to determine the number of Shares to be covered bysuch Awards (except as provided in Sections 11(g) and 15).

 

 (d) *Initial Award.*  Each personwho first becomes an Outside Director will be automatically granted an Optionto purchase 30,000 Shares (the “*InitialAward*”) on or about the date on which such person first becomes anOutside Director, whether through election by the stockholders of the Companyor appointment by the Board to fill a vacancy; provided, however, that anInside Director who ceases to be an Inside Director, but who remains aDirector, will not receive an Initial Award.

 

 (e) *Annual Award.*  Each OutsideDirector will be automatically granted an Option to purchase 10,000 Shares (an “*Annual Award*”) on each date of the annualmeeting of the stockholders of the Company beginning in 2007, if as of suchdate, he or she will have served on the Board for at least the preceding six (6) months.

 

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 (f) *Terms.*  The terms of eachAward granted pursuant to this Section will be as follows:

 

(i)   The term of theAward will be ten (10) years.

 

(ii)   The exerciseprice for Shares subject to Awards will be 100% of the Fair Market Value on thegrant date.

 

(iii)   Subject to Section 15,the Initial Award will vest and become exercisable as to one third (1/3rd)of the Shares subject to the Initial Option on each anniversary of its grantdate, provided that the Participant continues to serve as a Director througheach such date.

 

(iv)   Subjectto Section 15, the Annual Award will vest and become exercisable as to onehundred percent (100%) of the Shares subject to such Award on the day prior tothe next year’s annual shareholder meeting (but in no event later than December 31of the calendar year following the calendar year during which the Annual Awardis granted), provided that the Participant continues to serve as a Directorthrough such date.

 

 (g) *Adjustments.*  TheAdministrator in its discretion may change and otherwise revise the terms ofAwards granted under this Section 11, including, without limitation, thenumber of Shares and exercise prices thereof, for Awards granted on or afterthe date the Administrator determines to make any such change or revision.

 

12.* Performance-Based Compensation Under Code Section 162(m).*

 

 (a) *General.*  If theAdministrator, in its discretion, decides to grant an Award intended to qualifyas “performance-based compensation” under Code Section 162(m), theprovisions of this Section 12 will control over any contrary provision inthe Plan; provided, however, that the Administrator may in its discretion grantAwards that are not intended to qualify as “performance-based compensation”under Section 162(m) of the Code to such Participants that are basedon Performance Goals or other specific criteria or goals but that do notsatisfy the requirements of this Section 12.

 

 (b) *Performance Goals.*  Thegranting and/or vesting of Awards of Restricted Stock, Restricted Stock Units,Performance Shares and Performance Units and other incentives under the Planmay be made subject to the attainment of performance goals relating to one ormore business criteria within the meaning of Code Section 162(m) andmay provide for a targeted level or levels of achievement (“*Performance Goals*”) including (i) earningsper Share, (ii) enrollment rates in clinical and similar trials, (iii) financingsand capital raising events, (iv) operating cash flow, (v) operatingincome, (vi) product development, (vii) product approval, (viii) profitafter-tax, (ix) profit before-tax, (x) regulatory approval,(xi) regulatory filings, (xii) return on assets, (xiii) returnon equity, (xiv) return on sales, (xv) revenue, and (xvi) totalshareholder return. Any Performance Goals may be used to measure the performanceof the Company as a whole or a business unit of the Company and may be measuredrelative to a peer group or index. The Performance Goals may differ fromParticipant to Participant and from Award to Award. Prior to the DeterminationDate, the Administrator will determine whether any significant element(s) willbe included in or excluded from the calculation of any Performance Goal withrespect to any Participant.

 

 (c) *Procedures.*  To the extentnecessary to comply with the performance-based compensation provisions of Code Section 162(m),with respect to any Award granted subject to Performance Goals, within thefirst twenty-five percent (25%) of the Performance Period, but in no event morethan ninety (90) days following the commencement of any Performance Period(or such other time as may be required or permitted by Code Section 162(m)),the Administrator will, in writing: (i) designate one or more Participantsto whom an Award will be made, (ii) select the Performance Goalsapplicable to the Performance Period, (iii) establish the PerformanceGoals, and amounts of

 

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such Awards, as applicable, which may be earned for such PerformancePeriod, and (iv) specify the relationship between Performance Goals and theamounts of such Awards, as applicable, to be earned by each Participant forsuch Performance Period. Following the completion of each Performance Period,the Administrator will certify in writing whether the applicable PerformanceGoals have been achieved for such Performance Period. In determining theamounts earned by a Participant, the Administrator will have the right toreduce or eliminate (but not to increase) the amount payable at a given levelof performance to take into account additional factors that the Administratormay deem relevant to the assessment of individual or corporate performance forthe Performance Period. A Participant will be eligible to receive paymentpursuant to an Award for a Performance Period only if the Performance Goals forsuch period are achieved.

 

 (d) *Additional Limitations.* Notwithstanding any other provision of the Plan, any Award which isgranted to a Participant and is intended to constitute qualified “performance-basedcompensation” under Code Section 162(m) will be subject to anyadditional limitations set forth in the Code (including any amendment to Section 162(m))or any regulations and ruling issued thereunder that are requirements forqualification as qualified “performance-based compensation” as described in Section 162(m) ofthe Code, and the Plan will be deemed amended to the extent necessary toconform to such requirements.

 

13.* Leaves of Absence/Transfer Between Locations.*  Unless the Administrator provides otherwise,vesting of Awards granted hereunder will be suspended during any unpaid leaveof absence. A Service Provider will not cease to be an Employee in the case of (i)any leave of absence approved by the Company, or (ii) transfers betweenlocations of the Company or between the Company, its Parent, or any Subsidiary.For purposes of Incentive Stock Options, no such leave may exceed three (3) months,unless reemployment upon expiration of such leave is guaranteed by statute orcontract. If reemployment upon expiration of a leave of absence approved by theCompany is not so guaranteed, then six (6) months and one day followingthe commencement of such leave any Incentive Stock Option held by theParticipant will cease to be treated as an Incentive Stock Option and will betreated for tax purposes as a Nonstatutory Stock Option.

 

14.* Transferability of Awards.* Unless determined otherwise by the Administrator, an Award may not besold, pledged, assigned, hypothecated, transferred, or disposed of in anymanner other than by will or by the laws of descent or distribution and may beexercised, during the lifetime of the Participant, only by the Participant. Ifthe Administrator makes an Award transferable, such Award will contain suchadditional terms and conditions as the Administrator deems appropriate.

 

15.* Adjustments; Dissolution or Liquidation; Merger or Change in Control.*

 

 (a) *Adjustments.*  In the eventthat any dividend or other distribution (whether in the form of cash, Shares,other securities, or other property), recapitalization, stock split, reversestock split, reorganization, merger, consolidation, split-up, spin-off,combination, repurchase, or exchange of Shares or other securities of theCompany, or other change in the corporate structure of the Company affectingthe Shares occurs, the Administrator, in order to prevent diminution orenlargement of the benefits or potential benefits intended to be made availableunder the Plan, shall appropriately adjust the number and class of Shares thatmay be delivered under the Plan and/or the number, class, and price of Sharescovered by each outstanding Award, and the numerical Share limits set forth inSections 3, 6, 7, 8, 9, and 10.

 

 (b) *Dissolution or Liquidation.* In the event of the proposed dissolution or liquidation of the Company,the Administrator will notify each Participant as soon as practicable prior tothe effective date of such proposed transaction. To the extent it has not beenpreviously exercised, an Award will terminate immediately prior to theconsummation of such proposed action.

 

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 (c) *Change in Control.*  In theevent of a merger or Change in Control, each outstanding Award will be treatedas the Administrator determines, including, without limitation, that each Awardbe assumed or an equivalent option or right substituted by the successorcorporation or a Parent or Subsidiary of the successor corporation. TheAdministrator shall not be required to treat all Awards similarly in thetransaction.

 

In the event that thesuccessor corporation does not assume or substitute for the Award, unless theAdministrator provides otherwise, the Participant will fully vest in and havethe right to exercise all of his or her outstanding Options and StockAppreciation Rights, including Shares as to which such Awards would nototherwise be vested or exercisable, all restrictions on Restricted Stock andRestricted Stock Units will lapse, and, with respect to Awards withperformance- based vesting, all Performance Goals or other vesting criteria willbe deemed achieved at one hundred percent (100%) of target levels and all otherterms and conditions met. In addition, if an Option or Stock Appreciation Rightis not assumed or substituted in the event of a Change in Control, theAdministrator will notify the Participant in writing or electronically that theOption or Stock Appreciation Right will be fully vested and exercisable for aperiod of time determined by the Administrator in its sole discretion, and theOption or Stock Appreciation Right will terminate upon the expiration of suchperiod.

 

For the purposes of thissubsection (c), an Award will be considered assumed if, following theChange in Control, the Award confers the right to purchase or receive, for eachShare subject to the Award immediately prior to the Change in Control, theconsideration (whether stock, cash, or other securities or property) or, in thecase of a Stock Appreciation Right upon the exercise of which the Administratordetermines to pay cash or a Restricted Stock Unit, Performance Share orPerformance Unit which the Administrator can determine to pay in cash, the fairmarket value of the consideration received in the Change in Control by holdersof Common Stock for each Share held on the effective date of the transaction (andif holders were offered a choice of consideration, the type of considerationchosen by the holders of a majority of the outstanding Shares); provided,however, that if such consideration received in the Change in Control is notsolely common stock of the successor corporation or its Parent, theAdministrator may, with the consent of the successor corporation, provide forthe consideration to be received upon the exercise of an Option or StockAppreciation Right or upon the payout of a Restricted Stock Unit, PerformanceUnit or Performance Share, for each Share subject to such Award (or in the caseof Performance Units, the number of implied shares determined by dividing thevalue of the Performance Units by the per share consideration received byholders of Common Stock in the Change in Control), to be solely common stock ofthe successor corporation or its Parent equal in fair market value to the pershare consideration received by holders of Common Stock in the Change inControl.

 

Notwithstanding anything inthis Section 15(c) to the contrary, an Award that vests, is earned orpaid-out upon the satisfaction of one or more Performance Goals will not beconsidered assumed if the Company or its successor modifies any of suchPerformance Goals without the Participant’s consent; provided, however, amodification to such Performance Goals only to reflect the successorcorporation’s post-Change in Control corporate structure will not be deemed toinvalidate an otherwise valid Award assumption.

 

 (d) *Outside Director Awards.*  Withrespect to Awards granted to an Outside Director that are assumed orsubstituted for, if on the date of or following such assumption or substitutionthe Participant’s status as a Director or a director of the successorcorporation, as applicable, is terminated other than upon a voluntaryresignation by the Participant (unless such resignation is at the request ofthe acquiror), then the Participant will fully vest in and have the right toexercise Options and/or Stock Appreciation Rights as to all of the Shares underlyingsuch Award, including

 

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those Shares which would not otherwise be vested or exercisable, allrestrictions on Restricted Stock and Restricted Stock Units will lapse, and, withrespect to Performance Units and Performance Shares, all Performance Goals orother vesting criteria will be deemed achieved at one hundred percent (100%) oftarget levels and all other terms and conditions met.

 

16.* Tax Withholding.*

 

 (a) *Withholding Requirements.* Prior to the delivery of any Shares or cash pursuant to an Award (orexercise thereof), the Company will have the power and the right to deduct orwithhold, or require a Participant to remit to the Company, an amountsufficient to satisfy federal, state, local, foreign or other taxes (includingthe Participant’s FICA obligation) required to be withheld with respect to suchAward (or exercise thereof).

 

 (b) *Withholding Arrangements.*  TheAdministrator, in its sole discretion and pursuant to such procedures as it mayspecify from time to time, may permit a Participant to satisfy such taxwithholding obligation, in whole or in part by (without limitation) (a) payingcash, (b) electing to have the Company withhold otherwise deliverable cashor Shares having a Fair Market Value equal to the minimum statutory amountrequired to be withheld, or (c) delivering to the Company already-ownedShares having a Fair Market Value equal to the minimum statutory amountrequired to be withheld. The Fair Market Value of the Shares to be withheld ordelivered will be determined as of the date that the taxes are required to bewithheld.

 

17.* No Effect on Employment or Service.*  Neither the Plan nor any Award will conferupon a Participant any right with respect to continuing the Participant’srelationship as a Service Provider with the Company, nor will they interfere inany way with the Participant’s right or the Company’s right to terminate suchrelationship at any time, with or without cause, to the extent permitted byApplicable Laws.

 

18.* Date of Grant.*  Thedate of grant of an Award will be, for all purposes, the date on which theAdministrator makes the determination granting such Award, or such other laterdate as is determined by the Administrator. Notice of the determination will beprovided to each Participant within a reasonable time after the date of suchgrant.

 

19.* Term of Plan.*  Subjectto Section 23 of the Plan, the Plan will become effective upon itsadoption by the Board. It will continue in effect for a term of ten (10) yearsfrom the date adopted by the Board, unless terminated earlier under Section 20of the Plan.

 

20.* Amendment and Termination of the Plan.*

 

 (a) *Amendment and Termination.* The Administrator may at any time amend, alter, suspend or terminate thePlan.

 

 (b) *Stockholder Approval.*  TheCompany will obtain stockholder approval of any Plan amendment to the extentnecessary and desirable to comply with Applicable Laws.

 

 (c) *Effect of Amendment or Termination.* No amendment, alteration, suspension or termination of the Plan willimpair the rights of any Participant, unless mutually agreed otherwise betweenthe Participant and the Administrator, which agreement must be in writing andsigned by the Participant and the Company. Termination of the Plan will notaffect the Administrator’s ability to exercise the powers granted to ithereunder with respect to Awards granted under the Plan prior to the date ofsuch termination.

 

21.* Conditions Upon Issuance of Shares.*

 

 (a) *Legal Compliance.*  Shares willnot be issued pursuant to the exercise of an Award unless the exercise of suchAward and the issuance and delivery of such Shares will comply with

 

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Applicable Laws and will be further subject to the approval of counselfor the Company with respect to such compliance.

 

 (b) *Investment Representations.* As a condition to the exercise of an Award, the Company may require theperson exercising such Award to represent and warrant at the time of any suchexercise that the Shares are being purchased only for investment and withoutany present intention to sell or distribute such Shares if, in the opinion ofcounsel for the Company, such a representation is required.

 

22.* Inability to Obtain Authority.*  The inability of the Company to obtainauthority from any regulatory body having jurisdiction, which authority isdeemed by the Company’s counsel to be necessary to the lawful issuance and saleof any Shares hereunder, will relieve the Company of any liability in respectof the failure to issue or sell such Shares as to which such requisiteauthority will not have been obtained.

 

23.* Stockholder Approval.* The Plan will be subject to approval by the stockholders of the Companywithin twelve (12) months after the date the Plan is adopted by the Board.Such stockholder approval will be obtained in the manner and to the degreerequired under Applicable Laws.

 

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** **

**XTENT, INC.**

** **

**2006EQUITY INCENTIVE PLAN**

** **

**STOCKOPTION AWARD AGREEMENT**

** **

XTENT, Inc. (the “Company”)hereby grants you, [NAME] (the “Participant”), a stock option (the “Option”)under the Company’s 2006 Equity Incentive Plan (the “Plan”), to purchase sharesof common stock of the Company (“Shares”). In general, the latest date thisOption will expire is the Term/Expiration Date listed in Part I of thisStock Option Award Agreement (the Award Agreement”), below. However, asprovided in Part II of this Award Agreement, this Option may expireearlier than the Term/Expiration Date.

 

Capitalized terms used and notdefined in this Award Agreement will have the meaning set forth in the Plan.

 

**I.****                *NOTICE OF GRANT***

*** ***

**Name:**

** **

**Address:**

** **

You have been granted an Optionto purchase Common Stock of the Company, subject to the terms and conditions ofthe Plan and this Award Agreement, as follows:

 

| Grant Number                    |   |                        |
|---------------------------------|--------|-----------------------------|
|                            |   |                        |
| Date of  Grant                  |   |                        |
|                            |   |                        |
| Vesting  Commencement Date      |   |                        |
|                            |   |                        |
| Exercise  Price per Share       |   | $                           |   |
|                            |   |                        |   |
| Total Number  of Shares Granted |   |                        |
|                            |   |                        |   |
| Total  Exercise Price           |   | $                           |   |
|                            |   |                        |
| Type of  Option:                |   | o Incentive Stock Option    |
|                            |   |                        |
|                            |   | o Nonstatutory Stock Option |
|                            |   |                        |
| Term/Expiration  Date:          |   |                        |

* *

*Vesting Schedule:*

* *

Subject to accelerated vestingas set forth below or in the Plan, this Option may be exercised, in whole or inpart, in accordance with the following schedule:

 

**[InsertVesting Schedule]**

 

*Termination Period:*

* *

This Option will be exercisable(to the extent vested) for three (3) months after Participant ceases to bea Service Provider, unless such termination is due to Participant’s death orDisability, in which case this Option may be exercised (to the extent vested)for one (1) year after Participant ceases to be a Service Provider.Notwithstanding the foregoing sentence, in no event may Participant exercisethis Option after the Term/Expiration Date as provided above and may be subjectto earlier termination as provided in Section 14(c) of the Plan.

 

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**II.****            AWARD AGREEMENT**

** **

A.*  Grant of Option.*

 

The Company hereby grants toParticipant an Option to purchase the number of Shares, as set forth in theNotice of Grant, at the exercise price per share set forth in the Notice ofGrant (the “Exercise Price”), subject to the terms and conditions of the Plan,which is incorporated herein by reference. This Award Agreement is subject toall the terms and provisions of the Plan. Subject to Section 19(c) of thePlan, in the event of a conflict between the terms and conditions of the Planand the terms and conditions of this Award Agreement, the terms and conditionsof the Plan will prevail.

 

If designated in the Notice ofGrant as an Incentive Stock Option (“ISO”), this Option is intended to qualifyas an Incentive Stock Option under Section 422 of the Code. However, ifthis Option is intended to be an Incentive Stock Option, to the extent that itexceeds the $100,000 rule of Code Section 422(d) it will be treated as aNonstatutory Stock Option (“NSO”).

 

B.*  Exercise of Option.*

 

(a)*  Right toExercise.*  This Option isexercisable during its term in accordance with the Vesting Schedule set out inthe Notice of Grant and the applicable provisions of the Plan and this AwardAgreement. This Option may not be exercised for a fraction of a Share.

 

(b)*  Method ofExercise.*  This Option isexercisable by delivery of an exercise notice, in the form attached as *Exhibit A* (the “Exercise Notice”) orin such other form as the Company may designate, which will state the electionto exercise the Option, the number of Shares in respect of which the Option isbeing exercised (the “Exercised Shares”), and such other representations andagreements as may be required by the Company pursuant to the provisions of thePlan. The Exercise Notice will be accompanied by payment of the aggregateExercise Price as to all Exercised Shares, as such Exercise Price may beadjusted in accordance with the terms of Section 14 of the Plan. ThisOption will be deemed to be exercised upon receipt by the Company of such fullyexecuted Exercise Notice accompanied by such aggregate Exercise Price, togetherwith any applicable tax withholding.

 

No Shares willbe issued pursuant to the exercise of this Option unless such issuance andexercise complies with Applicable Laws. Assuming such compliance, for incometax purposes the Exercised Shares will be considered transferred to Participanton the date the Option is exercised with respect to such Exercised Shares.

 

C.*  Method of Payment.*

 

Payment of the aggregateExercise Price will be by any of the following, or a combination thereof, atthe election of Participant:

 

1.   cash;or

 

2.   check;or

 

3.   considerationreceived by the Company under a formal cashless exercise program implemented bythe Company in connection with the Plan; or

 

4.   tothe extent permitted by the Administrator, surrender of other Shares which,(i) in the case of Shares acquired either directly or indirectly from theCompany, have been owned by the Participant and not subject to a substantialrisk of forfeiture for more than six (6) months on the date of surrender,and (ii) have a Fair Market Value on the date of surrender equal to theaggregate Exercise Price of the Exercised Shares.

 

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D.*  Non-Transferability of Option.*

 

This Option may not betransferred in any manner otherwise than by will or by the laws of descent ordistribution and may be exercised during the lifetime of Participant only byParticipant. The terms of the Plan and this Award Agreement will be bindingupon the executors, administrators, heirs, successors and assigns ofParticipant.

 

E.*  Term of Option.*

* *

This Option may be exercisedonly within the term set out in the Notice of Grant, and may be exercisedduring such term only in accordance with the Plan and the terms of this AwardAgreement.

 

F.*  Tax Obligations.*

 

1.*  WithholdingTaxes.*  Participant agrees tomake appropriate arrangements with the Company (or the Parent or Subsidiaryemploying or retaining Participant) for the satisfaction of all Federal, state,and local income and employment tax withholding requirements applicable to theOption exercise. Participant acknowledges and agrees that the Company mayrefuse to honor the exercise and refuse to deliver Shares if such withholdingamounts are not delivered at the time of exercise.

 

2.*  Notice ofDisqualifying Disposition of ISO Shares.*  If the Option granted to Participant hereinis an ISO, and if Participant sells or otherwise disposes of any of the Sharesacquired pursuant to the ISO on or before the later of (1) the date twoyears after the Date of Grant, or (2) the date one year after the date ofexercise, Participant will immediately notify the Company in writing of suchdisposition. Participant agrees that Participant may be subject to income taxwithholding by the Company on the compensation income recognized byParticipant.

 

3.*  CodeSection 409A.*  Under CodeSection 409A, an option that vests after December 31, 2004 that wasgranted with a per Share exercise price that is determined by the InternalRevenue Service (the “IRS”) to be less than the fair market value of a Share ofCommon Stock on the date of grant (a “discount option”) may be considered “deferredcompensation.” An option that is a “discount option” may result in(i) income recognition by Participant prior to the exercise of the option,(ii) an additional 20% tax, and (iii) potential penalty and interestcharges. Participant acknowledges that the Company cannot and has notguaranteed that the IRS will agree that the per Share exercise price of thisOption equals or exceeds the fair market value of a Share of Common Stock onthe Date of Grant in a later examination. Participant agrees that if the IRSdetermines that the Option was granted with a per Share exercise price that wasless than the fair market value of a Share on the Date of Grant, Participantwill be solely responsible for Participant’s costs related to such adetermination.

 

G.*  Death of Participant.*  Any distribution or delivery to be made toParticipant under this Award Agreement will, if Participant is then deceased,be made to the administrator of executor of Participant’s estate. Any suchadministrator or executor must furnish the Company with (a) written noticeof his or her status as transferee, and (b) evidence satisfactory to theCompany to establish the validity of the transfer and compliance with any lawsor regulations pertaining to said transfer.

 

H.*  Entire Agreement; GoverningLaw.*  The Plan is incorporatedherein by reference. The Plan and this Award Agreement constitute the entireagreement of the parties with respect to the subject matter hereof andsupersede in their entirety all prior undertakings and agreements of theCompany and Participant with respect to the subject matter hereof, and may notbe modified adversely to Participant’s interest except by means of a writingsigned by the Company and Participant. This Award Agreement is governed by theinternal substantive laws, but not the choice of law rules, of California.

 

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I.*  Severability.*  In the event that any provision of this AwardAgreement becomes or is declared by a court of competent jurisdiction to beillegal, unenforceable or void, this Award Agreement will continue in fullforce and effect.

 

J.*  Administrator Authority.*  The Administrator will have the power tointerpret the Plan and this Award Agreement and to adopt such rules for theadministration, interpretation and application of the Plan as are consistenttherewith and to interpret or revoke any such rules (including, but not limitedto, the determination of whether or not any Shares have vested). All actionstaken and all interpretations and determinations made by the Administrator ingood faith will be final and binding upon Participant, the Company and allother interested persons. No Administrator will be personally liable for anyaction, determination or interpretation made in good faith with respect to thePlan or this Award Agreement.

 

K.*  Address for Notices.*  Any notice to be given to the Company underthe terms of this Award Agreement will be addressed to the Company, in care ofits Secretary, at 125 Constitution Drive, Menlo Park, California 94025, or atsuch other address as the Company may hereafter designate in writing.

 

L.*  Amendment, Suspension orTermination of the Plan.*  Byaccepting this Option, Participant expressly warrants that he or she hasreceived a stock option award under the Plan, and has received, read andunderstood a description of the Plan. Participant understands that the Plan isdiscretionary in nature and may be amended, altered, suspended or terminated bythe Company at any time.

 

M.*  NO GUARANTEE OF CONTINUEDSERVICE.*

 

PARTICIPANT ACKNOWLEDGES ANDAGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF ISEARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (ANDNOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASINGSHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THISAGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SETFORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUEDENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR ATALL, AND WILL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TOTERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH ORWITHOUT CAUSE.

 

***[Remainder of Page Intentionally Left Blank]***

 

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By Participant’s signature andthe signature of the Company’s representative below, Participant and theCompany agree that this Option is granted under and governed by the terms andconditions of the Plan and this Award Agreement. Participant has reviewed thePlan and this Award Agreement in their entirety, has had an opportunity to obtainthe advice of counsel prior to executing this Award Agreement and fullyunderstands all provisions of the Plan and Award Agreement. Participant herebyagrees to accept as binding, conclusive and final all decisions orinterpretations of the Administrator upon any questions relating to the Planand Award Agreement. Participant further agrees to notify the Company upon anychange in the residence address indicated below.

 

| PARTICIPANT:      |   | XTENT, INC. |
|-------------------|--------|------------------|
|              |   |             |
|              |   |             |
|              |   |             |
| Signature         |   | By               |
|              |   |             |
|              |   |             |
|              |   |             |
| Print Name        |   | Title            |
|              |   |             |
|              |   |             |
|              |   |             |
| Residence Address |   |             |
|              |   |             |
|              |   |             |

 

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**EXHIBIT A**

** **

**XTENT, INC.**

** **

**2006EQUITY INCENTIVE PLAN**

** **

**EXERCISENOTICE**

** **

XTENT, Inc.

125 Constitution Drive

Menlo Park, CA 94025

 

Attention: 

 

1.*  Exercise of Option.*  Effective as of today,                         ,             , the undersigned (“Purchaser”)hereby elects to purchase               shares (the “Shares”) of the Common Stock of XTENT, Inc. (the “Company”)under and pursuant to the 2006 Equity Incentive Plan (the “Plan”) and the StockOption Award Agreement dated             (the “Award Agreement”). Subject to adjustment in accordance withSection 14 of the Plan, the purchase price for the Shares will be $                        , as required by the AwardAgreement.

 

2.*  Delivery of Payment.*  Purchaser herewith delivers to the Companythe full purchase price for the Shares, as set forth in the Award Agreement,and any and all withholding taxes due in connection with the exercise of theOption.

 

3.*  Representations of Purchaser.*  Purchaser acknowledges that Purchaser hasreceived, read and understood the Plan and the Award Agreement and agrees toabide by and be bound by their terms and conditions.

 

4.*  Rights as Stockholder.*  Until the issuance (as evidenced by theappropriate entry on the books of the Company or of a duly authorized transferagent of the Company) of the Shares, no right to vote or receive dividends orany other rights as a stockholder will exist with respect to the OptionedStock, notwithstanding the exercise of the Option. The Shares so acquired willbe issued to Participant as soon as practicable after exercise of the Option.No adjustment will be made for a dividend or other right for which the recorddate is prior to the date of issuance, except as provided in Section 14 ofthe Plan.

 

5.*  Tax Consultation.*  Purchaser understands that Purchaser maysuffer adverse tax consequences as a result of Purchaser’s purchase ordisposition of the Shares. Purchaser represents that Purchaser has consultedwith any tax consultants Purchaser deems advisable in connection with thepurchase or disposition of the Shares and that Purchaser is not relying on theCompany for any tax advice.

 

6.*  Severability.*  In the event that any provision of thisExercise Notice becomes or is declared by a court of competent jurisdiction tobe illegal, unenforceable or void, this Exercise Notice will continue in fullforce and effect.

 

7.*  Entire Agreement; GoverningLaw.*  The Plan and AwardAgreement are incorporated herein by reference. This Exercise Notice, the Planand the Award Agreement constitute the entire agreement of the parties withrespect to the subject matter hereof and supersede in their entirety all priorundertakings and agreements of the Company and Purchaser with respect to thesubject matter hereof, and may not be modified adversely to the Purchaser’sinterest except by means of a writing signed by 

 

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the Company and Purchaser. Thisagreement is governed by the internal substantive laws, but not the choice oflaw rules, of California.

 

| Submitted by: |   | Accepted by:           |
|---------------|--------|------------------------|
|          |   |                   |
| PURCHASER:    |   | XTENT, INC.       |
|          |   |                   |
|          |   |                   |
|          |   |                   |
| Signature     |   | By                     |
|          |   |                   |
|          |   |                   |
|          |   |                   |
| Print Name    |   | Its                    |
|          |   |                   |
| Address:      |   | Address:               |
|          |   |                   |
|          |   |                   |
|          |   |                   |
|          |   | 125 Constitution Drive |
|          |   |                   |
|          |   | Menlo Park, CA 94025   |
|          |   |                   |
|          |   |                   |
|          |   |                   |
|          |   | Date Received          |

 

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