EXHIBIT 10.4


VAXGEN, INC.


AMENDED AND RESTATED


1996 STOCK OPTION PLAN


Amended and Restated Effective May 29, 2002


Amended by the Board of Directors December 16, 2002


This Amended and Restated 1996 Stock Option Plan (the “Plan”) provides for the grant of options to acquire shares of common stock, $0.01 par value (the “Common Stock”), of VaxGen, Inc., a Delaware corporation (the “Company”). Stock options granted under this Plan that qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), are referred to in this Plan as “Incentive Stock Options.”  Incentive Stock Options and stock options that do not qualify as such under Section 422 of the Code (“Non-Qualified Stock Options”) granted under this Plan are referred to as “Options.”


The Plan was initially adopted on October 29, 1996 and was subsequently amended. The Plan is hereby amended and restated as of December 16, 2002.





	
             
 	
            1.
 	
            PURPOSES.
 





The purposes of this Plan are to retain the services of non-employee directors, valued key employees and consultants of the Company, to encourage such persons to acquire a greater proprietary interest in the Company, thereby strengthening their incentive to achieve the objectives of the stockholders of the Company, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to directors, consultants a other persons selected by the Board of Directors in accordance with Section 3 below.





	
             
 	
            2.
 	
            ADMINISTRATION.
 





This Plan shall be administered by the full Board of Directors of the Company (the “Board”) or if the Board so desires, by committee designated by the Board and composed of two (2) or more “Non-Employee Directors” (as defined below). The term “Non-Employee Directors” shall have the meaning assigned to it under Rule 16b-3 (as amended from time to time) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In the event that the Company is or becomes subject to the provisions of Section 16 of the Exchange Act, the Board shall attempt to provide for administration of the Plan, insofar as it relates to the participation of officers, directors or stockholders of the Company who at the time in question are subject to the reporting and liability provisions of Section 16 of the Exchange Act (the “Insiders”), in a
manner which shall qualify the grant, exercise, expiration or surrender of options under this Plan for the treatment afforded by Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulatory requirement. The term “Board” when used in any provision of this Plan other than Section 5(n) shall be deemed to refer to the Board or any committee thereof appointed to administer this Plan.


Subject to the provisions of this Plan, and with a view to effecting its purpose, the Board shall have sole authority, in its absolute discretion to (a) construe and interpret this Plan; 


 

 




	
            
 





 






 


(b) define the terms used in this Plan; (c) prescribe, amend and rescind rules and regulations relating to this Plan; (d) correct any defect, supply any omission or reconcile any inconsistency in this Plan; (e) grant Options under this Plan; (f) determine the individuals to whom Options shall be granted under this Plan and whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option; (g) determine the time or times at which Options shall be granted under this Plan; (h) determine the number of shares of Common Stock subject to each Option, the exercise price of each Option, the duration of each Option and the times at which each Option shall become exercisable; (i) to effect, at any time and from time to time, with the consent of any adversely affected Optionee, (1) the reduction of the exercise price of any outstanding Option under the Plan, (2)
the cancellation of any outstanding Option under the Plan and the grant in substitution therefor (A) a new Option under the Plan covering the same or a different  number of shares of Common Stock, (B) a stock bonus under an equity incentive plan of the Company other than the Plan, (C) the right to acquire restricted stock under an equity incentive plan of the Company other than the Plan, and/or (D) cash, or (3) any other action that is treated as a repricing under generally accepted accounting principles; (j) determine all other terms and conditions of Options; and (k) make all other determinations necessary or advisable for the administration of this Plan. All decisions, determinations and interpretations made by the Board shall be binding and conclusive on all participants in this Plan and on their legal representatives, heirs and beneficiaries.





	
             
 	
            3.
 	
            ELIGIBILITY.
 





Incentive Stock Options may be granted to any individual who, at the time the Option is granted, is an employee of the Company or any Related Corporation (as defined below), including employees who are directors of the Company (“Employees”). Non-Qualified Stock Options may be granted to Employees, Non-Employee Directors and consultants. Options may be granted in substitution for outstanding options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization between such other corporation and the Company or any subsidiary of the Company. Options also may be granted in exchange for outstanding Options. Any person to whom an Option is granted under this Plan is referred to as an “Optionee.”  Any person who is the owner of an Option is referred to as a “Holder.”


As used in this Plan, the term “Related Corporation,” shall mean any corporation that is a “Parent Corporation” of the Company or “Subsidiary Corporation” of the Company, as those terms are defined in Sections 424 and 424(f), respectively, of the Code (or any successor provisions), and the regulations thereunder (as amended from time to time).





	
             
 	
            4.
 	
            STOCK.
 





Effective April 14, 2000, the Board is authorized to grant Options to acquire up to a total of 3,250,000 shares of the Company’s Common Stock. Effective as the date of this amendment and restatement, the Board is authorized to grant Options to acquire up to a maximum aggregate number of shares of Common Stock of 4,750,000, cumulatively increased on the first trading day of January of each year beginning with January 2003 until and including January 2007 by a number of shares equal to the lesser of (a) three and one-half percent (3.5%) of the number of shares of Common Stock issued and outstanding on the last trading day of the 


 


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immediately preceding December or (b) an amount determined by the Board, and shall consist of the Company’s authorized but unissued, or reacquired, Common Stock. In no event shall more than 4,750,000 shares of Stock be cumulatively available for issuance pursuant to the exercise of Incentive Stock Options. The number of shares with respect to which Options may be granted hereunder is subject to adjustment as set forth in Section 5(n) hereof. In the event that any outstanding Option expires or is terminated for any reason, the shares of Common Stock allocable to the unexercised portion of such Option may again be subject to an Option to the same Optionee (subject to the next sentence) or to a different person eligible under Section 3 of this Plan. Any canceled Options will be counted against the maximum number of shares with respect to which Options may be granted to the person previously holding the
canceled Options.





	
             
 	
            5.
 	
            TERMS AND CONDITIONS OF OPTIONS.
 





Each Option granted under this Plan shall be evidenced by a written agreement approved by the Board (the “Agreement”). Agreements may contain such provisions, not inconsistent with this Plan, as the Board in its discretion may deem advisable. All Options also shall comply with the following requirements:


  (a)              Number
    of Shares and Type of Option. Each Agreement shall
    state the number of shares of Common Stock to which it pertains and whether
    the Option is intended to be an Incentive Stock Option or a Non-Qualified
    Stock Option. In the absence of action to the contrary by the Board in connection
    with the grant of an Option, all Options shall be Non-Qualified Stock Options.
    The aggregate fair market value (determined at the Date of Grant, as defined
    below) of the stock with respect to which Incentive Stock Options are exercisable
    for the first time by the Optionee during any calendar year (granted under
    this Plan and all other Incentive Stock Option plans of the Company, a Related
    Corporation or a predecessor corporation) shall not exceed $100,000, or such
    other limit as may be prescribed by the Code as it may be amended from time
    to time. Any portion of an Option which exceeds the annual limit shall not
    be void but rather shall be a Non-Qualified Stock Option.


  (b)              Date
    of Grant. Each Agreement shall state the date the Board has deemed to
    be the effective date of the Option for purposes of this Plan (the “Date
    of Grant”).


  (c)              Exercise
    Price. Each Agreement shall state the price per share
    of Common Stock at which it is exercisable. Options granted in substitution
    for outstanding options of another corporation in connection with the merger,
    consolidation, acquisition of property or stock or other reorganization involving
    such other corporation and the Company or any subsidiary of the Company may
    be granted with an exercise price equal to the exercise price for the substituted
    option of the other corporation, subject to any adjustment consistent with
    the terms of the transaction pursuant to which the substitution is to occur.


  (i)             The
    per share exercise price for an Incentive Stock Option shall not be less than
    the fair market value per share of the Common Stock at the Date of Grant as
    determined by the Board in good faith. With respect to Incentive Stock Options
    granted to greater-than-ten percent ( (greater than) 10%) stockholders of
    the Company (as determined with reference to Section 424(d) of the Code),
    the exercise price per share shall not be less than one 


 


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hundred ten percent (110%) of the fair market value per share of the Common Stock at the Date of Grant as determined by the Board in good faith.


  (ii)
               The
    per share exercise price for a Non-Qualified Stock Option shall not be less
    than eighty-five percent (85%) of the fair market value per share of the Common
    Stock at the Date of Grant as determined by the Board in good faith. 


  (d)            Duration
    of Options. At the time of the grant of the Option,
    the Board shall designate, subject to paragraph 5(g) below, the expiration
    date of the Option. The expiration date of any Incentive Stock Option granted
    to a greater-than-ten percent ((greater than) 10%) stockholder of the Company
    (as determined with reference to Section 424(d) of the Code) shall not be
    later than five years from the Date of Grant. The expiration date of any other
    Incentive Stock Option shall not be later than ten (10) years from the Date
    of Grant. With respect to all other Options, in the absence of action to the
    contrary by the Board in connection with the grant of a particular Option,
    all Options granted under this Section 5 shall expire ten (10) years from
    the Date of Grant.


  (e)            Vesting
    Schedule. No Option shall be exercisable until it
    has vested. The vesting schedule for each Option may be specified by the Board
    at the time of grant of the Option prior to the provision of services with
    respect to which such Option is granted. If no vesting schedule is specified
    at the time of grant, the number of vested shares subject to the Option shall
    be determined by multiplying the total number of shares subject to the Option
    by the “Vested Ratio” as determined according to the following schedule:





	
             
 	
            VESTED
 RATIO
 
	
            On the first anniversary of the Date of Grant
 	
            1/4
 
	
            Plus:
 	
             
 
	
            For each full month of the Optionee’s continuous service from the first anniversary of the Date of Grant until the Vested Ratio is 1/1, an additional
 	
            1/48
 





 


The Board may specify a vesting schedule for all or any portion of an Option based on the achievement of performance objectives established in advance of the commencement by the Optionee of services related to the achievement of the performance objectives. Performance objectives may be expressed in terms of one or more of the following:  return on equity, return on assets, share price, market share, sales, earnings per share, costs, net earnings, net worth, inventories, cash and cash equivalents, gross margin, the Company’s performance relative to its internal business plan or such other basis as determined by the Board. Performance objectives may be in respect of the performance of the Company as a whole (whether on a consolidated or unconsolidated basis), a Related Corporation, or a subdivision, operating unit, product or such 


 


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other basis. Performance objectives may be absolute or relative and may be expressed in terms of a progression or a range. An Option which is exercisable (in whole or in part) upon the achievement of one or more performance objectives may be exercised only following written notice to the Optionee from the Board that the performance objective has been achieved.


  (f)            Acceleration
    of Vesting. The vesting of one or more outstanding
    options may be accelerated by the Board at such times and in such amounts
    as it shall determine in its sole discretion. The vesting of Options also
    shall be accelerated under the circumstances described in Sections 5(n) and
    5(o) below. 


  (g)            Term
    of Option. Vested Options shall terminate, to the
    extent not previously exercised, upon the first to occur of the following
    events: (i) the expiration of the Option; (ii) the date of an Optionee’s
    termination of employment (or service as a director or consultant with the
    Company or any Related Corporation for cause (as determined in the sole discretion
    of the Board); (iii) the expiration of ninety (90) days from the date of an
    Optionee’s termination of employment or service as a director or consultant
    with the Company or any Related Corporation for any reason whatsoever other
    than cause, death or Disability (as defined below) unless, the exercise period
    is extended by the Board until a date not later than the expiration date of
    the Option; or (iv) the expiration of one year from (A) the date of death
    of the Optionee or (B) cessation of an Optionee’s employment or contractual
    relationship by reason of Disability (as defined below) unless, the exercise
    period is extended by the Board until a date not later than the expiration
    date of the Option. If an Optionee’s employment or contractual relationship
    is terminated by death, any Option held by the Optionee shall be exercisable
    only by the person or persons to whom such Optionee’s rights under such
    Option shall pass by the Optionee’s will or by the laws of descent and
    distribution of the state or county of the Optionee’s domicile at the
    time of death. For purposes of the Plan, unless otherwise defined in the Agreement,
    “Disability” shall mean any physical, mental or other health condition
    which substantially impairs the Optionee’s ability to perform his or
    her assigned duties for one hundred twenty (120) days or more in any two hundred
    forty (240) day period or that can be expected to result in death. The Board
    shall determine whether an Optionee has incurred a Disability on the basis
    of medical evidence acceptable to the Board. Upon making a determination of
    Disability, the Board shall, for purposes of the Plan, determine the date
    of an Optionee’s termination of employment or contractual relationship.


Unless accelerated in accordance with Section 5(f) above, unvested Options shall terminate immediately upon termination of employment of the Optionee by the Company for any reason whatsoever, including death or Disability. For purposes of this Plan, transfer of employment between or among the Company and any Related Corporation, or among Related Corporations shall not be deemed to constitute a termination of employment with the Company or any Related Corporation. For purposes of this subsection with respect to Incentive Stock Options, employment shall be deemed to continue while the Optionee is on military leave, sick leave or other bona fide leave of absence (as determined by the Board). The foregoing notwithstanding, employment shall not be deemed to continue beyond the first ninety (90) days of such leave, unless the Optionee’s re-employment rights are guaranteed by statute or by contract.


 


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  (h)         Exercise
    of Options.  Options shall be exercisable, either
    all or in part, at any time after vesting, until termination. If less than
    all of the shares included in the vested portion of any Option are purchased,
    the remainder may be purchased at any subsequent time prior to the expiration
    of the Option term. If the vested portion of any Option is less than one hundred
    (100) shares, it may be exercised with respect to all shares for which it
    is vested. In all other cases, no portion of any Option for less than one
    hundred (100) shares (as adjusted pursuant to Section 5(m) below) may be exercised.
    Only whole shares may be issued pursuant to an Option, and to the extent that
    an Option covers less than one (1) share, it is unexercisable.


Options or portions thereof may be exercised by giving written notice to the Company, which notice shall specify the number of shares to be purchased, and be accompanied by payment in the amount of the aggregate exercise price for the Common Stock so purchased, which payment shall be in the form specified in Section 5(i) below. The Company shall not be obligated to issue, transfer or deliver a certificate of Common Stock to the Holder of any Option, until provision has been made by the Holder, to the satisfaction of the Company, for the payment of the aggregate exercise price for all shares for which the Option shall have been exercised and for any satisfaction of any tax withholding obligations associated with such exercise. During the lifetime of an Optionee, Options are exercisable only by the Optionee or a transferee who takes title to the Option in the manner permitted by
Section 5(1) hereof.


  (i)         Payment
    upon Exercise of Option. Upon the exercise of any
    Option, the aggregate exercise price shall be paid to the Company in cash
    or by certified or cashier’s check. In addition, the Holder, at its or
    the Company’s option, may pay for all or any portion of the aggregate
    exercise price by complying with one or more of the following alternatives:

  (1)            by
    delivering to the Company shares of Common Stock previously held by such Holder
    which shares of Common Stock received shall have a fair market value at the
    date of exercise (as determined by the Board) equal to the aggregate exercise
    price to be paid by the Optionee upon such exercise;


  (2)            by
    delivering a properly executed exercise notice together with irrevocable instructions
    to a broker to promptly deliver to the Company the amount of sale or loan
    proceeds to pay the exercise price;


  (3)            by
    delivering a full recourse promissory note for all or part of the aggregate
    exercise price, payable on such terms and bearing such interest rate as determined
    by the Board (but in no event less than the minimum interest rate specified
    under the Code at which no additional interest would be imputed and in no
    event more than the maximum interest rate allowed under applicable usury laws),
    which promissory note may be either secured or unsecured in such manner as
    the Board shall approve (including, without limitation, by a security interest
    in the shares of the Company);





	
             
 	
            (4)
 	
            by delivering a combination of (1), (2) and (3) above.
 





  (j)        Net
    Issue Exercise. Notwithstanding the provisions of Paragraph (i), above,
    if, at the date of making the calculation set forth below, the fair market
    value of one share of Common Stock is greater than the exercise price of the
    Option, then in lieu of exercising the 


 


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Option for cash, the Holder may elect to convert the Option and receive Common Stock equal to the value (as determined below) of the Option (or the portion thereof being exercised) by surrender of the Option together with a notice of the Holder’s election to proceed pursuant to this Paragraph (j). In such an event, the Company shall issue to the Holder that number of shares of Common Stock derived utilizing the following formula:





	
             
 	
            X
 	
            =
 	
            Y (A-B)
 





A





	
            Where
 	
            X =        the number of shares of Common Stock to be issued to the Holder pursuant to election under this Section 5(j)
 









	
             
 	
            Y =
 	
            the number of shares of Common Stock purchasable under the Option or, if only a portion of the Option is being exercised, the portion of the Option being converted and canceled (at the date of such calculation)
 






A = the fair market value of one share of Common Stock (at the date of such calculation)


B = the exercise price (as adjusted to the date of such calculation).


For purposes of the above calculation, the “fair market value” of one share of Common Stock shall equal:


  (i)            In
    the event the Option is exercised in connection with the Company’s initial
    public offering of n Stock, the per share offering price to the public in
    such public offering.


  (ii)           In
    other circumstances in which a public market exists for the Common Stock at
    the time of such the average of the closing bid and asked prices of the Common
    Stock quoted in the Over-The-Counter Market Summary or the last quoted sale
    price of the Common Stock or the closing price quoted on the Nasdaq National
    Market or on any exchange on which the Common Stock is listed, whichever is
    applicable, as published in The Wall Street Journal
    for the five (5) trading days prior to the date of determination of the fair
    market value.


  (iii)          In
    all other circumstances, such value as is established by the Board acting
    in good faith.


  (k)            Rights
    as a Stockholder. A Holder shall have no rights as
    a stockholder with respect to any shares covered by an Option until such Holder
    becomes a record holder of such shares, irrespective of whether such Holder
    has given notice of exercise. Subject to the provisions of Sections 5(n) and
    5(o) hereof, no rights shall accrue to a Holder and no adjustments shall be
    made on account of dividends (ordinary or extraordinary, whether in cash,
    securities or other property) or distributions or other rights declared on,
    or created in, the Common Stock for which the record date is prior to the
    date the Holder becomes a record holder of the shares of Common Stock covered
    by the Option, irrespective of whether such Holder has given notice of exercise.


 


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  (i)            Transfer
    of Option. No Option granted under this Plan shall
    be assignable or otherwise transferable by the optionee except by will or
    by the laws of descent and distribution. Upon any attempt to transfer, assign,
    pledge, hypothecate or otherwise dispose of any Option or of any right or
    privilege conferred by this Plan contrary to the provisions hereof, or upon
    the sale, levy or any attachment or similar process upon the rights and privileges
    conferred by this Plan, such Option shall thereupon terminate and become null
    and void. During the life of the optionee, an Option shall be exercisable
    only by the optionee.





	
             
 	
            (m)
 	
            Securities Regulation and Tax Withholding.
 





  (1)            Shares
    shall not be issued with respect to an Option unless the exercise of such
    Option and the issuance and delivery of such shares shall comply with all
    relevant provisions of law, including, without limitation, any applicable
    state securities laws, the Securities Act of 1933, as amended, the Exchange
    Act, the rules and regulations hereunder and the requirements of any stock
    exchange upon which such shares may then be listed, and such issuance shall
    be further subject to the approval of counsel for the Company with respect
    to such compliance, including the availability of an exemption from registration
    for the issuance and sale of such shares.


The inability of the Company to obtain from any regulatory body the authority deemed by the Company to be necessary for the lawful issuance and sale of any shares under this Plan, or the unavailability of an exemption from registration for the issuance and sale of any shares under this Plan, shall relieve the Company of any liability with respect to the non-issuance or sale of such shares.


As a condition to the exercise of an Option, the Board may require the Holder to represent and warrant in writing at the time of such exercise that the shares are being purchased only for investment and without any then-present intention to sell or distribute such shares. At the option of the Board, a stop-transfer order against such shares may be placed on the stock books and records of the Company, and a legend indicating that the stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any applicable law or regulation, may be stamped on the certificates representing such shares in order to assure an exemption from registration. The Board also may require such other documentation as may from time to time be necessary to comply with federal and state securities laws. THE COMPANY HAS NO OBLIGATION
TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF OP IONS.


  (2)            The
    Holder shall pay to the Company by certified or cashier’s check, promptly
    upon exercise of an Option r, if later, the date that the amount of such obligations
    becomes determinable, all applicable federal, state, local and foreign withholding
    taxes that the Board, in its discretion, determines to result upon exercise
    of an Option or from a transfer or other disposition of shares of Common Stock
    acquired upon exercise of an Option or otherwise related to an Option or shares
    of Common Stock acquired in connection with an Option. Upon approval of the
    Board, a Holder may satisfy such obligation by complying with one or more
    of the following alternatives selected by the Board:


 


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  (A)                   by
    delivering to the Company shares of Common Stock previously held by such Holder
    or by the Company withholding shares of Common Stock otherwise deliverable
    pursuant to the exercise of the Option, which shares of Common Stock received
    or withheld shall have a fair market value at the date of exercise (as determined
    by the Board) equal to the tax obligation to be paid by the Optionee upon
    such exercise; provided that if the Holder is an Insider or if beneficial
    ownership of the shares issuable upon exercise of the Option is attributable
    to an Insider pursuant to the regulations under Section 16 of the Exchange
    Act, the grant of such Option to such Holder was specifically approved (or,
    in the case of clause (b), ratified) (i) by the entire Board or a committee
    of the Board composed solely of two or more Non-Employee Directors (as defined
    in Rule 16b-3(b)(3)(i) of the Exchange Act) or (ii) in compliance with Section
    14 of the Exchange Act by the holders of a majority of the securities of the
    Company present, or represented, and entitled to vote at a meeting duly held
    in accordance with the laws of the state of incorporation of the Company,
    or the written consent of the holders of a majority of the securities of the
    Company entitled to vote, so long as such ratification occurred no later than
    the date of the next annual meeting of stockholders; or


  (B)            by
    executing appropriate loan documents approved by the Board by which the Holder
    borrows funds from the Company to pay the withholding taxes due under this
    Paragraph 2, with such repayment terms as the Board shall select.


  (3)            The
    issuance, transfer or delivery of certificates of Common Stock pursuant to
    the exercise of Options may be delayed, at the discretion of the Board, until
    the Board is satisfied that the applicable requirements of the federal and
    state securities laws and the withholding provisions of the Code have been
    meet.





	
             
 	
            (n)
 	
            Stock Dividend, Reorganization or Liquidation.
 





  (1)            If
    (i) the Company shall at any time be involved in a transaction described in
    Section 424(a) of the Code (or any successor provision) or any “corporate
    transaction” described in the regulations thereunder; (ii) the Company
    shall declare a dividend payable in, or shall subdivide or combine, its Common
    Stock or (iii) any other event with substantially the same effect shall
    occur, the Board shall, with respect to each outstanding Option, proportionately
    adjust the number of shares of Common Stock subject to such Option, the exercise
    price per share or both so as to preserve the rights of the Holder substantially
    proportionate to the rights of the Holder prior to such event, and to the
    extent that such action shall an increase or decrease in the number of shares
    of Common Stock subject to outstanding Options, the number of shares available
    under Section 4 of this Plan shall automatically be increased or decreased,
    as the case may be, proportionately, without further action on the part of
    the Board, the Company, the Company’s stockholders, or any Holder.


  (2)            If
    the Company shall at any time declare an extraordinary dividend with respect
    to the Common Stock, whether payable in cash or other property, the Board
    may, in the exercise of its sole discretion and with respect to each outstanding
    Option, proportionately adjust the number of shares of Common Stock subject
    to such Option, the exercise price per share or both so as to preserve the
    rights of the Holder substantially proportionate to the rights of the Holder
    prior to such event, and to the extent that such action shall include an increase
    or decrease in the number of shares of Common Stock subject to outstanding
    Options, the number 


 


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of shares available under Section 4 of this Plan shall automatically be increased or decreased, as the case may be, proportionately, without further action on the part of the he Company, the Company’s stockholders, or any Holder.


  (3)            If
    the Company is liquidated or dissolved, the Board may allow the Holders of
    any outstanding Options to exercise all or any part of the unvested portion
    of the Options held by them, provided they do so prior to the effective date
    of such liquidation or dissolution. If the Holders do not exercise their Options
    prior to such effective date, each outstanding Option shall terminate as of
    the effective date of the liquidation or dissolution.


  (4)            The
    foregoing adjustments in the shares subject to Options shall be made by the
    Board, or by any successor administrator of this Plan, or by the applicable
    terms of any assumption or substitution document.


  (5)            The
    grant of an Option shall not affect in any way the right or power of the Company
    to make adjustments, reclassifications, reorganizations or changes of its
    capital or business structure, to merge, consolidate or dissolve, to liquidate
    or to sell or transfer all or any part of its business or assets.





	
             
 	
            (o)
 	
            Change in Control.
 





  (1)            Any
    and all Options that are outstanding under the Plan at the time of occurrence
    of any of the events described in Subparagraphs (A), (B), (C) and (D) below
    (an “Eligible Option”) shall become immediately vested and fully
    exercisable for the periods indicated (each such exercise period referred
    to as an “Acceleration Window”):


  (A)            For
    a period of forty-five (45) days beginning on the day on which any Person
    together with all Affiliates and Associates (as such terms are defined below)
    of such Person shall become e Beneficial Owner (as defined below) of fifty
    percent (50%) or more of the shares of Common Stock then outstanding, but
    shall not include the Company, any subsidiary of the Company, any employee
    benefit plan of the Company or of any subsidiary of the Company, or any Person
    or entity organized, appointed or established by the Company for or pursuant
    to the terms of any such employee benefit plan;


  (B)            Beginning
    on the date that a tender or exchange offer for Common Stock by any Person
    (other than the Company, any subsidiary of the Company, any employee benefit
    plan of the Company or of any subsidiary of the Company, or any Person or
    entity organized, appointed or established by the Company for or pursuant
    to the terms of any such employee benefit plan) is first published or sent
    or given within the meaning of Rule 14d-2 under the Exchange Act and continuing
    so long as such offer remains open (including any extensions or renewals of
    such offer), unless by the terms of such offer the offeror, upon consummation
    thereof, would be the beneficial Owner of less than fifty percent (50%) of
    the shares of Common Stock then outstanding;


  (C)            For
    a period of twenty (20) days beginning on the day on which the stockholders
    of the Company (or, if later, approval by the stockholders of any Person)
    duly approve any merger, consolidation, reorganization or other transaction
    providing for the conversion or exchange of ore than fifty percent (50%) of
    the outstanding shares of Common 


 


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Stock into securities of any Person, or cash, or property, or a combination of any of the foregoing, unless the holders of the voting stock of the Company immediately prior to such transaction hold not less than fifty percent (0%) of the voting rights in the surviving entity; or


  (D)            For
    a period of twenty (20) days beginning on the day on which, at any meeting
    of the stockholders of the Company involving a contest for the election of
    directors, individuals constituting a majority of the Board who were not the
    Board’s nominees for election immediately prior to the meeting are elected;
    provided, however, that with respect to the events specified in Subparagraphs
    (A), (B) and (C) above, such accelerated vesting shall not occur if the event
    that would otherwise trigger the accelerated vesting of Eligible Options has
    received the prior approval f a majority of all of the directors of the Company,
    excluding for such purposes the votes of directors who are directors or officers
    of, or have a material financial interest in any Person (other tan the Company)
    who is a party to the event specified in Subparagraph (A), (B) or (C) above
    which otherwise would trigger acceleration of vesting and provided, further,
    that no Option which i to be converted into an option to purchase shares of
    Exchange Stock as stated at item (3) below all be accelerated pursuant to
    this Section 5(n).


  (2)            The
    exercisability of any Eligible Option which remains unexercised following
    expiration of an Acceleration Window shall be governed by the vesting schedule
    and other terms of the Agreement ting such Option.


  (3)             If
    the stockholders of the Company receive shares of capital stock of another
    Person (“Exchange Stock”) in exchange for or in place of shares
    of Common Stock in any transaction involving any merger, consolidation, reorganization
    or other transaction providing for the conversion or exchange of all or substantially
    all outstanding shares of Common Stock into Exchange Stock, then at the closing
    of such transaction all Options granted hereunder shall be converted into
    options to purchase shares of Exchange Stock unless the Company (by the affirmative
    vote of a majority of all of the directors of the Company, excluding for such
    purposes the votes of directors who are directors or officers of, or have
    a material financial interest in the Person issuing the Exchange Stock and
    any Affiliate of such Person), in its sole discretion, determines that any
    or all such Options granted hereunder shall not be so converted but instead
    shall terminate. The amount and price of converted Options shall be determined
    by adjusting the amount and price of the Options granted hereunder in the
    same proportion as used for determining the shares f Exchange Stock the holders
    of the Common Stock received in such merger, consolidation, reorganization
    or other transaction. Unless altered by the Board, the vesting schedule set
    forth in the Agreement shall continue to apply to the Options granted for
    Exchange Stock. For the purposes of this Section 5(n): (i) “Person”
    shall include any individual, firm, corporation, partnership or other entity;
    (ii) “Affiliate” and “Associate” shall have the meanings
    assigned to them in Rule 12b-2 under the Exchange Act; and (iii) “Beneficial
    Owner” shall have the meaning assigned to it in Rule 16a-1 under the
    Exchange Act.





	
             
 	
            6.
 	
            EFFECTIVE DATE; TERM.
 





This Plan shall be effective as of September 1, 1996. Incentive Stock Options may be granted by the Board from time to time thereafter until the tenth anniversary of such date. Non-Qualified Stock Options may be granted until this Plan is terminated by the Board in its sole 


 


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discretion. Termination of this Plan shall not terminate any Option granted prior to such termination. Any Options granted by the Board prior to the approval of this Plan by the stockholders of the Company shall be granted subject to ratification of this Plan by the stockholders of the Company within twelve (12) months after this Plan is adopted by the Board. The Board may require any stockholder approval that it considers necessary for the Company to comply with or to avail the Company and/or the Optionees of the benefits of any securities, tax, market listing or other administrative or regulatory requirement. If such stockholder ratification is sought within twelve (12) months after this Plan is adopted by the Board and such stockholder ratification is not obtained, each and every Option granted under this Plan shall be null and void and shall convey no rights to the Holder thereof.





	
             
 	
            7.
 	
            NO OBLIGATIONS TO EXERCISE OPTION.
 





The grant of an Option shall impose no obligation upon the Optionee to exercise such Option.





	
             
 	
            8.
 	
            NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
 





Whether or not any Options are to be granted under this Plan shall be exclusively within the discretion of the Board, and nothing contained in this Plan shall be construed as giving any person any right to participate under this Plan. The grant of an Option shall in no way constitute any form of agreement or understanding binding on any Related Corporation, express or implied, that the Company or any Related Corporation will act with an Optionee for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a Related Corporation’s right to terminate Optionee’s employment at any time, which right is hereby reserved.





	
             
 	
            9.
 	
            APPLICATION OF FUNDS.
 





The proceeds received by the Company from the sale of Common Stock issued upon the exercise of Options shall be used for general corporate purposes, unless otherwise directed by the Board. 





	
             
 	
            10.
 	
            INDEMNIFICATION OF THE BOARD.
 





In addition to all other rights of indemnification they may have as members of the Board, directors shall be indemnified by the Company for all reasonable expenses and liabilities of any type or nature, including attorneys’ fees, incurred in connection with any action, suit or proceeding to which they or any of them are a party by reason of, or in connection with, this Plan or any Option granted under this Plan, and against all amounts paid by them in settlement thereof (provided that such settlement is approved by independent legal counsel selected by the Company), except to the extent that such expenses relate to matters for which it is adjudged that such director is liable for willful misconduct; provided, that within fifteen (15) days after the institution of any such action, suit or proceeding, the director involved therein shall, in writing, notify the Company of such action,
suit or proceeding, so that the Company may have the opportunity to make appropriate o prosecute or defend the same.


 


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            11.
 	
            AMENDMENT OF PLAN
 





The Board may, at any time, modify, amend or terminate this Plan or modify or amend Options granted under this Plan, including, without limitation, such modifications or amendments as are necessary to maintain compliance with applicable statutes, rules or regulations; provided, however, no amendment with respect to an outstanding Option which has the effect of reducing the benefits afforded to the Holder thereof shall be made over the objection of such Holder; provided further, that the events triggering acceleration of vesting of outstanding Options may be modified, expanded or eliminated without the consent of Holders. The Board may condition the effectiveness of any such amendment on the receipt of stockholder approval at such time and in such manner as the Board may consider necessary for the Company to comply with or to avail the Company, the Optionees or both of the benefits of any
securities, tax, market listing or other administrative or regulatory requirement which the Board determines to be desirable. Without limiting the generality of the foregoing, the Board may modify grants to persons who are eligible to receive Options under this Plan who are foreign nationals or employed outside the United States to recognize differences in local law, tax policy or custom.


 


 


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