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 October 7, 2004

Approved by Stockholders December 2, 2004


 


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 three million seven
hundred thousand (3,700,000) 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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