**EXHIBIT 10.1**

**VERSICOR INC.2001 STOCK OPTION PLAN**

**1.  Purposes.**

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

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

      (c) TheCompany intends that the Stock Awards issued under the Plan shall, in thediscretion of the Board or any Committee to which responsibility foradministration of the Plan has been delegated pursuant to subsection 3(c), beeither (i) Options granted pursuant to Section 6 hereof, includingIncentive Stock Options and Nonstatutory Stock Options, (ii) stock bonusesor rights to purchase restricted stock granted pursuant to Section 7hereof, or (iii) stock appreciation rights granted pursuant toSection 8 hereof. All Options shall be separately designated IncentiveStock Options or Nonstatutory Stock Options at the time of grant, and in suchform as issued pursuant to Section 6, and a separate certificate orcertificates will be issued for shares purchased on exercise of each type ofOption.

**2.  Definitions.**

      (a) "***Affiliate***" meansany parent corporation or subsidiary corporation, whether now or hereafterexisting, as those terms are defined in Sections 424(e) and(f) respectively, of the Code.

      (b) "***Board***" means theBoard of Directors of the Company.

      (c) "***Cause***" means(unless otherwise expressly provided in the applicable Stock Award Agreement,or another applicable contract with the Stock Award holder that defines suchterm for purposes of determining the effect that a "for cause"termination has on the holder's Stock Awards) that the Company, acting in goodfaith based upon the information then known to the Company, determines that theStock Award holder has: (1) repeatedly failed to perform in a materialrespect his obligations under any employment agreement with the Company withoutproper reason and has not cured such failure in a reasonable time afterreceiving notice from the Company, (2) willfully engaged in illegalconduct or gross misconduct that is materially injurious to the Company, or(3) breached the provisions of any confidentiality agreement orconfidentiality provisions of any employment agreement with the Company.

      For purposes of this provision, no act orfailure to act, on the part of the Stock Award holder, shall be considered"willful" unless it is done, or omitted to be done, by the StockAward holder in bad faith or without reasonable belief that the Stock Awardholder's action or omission was in the best interests of the Company. Any act,or failure to act, based upon authority given pursuant to a resolution dulyadopted by the Board or upon the instructions of the chief executive officer ora senior officer of the Company or based upon the advice of counsel for theCompany shall be conclusively presumed to be done, or omitted to be done, bythe Stock Award holder in good faith and in the best interests of the Company.No termination of the Stock Award holder for Cause will be effective unlessadopted pursuant to a resolution duly adopted by the affirmative vote of notless than a majority of the entire membership of the Board at a meeting of theBoard called and held for such purpose, and communicated to the Stock Award holderby written notice that explains the basis on which Cause has been found.

      (d) "***Change in Control***"means any of the following:

           (i) Approvalby the stockholders of the Company of the dissolution or liquidation of theCompany;

          (ii) Approvalby the stockholders of the Company of an agreement to merge or consolidate, orotherwise reorganize, with or into one or more entities that are notsubsidiaries or other affiliates, as a result of which less than 50% of theoutstanding voting securities of the surviving or resulting entity immediatelyafter the reorganization are, or will be, owned, directly or indirectly, bystockholders of the Company immediately before such reorganization (assumingfor purposes of such determination that there is no change in the recordownership of the Company's securities from the record date for such approvaluntil such reorganization and that such record owners hold no securities of theother parties to such reorganization, but including in such determination anysecurities of the other parties to such reorganization held by affiliates ofthe Company);

          (iii) Approvalby the stockholders of the Company of the sale of substantially all of theCompany's business and/or assets to a person or entity which is not asubsidiary or other affiliate;

          (iv) Any"person" (as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934 (the "Exchange Act") but excludingany person described in and satisfying the conditions of Rule 13d-1(b)(1)thereunder), becomes the "beneficial owner" (as defined inRule 13d-3 under the Exchange Act), directly or indirectly, of securitiesof the Company representing more than 40% of the combined voting power of theCompany's then outstanding securities entitled to then vote generally in theelection of directors of the Company; or

          (v) Duringany period not longer than two consecutive years, individuals who at thebeginning of such period constituted the Board of Directors of the Companycease to constitute at least a majority thereof, unless the election, or thenomination for election by the Corporation's stockholders, of each new Boardmember was approved by a vote of at least three-fourths of the Board membersthen still in office who were Board members at the beginning of such period(including for these purposes, new members whose election or nomination was soapproved.

      (e) "***Code***" means theInternal Revenue Code of 1986, as amended.

      (f)  "***Committee***" meansa Committee appointed by the Board in accordance with subsection 3(c) of thePlan.

      (g) "***Company***" meansVersicor Inc., a Delaware corporation.

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

      (i)  "***Consultant***"means any person, including an advisor, engaged by the Company or an Affiliateto render consulting services and who is compensated for such services,provided that the term "Consultant" shall not include Directors whoare paid only a director's fee by the Company or who are not compensated by theCompany for their services as Directors.

      (j)  "***Continuous Status as an Employee,Director or Consultant***" means that the service of anindividual to the Company, whether as an Employee, Director or Consultant, isnot interrupted or terminated. The Board or the chief executive officer of theCompany may determine, in that party's sole discretion, whether ContinuousStatus as an Employee, Director or Consultant shall be considered interruptedin the case of: (i) any leave of absence approved by the Board or thechief executive officer of the Company, including sick leave, military leave,or any other personal leave; or (ii) transfers between the Company,Affiliates or their successors.

      (k) "***Covered Employee***"means the chief executive officer and the four (4) other highestcompensated officers of the Company for whom total compensation is required tobe reported to stockholders under the Exchange Act, as determined for purposesof Section 162(m) of the Code.

      (l)  "***Director***" meansa member of the Board.

      (m) "***Employee***" meansany person, including Officers and Directors, employed by the Company or anyAffiliate of the Company. Neither service as a Director nor payment of adirector's fee by the Company shall be sufficient to constitute"employment" by the Company.

      (n) "***Exchange Act***"means the Securities Exchange Act of 1934, as amended.

      (o) "***Fair Market Value***"means the last reported sales price on the relevant date of a share of theCompany's common stock as listed in the Western Edition of the Wall StreetJournal, or if there are no reported sales on such date, then the last reportedsales price on the next preceding day on which such a sale is transacted.

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

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

      (r) "***Non-Employee Director***"means a Director who either (i) is not a current Employee or Officer ofthe Company or its parent or subsidiary, does not receive compensation(directly or indirectly) from the Company or its parent or subsidiary forservices rendered as a consultant or in any capacity other than as a Director(except for an amount as to which disclosure would not be required under Item404(a) of Regulation S-K promulgated pursuant to the Securities Act("Regulation S-K")), does not possess an interest in any othertransaction as to which disclosure would be required under Item 404(a) ofRegulation S-K, and is not engaged in a business relationship as to whichdisclosure would be required under Item 404(b) of Regulation S-K; or(ii) is otherwise considered a "non-employee director" forpurposes of Rule 16b-3.

      (s) "***Nonstatutory Stock Option***"means an Option not intended to qualify as an Incentive Stock Option underSection 422 of the Code.

      (t)  "***Officer***" means aperson who is an officer of the Company within the meaning of Section 16of the Exchange Act and the rules and regulations promulgated thereunder.

      (u) "***Option***" means astock option granted pursuant to the Plan.

      (v) "***Optionee***" meansa person to whom an Option is granted pursuant to the Plan or, if applicable,such other person who holds an outstanding Option.

      (w) "***Outside Director***"means a Director who either (i) is not a current employee of the Companyor an "affiliated corporation" (within the meaning of the Treasuryregulations promulgated under Section 162(m) of the Code), is not a formeremployee of the Company or an "affiliated corporation" receivingcompensation for prior services (other than benefits under a tax qualifiedpension plan), was not an officer of the Company or an "affiliatedcorporation" at any time, and is not currently receiving direct orindirect remuneration from the Company or an "affiliated corporation"for services in any capacity other than as a Director, or (ii) isotherwise considered an "outside director" for purposes ofSection 162(m) of the Code.

      (x) "***Plan***" means this2001 Stock Option Plan.

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

      (z) "***Securities Act***"means the Securities Act of 1933, as amended.

      (aa) "***Stock Appreciation Right***"means any of the various types of rights which may be granted underSection 8 of the Plan.

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

      (cc) "***Stock Award Agreement***"means a written agreement between the Company and a holder of a Stock Awardevidencing the terms and conditions of an individual Stock Award grant. EachStock Award Agreement shall be subject to the terms and conditions of the Plan.

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

**3.  Administration.**

      (a) ThePlan shall be administered by the Board unless and until the Board delegatesadministration to a Committee, as provided in subsection 3(c).

      (b) TheBoard shall have the power, subject to, and within the limitations of, theexpress provisions of the Plan:

           (i) Todetermine from time to time which of the persons eligible under the Plan shallbe granted Stock Awards; when and how each Stock Award will be granted; whethera Stock Award will be an Incentive Stock Option, a Nonstatutory Stock Option, astock bonus, a right to purchase restricted stock, a Stock Appreciation Right,or a combination of the foregoing; when and how each Stock Award shall begranted; and the provisions of each Stock Award granted (which need not beidentical), including the time or times when a person shall be permitted toreceive stock pursuant to a Stock Award and the number of shares with respectto which a Stock Award shall be granted to each such person.

          (ii) Toconstrue and interpret the Plan and Stock Awards granted under it, and toestablish, amend and revoke rules and regulations for its administration. TheBoard, in the exercise of this power, may correct any defect, omission orinconsistency in the Plan or in any Stock Award Agreement, in a manner and tothe extent it shall deem necessary or expedient to make the Plan fullyeffective.

          (iii) Toamend the Plan or a Stock Award as provided in Section 13; provided,however, that the Board shall not have the power to reprice any Stock Awardonce granted, except for adjustments resulting from a stock split, reversestock split, or similar change to the outstanding capital stock, as provided inSection 12.

          (iv) Generally,to exercise such powers and to perform such acts as the Board deems necessaryor expedient to promote the best interests of the Company that are not inconflict with the provisions of the Plan.

      (c) TheBoard may delegate administration of the Plan to a committee of the Boardcomposed of not fewer than two (2) members (the "Committee"),all of the members of which Committee may be, in the discretion of the Board,Non-Employee Directors and/or Outside Directors. If administration is delegatedto a Committee, the Committee shall have, in connection with the administrationof the Plan, the powers theretofore possessed by the Board, including the powerto delegate to a subcommittee of two (2) or more members any of theadministrative powers the Committee is authorized to exercise (any referencesin this Plan to the Board shall thereafter be to the Committee or such asubcommittee), subject, however, to such resolutions, not inconsistent with theprovisions of the Plan, as may be adopted from time to time by the Board. TheBoard may abolish the Committee at any time and revest in the Board theadministration of the Plan. Notwithstanding anything in this Section 3 tothe contrary, the Board or the Committee may delegate to a committee of one ormore members of the Board the authority to grant Stock Awards to eligiblepersons who (1) are not then subject to Section 16 of the ExchangeAct and/or (2) are either (i) not then Covered Employees and are notexpected to be Covered Employees at the time of recognition of income resultingfrom such Stock Award, or (ii) not persons with respect to whom theCompany wishes to comply with Section 162(m) of the Code.

 

**4.  Shares Subject To The Plan.**

      (a) Subjectto the provisions of Section 12 relating to adjustments upon changes instock, the stock that may be issued pursuant to Stock Awards shall not exceedin the aggregate one million two hundred thousand (1,200,000) shares of theCompany's common stock. If any Stock Award shall for any reason expire orotherwise terminate, in whole or in part, without having been exercised infull, the stock not acquired under such Stock Award shall revert to and againbecome available for issuance under the Plan. Shares subject to StockAppreciation Rights exercised in accordance with Section 8 of the Planshall not be available for subsequent issuance under the Plan.

      (b) Thestock subject to the Plan may be unissued shares or reacquired shares, boughton the market or otherwise.

**5.  Eligibility.**

      (a) IncentiveStock Options and Stock Appreciation Rights appurtenant thereto may be grantedonly to Employees. Stock Awards other than Incentive Stock Options and StockAppreciation Rights appurtenant thereto may be granted to Employees, Directorsor Consultants.

      (b) Noperson shall be eligible for the grant of an Incentive Stock Option if, at thetime of grant, such person owns (or is deemed to own pursuant toSection 424(d) of the Code) stock possessing more than ten percent (10%)of the total combined voting power of all classes of stock of the Company or ofany of its Affiliates unless the exercise price of such Option is at least onehundred ten percent (110%) of the Fair Market Value of such stock at the dateof grant and the Option is not exercisable after the expiration of five(5) years from the date of grant.

      (c) Subjectto the provisions of Section 12 relating to adjustments upon changes instock, no person shall be eligible to be granted Options and Stock AppreciationRights covering more than three hundred thousand (300,000) shares of theCompany's common stock in any twelve (12) month period. Subject to the provisionsof Section 12 relating to adjustments upon changes in stock, no personshall be eligible to be granted Stock Awards covering in the aggregate morethan three hundred thousand (300,000) shares of the Company's common stock inany twelve (12) month period.

**6.  Option Provisions.**

      Each Optionshall be in such form and shall contain such terms and conditions as the Boardshall deem appropriate. The provisions of separate Options need not beidentical, but each Option shall include (through incorporation of provisionshereof by reference in the Option or otherwise) the substance of each of thefollowing provisions:

      (a) **Term.  **No Option shall beexercisable after the expiration of ten (10) years from the date it wasgranted.

      (b) **Price.  **The exercise price ofeach Incentive Stock Option shall be not less than one hundred percent (100%)of the Fair Market Value of the stock subject to the Option on the date theOption is granted; the exercise price of each Nonstatutory Stock Option shallbe not less than eighty-five percent (85%) of the Fair Market Value of thestock subject to the Option on the date the Option is granted.

Notwithstandingthe foregoing, an Option (whether an Incentive Stock Option or a NonstatutoryStock Option) may be granted with an exercise price lower than that set forthin the preceding sentence if such Option is granted pursuant to an assumptionor substitution for another option in a manner satisfying the provisions ofSection 424(a) of the Code.

      (c) **Consideration.  **The purchase priceof stock acquired pursuant to an Option shall be paid, to the extent permittedby applicable statutes and regulations, either (i) in cash at the time theOption is exercised, or (ii) at the discretion of the Board or theCommittee, at the time of the grant of the Option, (A) by delivery to theCompany of other common stock of the Company, (B) according to a deferredpayment arrangement, except that payment of the common stock's "parvalue" (as defined in the Delaware General Corporation Law) shall not bemade by deferred payment, or other arrangement (which may include, withoutlimiting the generality of the foregoing, the use of other common stock of theCompany) with the person to whom the Option is granted or to whom the Option istransferred pursuant to subsection 6(d), or (C) in any other form of legalconsideration that may be acceptable to the Board.

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

      (d) **Transferability.  **An IncentiveStock Option shall not be transferable except by will or by the laws of descentand distribution, and shall be exercisable during the lifetime of the person towhom the Incentive Stock Option is granted only by such person. A NonstatutoryStock Option shall only be transferable by the Optionee upon such terms andconditions as are set forth in the Stock Award Agreement for such Option, asthe Board or the Committee shall determine in its discretion or pursuant to adomestic relations order. The person to whom the Option is granted may, by deliveringwritten notice to the Company, in a form satisfactory to the Company, designatea third party who, in the event of the death of the Optionee, shall thereafterbe entitled to exercise the Option.

      (e) **Vesting.  **The total number ofshares of stock subject to an Option may, but need not, be allotted in periodicinstallments (which may, but need not, be equal). The Stock Award Agreement mayprovide that from time to time during each of such installment periods, theOption may become exercisable ("vest") with respect to some or all ofthe shares allotted to that period, and may be exercised with respect to someor all of the shares allotted to such period and/or any prior period as towhich the Option became vested but was not fully exercised. The Option may besubject to such other terms and conditions on the time or times when it may beexercised (which may be based on performance or other criteria) as the Boardmay deem appropriate. The provisions of this subsection 6(e) are subject to anyOption provisions governing the minimum number of shares as to which an Optionmay be exercised.

      (f) **Termination of Employment or Relationship as aDirector or Consultant.  **In the event an Optionee'sContinuous Status as an Employee, Director or Consultant terminates (other thanupon the Optionee's death or disability), the Optionee may exercise his or herOption (to the extent that the Optionee was entitled to exercise it as of thedate of termination) but only within such period of time ending on the earlierof (i) the date three (3) months following the termination of theOptionee's Continuous Status as an Employee, Director or Consultant (or suchlonger or shorter period, which shall not be less than thirty (30) days,specified in the Stock Award Agreement), or (ii) the expiration of theterm of the Option as set forth in the Stock Award Agreement. If, at the dateof termination, the Optionee is not entitled to exercise his or her entireOption, the shares covered by the unexercisable portion of the Option shall revertto and again become available for issuance under the Plan. If, aftertermination, the Optionee does not exercise his or her Option within the timespecified in the Stock Award Agreement, the Option shall terminate, and theshares covered by such Option shall revert to and again become available forissuance under the Plan.

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

      (g) **Disability of Optionee.  **In theevent an Optionee's Continuous Status as an Employee, Director or Consultantterminates as a result of the Optionee's disability, the Optionee may exercisehis or her Option (to the extent that the Optionee was entitled to exercise itas of the date of termination), but only within such period of time ending onthe earlier of (i) the date twelve (12) months following suchtermination (or such longer or shorter period, which in no event shall be lessthan six (6) months, specified in the Stock Award Agreement), or(ii) the expiration of the term of the Option as set forth in the StockAward Agreement. If, at the date of termination, the Optionee is not entitledto exercise his or her entire Option, the shares covered by the unexercisableportion of the Option shall revert to and again become available for issuanceunder the Plan. If, after termination, the Optionee does not exercise his orher Option within the time specified herein, the Option shall terminate, andthe shares covered by such Option shall revert to and again become available forissuance under the Plan.

      (h) **Death of Optionee.  **In the eventof the death of an Optionee during, or within a period specified in the StockAward Agreement after the termination of, the Optionee's Continuous Status asan Employee, Director or Consultant, the Option may be exercised (to the extentthe Optionee was entitled to exercise the Option as of the date of death) bythe Optionee's estate, by a person who acquired the right to exercise theOption by bequest or inheritance or by a person designated to exercise theoption upon the Optionee's death pursuant to subsection 6(d), but only withinthe period ending on the earlier of (i) the date eighteen (18) monthsfollowing the date of death (or such longer or shorter period, which in noevent shall be less than six (6) months, specified in the Stock AwardAgreement), or (ii) the expiration of the term of such Option as set forthin the Stock Award Agreement. If, at the time of death, the Optionee was notentitled to exercise his or her entire Option, the shares covered by theunexercisable portion of the Option shall revert to and again become availablefor issuance under the Plan. If, after death, the Option is not exercisedwithin the time specified herein, the Option shall terminate, and the sharescovered by such Option shall revert to and again become available for issuanceunder the Plan.

      (i) **Early Exercise.  **The Option may,but need not, include a provision whereby the Optionee may elect at any timewhile an Employee, Director or Consultant to exercise the Option as to any partor all of the shares subject to the Option prior to the full vesting of theOption. Any unvested shares so purchased shall be subject to a repurchase rightin favor of the Company, with the repurchase price to be equal to the originalpurchase price of the stock, or to any other restriction the Board determinesto be appropriate; *provided, however*,that (i) the right to repurchase at the original purchase price shall beexercisable only within (A) the ninety (90) day period following thetermination of employment or the relationship as a Director or Consultant, or(B) such longer period as may be agreed to by the Company and theOptionee, and (ii) such right shall be exercisable only for cash orcancellation of purchase money indebtedness for the shares. Should the right ofrepurchase be assigned by the Company, the assignee shall pay the Company cashequal to the difference between the original purchase price and the stock'sFair Market Value if the original purchase price is less than the stock's FairMarket Value.

 

      (j) **Re-Load Options.  **Without in anyway limiting the authority of the Board or Committee to make or not to makegrants of Options hereunder, the Board or Committee shall have the authority(but not an obligation) to include as part of any Stock Award Agreement aprovision entitling the Optionee to a further Option (a "Re-LoadOption") in the event the Optionee exercises the Option evidenced by theStock Award Agreement, in whole or in part, by surrendering other shares ofCommon Stock in accordance with this Plan and the terms and conditions of theStock Award Agreement. Any such Re-Load Option (i) shall be for a numberof shares equal to the number of shares surrendered as part or all of theexercise price of such Option; (ii) shall have an expiration date which isthe same as the expiration date of the Option the exercise of which gave riseto such Re-Load Option; and (iii) shall have an exercise price which isequal to one hundred percent (100%) of the Fair Market Value of the CommonStock subject to the Re-Load Option on the date of exercise of the originalOption.

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

      There shall beno Re-Load Options on a Re-Load Option. Any such Re-Load Option shall besubject to the availability of sufficient shares under subsection 4(a) and thelimits on the grants of Options under subsection 5(c) and shall be subject tosuch other terms and conditions as the Board or Committee may determine whichare not inconsistent with the express provisions of the Plan regarding theterms of Options.

**7.  Terms Of Stock Bonuses AndPurchases Of Restricted Stock.**

      Each stock bonusor restricted stock purchase agreement shall be in such form and shall containsuch terms and conditions as the Board or the Committee shall deem appropriate.The terms and conditions of stock bonus or restricted stock purchase agreementsmay change from time to time, and the terms and conditions of separateagreements need not be identical, but each stock bonus or restricted stockpurchase agreement shall include (through incorporation of provisions hereof byreference in the agreement or otherwise) the substance of each of the followingprovisions as appropriate:

      (a) **Purchase Price.  **The purchaseprice under each restricted stock purchase agreement shall be such amount asthe Board or Committee shall determine and designate in such Stock AwardAgreement. The Board or the Committee may determine that eligible participantsin the Plan may be awarded stock pursuant to a stock bonus agreement inconsideration for past services actually rendered to the Company or for itsbenefit.

      (b) **Transferability.  **Rights under astock bonus or restricted stock purchase agreement shall be transferable by thegrantee only upon such terms and conditions as are set forth in the applicableStock Award Agreement, as the Board or the Committee shall determine in itsdiscretion, so long as stock awarded under such Stock Award Agreement remainssubject to the terms of the agreement.

      (c) **Consideration.  **The purchaseprice of stock acquired pursuant to a stock purchase agreement shall be paideither: (i) in cash at the time of purchase; (ii) at the discretionof the Board or the Committee, according to a deferred payment arrangement,except that payment of the common stock's "par value" (as defined inthe Delaware General Corporation Law) shall not be made by deferred payment, orother arrangement with the person to whom the stock is sold; or (iii) inany other form of legal consideration that may be acceptable to the Board orthe Committee in its discretion. Notwithstanding the foregoing, the Board orthe Committee to which administration of the Plan has been delegated may awardstock pursuant to a stock bonus agreement in consideration for past servicesactually rendered to the Company or for its benefit.

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

      (e) **Termination of Employment or Relationship as aDirector or Consultant.  **In the event a Participant'sContinuous Status as an Employee, Director or Consultant terminates, theCompany may repurchase or otherwise reacquire, subject to the limitationsdescribed in subsection 7(d), any or all of the shares of stock held bythat person which have not vested as of the date of termination under the termsof the stock bonus or restricted stock purchase agreement between the Companyand such person.

**8.  Stock Appreciation Rights.**

      (a) TheBoard or Committee shall have full power and authority, exercisable in its solediscretion, to grant Stock Appreciation Rights under the Plan to Employees orDirectors of or Consultants to, the Company or its Affiliates. To exercise anyoutstanding Stock Appreciation Right, the holder must provide written notice ofexercise to the Company in compliance with the provisions of the Stock AwardAgreement evidencing such right.

      (b) Threetypes of Stock Appreciation Rights shall be authorized for issuance under thePlan:

          (i) **Tandem Stock Appreciation Rights.  **TandemStock Appreciation Rights will be granted appurtenant to an Option, and shall,except as specifically set forth in this Section 8, be subject to the sameterms and conditions applicable to the particular Option grant to which itpertains. Tandem Stock Appreciation Rights will require the holder to electbetween the exercise of the underlying Option for shares of stock and thesurrender, in whole or in part, of such Option for an appreciationdistribution. The appreciation distribution payable on the exercised TandemRight shall be in cash (or, if so provided, in an equivalent number of sharesof stock based on Fair Market Value on the date of the Option surrender) in anamount up to the excess of (A) the Fair Market Value (on the date of theOption surrender) of the number of shares of stock covered by that portion ofthe surrendered Option in which the Optionee is vested over (B) theaggregate exercise price payable for such vested shares.

          (ii) **Concurrent Stock Appreciation Rights.  **ConcurrentRights will be granted appurtenant to an Option and may apply to all or anyportion of the shares of stock subject to the underlying Option and shall,except as specifically set forth in this Section 8, be subject to the sameterms and conditions applicable to the particular Option grant to which itpertains. A Concurrent Right shall be exercised automatically at the same timethe underlying Option is exercised with respect to the particular shares ofstock to which the Concurrent Right pertains. The appreciation distributionpayable on an exercised Concurrent Right shall be in cash (or, if so provided,in an equivalent number of shares of stock based on Fair Market Value on tiledate of the exercise of the Concurrent Right) in an amount equal to suchportion as shall determined by the Board or the Committee at the time of thegrant of the excess of (A) the aggregate Fair Market Value (on the date ofthe exercise of the Concurrent Right) of the vested shares of stock purchasedunder the underlying Option which have Concurrent Rights appurtenant to themover (B) the aggregate exercise price paid for such shares.

          (iii) **Independent Stock Appreciation Rights.  **IndependentRights will be granted independently of any Option and shall, except asspecifically set forth in this Section 8, be subject to the same terms andconditions applicable to Nonstatutory Stock Options as set forth inSection 6. They shall be denominated in share equivalents. Theappreciation distribution payable on the exercised Independent Right shall benot greater than an amount equal to the excess of (A) the aggregate FairMarket Value (on the date of the exercise of the Independent Right) of a numberof shares of Company stock equal to the number of share equivalents in whichthe holder is vested under such Independent Right, and with respect to whichthe holder is exercising the Independent Right on such date, over (B) theaggregate Fair Market Value (on the date of the grant of the Independent Right)of such number of shares of Company stock. The appreciation distribution payableon the exercised Independent Right shall be in cash or, if so provided, in anequivalent number of shares of stock based on Fair Market Value on the date ofthe exercise of the Independent Right.

**9.  Covenants Of The Company.**

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

      (b) TheCompany shall seek to obtain from each regulatory commission or agency havingjurisdiction over the Plan such authority as may be required to issue and sellshares of stock upon exercise of the Stock Award; provided, however, that thisundertaking shall not require the Company to register under the Securities Acteither the Plan, any Stock Award or any stock issued or issuable pursuant toany such Stock Award. If, after reasonable efforts, the Company is unable toobtain from any such regulatory commission or agency the authority whichcounsel for the Company deems necessary for the lawful issuance and sale ofstock under the Plan, the Company shall be relieved from any liability forfailure to issue and sell stock upon exercise of such Stock Awards unless anduntil such authority is obtained.

**10. Use Of Proceeds From Stock.**

      Proceeds fromthe sale of stock pursuant to Stock Awards shall constitute general funds ofthe Company.

**11. Miscellaneous.**

      (a) Subjectto any applicable provisions of the California Corporate Securities Law of 1968and related regulations relied upon as a condition of issuing securitiespursuant to the Plan, the Board shall have the power to accelerate the time atwhich a Stock Award may first be exercised or the time during which a StockAward or any part thereof will vest pursuant to subsection 6(e), 7(d) or8(b) notwithstanding the provisions in the Stock Award stating the time atwhich it may first be exercised or the time during which it will vest.

      (b) Neitheran Employee, Director or Consultant nor any person to whom a Stock Award istransferred under subsection 6(d), 7(b), or 8(b) shall be deemed to be theholder of, or to have any of the rights of a holder with respect to, any sharessubject to such Stock Award unless and until such person has satisfied allrequirements for exercise of the Stock Award pursuant to its terms.

      (c) Nothingin the Plan or any instrument executed or Stock Award granted pursuant theretoshall confer upon any Employee, Director, Consultant or other holder of StockAwards any right to continue in the employ of the Company or any Affiliate (orto continue acting as a Director or Consultant) or shall affect the right ofthe Company or any Affiliate to terminate the employment of any Employee withor without cause the right of the Company's Board of Directors and/or theCompany's stockholders to remove any Director as provided in the Company'sBy-Laws and the provisions of the Delaware General Corporation Law, or theright to terminate the relationship of any Consultant subject to the terms ofsuch Consultant's agreement with the Company or Affiliate.

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

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

**12. Adjustments Upon Changes inStock.**

      (a) If anychange is made in the stock subject to the Plan, or subject to any Stock Award(through merger, consolidation, reorganization, recapitalization,reincorporation, stock dividend, dividend in property other than cash, stocksplit, liquidating dividend, combination of shares, exchange of shares, changein corporate structure or other transaction not involving the receipt ofconsideration by the Company), the Plan will be appropriately adjusted in thetype(s) and maximum number of securities subject to the Plan pursuant tosubsection 4(a) and the maximum number of securities subject to award toany person during any calendar year pursuant to subsection 5(c), and theoutstanding Stock Awards will be appropriately adjusted in the type(s) andnumber of securities and price per share of stock subject to such outstandingStock Awards. Such adjustments shall be made by the Board or the Committee, thedetermination of which shall be final, binding and conclusive. (The conversionof any convertible securities of the Company shall not be treated as a"transaction not involving the receipt of consideration by theCompany.")

      (b) In theevent of: (1) a dissolution, liquidation or sale of all or substantiallyall of the assets of the Company; (2) a merger or consolidation in whichthe Company is not the surviving corporation; or (3) a reverse merger inwhich the Company is the surviving corporation but the shares of the Company'scommon stock outstanding immediately preceding the merger are converted byvirtue of the merger into other property, whether in the form of securities,cash or otherwise; then: (i) any surviving corporation or acquiringcorporation shall assume any Stock Awards outstanding under the Plan or shallsubstitute similar stock awards (including an award to acquire the sameconsideration paid to the stockholders in the transaction described in thissubsection 12(b)) for those outstanding under the Plan, or (ii) in theevent any surviving corporation or acquiring corporation refuses to assume suchStock Awards or to substitute similar stock awards for those outstanding underthe Plan, (A) with respect to Stock Awards held by persons then performingservices as Employees, Directors or Consultants and subject to any applicableprovisions of the California Corporate Securities Law of 1968 and relatedregulations relied upon as a condition of issuing securities pursuant to thePlan, the vesting of such Stock Awards (and, if applicable, the time duringwhich such Stock Awards may be exercised) shall be accelerated prior to suchevent and the Stock Awards terminated if not exercised (if applicable) aftersuch acceleration and at or prior to such event, and (B) with respect toany other Stock Awards outstanding under the Plan, such Stock Awards shall beterminated if not exercised (if applicable) prior to such event.

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

          (i) Ifa Stock Award holder's Continuous Status as an Employee, Director or Consultantis terminated by the Company or an Affiliate upon or within one year after aChange in Control (as defined below), and the termination is not the result ofthe holder's death or disability and is not a termination by the Company or anAffiliate for Cause (as defined below), then, subject to the other provisionsof this Section 12, all outstanding Stock Awards held by the holder shallbe deemed fully vested immediately prior to such termination.

**13. Amendment Of The Plan And Stock Awards.**

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

      (b) TheBoard may in its sole discretion submit any other amendment to the Plan forstockholder approval, including, but not limited to, amendments to the Planintended to satisfy the requirements of Section 162(m) of the Code and theregulations promulgated thereunder regarding the exclusion of performance-basedcompensation from the limit on corporate deductibility of compensation paid tocertain executive officers.

      (c) It isexpressly contemplated that the Board may amend the Plan in any respect theBoard deems necessary or advisable to provide eligible Employees with the maximumbenefits provided or to be provided under the provisions of the Code and theregulations promulgated thereunder relating to Incentive Stock Options and/orto bring the Plan and/or Incentive Stock Options granted under it intocompliance therewith.

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

      (e) TheBoard at any time, and from time to time, may amend the terms of any one ormore Stock Award; provided, however, that the rights and obligations under anyStock Award shall not be impaired by any such amendment unless (i) theCompany requests the consent of the person to whom the Stock Award was grantedand (ii) such person consents in writing; provided further, that the Boardshall not have the power to reprice any Stock Award once granted, except foradjustments resulting from a stock split, reverse stock split, or similarchange to the outstanding capital stock, as provided in Section 11.

**14. TerminationOr Suspension Of The Plan.**

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

      (b) Rightsand obligations under any Stock Award granted while the Plan is in effect shallnot be impaired by suspension or termination of the Plan, except with thewritten consent of the person to whom the Stock Award was granted.

**15. Effective Date of Plan.**

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