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Exhibit 4.1




DIACRIN, INC.

1997 STOCK OPTION PLAN




1. Purpose




     The purpose of this 1997 Stock Option Plan (the “Plan”) of Diacrin, Inc.,
a Delaware corporation (the “Company”), is to advance the interests of the
Company’s stockholders by enhancing the Company’s ability to attract, retain
and motivate persons who make (or are expected to make) important contributions
to the Company by providing such persons with equity ownership opportunities
and performance-based incentives and thereby better aligning the interests of
such persons with those of the Company’s stockholders. Except where the
context otherwise requires, the term “Company” shall include any present or
future subsidiary corporations of Diacrin, Inc. as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”).



2. Eligibility




     All of the Company’s employees, officers, directors, consultants and
advisors are eligible to be granted options (each, an “Option”) under the Plan
to purchase shares of the common stock, $0.01 par value per share, of the
Company (the “Common Stock”). Any person who has been granted an Option under
the Plan shall be deemed a “Participant.”



3. Administration, Delegation





     a. Administration by Board of Directors. The Plan will be
administered by the Board of Directors of the Company (the “Board”). The
Board shall have authority to grant Options and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to
the Plan as it shall deem advisable. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or any
Option in the manner and to the extent it shall deem expedient to carry
the Plan into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be made in the Board’s sole
discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Option. No director or
person acting pursuant to the authority delegated by the Board shall be
liable for any action or determination relating to or under the Plan made
in good faith.




     b. Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers
of the Company the power to grant Options and exercise such other powers
under the Plan as the Board may determine, provided that the Board shall
fix the maximum number of shares subject to Options and the maximum
number of shares for any one Participant to be made by such executive
officers.




     c. Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to
one or more committees or



 









 






subcommittees of the Board (a “Committee”). All references in the
Plan to the “Board” shall mean the Board or a Committee of the Board or
the executive officer referred to in Section 3(b) to the extent that the
Board’s powers or authority under the Plan have been delegated to such
Committee or executive officer.



4. Stock Available for Options





     a. Number of Shares. Subject to adjustment under Section 4(c),
Options may be granted under the Plan for up to 1,200,000 shares of
Common Stock. If any Option expires or is terminated, surrendered or
canceled without having been fully exercised or results in any Common
Stock not being issued, the unused Common Stock covered by such Option
shall again be available for the grant of Options under the Plan,
subject, however, in the case of Incentive Stock Options (as hereinafter
defined), to any limitation required under the Code. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.




     b. Per-Participant Limit. Subject to adjustment under Section 4(c),
the maximum number of shares with respect to which an Option may be
granted to any Participant under the Plan shall be 250,000 per calendar
year. The per-participant limit described in this Section 4(b) shall be
construed and applied consistently with Section 162(m) of the Code.




     c. Adjustment to Common Stock. In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar
change in capitalization or event, or any distribution to holders of
Common Stock other than a normal cash dividend, (i) the number and class
of securities available under this Plan and (ii) the number and class of
security and exercise price per share subject to each outstanding Option
shall be appropriately adjusted by the Company (or substituted Options
may be granted, if applicable) to the extent the Board shall determine,
in good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 4(c) applies and Section 6(e)(1) also
applies to any event, Section 6(e)(1) shall be applicable to such event,
and this Section 4(c) shall not be applicable.



5. Terms and Conditions of Options





     a. General.
 The Board may grant Options and determine the number of
shares of Common Stock to be covered by each Option, the exercise price
of each Option and the conditions and limitations applicable to the
exercise of each Option, including conditions relating to applicable
federal or state securities laws, as it considers necessary or advisable.
An Option which is not intended to be an Incentive Stock Option (as
hereinafter defined) shall be designated a “Nonstatutory Stock Option.”



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     b. Incentive Stock Options. An Option that the Board intends to be
an “incentive stock option” as defined in Section 422 of the Code (an
“Incentive Stock Option”) shall only be granted to employees of the
Company and shall be subject to and shall be construed consistently with
the requirements of Section 422 of the Code. The Company shall have no
liability to a Participant, or any other party, if an Option (or any part
thereof) which is intended to be an Incentive Stock Option is not an
Incentive Stock Option.




     c. Exercise Price. The Board shall establish the exercise price at
the time each Option is granted and specify it in the applicable option
agreement; provided, however, that in no event shall the exercise price
of any Option be less than the fair market value of the Common Stock at
the time of grant.




     d. Duration of Options. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify
in the applicable option agreement, provided, however, that in no event
shall an Option be granted for a term in excess of ten years from the
date of grant.




     e. Exercise of Option. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person
together with payment in full as specified in Section 5(f) for the number
of shares for which the Option is exercised.




     f. Payment Upon Exercise. Common Stock purchased upon the exercise
of an Option granted under the Plan shall be paid for as follows:




          (1) in cash or by check, payable to the order of the Company;




          (2) except as the Board may otherwise provide in an Option
Agreement, delivery of any irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds
to pay the exercise price, or delivery by the Participant to the Company
of a copy of irrevocable and unconditional instructions to a creditworthy
broker to deliver promptly to the Company cash or a check sufficient to
pay the exercise price;




          (3) to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by
the Participant valued at their fair market value as determined by the
Board in good faith (“Fair Market Value”), which Common Stock was owned
by the Participant at least six months prior to such delivery, (ii) by
delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (iii) by payment of such other lawful
consideration as the Board may determine; or




          (4) any combination of the above permitted forms of payment.



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6. General Provisions





     a. Transferability of Options. Except as the Board may otherwise
determine or provide in an Option, Options shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they
are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the
Participant, shall be exercisable only by the Participant. References to
a Participant, to the extent relevant in the context, shall include
references to authorized transferees.




     b. Documentation. Each Option under the Plan shall be evidenced by
a written instrument in such form as the Board shall determine. Each
Option may contain terms and conditions in addition to those set forth in
the Plan.




     c. Board Discretion. Except as otherwise provided by the Plan, each
Option may be granted alone or in addition to any other Option. The
terms of each Option need not be identical, and the Board need not treat
Participants uniformly.




     d. Termination of Status. The Board shall determine the effect on
an Option of the disability, death, retirement, authorized leave of
absence or other change in the employment or other status of a
Participant and the extent to which, and the period during which, the
Participant, the Participant’s legal representative, conservator,
guardian or Designated Beneficiary may exercise rights under the Option.
As used herein, “Designated Beneficiary” means any beneficiary designated
by a Participant to exercise rights of the Participant in the event of
the Participant’s death.




     e. Acquisition Events.




          (1) Consequences of Acquisition Events. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of
any agreement with respect to an Acquisition Event, the Board shall take
one of the following actions with respect to then outstanding Options:
(i) provide that outstanding Options shall be assumed, or equivalent
Options shall be substituted, by the acquiring or succeeding corporation
(or an affiliate thereof), provided that any such Options substituted for
Incentive Stock Options shall satisfy, in the determination of the Board,
the requirements of Section 424(a) of the Code; (ii) upon written notice
to the Participants, provide that all then unexercised Options will
become exercisable in full as of a specified time (the “Acceleration
Time”) prior to the Acquisition Event and will terminate immediately
prior to the consummation of such Acquisition Event, except to the extent
exercised by the Participants between the Acceleration Time and the
consummation of such Acquisition Event; and (iii) in the event of an
Acquisition Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share of Common
Stock surrendered pursuant to such Acquisition Event (the “Acquisition



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Price”), provide that all outstanding Options shall terminate upon
consummation of such Acquisition Event and each Participant shall
receive, in exchange therefor, a cash payment equal to the amount (if
any) by which (A) the Acquisition Price multiplied by the number of
shares of Common Stock subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise price of such
Options.



          An “Acquisition Event” shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after
such merger or consolidation; (b) any sale of all or substantially all of the
assets of the Company; or (c) the complete liquidation of the Company.




          (2) Assumption of Options Upon Certain Events. The Board may grant
Options under the Plan in substitution for stock and stock-based awards
held by employees of another corporation who become employees of the
Company as a result of a merger or consolidation of the employing
corporation with the Company or the acquisition by the Company of
property or stock of the employing corporation. The substitute Options
shall be granted on such terms and conditions as the Board considers
appropriate in the circumstances.




     f. Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in connection with Options to such Participant no
later than the date of the event creating the tax liability. The Board
may allow Participants to satisfy such tax obligations in whole or in
part in shares of Common Stock, including shares retained from the Option
creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.




     g. Amendment of Option. The Board may amend, modify or terminate
any outstanding Option, including but not limited to, substituting
therefor another Option of the same or a different type, changing the
date of exercise, and converting an Incentive Stock Option to a
Nonstatutory Stock Option; provided that the Participant’s consent to
such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant; and provided further that the Board may
not amend the exercise price, as determined in accordance with Section
5(c), of any outstanding Option subsequent to the time of grant, except
in accordance with the provisions of Section 4(c).




     h. Conditions on Delivery of Stock. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or
to remove restrictions from shares



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previously delivered under the Plan until (i) all conditions of the
Option have been met or removed to the satisfaction of the Company, (ii)
in the opinion of the Company’s counsel, all other legal matters in
connection with the issuance and delivery of such shares have been
satisfied, including any applicable securities laws and any applicable
stock exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such
representations or agreements as the Company may consider appropriate to
satisfy the requirements of any applicable laws, rules or regulations.




     i. Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part.



7. Miscellaneous





     a. No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Option, and the grant of an Option shall
not be construed as giving a Participant the right to continued
employment or any other relationship with the Company. The Company
expressly reserves the right at any time to dismiss or otherwise
terminate its relationship with a Participant free from any liability or
claim under the Plan, except as expressly provided in the applicable
Option.




     b. No Rights as Stockholder. Subject to the provisions of the
applicable Option, no Participant or Designated Beneficiary shall have
any rights as a stockholder with respect to any shares of Common Stock to
be distributed with respect to an Option until becoming the record holder
of such shares.




     c. Effective Date and Term of Plan. The Plan shall become effective
on the date on which it is adopted by the Board (March 17, 1997), but no
Option granted to a Participant designated as subject to Section 162(m)
by the Board shall become exercisable unless and until the Plan has been
approved by the Company’s stockholders. No Options shall be granted
under the Plan after March 17, 2007, but Options previously granted may
extend beyond that date.




     d. Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no Option granted
to a Participant designated as subject to Section 162(m) by the Board
after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to grant such Option to a
particular Participant), unless and until such amendment shall have been
approved by the Company’s stockholders.




     e. Stockholder Approval. For purposes of this Plan, stockholder
approval shall mean approval by a vote of the Stockholders in accordance
with the requirements of Section 162(m) of the Code.




     f. Governing Law. The provisions of the Plan and all Options made
hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware without regard to any applicable conflicts
of law.



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