Exhibit
4.1


 




VALENTIS, INC.



AMENDED AND RESTATED 1997 EQUITY INCENTIVE PLAN


 


Adopted by the Board of Directors July 25, 1997

Approved by Stockholders September 3, 1997


 


Amended and Restated by the Board of Directors
November 21, 2003

Approved by Stockholders December 30, 2003


 


1.     Purposes.


 


        (a)    The purpose of
the Plan is to provide a means by which selected Employees and Directors of and
Consultants to the Company and its Affiliates may be given an opportunity to
benefit from increases in value of the common stock of the Company (“Common
Stock”) through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses and
(iv) rights to purchase restricted stock.


 


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


 


        (c)    The Company
intends that the Stock Awards issued under the Plan shall, in the discretion of
the Board or any Committee to which responsibility for administration of the
Plan has been delegated pursuant to subsection 3(c), be either (i) Options
granted pursuant to Section 6 hereof, including Incentive Stock Options
and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and in such form as issued pursuant to
Section 6, and a separate certificate or certificates will be issued for
shares purchased on exercise of each type of Option.


 


2.     Definitions.


 


        (a)    ”Affiliate” means any
parent corporation or subsidiary corporation, whether now or hereafter
existing, as those terms are defined in Sections 424(e) and
(f) respectively, of the Code.


 


        (b)    ”Board” means the
Board of Directors of the Company.


 


        (c)    ”Code” means the
Internal Revenue Code of 1986, as amended.


 


        (d)    ”Committee” means a
Committee appointed by the Board in accordance with subsection 3(c) of the
Plan.


 


        (e)    ”Company” means
Valentis, Inc., a Delaware corporation.


 


        (f)    ”Consultant” means
any person, including an advisor, engaged by the Company or an Affiliate to
render consulting services and who is compensated for such services, provided
that the term “Consultant” shall not include Directors who are paid only a
director’s fee by the Company or who are not compensated by the Company for
their services as Directors.


 


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        (g)    ”Continuous Status as an Employee,
Director or Consultant” means the employment or relationship as
a Director or Consultant is not interrupted or terminated. The Board, in its
sole discretion, may determine whether Continuous Status as an Employee,
Director or Consultant shall be considered interrupted in the case of:
(i) any leave of absence approved by the Board, including sick leave,
military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their
successors.


 


        (h)    ”Director” means a
member of the Board.


 


        (i)    ”Employee” means any
person, including Officers and Directors, employed by the Company or any
Affiliate of the Company. Neither service as a Director nor payment of a director’s
fee by the Company shall be sufficient to constitute “employment” by the
Company.


 


        (j)    ”Exchange Act” means
the Securities Exchange Act of 1934, as amended.


 


        (k)    ”Fair Market Value”
means, as of any date, the value of the Common Stock of the Company determined
as follows:


 


        (1)   If the Common Stock is
listed on any established stock exchange, or traded on the Nasdaq National
Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in Common Stock) on the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;


 


        (2)   In the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Board.


 


        (l)    ”Incentive Stock Option”
means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated
thereunder.


 


        (m)    ”Non-Employee Director”
means a Director who either (i) is not a current Employee or Officer of
the Company or its parent or subsidiary, does not receive compensation
(directly or indirectly) from the Company or its parent or subsidiary for
services 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 Item
404(a) of Regulation S-K promulgated pursuant to the Securities Act of
1933 (“Regulation S-K”), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3.


 


        (n)    ”Nonstatutory Stock Option”
means an Option not intended to qualify as an Incentive Stock Option.


 


        (o)    ”Officer” means a
person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.


 


        (p)    ”Option” means a
stock option granted pursuant to the Plan.


 


        (q)    ”Option Agreement”
means a written agreement between the Company and an Optionee evidencing the
terms and conditions of an individual Option grant. Each Option Agreement shall
be subject to the terms and conditions of the Plan.


 


        (r)    ”Optionee” means a
person to whom an Option is granted pursuant to the Plan.


 


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        (s)    ”Outside Director” means
a Director who either (i) is not a current employee of the Company or an
“affiliated corporation” (within the meaning of Treasury regulations
promulgated under Section 162(m) of the Code), is not a former employee of
the Company or an “affiliated corporation” receiving compensation for prior
services (other than benefits under a tax qualified pension plan), was not an
officer of the Company or an “affiliated corporation” at any time, and is not
currently receiving direct or indirect remuneration from the Company or an
“affiliated corporation” for services in any capacity other than as a Director,
or (ii) is otherwise considered an “outside director” for purposes of
Section 162(m) of the Code.


 


        (t)    ”Plan” means this
Valentis, Inc. Amended and Restated 1997 Equity Incentive Plan.


 


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


 


        (v)    ”Stock Award” means
any right granted under the Plan, including any Option, any stock bonus, and
any right to purchase restricted stock.


 


        (w)    ”Stock Award Agreement”
means a written agreement between the Company and a holder of a Stock Award
evidencing the terms and conditions of an individual Stock Award grant. Each
Stock Award Agreement shall be subject to the terms and conditions of the Plan.


 


3.     ADMINISTRATION.


 


        (a)    The Plan shall be
administered by the Board unless and until the Board delegates administration
to a Committee, as provided in subsection 3(c).


 


        (b)    The Board shall
have the power, subject to, and within the limitations of, the express
provisions of the Plan:


 


        (1)   To determine from time
to time which of the persons eligible under the Plan shall be granted Stock
Awards; when and how each Stock Award shall be granted; whether a Stock Award
will be an Incentive Stock Option, a Nonstatutory Stock Option, a stock bonus,
a right to purchase restricted stock, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award and the number of shares with respect to which a Stock Award
shall be granted to each such person.


 


        (2)   To construe and
interpret the Plan and Stock Awards granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any Stock Award Agreement, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.


 


        (3)   To amend the Plan or a
Stock Award as provided in Section 13.


 


        (4)   Generally, to exercise
such powers and to perform such acts as the Board deems necessary or expedient
to promote the best interests of the Company which are not in conflict with the
provisions of the Plan.


 


        (c)    The Board may
delegate administration of the Plan to a committee or committees (“Committee”)
of one or more members of the board. In the discretion of the Board, a
Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors,
in accordance with Rule 16b-3. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be


 


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to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.


 


4.     SHARES
SUBJECT TO THE PLAN.


 


        (a)    Subject to the
provisions of Section 12 relating to adjustments upon changes in stock,
the stock that may be issued pursuant to Stock Awards shall not exceed in the
aggregate one million seven hundred thousand (1,700,000) shares of the
Company’s Common Stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full
(or vested in the case of Restricted Stock), the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan.


 


        (b)    The stock subject
to the Plan may be unissued shares or reacquired shares, bought on the market
or otherwise.


 


5.     ELIGIBILITY.


 


        (a)    Incentive Stock
Options may be granted only to Employees. Stock Awards other than Incentive
Stock Options may be granted only to Employees, Directors or Consultants.


 


        (b)    No person shall
be eligible for the grant of an Incentive Stock Option if, at the time of
grant, such person owns (or is deemed to own pursuant to Section 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 of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the Option
is not exercisable after the expiration of five (5) years from the date of
grant.


 


        (c)    Subject to the
provisions of Section 12 relating to adjustments upon changes in stock, no
person shall be eligible to be granted Options covering more than five hundred
thousand (500,000) shares of the Common Stock in any calendar year. This
subsection 5(c) shall not apply until (i) the earliest of: (A) the
first material modification of the Plan (including any increase to the number
of shares reserved for issuance under the Plan in accordance with
Section 4); (B) the issuance of all of the shares of Common Stock
reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of stockholders at which directors are to be elected
that occurs after the close of the third calendar year following the calendar
year in which occurred the first registration of an equity security under
Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated
thereunder.


 


6.     OPTION
PROVISIONS.


 


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


 


        (a)    Term. No Option shall be exercisable after
the expiration of ten (10) years from the date it was granted.


 


        (b)    Price. The exercise price of each Incentive
Stock Option and each Nonstatutory 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 the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence, including where such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the


 


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provisions of Section 424(a) of the Code, if such
Option is approved by the holders of a majority of the shares of common stock
of the Company present and entitled to vote at a duly convened meeting of
shareholders.


 


        (c)    Consideration. The purchase price of stock
acquired pursuant to an Option shall be paid, to the extent permitted by
applicable statutes and regulations, either (i) in cash at the time the
Option is exercised, or (ii) at the discretion of the Board or the
Committee, at the time of the grant of the Option, (A) by delivery to the
Company of other Common Stock of the Company, (B) according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred
pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board.


 


        In the
case of any deferred payment arrangement, interest shall be payable at least
annually and shall be charged at no less than a market rate of interest that is
sufficient to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.


 


        (d)    Transferability. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to
whom the Incentive Stock Option is granted only by such person. A Nonstatutory
Stock Option may be transferred to the extent provided in the Option Agreement;
provided that if the Option Agreement does not expressly permit the transfer of
a Nonstatutory Stock Option, the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person or any transferee pursuant to a domestic relations
order. Notwithstanding the foregoing, the person to whom the Option is granted
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.


 


        (e)    Vesting. The total number of shares of
stock subject to an Option may, but need not, be allotted in periodic
installments (which may, but need not, be equal). The Option Agreement may
provide that from time to time during each of such installment periods, the
Option may become exercisable (“vest”) with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of
the shares allotted to such period and/or any prior period as to which the
Option became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.


 


        (f)    Termination of Employment or Relationship as a
Director or Consultant. In the event an Optionee’s Continuous Status
as an Employee, Director or Consultant terminates (other than upon the
Optionee’s death or disability), the Optionee may exercise his or her Option
(to the extent that the Optionee was entitled to exercise it at the date of
termination) but only within such period of time ending on the earlier of
(i) the date three (3) months after the termination of the Optionee’s
Continuous Status as an Employee, Director or Consultant (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration
of the term of the Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.


 


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        An
Optionee’s Option Agreement may also provide that if the exercise of the Option
following 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, then
the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the Option Agreement, or (ii) the tenth
(10th) day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an Optionee’s
Option Agreement may also provide that if the exercise of the Option following
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 would violate the
registration requirements under the Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the
first paragraph of this subsection 6(f), or (ii) the expiration of a
period of three (3) months after the termination of the Optionee’s Continuous
Status as an Employee, Director or Consultant during which the exercise of the
Option would not be in violation of such registration requirements.


 


        (g)    Disability of Optionee. In the event an
Optionee’s Continuous Status as an Employee, Director or Consultant terminates
as a result of the Optionee’s disability, the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it at the date
of termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.


 


        (h)    Death of Optionee. In the event of the
death of an Optionee during, or within a period specified in the Option after
the termination of, the Optionee’s Continuous Status as an Employee, Director
or Consultant, the Option may be exercised (to the extent the Optionee was
entitled to exercise the Option at the date of death) by the Optionee’s estate,
by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the
Optionee’s death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date twelve (12) months following the date
of death (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the
Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.


 


        (i)    Early Exercise. The Option may, but need
not, include a provision whereby the Optionee may elect at any time while an
Employee, Director or Consultant to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the Option.
Any unvested shares so purchased may be subject to a repurchase right in favor
of the Company or to any other restriction the Board determines to be
appropriate.


 


        (j)    Re-Load Options. Without in any way
limiting the authority of the Board or Committee to make or not to make grants
of Options hereunder, the Board or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a provision entitling
the Optionee to a further Option (a “Re-Load Option”) in the event the Optionee
exercises the Option evidenced by the Option Agreement, in whole or in part, by
surrendering other shares of Common Stock in


 


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accordance with this Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number
of shares equal to the number of shares surrendered as part or all of the
exercise price of such Option; (ii) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave rise
to such Re-Load Option; and (iii) shall have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Re-Load Option on the date of exercise of the original
Option. Notwithstanding the foregoing, a Re-Load Option which is an Incentive
Stock Option and which is granted to a 10% stockholder (as described in
subsection 5(b)), shall have an exercise price which is equal to one hundred
ten percent (110%) of the Fair Market Value of the stock subject to the Re-Load
Option on the date of exercise of the original Option and shall have a term
which is no longer than five (5) years.


 


        Any
such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock
Option, as the Board or Committee may designate at the time of the grant of the
original Option; provided, however,
that the designation of any Re-Load Option as an Incentive Stock Option shall
be subject to the one hundred thousand dollars ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 11(d) of the
Plan and in Section 422(d) of the Code. There shall be no Re-Load Options
on a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and shall be subject to
such other terms and conditions as the Board or Committee may determine which
are not inconsistent with the express provisions of the Plan regarding the
terms of Options.


 


7.     TERMS
OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.


 


        Each
stock bonus or restricted stock purchase agreement shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:


 


        (a)    Purchase Price. The purchase price under
each restricted stock purchase agreement shall be such amount as the Board or
Committee shall determine and designate in such agreement; provided, however, that unless approved by
the holders of a majority of the shares of common stock of the Company present
and entitled to vote at a duly convened meeting of shareholders, the purchase
price shall not be less than one hundred percent (100%) of the stock’s Fair
Market Value on the date such award is made. Notwithstanding the foregoing, the
Board or the Committee may determine that eligible participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company for its benefit.


 


        (b)    Transferability. No rights under a stock
bonus or restricted stock purchase agreement shall be transferable except by
will or the laws of descent and distribution or, if the agreement so provides,
pursuant to a domestic relations order satisfying the requirements of
Rule 16b-3, so long as stock awarded under such agreement remains subject
to the terms of the agreement.


 


        (c)    Consideration. The purchase price of stock
acquired pursuant to a stock purchase agreement shall be paid either:
(i) in cash at the time of purchase; (ii) at the discretion of the
Board or the Committee, according to a deferred payment or other arrangement
with the person to whom the stock is sold; or (iii) in any other form of
legal consideration that may be acceptable to the Board or the Committee in its
discretion. Notwithstanding the foregoing, the Board or the Committee to which
administration of the Plan has been delegated may award stock pursuant to a
stock bonus agreement in consideration for past services actually rendered to
the Company or for its benefit.


 


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


 


        (e)    Termination of Continuous Status as an Employee,
Director or Consultant. In the event a Participant’s Continuous
Status as an Employee, Director or Consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock held by
that person which have not vested as of the date of termination under the terms
of the stock bonus or restricted stock purchase agreement between the Company
and such person.


 


8.     REPRICING
PROHIBITED.


 


        Notwithstanding
any provision in this Plan to the contrary, unless approved by the holders of a
majority of the shares of common stock of the Company present and entitled to
vote at a duly convened meeting of shareholders, no Stock Award may be amended
to reduce the exercise price (or the purchase price, as applicable) per share
of the shares subject to the Stock Award below the exercise or purchase price
as of the date the Stock Award is granted. In addition, unless approved by the
holders of a majority of the shares of common stock of the Company present and
entitled to vote at a duly convened meeting of shareholders, no Stock Award may
be granted in exchange for, or in connection with, the cancellation or
surrender of a Stock Award having a higher exercise or purchase price or less
favorable vesting schedule.


 


9.     COVENANTS
OF THE COMPANY.


 


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


 


        (b)    The Company shall
seek to obtain from each regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to issue and sell shares under
Stock Awards; provided, however, that this undertaking shall not require the
Company to register under the Securities Act of 1933, as amended (the
“Securities Act”) either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.


 


10.   USE
OF PROCEEDS FROM STOCK.


 


        Proceeds
from the sale of stock pursuant to Stock Awards shall constitute general funds
of the Company.


 


11.   MISCELLANEOUS.


 


        (a)    The Board shall
have the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest pursuant
to subsection 6(e) or 7(d), notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.


 


        (b)    Neither an
Employee, Director nor a Consultant nor any person to whom a Stock Award is
transferred in accordance with the Plan shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares subject to such
Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.


 


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        (c)    Nothing in the
Plan or any instrument executed or Stock Award granted pursuant thereto shall
confer upon any Employee, Consultant or other holder of Stock Awards any right
to continue in the employ of the Company or any Affiliate, or to continue
serving as a Consultant and Director, or shall affect the right of the Company
or any Affiliate to terminate the employment of any Employee with or without
notice and with or without cause, or the right to terminate the relationship of
any Consultant pursuant to the terms of such Consultant’s agreement with the
Company or Affiliate or service as a Director pursuant to the Company’s
By-Laws.


 


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


 


        (e)    The Company may
require any person to whom a Stock Award is granted, or any person to whom a
Stock Award is transferred in accordance with the Plan, as a condition of
exercising or acquiring stock under any Stock Award, (1) to give written
assurances satisfactory to the Company as to such person’s knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Stock Award for such person’s own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(i) the issuance of the shares upon the exercise or acquisition of stock
under the Stock Award has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.


 


        (f)    To the extent
provided by the terms of a Stock Award Agreement, the person to whom a Stock
Award is granted may satisfy any federal, state or local tax withholding
obligation relating to the exercise or acquisition of stock under a Stock Award
by any of the following means or by a combination of such means:
(1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of
the Common Stock of the Company.


 


12.   ADJUSTMENTS
UPON CHANGES IN STOCK.


 


        (a)    If any change is
made in the stock subject to the Plan, or subject to any Stock Award, without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan pursuant to subsection 4(a) and the maximum number of shares subject
to award to any person during any calendar year pursuant to subsection 5(c),
and the outstanding Stock Awards will be appropriately adjusted in the
class(es) and number of shares and price per share of stock subject to such
outstanding Stock Awards.


 


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Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a “transaction not involving the receipt of consideration by the
Company”.)


 


        (b)    In the event of
Change of Control:


 


        (1)   with respect to each
Optionee who is an executive officer, the vesting under all outstanding Options
shall automatically accelerate by the greater of (i) 12 months (e.g.,
that number of shares shall be immediately vested as would have been vested on
the date 12 months after the date of the Change of Control) or
(ii) that number of months equal to the number of full months during which
such executive officer has been employed by the Company; provided, however,
that the Board does not find that it is in the collective interest of the
Company’s stockholders and the Optionees to provide otherwise. If such a
finding is made, the Options shall either remain outstanding or be assumed by
the acquiror (with the Optionee being entitled to receive the same
consideration as was received by the Common Stock stockholders in the Change of
Control transaction) or the Board and/or the acquiror shall adopt a replacement
benefit which shall (at a minimum) provide value to the executive officer on
the vesting dates of the non-accelerated Options substantially equal to the
value the executive officer would have received if the shares had participated
in all steps of the transaction; and


 


        (2)   with respect to each
Stock Award other than an Option held by an executive officer, any Stock Award
shall remain outstanding under the Plan, be assumed by the acquiror or be
substituted with similar Stock Awards. In the event the acquiror refuses to
assume, substitute or continue such Stock Awards, then such Stock Awards shall
be terminate if not exercised or vested, as applicable, prior to the Change of
Control.


 


        For
purposes of this Plan, “Change of Control” shall mean: any consolidation or
merger of the Company with or into any other entity or person, or any other
corporate reorganization in which the Company shall not be the continuing or
surviving entity, or any transaction or series of related transactions by the
Company in which in excess of 50% of the Company’s voting power is transferred,
or any sale, lease, license or other disposition of all or substantially all of
the assets of the Company. The continuing or surviving organization entity
shall be deemed the acquiror for purposes of this subsection of the Plan.


 


13.   AMENDMENT
OF THE PLAN AND STOCK AWARDS.


 


        (a)    The Board at any
time, and from time to time, may amend the Plan. However, (i) except as
provided in Section 12 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders of the Company
where stockholder is necessary for the Plan to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements, and (ii) no amendment to the minimum price
provisions of Sections 6(b) or 7(a) and no amendment to Section 8 shall be
effective unless approved by the holders of a majority of the shares of common
stock of the Company present and entitled to vote at a duly convened meeting of
shareholders.


 


        (b)    The Board may in
its sole discretion submit any other amendment to the Plan for stockholder
approval, including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to certain executive
officers.


 


        (c)    It is expressly
contemplated that, subject to this Section 13, the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code


 


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and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.


 


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


 


        (e)    The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights and obligations under any Stock
Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and
(ii) such person consents in writing.


 


14.   TERMINATION
OR SUSPENSION OF THE PLAN.


 


        (a)    The Board 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 adopted by the
Board or approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.


 


        (b)    Rights and
obligations under any Stock Award granted while the Plan is in effect shall not
be impaired by suspension or termination of the Plan, except with the consent
of the person to whom the Stock Award was granted.


 


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