exv10w1



 







Exhibit 10.1




SUTURA, INC.




2001 STOCK OPTION PLAN




     Sutura, Inc., a Delaware corporation, by action of its Board of Directors, as approved
by it stockholders, adopted the Sutura, Inc. 2001 Stock Option Plan (the “Plan”)
effective on October 25, 2001.



1. PURPOSE.




     This Plan is intended to provide to officers, directors, key employees, and consultants of
the corporation an opportunity to acquire a proprietary interest in the corporation, to
encourage such key individuals to remain in the employ of or to contract with the corporation,
an to attract and retain new employees, consultants, and directors with outstanding
qualifications. Pursuant to the Plan, the corporation may grant to officers, directors,
consultants, and key employees of the corporation options to purchase shares of common stock of
the corporation upon such terms and conditions as provided herein.



2. DEFINITIONS.




     (a) “Affiliate” shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations that includes the Corporation if each of such corporations, other
than the last corporation in the chain, owns at least 50% of the total voting power of one of the
other
corporations.



     (b) “Board” shall mean the Board of Directors of the
Corporation.



     (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.



     (d) “Committee” shall mean the committee appointed by the Board to administer the
Plan, or if no such committee is appointed, the Board.



     (e) “Common Stock” shall mean the voting common stock of the Corporation.



     (f) “Consultant” shall mean any person who, or any employee of any firm which, is
engaged by the Company or any Affiliate to render consulting services and is compensated for such
consulting services, and any non-employee director of the Company whether compensated for such
services or not.



 









 





     (g) “Corporation” shall mean Sutura, Inc., a Delaware
corporation.



     (h) “Effective Date” shall mean October 25, 2001.



     (i) “Employee” shall mean any individual who IS employed, within the meaning of
Section 3401 of the Code and the regulations thereunder, by the Corporation or by any Affiliate.
For purposes of the Plan and only for purposes of the Plan, and in regard to Nonstatutory Stock
Options but not for Incentive Stock Options, a Consultant or director of the Corporation or any
Affiliate shall be deemed to be an Employee, and service as a Consultant or director with the
Corporation or any Affiliate shall be deemed to be employment, but no Incentive Stock Option shall
be granted to a Consultant or director who is not an employee of the Corporation or any Affiliate
within the meaning of Section 3401 of the Code and the regulations thereunder. In the case of a
non-employee director or Consultant, the provisions governing when a termination of employment has
occurred for purposes of the Plan shall be set forth in the written stock option agreement between
the Optionee and the corporation, or, if not so set forth, the Committee shall have the discretion
to determine when a termination of “employment” has occurred for purposes of the Plan.



     (j) ‘’Escrow Agent” shall mean the person selected by the Corporation, if any, to
hold the stock certificates representing Shares issued in the name of an Optionee pursuant to
such Optionee’s exercise of an Option.



     (k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.



     (1) “Exercise Price” shall mean the price per Share at which an Option may
be exercised, as determined by the Committee and as specified in the Optionee’s stock
option agreement.



     (m) “Fair Market Value” shall mean the value of one Share of Common Stock, determined
as follows: (i) if the Shares are traded on an exchange or on the NASDAQ National Market System,
the reported “closing price” on the date of valuation or if no trading occurred on such date, the
next preceding day on which trading occurred; (ii) if the Shares are traded over-the-counter on
the NASDAQ System (other than on the NASDAQ National Market System), the mean between the bid and
the ask prices on said System at the close of business on the date of valuation or if no trading
occurred on such date, the next preceding day on which trading occurred; and (iii) if neither (i)
nor (ii) app lies, the fair market value as determined by the Board in good faith.



Such determination shall be. conclusive and binding on all persons. .



     (n) “Incentive Stock Option” shall mean an Option of the type
described in Section 422(b) of the Code.



     (o) “Joint Escrow Instructions” shall mean joint escrow instructions entered into
between Optionee and the Corporation in such form as may be approved by the Committee from time
to time.



 









 





     (p) ‘’Nonstatutory Stock Option” shall mean an Option of the type not described
in Section 422(b) or 423(b) of the Code.



     (q) “Option” shall mean an option to purchase Common Stock granted pursuant to
the
Plan.



     (r) “Optionee” shall mean any person who holds an Option pursuant to the
Plan.



     (s) “Plan” shall mean this stock option plan as it may be amended from time to
time.



     (t) “Purchase Price” shall mean at any particular time the Exercise Price times
the
number of Shares for which an Option is being exercised.



     (u) “Share” shall mean one share of authorized Common
Stock.



3. ADMINISTRATION.




     (a) The Committee.



          (i) The Board may administer the Plan or appoint a Committee to administer the
Plan. The Committee shall consist of not less than two members who may also be members of the
Board. Members of the Board or the Committee who are either eligible for Options or have been
granted Options may vote on any matters affecting the administration of the Plan or the grant of
any Options pursuant to the Plan, except that no such member shall act upon the granting of an
Option to himself or herself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Committee and shall be excluded in determining unanimity of an act in
writing, for any action which is taken with respect to the granting of an Option to such member.




          (ii) If the Corporation registers any class of any equity security pursuant to Section 12 of
the Exchange Act from the effective date of such registration until six months after the
termination of such registration, the Plan shall be administered by a Committee of directors which
shall consist of not less than two members, who during the one year prior to service as an
administrator of the Plan, shall not have been granted or awarded equity securities pursuant to
the Plan or any other plan of the Corporation or any of its Affiliates except as permitted under
Rule 16b- 3 under the Exchange Act which provides that participation in a formal plan meeting the
conditions of Rule 16(b )(3)( c )(2)(ii) or in an ongoing securities acquisition plan meeting the
conditions in Rule 16(b )(3)( d)(2)(i) shall not disqualify a member of the Committee from serving
as an administrator of the Plan. In addition, an election to receive an annual retainer fee in
either cash or an equivalent amount of securities, or partly in cash and partly in securities,
shall not disqualify a member of the Committee from serving as an administrator of the Plan. The
Board may from time to time designate individuals as ineligible to participate in the Plan for a
specified period in order to become eligible to be a member of the Committee.




     (b) Powers of the Committee. Subject to the provisions of the Plan, the Committee
shall have the authority, in its discretion and on behalf of the Corporation:



 









 





          (i) to grant Options;




          (ii) to determine the Exercise Price per Share of Options to be granted;




          (iii) to determine the Employees to whom, and the time or times at which, Options
shall be granted and the number of Shares for which an Option will be exercisable;




          (iv) to interpret the Plan;




          (v) to prescribe, amend, and rescind rules and regulations relating to the Plan;




          (vi) to determine the terms and provisions of each Option granted and, with the consent of
the holder thereof, modify or amend each Option;




          (vii) to accelerate or defer, with the consent of the Optionee, the exercise date
of any Option;




          (viii) to authorize any person to execute on behalf of the Corporation any instrument
required to effectuate the grant of an Option previously granted by the Committee;




          (ix) with the consent of the Optionee, to reprice, cancel and regrant, or otherwise adjust
the Exercise Price of an Option previously granted by the Committee; and




          (x) to make all other determinations deemed necessary or advisable for the
administration of the Plan.




     (c) Board’s Determination of Fair Market Value. The Board shall have the authority
to determine, upon review of relevant information, the Fair Market Value of the Common Stock,
subject to the provisions of the Plan and irrespective of whether the Board has appointed a
Committee to administer the Plan. The Board may delegate this authority to the Committee.



     (d) Committee’s Interpretation of the Plan. The interpretation and construction by
the Committee of any provision of the Plan or of any Option granted hereunder shall be final and
binding on all parties claiming an interest in an Option granted under the Plan. No member of
the Committee shall be liable for any action or determination made in good faith with respect to
the Plan or any Option.



     (e) All Committee Actions to be in Writing. Any and all actions of the Committee
taken in exercise of the powers granted to it in this Section 3 shall be in writing.



     (f) Delegation by Committee. Subject to the provisions of the Plan, the Committee
shall have the authority, in its discretion and on behalf of the Corporation, to delegate the
following powers to any individual or individuals with respect to the granting of Options to
those Employees who are not subject to the short-swing profit rules of Section 16 of the Exchange
Act:



-4









 





          (i) the power to grant Options;




          (ii) the power to determine the Employees to whom and the time or times at which Options
shall be granted and the number of Shares for which an Option will be exercisable; and




          (iii) the power to determine the Exercise Price per Share of Options to be granted.



In delegating its powers hereunder, the Committee may place any restrictions it deems appropriate
on the delegatee(s). Any delegation of power under this Section shall be valid until it expires
by its own terms, until revoked by the Committee, or until revoked by the Board, whichever first
occurs.




4. PARTICIPATION.




     (a) Eligibility. The Optionees shall be such persons as the Committee may select
from among the Employees, provided that Consultants are not eligible to receive Incentive Stock
Options.



     (b) Ten Percent Stockholders. Any Employee who owns Stock possessing more than 10%
of the total combined voting power of all classes of outstanding stock of the Corporation or
any Affiliate shall not be eligible to receive an Option unless:



          (i) the Exercise Price of the Shares subject to such Option when granted is at
least 110% of the Fair Market Value of such Shares, and




          (ii) such Option by its terms is not exercisable after the expiration of five years from
the date of grant.




     (c) Stock Ownership. For purposes of Paragraph 4(b), in determining stock ownership,
an Employee shall be considered as owning the stock owned, directly or indirectly, by or for his
or her brothers and sisters, spouse, ancestors, and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being
owned proportionately by or for its shareholders, partners, or beneficiaries, respectively. Stock
with respect to which such Employee or any other person holds an option shall be disregarded.



     (d) Outstanding Stock. For purposes of Section 4(b), the term “outstanding stock”
shall include all stock actually issued and outstanding immediately after the grant of the Option
to the Optionee but shall not include any share for which an Option is exercisable by any person.



5. STOCK.




     (a) Shares Subject to This Plan. The aggregate number of Shares which maybe issued
upon exercise of Options under the Plan shall not exceed 2,250,000 Shares, subject to adjustment



-5









 







pursuant to Section 9 hereof. For so long as the Corporation is relying upon the exemption
set forth in Section 25102(0) of the California Corporations Code, the total number of Shares
issuable upon exercise of all outstanding Options shall not exceed a number of shares which is
equal to 30% of the then outstanding shares of the Corporation (convertible preferred or
convertible senior common shares will be counted on an as if converted basis), exclusive of promotional shares, for
which the promotional stockholders waive all rights to receive cash or property dividends and to
participate in any distribution of assets, in the event of liquidation.



     (b) Options Not to Exceed Shares Available. The number of Shares for which an Option
is exercisable at any time shall not exceed the number of Shares remaining available for issuance
under the Plan. If any Option expires or is terminated, the number of Shares for which such Option
was exercisable may be made exercisable pursuant to other Options under the Plan. If the
Corporation reacquires any Shares pursuant to Sections 11 or 12, hereof: such Shares may again be
made exercisable pursuant to an Option. The limitations established by this Section 5(b) shall be
subject to adjustment in the manner provided in Section 9 hereof upon the occurrence of an event
specified therein.



6. TERMS AND CONDITIONS OF OPTIONS.




     (a) Stock Option Agreements. Options shall be evidenced by a written stock option
agreement between the Optionee and the Corporation either in the form of a Non-statutory Stock
Option Agreement (attached hereto as Exhibit A), in the form of an Incentive Stock Option
Agreement (attached hereto as Exhibit B) or in such other form as the Committee shall from time to
time determine. No Option or purported Option shall be a valid and binding obligation of the
Corporation unless so evidenced in writing.



     (b) Number of Shares. Each stock option agreement shall state the number of Shares
for which the Option is exercisable and shall provide for the adjustment thereof in accordance
with Section 9 hereof. Each stock option agreement will also specify whether the option is a
Nonstatutory Stock Option or an Incentive Stock Option. The maximum number of shares with respect
to which options may be granted to anyone Optionee, in the aggregate in any calendar year, shall
not exceed Five Hundred Thousand (500,000) Shares.



     (c) Vesting. An Optionee may not exercise his or her Option for any Shares until the
Option, in regard to such Shares, has vested. Each stock option agreement shall include a vesting
schedule which shall show when the Option becomes exercisable provided, each Option shall vest at
a rate of at least twenty percent (20%) per year over a period of five (5) years. The vesting
schedule shall not impose upon the Corporation or any Affiliate any obligation to retain the
Optionee in its employ or under contract for any period or otherwise change the employment-at-will
status of an Optionee who is an employee of the Corporation or any Affiliate.



     (d) Lapse of Options. Each stock option agreement shall state the time or times
when the Option covered thereby lapses and becomes unexercisable in part or in full. An Option
shall lapse on the earliest of the following events (unless otherwise determined by the
Committee and reflected in an option agreement):



-6









 





          (i) the tenth anniversary of the date of granting the Option;




          (ii) the first anniversary of the Optionee’s death;




          (iii) the first anniversary of the date the Optionee ceases to be an Employee due to total
and permanent disability;




          (iv) on the date provided in Section 6(h) (i), unless with respect to a Nonstatutory Stock
Option, the Committee otherwise extends such period before the applicable expiration date;




          (v) on the date provided in Section 9 for a transaction described in such Section;




          (vi) the date the Optionee files or has filed against him or her a petition in
bankruptcy; or




          (vii) the expiration date specified in an Optionee’s stock option agreement.




     (e) Exercise Price. Each stock option agreement shall state the Exercise Price for
the Shares for which the Option is exercisable. Subject to Section 4(b), the Exercise Price of an
Incentive Stock Option and a Nonstatutory Stock Option shall, when granted, be not less than 100%
and 85% of the Fair Market Value of the Shares for which the Option is exercisable, respectively,
and not less than the par value of the Shares.



     (f) Medium and Time of Payment. The Purchase Price shall be payable in full in cash
upon the exercise of an Option but the Committee may allow the Optionee to pay the Purchase
Price:



          (i) by surrendering Shares in good form for transfer, owned by the Optionee and having a Fair
Market Value on the date of exercise equal to the Purchase Price;




          (ii) by delivery of a full recourse promissory note (“Note’’) made by the Optionee in the
amount of the Purchase Price, bearing interest, compounded semiannually, at a rate not less than
the rate determined under Section 7872 of the Code to insure that no “foregone interest”, as
defined in such section, will accrue, together with the delivery of a du1y executed standard form
security agreement securing the Note by a pledge of the Shares purchased; or




          (iii) in any combination of such consideration or such other consideration and method of
payment for the issuance of Shares to the extent permitted under applicable law as long as the
sum of the cash so paid, the Fair Market Value of the Shares so surrendered, and the amount of
any Note equals the Purchase Price.



The Committee or a stock option agreement may prescribe requirements with respect to the exercise
of Options, including the submission by the Optionee of such forms and documents as the Committee
may require and, the delivery by the Optionee of cash sufficient to satisfy applicable


-7









 






withholding requirements. The Committee may vary the exercise requirements and procedures
from time to time to facilitate, for example, the broker-assisted exercise of Options.




     (g) Nontransferability of Options. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee or the Optionee’s conservator or legal representative
and shall not be assignable or transferable. In the event of the Optionee’s death, the Option
shall not be transferable by the Optionee other than by will or the laws of descent and
distribution.



     (h) Termination of Employment Other than by Death or
Disability.



          (i) If an Optionee ceases to be an Employee for any reason other than his or her
death or disability, the Optionee shall have the right, subject to the provisions of this Section
6, to exercise any Option held by the Optionee at any time within thirty (30) days after his or
her termination of employment, but not beyond the otherwise applicable term of the Option and only
to the extent that on such date of termination of employment the Optionee’s right to exercise such
Option had vested.




          (ii) For purposes of this Section 6(h), the employment relationship shall be treated as
continuing intact while the Optionee is an active employee of the Corporation or any Affiliate,
or is on military leave, sick leave, or other bona fide leave of absence to be determined in the
sole discretion of the Committee. The preceding sentence notwithstanding, in the case of an
Incentive Stock Option, employment shall be deemed to terminate on the date the Optionee ceases
active employment with the Corporation or any Affiliate, unless the Optionee’s reemployment
rights are guaranteed by statute or contract.




     (i) Death of Optionee. If an Optionee dies while an Employee, or after ceasing to be
an Employee but during the period while he or she could have exercised an Option under Section
6(h),
any Option granted to the Optionee may be exercised, to the extent it had vested at the time of
death and subject to the Plan, at any time within 12 months after the Optionee’s death, by the
executors or administrators of his or her estate or by any person or persons who acquire the
Option by will or the laws of descent and distribution, but not beyond the otherwise applicable
term of the Option.



     G) Disability of Optionee. If an Optionee ceases to be an Employee due to becoming
totally and permanently disabled within the meaning of Section 22(e) (3) of the Code, any Option
granted to the Optionee may be exercised to the extent it had vested at the time of cessation
and, subject to the Plan, at any time within 12 months after the Optionee’s termination of
employment, but not beyond the otherwise applicable term of the Option.



     (k) Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have
no rights as a stockholder of the Corporation with respect to any Shares for which his or her
Option is exercisable until the date of the issuance of a stock certificate for such Shares. No
adjustment shall be made for dividends, ordinary or extraordinary or whether in currency,
securities, or other property, distributions, or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided in Section 9 hereof.



-8









 





     (1) Modification. Extension. and Renewal of Options. Within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options or accept the cancellation of
outstanding Options for the granting of new Options in substitution therefor. Notwithstanding the
preceding sentence, no modification of an Option shall, without the consent of the Optionee, alter
or impair any rights or obligations under any Option previously granted.



     (m) Other Provisions. The stock option agreements authorized under the Plan may
contain such other provisions which are not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable.



7. $100.000 PER YEAR LIMITATION ON VESTING OF ISOs.




     To the extent that the Fair Market Value of Shares (determined for each Share as of the date
of grant of the Option covering such Share) subject to Options granted under this Plan (or any
other
plan of the Corporation or any Affiliate) which are designated as incentive Stock Options and
which become exercisable by an Optionee for the first time during a single calendar year exceeds
$100,000, the Option(s) (or portion thereof) covering such Shares shall be recharacterized (to the
extent of such excess over $100,000) as a Nonstatutory Stock Option. ill determining which
Option(s) shall be treated as Nonstatutory Stock Options under the preceding sentence, the Options
shall be taken into account in the order granted, with the result that a later granted Option
shall be recharacterized as a Nonstatutory Stock Option prior to such recharacterization of a
previously granted Option.



8. TERM OF PLAN.




     Options may be granted pursuant to the Plan until ten (10) years following the Effective
Date, and all Options which are outstanding on such date shall remain in effect until they are
exercised or expire by their terms. The Plan shall expire for all purposes on the date ten (10)
years following the Effective Date.



9. RECAPITALIZATION. TAKEOVERS. AND LIOUIDATIONS.




     (a) Reorganizations. The number of Shares covered by the Plan, as provided in
Section 5 hereof, and the number of Shares for which each Option is exercisable shall be
proportionately adjusted for any increase or decrease in the number of issued Shares resulting
from the payment of a Common Stock dividend, a stock split, a reverse stock split,
recapitalization, combination, reclassification or any other event which results in an increase
or decrease in the number of issued Shares effected without receipt of consideration by the
Corporation, and the Exercise Price shall be proportionately increased in the event the number of
Shares subject to such Option are decreased and shall be proportionately decreased in the event
the number of Shares subject to such Option are increased. For the purposes of this paragraph,
conversion of any convertible securities of the Corporation shall not be deemed to have been
“effected without receipt of consideration.” Adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the



-9









 







Corporation of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.



     (b) Liquidation. In the event of the dissolution or liquidation of the Corporation,
each Option shall terminate immediately prior to the consummation of such action. The Committee
shall notify the Optionee not less than fifteen (15) days prior to the proposed consummation of a
pending dissolution or liquidation, and the Option shall be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such action.



     (c) Merger. In the event of (i) a proposed merger of the Corporation with or into
another corporation, as a result of which the Corporation is not the surviving corporation and
(ii) the
Option is not assumed or an equivalent option substituted by the successor corporation or a
parent or subsidiary of the successor corporation, then in such case each Option shall terminate
immediately prior to the consummation of such transaction. The Committee shall notify the Optionee
not less than fifteen (15) days prior to the proposed consummation of such transaction, and the
Option shall be exercisable as to all Shares which are vested prior to expiration and until
immediately prior to the consummation of such transaction.



     (d) Determination by Committee. All adjustments described in this Section 9 shall
be made by the Committee, whose determination shall be conclusive and binding on all persons.



     (e) Limitation on Rights of Optionee. Except as expressly provided in this Section 9,
no Optionee shall have any rights by reason of any payment of any stock dividend, stock split or
reverse stock split or any other increase or decrease in the number of shares of stock of any
class, or by reason of any reorganization, consolidation, dissolution, liquidation, merger,
exchange, split-up or reverse split-up, or spin-off of assets or stock of another corporation. Any
issuance by the Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of the Shares for which an Option is exercisable. Notwithstanding the foregoing, if
the Corporation shall enter into a transaction affecting the Corporation’s capital stock or
distributions to the holders of its capital stock for which a revision in the terms of each Option
is not required pursuant to this Section 9, the Committee shall have the right, but not the
obligation, to revise the terms of each Option in a manner the Committee, in its sole discretion,
deems fair and reasonable given the transaction involved. If necessary or appropriate in
connection with such transaction, the Committee may declare that any Option shall terminate as of
a date fixed by the Committee and give each Optionee the right to exercise his Option in whole or
in part, including exercise as to Shares to which the Option would not otherwise be exercisable.



     (f) No Restriction on Rights of Corporation. The grant of an Option shall not affect
or restrict in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations, or changes of its capital or business structure, or to merge
or consolidate, or to dissolve, liquidate, sell, or transfer al~ or any part of its business or
assets.



10. SECURITIES LAW REOUIREMENTS.





-10









 








     (a) Legality of Issuance. No Share shall be issued upon the exercise of any
Option unless and until the Corporation has determined that:



          (i) the Corporation and the Optionee have taken all actions required to exempt the issuance
of the Shares from the registration requirements under the Securities Act of 1933, as amended
(the “Act”), or the Corporation and the Optionee shall determine that the registration
requirements of the Act do not apply to such exercise;




          (ii) any applicable listing requirement of any stock exchange on which the Common Stock is
listed has been satisfied; and




          (iii) any other applicable provision of state or Federal law has been
satisfied.




     (b) Restrictions on Transfer: Representations of Optionee: Legends. Regardless of
whether the offering and sale of Shares has been registered under the Act or has been registered
or qualified under the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge, or other transfer of such Shares, including the placement of appropriate legends
on stock certificates, if, in the judgment of the Corporation and its counsel, such restrictions
are necessary or desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state, or any other law. If the sale of Shares is not registered under the
Act and the Corporation shall determine that the registration requirements of the Act apply to
such sale, but an exemption is available which requires an investment representation or other
representation, the Optionee shall be required, as a condition to purchasing Shares by exercise of
his or her Option, to represent that such Shares are being acquired for investment, and not with a
view to the sale or distribution thereof, except in compliance with the Act, and to make such
other representations as are deemed necessary or appropriate by the Corporation and its counsel.
Stock certificates evidencing Shares acquired pursuant to an unregistered transaction to which the
Act applies shall bear a restrictive legend substantially in the following form and such other
restrictive legends as are required or deemed advisable under the Plan or the provisions of any
applicable law:



“THE SHARES REPRESENTED BY THIS CERTIFICATE HA VB NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF, AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION UNDER THE ACT AND/OR QUALIFICATION UNDER ANY APPLICABLE STATE
SECURITIES LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION AND
ITS COUNSEL THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.”


The Corporation shall also place legends on stock certificates representing its right
of repurchase under Section 11 hereof and the right of first refusal under Section 12
hereof.


-11









 






Any determination by the Corporation and its counsel in connection with any of the matters
set forth in this Section 10 shall be conclusive and binding on all persons.




     (c) Registration or Qualification of Securities. The Corporation may, but shall not
be obligated to, register or qualify the sale of Shares under the Act or any other applicable
law. In connection with any such registration or qualification, the Corporation shall provide
each Optionee with such information required pursuant to all applicable laws and regulations.



     (d) Exchange of Certificates. If, in the opinion of the Corporation and its
counsel, any legend placed on a stock certificate representing Shares sold hereunder is no
longer required, the Optionee or the holder of such certificate shall be entitled to exchange
such certificate for a certificate representing the same number of Shares but lacking such
legend.



     (e) Market Standoff Agreement. By acceptance of an Option, each Optionee agrees
that if so requested by the Corporation or any representative of the underwriters in
connection with any registration of any securities of the Corporation under the Act,
Optionee shall not sell or otherwise transfer any of the Shares or other securities of the
Corporation during the period requested by the Corporation or the representative of the
underwriters, as the case may be. Each Optionee agrees that the Corporation may impose
stop-transfer instructions with respect to the securities subject to the foregoing restrictions.



11. RIGHT OF REPURCHASE.




     (a) Repurchase Right. At the Committee’s discretion, Shares issued pursuant to the
exercise of an Option may be subject to a right, but not an obligation, of repurchase by the
Corporation (the “Right of Repurchase”), at the price specified in Section 11 (b), if the
Optionee ceases to be an Employee for any reason (“Employment Termination”) at any time after the
grant of the Option pursuant to which such Shares were issued. Shares issued by the Corporation
shall only be transferable by the Optionee subject to the Right of Repurchase, and the Corporation
shall legend the Right of Repurchase on the stock certificates evidencing such Shares and shall
take such other steps as it deems necessary to ensure compliance with this restriction. The
Corporation’s rights under this Section 11 (a) shall be freely assignable, in whole or in part.



     (b) Repurchase Price. The price per Share at which the Corporation may exercise the
Right of Repurchase under Section 11 (a) (the “Repurchase Price”) shall be the higher of the
Exercise Price of each Share as paid by the Optionee, or Fair Market Value of the Shares on the
date the Corporation sends the notice to the Optionee of its exercise of its Right of Repurchase
pursuant to Section 11 (a).



     (c) Repurchase Procedure. The Corporation may exercise its Right of Repurchase by
sending a written notice to the Optionee and to the Escrow Agent, if any, of its taking such
action and specifying the number of Shares being repurchased. The



-12









 







Corporation’s Right of Repurchase shall terminate if not exercised by written notice from the
Corporation to the Optionee within ninety (90) days of the date on which the Corporation learns of
the Employment Termination or the last date any Option granted to such Optionee is exercised,
which ever is later. If the Corporation exercises its Right of Repurchase, the Optionee, or if
applicable, the Escrow Agent, shall deliver to the Corporation every stock certificate
representing the Shares being repurchased, together with appropriate Assignments Separate from
Certificates, and the Corporation shall then promptly pay the total Repurchase Price in cash to
the Optionee, or if applicable, to the Escrow Agent, for delivery to the Optionee.



     (d) Election to Defer Purchase of Incentive Stock Option Shares.



          (i) Notwithstanding the preceding provisions of this Section 11, an Optionee whose Shares
were issued pursuant to an Incentive Stock Option may elect to defer the Corporation’s repurchase
of such Shares pursuant to this Section 11 until the holding period requirements of Section 422(
a) of the Code are met. Such election shall be in writing in such form as the Committee may
require and shall be delivered to the Corporation and to the Escrow Agent by certified mail no
later than seven (7) days after the date on which the Optionee receives notice that the
Corporation elects to exercise its Right of Repurchase. Such election shall pertain to all such
Shares issued to the Optionee and shall be irrevocable.




          (ii) With respect to an Optionee who makes the election described in subsection 11 (d) (i),
the Corporation shall repurchase such Shares on or before the date which is ninety (90) days
following the earlier of the date on which the Optionee dies or the date on which the holding
period requirements of Section 422(a) of the Code are met. The Repurchase Price of each such Share
determined under Section 11 (b) shall be calculated by substituting for the Optionee’s Employment
Termination date the earlier of the date on which the Optionee dies or the date on which such
holding period requirements are met.




     (e) Escrow. To facilitate the consummation of the Corporation’s Right of Repurchase
under this Section 11, at the request of the Committee, the Optionee and the Corporation shall
execute Joint Escrow instructions and the Optionee shall deliver and deposit with the Escrow Agent
named in the Joint Escrow instructions two “Assignments Separate from Certificate”, together with
all certificates evidencing the Shares of Common Stock issued to the Optionee pursuant to the
Plan, duly endorsed in blank. The Escrow Agent shall hold such documents and deliver the same to
the Corporation pursuant to the Joint Escrow instructions and in accordance with the terms of this
Section 11, as applicable.



     (f) Binding Effect. The Corporation’s Right of Repurchase shall inure to the benefit
of its successors and assigns and shall be binding upon any representative, executor,
administrator, heir, or legatee of the Optionee.



     (g) Payment of Net Amount Owing. Notwithstanding anything to the contrary contained
herein, if the Corporation determines to exercise its rights of repurchase pursuant



 









 







to this Section before any Shares have been issued as a result of an exercise of an Option, in
lieu of issuing any Shares, the Corporation shall have the right, but not the obligation, to pay
to the Optionee the net amount owing to the Optionee.



     (h) Termination or Right of Repurchase. Notwithstanding any other provision of this
Section 11, in the event that the Common Stock is listed on any United States securities
exchange or traded on any formal over-the-counter market in general use in the United States at
the time the Optionee would otherwise be required to transfer his or her Shares, the Corporation
shall no longer have the Right of Repurchase, and the Optionee shall have no obligation to
comply with this Section 11.



12. RIGHT OF FIRST REFUSAL.




     (a) Right of First Refusal. At the Committee’s discretion, shares issued pursuant to
the exercise of an Option may be subject to a requirement that if an Optionee proposes to sell,
pledge, or otherwise transfer any Shares acquired pursuant to exercise of an Option, or any
interest in such Shares, to any person or entity, the Corporation shall have a right of first
refusal (the ''Right of First Refusal”) with respect to such Shares. Any Optionee desiring to
transfer Shares subject to the Right of First Refusal shall give a written notice (the ''Transfer
Notice”) to the Corporation describing fully the proposed transfer, including the number of Shares
proposed to be transferred, the proposed transfer price, and the name and address of the proposed
transferee. The Transfer Notice shall be signed both by the Optionee and by the proposed
transferee and must constitute a binding commitment of both parties to the transfer of the Shares.
The Corporation shall have the right to purchase the Shares subject to the Transfer Notice on the
terms of the proposal referred to in the Transfer Notice, subject to any change in such terms
permitted under Section 12(b) hereof, by delivery of a notice of exercise of the Right of First
Refusal within 30 days after the date the Transfer Notice is received by the Corporation. The
Corporation’s rights under this Section 12(a) shall be freely assignable, in whole or in part.



     (b) Transfer of Shares. If the Corporation fails to exercise the Right of First
Refusal within 30 days after the date on which it receives the Transfer Notice, the Optionee may,
not later than six months following receipt of the Transfer Notice by the Corporation, consummate
a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in
the Transfer Notice. Any proposed transfer on terms and conditions different from those described
in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again
be subject to the Right of First Refusal and shall again require compliance with the procedure
described in Section 12(a). If the Corporation exercises its Right of First Refusal, the Optionee
shall immediately endorse and deliver to the Corporation every stock certificate representing the
Shares being purchased, and the Corporation shall then promptly pay the purchase price in
accordance with the terms set forth in the Transfer Notice.



     (c) Repurchase Payment. The amount payable to an Optionee pursuant to the
Corporation’s exercise of the Right of First Refusal shall be paid to the Optionee in



 









 







accordance with the terms and conditions of the Transfer Notice or may, at the election of
the Corporation, be paid in full in cash.



     (d) Binding Effect. The Corporation’s Right of First Refusal shall inure to the
benefit of its successors and assigns and shall be binding upon any transferee of the Shares,
other than a transferee acquiring Shares in a transaction with respect to which the Corporation
failed to exercise its Right of First Refusal (a ''Free Transferee’’) or a transferee of a Free
Transferee.



     (e) Termination of Right of First Refusal. Notwithstanding any other provision of
this Section 12, if the Common Stock is listed on any United States securities exchange or traded
on any formal over-the-counter market in general use in the United States at the time the Optionee
desires to transfer his or her Shares, the Corporation shall no longer have the Right of First
Refusal, and the Optionee shall have no obligation to comply with this Section 12.



13. EXERCISE OF UNVESTED OPTIONS.




     The Committee may grant any Optionee the right to exercise any Option prior to the complete
vesting of such Option. Without limiting the generality of the foregoing, the Committee may
provide that if an Option is exercised prior to having completely vested, the Shares issued upon
such exercise shall remain subject to vesting at the same rate as under the Option so exercised
and shall be subject to a right, but not an obligation, of repurchase by the Corporation with
respect to all unvested Shares if the Optionee ceases to be an Employee for any reason. For the
purposes of facilitating the enforcement of any such right of repurchase, at the request of the
Committee, the Optionee shall enter into the Joint Escrow Instructions with the Corporation and
deliver every certificate for his or her unvested Shares with a stock power executed in blank by
the Optionee and by the Optionee’s spouse, if required for transfer.



14. AMENDMENT OF THE PLAN.




     The Board or the Committee may, from time to time, terminate, suspend or discontinue the
Plan, in whole or in part, or revise or amend it in any respect whatsoever including, but not
limited to, the adoption of any amendment( s) deemed necessary or advisable to qualify the
Options under rules and regulations promulgated by the Securities and Exchange Commission with
respect to Employees who are subject to the provisions of Section 16 of the Securities Exchange
Act of 1934, as amended, or to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option granted thereunder, without approval of the
stockholders of the Corporation, but without the approval of the Corporation’s stockholders, no
such revision or amendment shall:



     (i) increase the number of Shares subject to the Plan, other than any increase
pursuant to Section 9;



 









 





     (ii) materially modify the requirements as to eligibility for participation in the
Plan;



     (iii) materially increase the benefits accruing to Optionees under the Plan;



     (iv) extend the term of the Plan; or



     (v) amend this Section 14 to defeat its purpose.


No amendment, termination or modification of the Plan shall affect any Option theretofore
granted in any material adverse way without the consent of the Optionee.




15. APPLICATION OF FUNDS.




     The proceeds received by the Corporation from the sale of Common Stock pursuant to the
exercise of an Option shall be used for general corporate purposes.



16. APPROVAL OF STOCKHOLDERS.




     The Plan shall be subject to approval by the affirmative vote of the holders of a majority
of all classes of the outstanding shares present and entitled to vote at the first meeting of
stockholders of the Corporation following the adoption of the Plan or by written
consent, and in no event later than one (1) year following the Effective Date. Prior to such
approval, Options may be granted but shall not be exercisable. Any- amendment described in
Section 14 (i) to (iv) shall also be subject to approval by the Corporation’s stockholders.



17. WITHHOLDING OF TAXES.




     In the event the Corporation or an Affiliate determines that it is required to withhold
Federal, state, or local taxes in connection with the exercise of an Option or the disposition
of Shares issued pursuant to the exercise of an Option, the Optionee or any person
succeeding to the rights of the Optionee, as a condition to such exercise or disposition, may be
required to make arrangements satisfactory to the Corporation or the Affiliate to enable it to
satisfy such withholding requirements.



18. RIGHTS AS AN EMPLOYEE.




     Neither the Plan nor any Option granted pursuant thereto shall be construed to give any
person the right to remain in the employ of the Corporation or any Affiliate, or to affect the
right of the Corporation or any Affiliate to terminate such individual’s employment at any time
with or without cause. The grant of an Option shall not entitle the Optionee to, or disqualify the
Optionee from, participation in the grant of any other Option under the Plan or participation in
any other benefit plan maintained by the Corporation or any Affiliate.



 









 





19. DISAVOWAL OF REPRESENTATIONS. UNDERTAKINGS OR CREATION
OF IMPLIED RIGHTS.




     ill adopting and maintaining this Plan and granting options hereunder, neither the
Corporation nor any Affiliate makes any representations or undertakings with respect to the
initial qualification or treatment of Options under federal or state tax or securities laws. The
Corporation and each Affiliate expressly disavows the creation of any rights in Employees,
Optionees, or beneficiaries of any obligations on the part of the Corporation, any Affiliate or
the Committee, except as expressly provided herein.



20. INSPECTION OF RECORDS.




     Copies of the Plan, records reflecting each Optionee’s Option, and any other documents and
records which an Optionee is entitled by law to inspect shall be open to inspection by the
Optionee and his or her duly authorized representative at the office of the Committee at any
reasonable business hour.



21. INFORMATION TO OPTIONEES.




     Each Optionee shall be provided with such information regarding the Corporation as the
Committee from time to time deems necessary or appropriate; provided however, that each Optionee
shall at all times be provided with such information as is required to be provided from time to
time pursuant to applicable regulatory requirements, including, but not limited to, any applicable
requirements of the Securities and Exchange Commission, the California Department of Corporations
and other state securities agencies.



-17









 





AMENDMENT NO.1




TO




SUTURA, INC.




2001 STOCK OPTION PLAN



The 2001 Stock Option Plan is amended by adding the following provision after the existing
language in Section 6(c):




“However, notwithstanding the foregoing, options granted to any
Optionee, for which at least one year has elapsed since the Vesting
Commencement Date at the time of a Change of Control of the
Corporation (as defined below), shall become immediately vested upon
such Change of Control.



For purposes of this Section 6, a Change of Control shall
be            defined as (i) the sale by the Corporation of all or
substantially all of its assets, or (ii) the Corporation’s merger
into or consolidation with any other corporation or other entity, or
any other corporate reorganization, in which the holders of the
Corporation’s voting shares, immediately prior to such transaction
own, immediately after such transaction, securities representing less
than fifty percent (50%) of the voting power of the Corporation or
other entity surviving such transaction, provide that a merger
effected exclusively for the purpose of changing the domicile of the
Corporation shall not be a Change of Control.”