Document:

Exhibit
4.2

WARRANT AND PUT OPTION AGREEMENT

WARRANT
AND PUT OPTION AGREEMENT dated as of 
November 30, 2006 by and between XENOMICS, INC., a Florida
corporation  (the “Company”) and GIAN
LUIGI BUITONI (the “Lead Investor”).

W I T N E S S E T H:

WHEREAS,
the Company issued to the Lead Investor 6,363,636 warrants (each  a “Lead Investor’s Warrant”), each to
purchase one unit, containing one share of the Company’s common stock, par
value $0.0001 per share (the “Common Stock”) and one Common Stock purchase warrant
(the “Warrants,” and collectively with the Common Stock, the “Units”),

WHEREAS,
the Company agreed to issue the Lead Investor’s Warrants pursuant to Securities
Purchase Agreements dated as of November 14 and 17, 2006  (the “SPA”) among the Company and the
Purchasers named therein, including the Lead Investor, and as an inducement for
the Lead Investor to assume the role of Executive Chairman and facilitate
financing by the Company,

WHEREAS,
the Company accepted a proposal by the Lead Investor to amend certain terms of
the Lead Investor Warrants in consideration of the issuance of an additional
2,727,272 (the “Additional Warrants’) Lead Investor Warrants containing an
option on the Company’s part to put the Additional Warrants to the Lead
Investor, at certain times and subject to certain conditions (“Put Option”) on
November 30, 2006.

NOW,
THEREFORE, in consideration of the premises, the payment by the Lead Investor
to the Company of $10.00 (receipt of which is hereby acknowledged), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

1.             Grant.  The Holder (as defined in Section 3 below) is
hereby granted the right to purchase, at any time from November 30, 2006 until
5:30 p.m., New York time, to December 31, 2007 (the “Expiration Date”), up to
2,727,272 Units, at an initial purchase price (subject to adjustment as
provided in Section 8 hereof) of $0.55 per Unit (the “Exercise Price”), subject
to the terms and conditions of this Agreement; provided, on or prior to the
time of exercise, the Company shall have received an aggregate of $5.0 million
of financing in addition to financing pursuant to the SPA (the “Financing
Condition”).  For the purposes of
determining whether the Financing Condition has been fulfilled, the gross
proceeds of the sale of securities for cash consideration shall be included,
without deduction for commission or expenses of such sales and the date such
proceeds are received by the Company or deposited in escrow shall be considered
the date of completion, provided definitive documentation is executed as
accepted by the purchasers of such securities on or before September 5,
2007.  The proceeds of securities sold
pursuant to the exercise of the Put Rights set forth in Section 3(b) of this
Agreement on or before August 31, 2007 shall be included in the determination
of whether the Financing Condition has been fulfilled and those sold thereafter
shall

 

be excluded.  If the Company shall not have attained the
financing condition on or before August 31, 2007, the Lead Investor’s Warrants
shall terminate and be of no further force or effect and thereafter August 31,
2007 shall be deemed the Expiration Date. 
The securities issuable upon exercise of the Lead Investor’s Warrant are
sometimes referred to herein as the “Lead Investor’s Securities.”

2.             Warrant Certificates.  The warrant certificate (the “Lead Investor’s
Warrant Certificate”) to be delivered pursuant to this Agreement shall be in
the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.

3.             Exercise of Lead Investor’s
Warrant; Put Rights.

(a)           Exercise.  The Lead Investor’s Warrant is exercisable
during the term set forth in Section 1 hereof payable by certified or cashier’s
check or money order in lawful money of the United States.  Upon surrender of Lead Investor’s Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Lead Investor’s Securities (and such other amounts, if any, arising pursuant to
Section 4 hereof) at the Company’s principal office currently located at 420
Lexington Avenue, Suite 1701, New York, NY 
10170, or the address of the Company’s transfer agent for its Common
Stock, the registered holder of a Lead Investor’s Warrant Certificate (“Holder”
or “Holders”) shall be entitled to receive a certificate or certificates for
the Lead Investor’s Securities so purchased. 
The purchase rights represented by each Lead Investor’s Warrant
Certificate are exercisable at the option of the Holder or Holders thereof, in
whole or in part as to Lead Investor’s Securities.  The Lead Investor’s Warrant may be exercised
to purchase all or any part of the Lead Investor’s Securities represented
thereby.  In the case of the purchase of
less than all the Lead Investor’s Securities purchasable on the exercise of the
Lead Investor’s Warrant represented by a Lead Investor’s Warrant Certificate,
the Company shall cancel the Lead Investor’s Warrant Certificate represented
thereby upon the surrender thereof and shall execute and deliver a new Lead Investor’s
Warrant Certificate of like tenor for the balance of the Lead Investor’s
Securities purchasable thereunder.

(b)           Put Rights.  The Lead Investor grants the Company the
rights set forth in this Section 3(b).

(i)            Certain Definitions.  As used in this Agreement:

“Maximum
Put Amount” shall mean the sum of $5,000,000 less the amount from the sale of
securities during the period beginning on December __, 2006 to the date of
measurement, including any such sales pursuant to the Company’s prior exercise
in part of the rights contained in this Section 3(b) on or before August 31,
2007.  In no event shall the Maximum Put
Amount exceed $500,000 in a period of 30 calendar days or $1,500,000 in the
aggregate.

“Financing
Condition” shall have the meaning set forth in Section 1 of this Agreement.

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(ii)           Upon written notice from the Company
at any time on or after June 1, 2007 and ending the earlier of the satisfaction
of the Financing Condition or December 31, 2007, the Lead Investor shall,
within 30 days from the date designated in such notice (the “Put Closing Date”),
purchase the number of Units specified in such notice up to the Maximum Put
Amount divided by the applicable Exercise Price.  On each Put Closing Date, the Lead Investor
shall surrender this Warrant and the full Exercise Price of the Units specified
in the Notice in immediately available funds against the Company’s delivery of
Lead Investor’s Securities.  If less than
all of the Investor’s Securities which may then be acquired on the exercise of
this Warrant are specified in the Notice, the Company shall cancel this Warrant
and issue and deliver to the Lead Investor a new Warrant for the Lead Investor’s
Securities remaining.

4.             Issuance of Certificates.  Upon the exercise of the Lead Investor’s
Warrant and payment of the Purchase Price therefor, the issuance of
certificates representing the Lead Investor’s Securities or other securities,
properties or rights underlying such Lead Investor’s Warrant, shall be made
forthwith (and in any event within five (5) business days thereafter) without
further charge to the Holder thereof, and such certificates shall (subject to
the provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in
a name other than that of the Holder, and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.  The Lead Investor’s
Warrant Certificates and the certificates representing the Lead Investor’s
Securities or other securities, property or rights (if such property or rights
are represented by certificates) shall be executed on behalf of the Company by
the manual or facsimile signature of the then present Chairman or Vice Chairman
of the Board of Directors or President or Vice President of the Company,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary or Treasurer or Assistant Treasurer of the Company.  The Lead Investor’s Warrant Certificates
shall be dated the date of issuance thereof by the Company upon initial
issuance, transfer or exchange.

5.             Restriction On Transfer of Lead
Investor’s Warrant. The Holder of an Lead Investor’s Warrant Certificate
(and its Permitted Transferee, as defined below), by its acceptance thereof,
covenants and agrees that the Lead Investor’s Warrant may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, unless such sale is registered under the Securities Act of 1933, as
amended, or an exemption therefrom is available.

6.             Purchase Price.

(a)           Initial and Adjusted Purchase
Price. Except as otherwise provided in Section 8 hereof, the initial purchase
price of the Lead Investor’s Securities shall be $0.55 per Unit.  The adjusted purchase price shall be the
price which shall result from time to time from any and all adjustments of the
initial purchase price in accordance with the provisions of Section 8 hereof.

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(b)           Purchase Price. The term “Purchase
Price” herein shall mean the initial purchase price or the adjusted purchase
price, depending upon the context.

7.             Registration Rights.

(a)           Registration Under the Securities
Act of 1933, as amended (“Act”). The Lead Investor’s Warrant may have not
been registered under the Act.  The Lead
Investor’s Warrant Certificates may bear the following legend:

The securities
represented by this certifi­cate have not been registered under the Securities
Act of 1933 (the “Act”), and may not be offered for sale or sold except
pursuant to (i) an effective registration statement under the Act, or (ii) an
opinion of counsel, if such opinion and counsel shall be reasonably satis­factory
to counsel to the issuer, that an exemption from registration under the Act is
available.

(b)           Piggyback Registration.  If the Company should file a registration
statement with the Commission under the Act (other than in connection with a
merger or other business combination transaction or pursuant to Form S-8), it
will give written notice at least twenty (20) calendar days prior to the filing
of each such registration statement to the Lead Investor and to all other
Holders of the Lead Investor’s Warrant and/or the Lead Investor’s Securities of
its intention to do so.  If an Lead
Investor or other Holders of the Lead Investor’s Warrant and/or the Lead
Investor’s Securities notify the Company within fifteen (15) calendar days
after receipt of any such notice of its or their desire to include any Lead
Investor’s Securities in such proposed registration statement, the Company
shall afford the Lead Investor and such Holders of the Lead Investor’s Warrant
and/or Lead Investor’s Securities the opportunity to have any such Lead
Investor’s Securities registered under such registration statement.  Notwithstanding the provisions of this
Section 7(b) and the provisions of Section 7(c), the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section 7(b) (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.

(c)           Covenants of the Company With
Respect to Registration.  In
connection with any registrations under Sections 7(b) hereof, the Company
covenants and agrees as follows:

(1)           The Company shall use its best
efforts to have any registration statement declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Lead Investor’s
Securities such number of prospectuses as shall reasonably be requested.

(2)           The Company shall pay all costs
(excluding fees and expenses of Holders’ counsel and any underwriting discounts
or selling fees, expenses or commissions), fees and expenses in connection with
any registration statement filed pursuant to Sections 7(b) and 7(c) hereof
including, without limitation, the Company’s legal and accounting fees,
printing expenses, blue sky fees and expenses.

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(3)           The Company will use its best efforts
to qualify or register the Lead Investor’s Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holders, provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.

(4)           The Company shall indemnify the
Holders of the Lead Investor’s Securities to be sold pursuant to any
registration statement and each person, if any, who controls such Holders
within the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934 (the “Exchange Act”), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement, but only to the same extent and with
the same effect as the provisions pursuant to which the Company has agreed to
indemnify the Lead Investor contained in Section 8 of the Underwriting Agreement.

(5)           The Holders of the Lead Investor’s
Securities to be sold pursuant to a registration statement, and their
successors and assigns, shall indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability to which they may become subject under the Act,
the Exchange Act or otherwise, arising from information furnished by or on behalf
of such Holders, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in Section 8 of the Underwriting Agreement pursuant to
which the Lead Investor has agreed to indemnify the Company.

(6)           Nothing contained in this Agreement
shall be construed as requiring the Holders to exercise their Lead Investor’s
Warrant prior to the initial filing of any registration statement or the
effectiveness thereof, provided that such Holders have made arrangements
reasonably satisfactory to the Company to pay the exercise price from the
proceeds of such offering.

(7)           The Company shall furnish to each
Lead Investor for the offering, if any, such documents as such Lead Investor
may reasonably require.

(8)           The Company shall as soon as
practicable after the effective date of the registration statement, and in any
event within 15 months thereafter, make “generally available to its security
holders” (within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act and
covering a period of at least 12 consecutive months beginning after the
effective date of the registration statement.

(9)           The Company shall deliver promptly to
each Holder participating in the offering requesting the correspondence
described below and any managing Lead Investor copies of all correspondence
between the Commission and the Company, its counsel or auditors with

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respect to the
registration statement and permit each Holder and Lead Investor to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. (“NASD”). Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any such
Holder shall reasonably request.

8.             Certain Adjustments

(a)           Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted. 
Any adjustment made pursuant to this Section 8(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or re-classification.

 

(b)           Subsequent Equity Sales.

 

i.              If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common Stock or
Common Stock Equivalents entitling any Person to acquire shares of Common
Stock, at an effective price per share less than the then Exercise Price (such
lower price, the “Base Share Price” and such issuances collectively, a “Dilutive
Issuance”), as adjusted hereunder (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the Exercise
Price, such issuance shall be deemed to have occurred for less than the
Exercise Price on such date of the Dilutive Issuance), then the Exercise Price
shall be reduced and only reduced to equal the Base Share Price and the number
of Lead Investor’s Securities issuable hereunder shall be increased such that
the aggregate Exercise Price payable hereunder, after taking into account the
decrease in the Exercise Price, shall be equal to the aggregate Exercise Price
prior to such adjustment.

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ii.     If the
Company or any Subsidiary there, as applicable, at any time while this Warrant
is outstanding, shall offer, sell, grant any option to purchase or offer, sell
or grant any right to reprice its securities, or otherwise dispose of or issue
(or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than
the VWAP on either the Trading Day immediately prior to the date agreements for
such issuance are entered into or the date such issuance is consummated,
whichever results in a higher VWAP, but more than the then effective Exercise
Price (which is addressed in 8(b)(i) above) (such lower price, the “Market
Base Price” and such issuances collectively, a “Market Dilutive Issuance”),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued
in connection with such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price on
such date of the Market Dilutive Issuance) then the Exercise Price shall be
reduced to a price determined by multiplying the then effective Exercise Price
by a fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding immediately prior to the Market Dilutive Issuance plus
the number of shares of Common Stock which the aggregate offering price for such
Market Dilutive Issuance would purchase at the then Market Base Price, and the
denominator of which shall be the sum of the number of shares of Common Stock
issued and outstanding immediately prior to the Market Dilutive Issuance plus
the number of shares of Common Stock so issued or issuable in connection with
the Market Dilutive Issuance and the number of Lead Investor’s Securities
issuable hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the Exercise
Price, shall be equal to the aggregate Exercise Price prior to such adjustment.

iii.    Such adjustments shall be made whenever such
Common Stock or Common Stock Equivalents are issued. The Company shall notify
the Holder in writing, no later than the Trading Day following the issuance of
any Common Stock or Common Stock Equivalents subject to this section,
indicating therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”).  For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 8(b), upon the occurrence of any Dilutive Issuance or
Market Dilutive Issuance, as applicable, after the date of such Dilutive
Issuance or Market Dilutive Issuance, as applicable, the Holder is entitled to
receive a number of Lead Investor’s Securities based upon the Base Share Price
or the price determined pursuant to 8(b)(ii), as applicable, regardless of
whether the Holder accurately refers to the Base Share Price or such price
determined pursuant to 8(b)(ii) in the Notice of Exercise.

(c)           Pro Rata Distributions.  If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 8(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect 

 

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immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.

(d)           Fundamental Transaction. If,
at any time while this Warrant is outstanding, (A) the Company effects any
merger or consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder shall have the right to
receive, for each Unit that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the
option of the Holder, (a) upon exercise of this Warrant, the number of shares
of Common Stock and Warrant of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of
assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event or (b) if the Company is
acquired in an all cash transaction, cash equal to the value of this Warrant as
determined in accordance with the Black-Scholes option pricing formula.  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with the foregoing provisions and evidencing the Holder’s
right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(d) and insuring that this Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.

 

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(e)           Calculations. All calculations
under this Section 8 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be. For purposes of this Section 8, the number of
shares of Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.

(f)            Voluntary Adjustment By Company.
The Company may at any time during the term of this Warrant reduce the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.

(g)           Notice to Holders.

i.      Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to this Section 8, the Company
shall promptly mail to each Holder a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).

ii.     Notice to Allow Exercise by Holder.
If (A) the Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation
or merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then, in
each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least
20 calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. 
The Holder is entitled to exercise this Warrant during the 20-day period
commencing on the date of such notice to the effective date of the event
triggering such notice.

 

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9.             Exchange and Replacement of
Warrant Certi­ficates.  Each Lead
Investor’s Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office
of the Company, for a new Lead Investor’s Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Lead Investor’s Securities in such denominations as shall be designated by the
Holders thereof at the time of such surrender.

10.           Loss, Theft etc. of Certificates  Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Lead Investor’s Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Lead Investor’s Warrant Certificates, if
mutilated, the Company will make and deliver a new Lead Investor’s Warrant
Certificate of like tenor, in lieu thereof.

11.           Elimination of Fractional
Interests. The Company shall not be required to issue certificates
representing fractions of shares of Common Stock upon the exercise of the Lead
Investor’s Warrant, nor shall it be required to issue scrip or pay cash in lieu
of fractional interests; provided, however, that if a Holder exercises all Lead
Investor’s Warrant held of record by such Holder the fractional interests shall
be eliminated by rounding any fraction to the nearest whole number of shares of
Common Stock or other securities, properties or rights.

12.           Reservation and Listing of
Securities. The Company shall at all times reserve and keep available out
of its authorized shares of Common Stock and Warrants, solely for the purpose
of issuance upon the exercise of the Lead Investor’s Warrant, such number of
shares of Common Stock and Warrants or other securities and properties or
rights as shall be issuable upon the exercise thereof.  The Company covenants and agrees that, upon
exercise of Lead Investor’s Warrant and payment of the Purchase Price therefor,
all the shares of Common Stock and Warrants issuable upon such exercise shall
be duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder.  As
long as the Lead Investor’s Warrant shall be outstanding, the Company shall use
its best efforts to cause the Common Stock and Warrants to be listed (subject
to official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed or quoted.

13.           Notices to Lead Investor’s Warrant
Holders. Nothing contained in this Agreement shall be construed as
conferring upon the Holders the right to vote or to consent or to receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever
as a stockholder of the Company. If, however, at any time prior to the
expiration of the Lead Investor’s Warrant and their exercise, any of the
following events shall occur:

(a)           the Company shall take a record of
the holders of its shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or retained
earnings, as 

 

 10
 

 

indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or

(b)           the Company shall offer to all the
holders of its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe therefor; or

(c)           a dissolution, liquidation or winding
up of the Company (other than in connection with a consolidation or merger) or
a sale of all or substantially all of its property, assets and business as an
entirety shall be proposed; then, in any one or more of said events, the
Company shall give written notice of such event at least fifteen (15) calendar
days prior to the date fixed as a record date or the date of closing the
transfer books for the determi­nation of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. 
Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.

14.           Notices.  All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or five days after being mailed by registered or
certified mail, return receipt requested. 
If to the registered Holders of the Lead Investor’s Warrant, to the
address of such Holders as shown on the books of the Company; or if to the
Company to 420 Lexington Avenue, Suite 1701, New York, NY  10170, or to such other address as the
Company may designate by notice to the Holders.

15.           Supplements and Amendments.  The Company and the Lead Investor may from
time to time supplement or amend this Agree­ment without the approval of any
Holders of Lead Investor’s Warrant Certi­ficates (other than the Lead Investor)
in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provi­sions
herein, or to make any other provision in regard to matters or questions
arising hereunder which the Company and the Lead Investor may deem necessary or
desirable and which the Company and the Lead Investor deem shall not adversely
affect the interests of the Holders of Lead Investor’s Warrant Certificates.

16.           Successors.  All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Lead Investor, the Holders and their respective successors and assigns
hereunder.

17.           Governing Law; Submission to
Jurisdiction. This Agreement and each Lead Investor’s Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with
the laws of said state without giving effect to the rules of said state
governing the conflicts of laws.

 

 11
 

 

18.           Entire Agreement; Modification.  This Agreement (including the Underwriting
Agreement, to the extent portions thereof are referred to herein) contains the
entire understanding between the parties hereto with respect to the subject matter
hereof and thereof.  This Agreement may
not be modified or amended except by a writing duly signed by the Company and
the Holders of a Majority in Interest of the Lead Investor’s Securities (for
this purpose, treating all then outstanding Lead Investor’s Warrants as if they
had been exercised).

19.           Severability.  If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.

20.           Captions.  The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor
should they be construed as, a part of this Agreement and shall be given no
substantive effect.

21.           Benefits of this Agreement.  Nothing in this Agreement shall be construed
to give to any person or corporation other than the Company and the Lead
Investor and any other registered Holders of the Lead Investor’s Warrant
Certificates or Lead Investor’s Securities any legal or equitable right, remedy
or claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Lead Investor and any other Holders of
the Lead Investor’s Warrant Certificates or Lead Investor’s Securities.

22.           Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counter­parts shall together constitute but one and
the same instrument.

23.           Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the Company, the Lead Investor and their respective
successors and assigns and the Holders from time to time of the Lead Investor’s
Warrant Certificates or any of them.

[Signature
on following page]

 

 12
 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed, as
of the day and year first above written.

	
   

  	
  XENOMICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Frederick Larcombe, CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Gian Luigi Buitoni

  

 

 13

 

Exhibit A

XENOMICS,
INC.

WARRANT
CERTIFICATE

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE “ACT”), AND MAY NOT BE OFFERED FOR SALE OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (ii) AN
OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.

THE TRANSFER OR
EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN
ACCORDANCE WITH THE WARRANT AND  PUT
OPTION AGREEMENT REFERRED TO HEREIN.

EXERCISABLE
COMMENCING NOVEMBER 30, 2006 THROUGH

5:30 P.M., NEW YORK TIME ON DECEMBER 31, 2007

No. LI-2

This Warrant
Certificate certifies that Gian Luigi Buitoni or registered assigns, is the
registered holder of this Warrant is entitled to purchase (subject to the
conditions of the Warrant Agreement) initially, at any time from November 30,
2006, until 5:30 p.m., New York time on December 31, 2007 (the “Expiration Date”),
up to 2,727,272 units, each consisting of one share of Common Stock, $0.0001
par value (the “Common Stock”) and one Common Stock purchase warrant (the “Warrants”)
of  Xenomics, Inc. (the “Company”)
exercisable at an initial purchase price of $0.55 per share (the “Purchase
Price”), upon the surrender of this Warrant Certificate and payment of the
applicable Purchase Price at an office or agency of the Company, but subject to
the conditions set forth herein and in the Warrant and Put Option Agreement,
dated as of November 30, 2006, by and between the Company and Gian Luigi
Buitoni (the “Warrant Agreement”). 
Payment of the Purchase Price shall be made by certified or cashier’s
check or money order payable to the order of the Company, or surrender as
provided in the Warrant Agreement.

No Warrant may be
exercised after 5:30 p.m., New York time, on the Expiration Date, at which time
all Warrant evidenced hereby, unless exercised prior thereto, shall thereafter
be void.

The Warrant evidenced
by this Warrant Certificate is part of a duly authorized issue of Warrants
issued pursuant to the Warrant Agreement between the Company and the Lead
Investor, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Company and the holders (the words “holders” or “holder” meaning the
registered holders or registered holder) of the Warrant.

 1
 

 

The Warrant
Agreement provides that upon the occurrence of certain events the Purchase
Price and the type and/or number of the Company’s securities issuable upon the
exercise of this Warrant, may, subject to certain conditions, be adjusted.  In such event, the Company will, at the
request of the holder, issue a new Warrant Certificate evidencing the
adjustment in the Purchase Price and the number and/or type of securities
issuable upon the exercise of the Warrant; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in
the Warrant Agreement.

Upon due
presentment for registration of transfer of this Warrant Certificate at an
office or agency of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrant shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.

Upon the exercise
of less than all of the Warrants evidenced by this Certificate, the Company
shall forthwith issue to the holder hereof a new Warrant Certificate
representing such number of unexercised Warrants.

The Company may
deem and treat the registered holder(s) hereof as the absolute owner(s) of this
Warrant Certificate (notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof, and of any
distribution to the holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

All terms used in
this Warrant Certificate which are defined in the Warrant Agreement shall have
the meanings assigned to them in the Warrant Agreement.

IN WITNESS
WHEREOF, the undersigned has executed this certificate this       
day of                ,
200  .

	
  

  	
  XENOMICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Frederick Larcombe, CFO

  	
   

  

 

 2
 

 

FORM OF ASSIGNMENT

(To be executed by
the registered holder if such holder

desires to transfer the Warrant Certificate.)

FOR VALUE RECEIVED                                                                     

hereby sells,
assigns and transfers unto                                                                    

(Please print name
and address of transferee)

this Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint                                                                      
Attorney, to transfer the within Warrant Certificate on the books of Xenomics,
Inc., with full power of substitution.

Dated:                

	
  Signature  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must
  conform in all respects to the name of

  
	
   

  	
   

  	
  of holder as
  specified on the face of the Warrant Certificate.) 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Signature
  guarantee]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Insert Social
  Security or Other

  
	
   

  	
   

  	
  Identifying
  Number of Holders)

  

 

 3
 

 

FORM OF ELECTION TO PURCHASE

The undersigned
hereby irrevocably elects to exercise the right, represented by this Warrant
Certificate, to purchase               
units and herewith tenders in payment for such securities a certified or
cashier’s check or money order payable to the order of Xenomics, Inc. in the
amount of $                         ,
all in accordance with the terms hereof. 
The undersigned requests that certificates for such securities be
registered in the name of                                         
whose address is                                     
and that such certificates be delivered to                                                          whose address is                                                  .

Dated:                           

Signature                                                       

(Signature must
conform in all respects to the name of holder as specified on the face of the
Warrant Certificate.)

(Insert Social Security
or Other

Identifying Number of Holders)

[Signature
guarantee]

 4Prepared and filed by St Ives Financials

EXHIBIT 10.1

 

AMENDED AND RESTATED NEOWARE, INC.

2004 EQUITY INCENTIVE PLAN

Section 1. Purpose of the Plan; Effective Date.

1.1. Purpose. This Amended and Restated 2004 Equity Incentive Plan (the “Plan”) is intended to promote the interests of Neoware, Inc., a Delaware corporation (the “Company”), by: (a) enabling the Company and its subsidiaries to recruit and retain highly qualified employees, directors and consultants; (b) providing those employees, directors and consultants with an incentive for productivity; and (c) providing those employees, directors and consultants with an opportunity to share in the growth and value of the Company.

1.2 Effective Date. The Plan was approved by the Board on October 19, 2004 and became effective immediately upon its adoption by the stockholders of the Company. The date of its approval by the stockholders is hereby designated the “Plan Effective Date.”

Section 2. Definitions. For the purposes of the Plan, the following definitions shall be in effect:

2.1. Award: a grant of Options, SARs, Restricted Shares or Restricted Share Units pursuant to the provisions of the Plan.

2.2. Award Agreement: with respect to any particular Award, the written document that sets forth the terms of that Award.

2.3. Board: the Company’s Board of Directors.

2.4. Change in Control: a change in ownership or control of the Company effected through any of the following transactions:

2.4.1. the direct or indirect acquisition by any person or related group of persons (other than the Company or any majority-owned subsidiary or any employee benefit plan sponsored by the Company or any trust or investment manager for the account of such a plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities;

2.4.2. a change in the composition of the Board over a period of 24 months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been Board members continuously since the beginning of such period, or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (a) who were still in office at the time such election or nomination was approved by the Board;

2.4.3. the consummation of any consolidation, share exchange or merger of the Company (a) in which the stockholders of the Company immediately prior to such transaction do not own at least a majority of the voting power of the entity which survives/results from that transaction, or (b) in which a stockholder of the Company who does not own a majority of the voting stock of the Company immediately prior to such transaction, owns a majority of the Company’s voting stock immediately after such transaction; or

2.4.4. the liquidation or dissolution of the Company or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, including stock held in subsidiary corporations or interests held in subsidiary ventures.

2.5. Code: the Internal Revenue Code of 1986, as amended.

2.6 Committee: the committee appointed by the Board to administer and interpret the Plan in accordance with Section 3.1.

2.7. Common Stock: shares of the Company’s common stock.

2.8 Employee: an individual who performs services while in the employ of the Company or any of its Subsidiaries, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance.

2.9. Exchange Act: the Securities Exchange Act of 1934, as amended.

2.10 Exercise Date: the date on which all conditions for exercise, including without limitation the giving of written notice to the Company and payment of the exercise price, have been satisfied.

2.11 Fair Market Value: the Fair Market Value per share of Common Stock determined in accordance with the following provisions:

2.11.1. NASDAQ. If the Common Stock is at the time traded on the Nasdaq National Market, the Fair Market Value shall be the closing selling price per share on the date in question, as such price is reported by NASDAQ on the Nasdaq Global Market or any successor system. If there is no reported closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

2

2.11.2 Other National Securities Exchange. If the Common Stock is at the time listed or admitted to trading on any national securities exchange, then the Fair Market Value shall be the closing selling price per share on the date in question on the exchange determined by the Committee to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists.

2.11.3 Not Publicly Traded. If the Common Stock is on the date in question neither listed nor admitted to trading on any national securities exchange nor traded on the Nasdaq Global Market, then the Fair Market Value of the Common Stock on such date shall be determined by the Committee in its sole and absolute discretion.

2.12. Incentive Stock Option: an Option intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

2.13. Misconduct: (a) the commission of any act of fraud, embezzlement or dishonesty by the Participant, (b) any unauthorized use or disclosure by such individual of confidential information or trade secrets of the Company or of any Subsidiary, (c) any failure to perform any specific lawful direction of the Company’s Board or officers of the Company, (d) any refusal or neglect to perform such individual’s duties in connection with his or her employment, (e) any conviction of, or entering of a plea of nolo contendere to, a crime which constitutes a felony, or (f) any other misconduct by such individual adversely affecting the
business or affairs of the Company, each as determined by the Committee in its sole and absolute discretion; provided, however that if a Participant and the Company or any of its Subsidiaries have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines “misconduct,” “cause” or another similar term, then with respect to that Participant, “Misconduct” shall have the meaning ascribed to such term in that agreement. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Company or any Subsidiary may consider as grounds for the dismissal or discharge of any Participant or other individual in the Service of the Company.

2.14. Non-Qualified Option: an Option that is not an Incentive Stock Option.

2.15. Option: an option to purchase shares of Common Stock (including Restricted Shares, if the Committee so determines) granted pursuant to Section 6, 7 or 8 hereof.

2.16. Optionee: a person to whom an Option is granted under the Plan.

2.17. Participant: a person who is issued an Award under the Plan.

2.18. Permanent Disability: a permanent and total disability as defined in Section 22(e)(3) of the Code.

2.19 Qualifying Performance Criteria: the performance criteria set forth in Section 13.3.2.

3

2.20. Restricted Shares: shares that are granted under and subject to restrictions pursuant to Section 10 of the Plan.

2.21. Restricted Share Unit: a right granted under and subject to restrictions pursuant to Section 11 of the Plan.

2.22. SAR: a stock appreciation right granted under and described in Section 9 of the Plan.

2.23. Service: the performance of services on a periodic basis for the Company (or any Subsidiary) in the capacity of an Employee, a non-employee member of the Board or an independent consultant, except to the extent otherwise specifically provided in the applicable Award Agreement.

2.24. Subsidiary: each corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, provided each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.25 Ten Percent Stockholder: a stockholder owning 10% or more of the total combined voting power of all classes of stock of the Company or any related corporation of the Company.

Section 3. Administration of the Plan.

3.1. The Committee. The Board shall appoint a Committee to administer and interpret the Plan. The Committee shall consist of two or more Board members, each of whom is “independent” as defined in the rules of the Nasdaq Stock Market, is an “outside director” as defined under Code Section 162(m) and related Treasury Regulations and may be a “non-employee director” as defined under Rule 16b-3 of the Exchange Act. Members of the Committee shall serve for such period as the Board may decide. The Committee shall have full power and authority (subject to the express provisions of the Plan, including without limitation Sections 3.2, 3.3 and 3.4 below) to establish rules and regulations for the proper administration of
the Plan and to make such determinations under, and issue such interpretations of, the provisions of the Plan and any outstanding Award thereunder as it may deem necessary or advisable. Decisions of the Committee shall be final and binding on all parties. No member of the Board, or delegate thereof, will be liable for any good faith determination or act in connection with the Plan or any Award.

3.2. Delegation of Authority. The Board may appoint one or more officers of the Company, Board members, or a committee of officers and/or Board members to act individually or jointly, as set forth in the delegating resolution. To the extent permitted in accordance with Section 157 of the Delaware General Corporation Law and within the limits established by the Board at the time of the delegation, each such person shall have the authority to grant Awards to Participants who are not subject, as a result of their relationship to the Company or ownership of the Company’s securities, to Section 16 of the Exchange Act, and solely with respect to any Awards so granted, references in the Plan to the Committee will be deemed also to refer to
such persons to whom authority has been granted.

4

3.3. Approval of Discretionary Director Grants. The Board must ratify any grants of Awards under the Plan (other than those made pursuant to Section 7) to any non-employee Board member.

3.4. Administration of Non-Employee Director Grants. Administration of the grants made pursuant to Section 7 of the Plan shall be self-executing, and the Committee shall exercise no discretionary functions with respect to such option grants. Administration of discretionary grants made to non-employee Board members under Section 8 shall be administered by the Committee, subject to Section 3.3. 

Section 4. Eligibility.

4.1. Eligible Persons. Subject to the terms of the Plan, the persons eligible to participate in the Plan shall be limited to the following:

4.1.1 officers and other Employees of the Company (or any Subsidiary);

4.1.2. non-employee members of the Board and the non-employee members of the board of directors of any Subsidiary; and

4.1.3. consultants who provide Services to the Company (or any Subsidiary), provided such Services are not in connection with the offer or sale of securities in a capital-raising transaction.

4.2. Determination of Eligibility. Subject to the terms of the Plan, the Committee and, to the extent consistent with the Plan and the Board’s delegation, the persons to whom authority has been delegated under Section 3.2, shall have full authority to determine which eligible individuals are to receive Awards.

Section 5. Stock Subject to the Plan

5.1. Number of Shares Available for Grant. The maximum number of shares of Common Stock which may be issued under the Plan shall not exceed 2,700,000 shares, plus up to an aggregate maximum of 1,750,000 shares subject to options outstanding as of December 1, 2004 under the Company’s 1995 Stock Option Plan and 2002 Non-Qualified Stock Option Plan that terminate, expire or are canceled without having been exercised on or after December 1, 2004, subject to adjustment from time to time in accordance with the provisions of Section 5.4. The maximum number of shares that may be issued under the Plan as Restricted Shares shall not exceed 300,000 shares.

5

5.2. Annual Per-Participant Limit. The aggregate number of shares of Common Stock subject to Options or SARs granted under the Plan in any fiscal year of the Company to any one Participant in the Plan shall not exceed 500,000 shares. The aggregate number of shares subject to Restricted Share or Restricted Share Units granted under the Plan during any fiscal year of the Company to any one Participant shall not exceed 250,000. Notwithstanding the foregoing limitations, no non-employee Board member may receive Awards in any given fiscal year of the Company (not including automatic grants of Options under Section 7) with respect to more than 100,000 shares. Notwithstanding anything to the contrary in the Plan, the foregoing limitations shall be
subject to adjustment under Section 5.4.

5.3. Forfeited Awards and Other Shares Again Available for Grant. If and to the extent that an Option, SAR or Restricted Share Unit expires, terminates or is canceled, surrendered or forfeited or becomes unexercisable or irredeemable for any reason without having been exercised or settled in full, the shares of Common Stock associated with that Option, SAR or Restricted Share Unit will again become available for grant under the Plan. Similarly, if and to the extent any Restricted Share is canceled, surrendered or forfeited for any reason, that share will again be available for grant under the Plan. The number of shares that will be considered issued under the Plan shall equal the number of shares issued upon exercise or settlement of an Award
and shall not include the number of shares returned to the Company upon termination, cancellation, expiration, forfeiture or surrender of an Award. Notwithstanding the foregoing, shares subject to an Award under the Plan may not again be made available for issuance under the Plan if such shares are retained by the Company upon the vesting, exercise or redemption of an Award in order to satisfy the exercise price for such Award or withholding taxes, if any, due in connection with such vesting, exercise or redemption. For the avoidance of doubt, shares underlying (i) the unexercised portion of an Option or SAR and (ii) the unvested portion of a Restricted Share or Restricted Share Unit at the time any such Award terminates, shall revert to and again be available for future grant under the Plan, unless the Plan has been terminated. If shares that were acquired upon exercise of an Option or redemption of a SAR, or in connection with a Restricted Share or Restricted Share Unit,
are subsequently repurchased by the Company, such shares shall not in any event be returned to the Plan and shall not become available for future grant under the Plan, and any shares subject to awards of SARs or Restricted Share Units will, upon any distribution in respect of such awards, be treated as issued and will not be available under the Plan, whether the distribution is paid in cash or shares. 

5.4. Adjustment. Should any change be made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, then appropriate adjustments shall be made to (a) the maximum number and/or class of securities issuable under the Plan, (b) the maximum amount and/or class of securities for which any one individual participating in the Plan may be granted Options, separately exercisable SARs, Restricted Shares and Restricted Share Units for any given year under the Plan, (c) the number and/or class of securities for which automatic Option grants are to be subsequently made per
eligible non-employee Board member under Section 7 of the Plan, (d) the number and/or class of securities and price per share in effect under each Option and SAR outstanding under the Plan, and (e) the number of Restricted Share Units outstanding under the Plan and/or the class of securities referenced for determining payment in respect thereof. Such adjustments to outstanding Awards are to be effected in a manner intended to avoid the enlargement or dilution of rights and benefits under such Awards. The adjustments determined by the Committee shall be final, binding and conclusive.

6

Section 6. Stock Options; In General

6.1. Option Grant and Award Agreement. Subject to the terms of the Plan, the Committee and, subject further to the delegating resolution, the persons who are delegated authority under Section 3.2, are authorized to grant Incentive Stock Options and Non-Qualified Options (including Options to purchase Restricted Shares) to eligible individuals. Each granted Option shall be evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan.

6.1.1. No ISOs for Non-Employees. Individuals who are not Employees may only be granted Non-Qualified Options.

6.1.2. $100,000 ISO Limit. The aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more Incentive Stock Options granted to any Employee under the Plan (or any other option plan of the Company or any Parent or Subsidiary) may for the first time become exercisable during any one calendar year shall not exceed the sum of $100,000. To the extent the Employee holds two or more such Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Stock Options shall be applied on the basis of the order in which such Options are granted. Should the number of shares of Common Stock for which any Incentive Stock Option first becomes
exercisable in any calendar year exceed the applicable $100,000 limitation, then that Option may nevertheless be exercised in that calendar year (or thereafter in accordance with its terms) for the excess number of shares as a Non-Qualified Option.

6.2. Exercise Price. The exercise price per share of each option granted under the Plan shall be fixed by the Committee, in accordance with the following provisions: The exercise price per share of Common Stock subject to an Option shall in no event be less than 100% of the Fair Market Value of such Common Stock on the grant date; provided that, if the individual to whom an Incentive Stock Option is granted is a Ten Percent Stockholder, then the exercise price per share shall not be less than 110% of the Fair Market Value per share of Common Stock on the grant date.

6.3 Exercisability and Term of Options. Each option granted under the Plan shall be exercisable at such time or times and during such period as is determined by the Committee and set forth in the Award Agreement evidencing the grant. No such option, however, shall have a maximum term in excess of ten years measured from the grant date (five years if the option is an Incentive Stock Option granted to a Ten Percent Stockholder).

7

6.4. Payment of the Exercise Price. The exercise price shall become immediately due upon exercise of the Option and shall be payable in one or more of the forms specified below as permitted by the Committee:

6.4.1 by cash or check made payable to the Company;

6.4.2. in shares of Common Stock held by the Optionee;

6.4.3. pursuant to a broker assisted exercise; or

6.4.4 by such other forms of consideration as determined by the Committee.

6.5. Transfer of an Option.

6.5.1 In General; No Transfers. During the lifetime of the Optionee, the Option, together with any related SAR, shall be exercisable only by the Optionee and shall not be assignable or transferable by the Optionee, except for a transfer of the Option by will or by the laws of descent and distribution following the Optionee’s death or, with respect to Options other than Incentive Stock Options, if permitted in any specific case by the Committee, pursuant to a domestic relations order (as defined under the Code or Treasury Regulations).

6.5.2. Committee May Permit Transfer of Non-Qualified Options. Notwithstanding the foregoing provisions of this Section 6.5, the Committee may provide that an Optionee may transfer Non-Qualified Options to family members or other persons or entities according to such terms as the Committee may determine, provided that the Optionee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

6.6. No Stockholder Rights. An Optionee shall have no stockholder rights with respect to any shares covered by the Option until such individual shall have exercised the Option and paid the exercise price for the purchased shares.

6.7. Exercise and Forfeiture Following Termination of Service. 

6.7.1. In General. Upon a Participant’s death or termination of Service, all Options and SARs held by the Participant that are not exercisable immediately prior to the death or termination of Service shall terminate immediately. 

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6.7.2. Exercise Period Following Termination. In the event of a Participant’s death or termination of Service, the following provisions shall govern the exercise period applicable to the portion of Options and SARs held by the Participant that is exercisable immediately prior to the Participant’s death or termination of Service:

(a) Other than Death, Permanent Disability or Misconduct. If a Participant terminates Service for any reason other than death, Permanent Disability or Misconduct, then each outstanding Option and SAR held by such Participant shall remain exercisable during the three-month period following the date of such termination of Service.

(b) Disability. If a Participant terminates Service by reason of his or her Permanent Disability, then each outstanding Option and SAR held by the Participant shall remain exercisable during the 12-month period following the date of such termination of Service.

(c) Death. If a Participant dies while holding one or more outstanding Options or SARs, then each such Option and SAR shall remain exercisable during the 12-month period, or such lesser period as determined by the Committee, following the date of the Participant’s death. During such limited period, the Options and SARs may be exercised by the personal representative of the Participant’s estate or by the person or persons to whom the Options and SARs are transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution.

(d) Misconduct. Upon termination of the Participant’s Service for Misconduct, all outstanding Options and SARs held by the Participant shall terminate immediately and cease to be outstanding.

(e) Expiration. Subject to the discretion of the Committee under Section 6.7.4, upon the expiration of the applicable exercise period provided for in this Section 6.7.2 or (if earlier) upon the expiration of the term of the Option or SAR, the Option or SAR shall terminate and cease to be exercisable for any shares for which the Option or SAR has not been exercised.

(f) Change of Control Agreements. Notwithstanding any other provision of this Section 6.7, with respect to a particular Participant, if there is any conflict between this Section 6.7 and any employment agreement or change of control agreement between the Participant and the Company, such agreement will control. 

6.7.3. No Exercise After Expiration of Term. Notwithstanding the foregoing or any other provision of this Plan, under no circumstances shall any Option or SAR be exercisable after the specified expiration date of the Option’s term.

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6.7.4. Committee Discretion. The Committee shall have complete discretion, exercisable either at the time the Option is granted or at any time while the Option remains outstanding:

(a) to extend the period of time for which the Option (other than Options granted pursuant to Section 7) or SAR is to remain exercisable following the Participant’s death or cessation of Service other than for cause from the limited period in effect under Section 6.7.2 to such greater period of time as the Committee shall deem appropriate; provided that in no event shall such option be exercisable after the specified expiration date of the Option or SAR term; and/or

(b) to permit one or more Options or SARs held by the Participant (other than Options granted pursuant to Section 7) to be exercised, during the limited post-Service exercise period applicable under this Section 6.7, not only with respect to the number of vested shares of Common Stock for which each such Option or SAR is exercisable at the time of the Participant’s cessation of Service but also with respect to any other shares subject to that Option or SAR.

6.8 No Repricing. Other than in connection with a change in the Company’s capitalization (as described in Section 5.4), the exercise price of an Option may not be reduced without stockholder approval (including canceling previously awarded Options and regranting them with a lower exercise price).

Section 7. Stock Options; Automatic Grants for Non-Employee Directors.

7.1. Eligibility. The individuals eligible to receive automatic option grants pursuant to the provisions of this Section 7 shall be limited to (a) those individuals who are serving as non-employee Board members on the Plan Effective Date, (b) those individuals who are first elected or appointed as non-employee Board members on or after the Plan Effective Date, whether through appointment by the Board or election by the Company’s stockholders, and (c) those individuals who are re-elected to serve as non-employee Board members at one or more annual meeting of the Company’s stockholders (each an “Annual Stockholders Meeting”) held on or after the Plan Effective Date. Each non-employee Board member eligible to receive one or more automatic option grants
pursuant to the foregoing criteria shall be designated an “Eligible Director” for purposes of the Plan.

7.2. Grant Dates. Option grants shall be made under this Section 7 on the dates specified below:

7.2.1. Initial Grant. Each Eligible Director who is first elected or appointed as a non-employee Board member on or after the Plan Effective Date shall automatically be granted, on the date of such initial election or appointment (as the case may be), a Non-Qualified Option to purchase 10,000 shares of Common Stock upon terms and conditions of this Section 7.

7.2.2. Annual Grant. On the date of each Annual Stockholders Meeting, beginning with the first Annual Stockholders Meeting held on the Plan Effective Date, each individual who will continue to serve after such meeting as an Eligible Director shall automatically be granted a Non-Qualified Option to purchase an additional 7,500 shares of Common Stock upon the terms and conditions of this Section 7, provided he or she has served as a non-employee Board member for at least six months prior to the date of such Annual Stockholders Meeting.

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7.3. No Limitation. There shall be no limit on the number of shares of Common Stock for which any one Eligible Director may be granted Options under this Section 7 over his or her period of Board service.

7.4. Exercise Price. The exercise price per share of Common Stock subject to each Option grant made under this Section 7 shall be equal to 100% of the Fair Market Value per share of Common Stock, on the automatic grant date.

7.5. Option Term. Each Option grant under this Section 7 shall have a term of ten years measured from the automatic grant date, subject to earlier termination in accordance with Section 7.7 below.

7.6. Exercisability and Vesting. Each Option grant under this Section 7 shall vest and be exercisable for any or all of the shares subject thereto, as follows.

7.6.1. Initial Grant. The shares of Common Stock subject to each Option granted pursuant to Section 7.2.1 shall vest and be exercisable in full six months from the date of grant. The right to exercise such Options will expire on the tenth anniversary of the date on which the Options were granted.

7.6.2. Annual Grant. The shares subject to each Option granted pursuant to Section 7.2.2 shall vest and be exercisable on a cumulative basis as to 3,750 shares beginning six months from the date of grant and 3,750 additional shares of Common Stock beginning on the first anniversary of the date of grant. The right to exercise such Options will expire on the tenth anniversary of the date on which the Options were granted.

7.7. Effect of Termination of Board Service. Upon cessation of Service as a non-employee Board member (for reasons other than retirement or death), only those Options exercisable at the date of cessation of service shall be exercisable by the non-employee Board member. Such Options shall be exercisable for a period of three months from cessation of Service of the non-employee Board member or the expiration of the Option, whichever period is shorter.

Upon the retirement or death of a non-employee Board member, Options shall be exercisable as follows: 

7.7.1 Retirement. Upon retirement as a non-employee Board member after the non-employee Board member has served for at least six consecutive years as a director, all Options shall continue to be exercisable during their terms as if such person had remained a non-employee Board member.

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7.7.2 Death. In the event of the death of a non-employee Board member while a member of the Board, the Options granted to him or her shall be exercisable, to the extent then exercisable, for a period of one year from the date of the non-employee Board member’s death, or until the expiration of the Option, whichever period is shorter.

7.8. Other Option Terms Apply. Except to the extent inconsistent with the terms of this Section 7, all Options granted pursuant to this Section 7 shall be subject to the terms and conditions of Sections 1 through 6 and Sections 12 and 13 of the Plan.

Section 8. Discretionary Option Grants to Non-Employee Directors

8.1. Option Grants. The Committee, upon ratification by the Board, shall have the authority to grant discretionary Non-Qualified Options to non-employee Board members under this Section 8. Participants granted Options under this Section 8 may be selected from among those non-employee Board members who, in the opinion of the Committee and the Board, have the capacity to devote themselves to the Company’s success.

8.2. Option Terms. Except to the extent inconsistent with the terms of this Section 8, each Option granted pursuant to this Section 8 shall be a Non-Qualified Option governed by the terms and conditions specified under Sections 1 through 6 and 12 and 13 of the Plan.

8.2.4. Effect of Termination of Service. Subject to the discretion of the Committee under Section 6.7.4, Section 7.7 of the Plan shall apply to the termination of Options granted to non-employee Board members under this Section 8, except that upon termination of the non-employee Board member’s Service for Misconduct, all outstanding Options held by the non-employee Board member shall terminate immediately and cease to be outstanding.

Section 9. Stock Appreciation Rights

9.1. In General. Subject to the terms of the Plan, the Committee and, subject further to the delegating resolution, the persons authorized under Section 3.2, are authorized to grant SARs to eligible individuals. Each granted SAR shall be evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan. The grant of an SAR provides the holder the right to receive the appreciation in value of shares of Common Stock between the date of grant and the date of exercise. SARs may be granted alone (“Stand-Alone SARs”) or in conjunction with all or part of any Option (“Tandem SARs”). In the case of a Non-Qualified Option, a Tandem SAR may be granted either at or after the time of the grant
of such Option. In the case of an Incentive Stock Option, a Tandem SAR may be granted only at the time of the grant of such Option.

9.2. Exercise. An SAR may be exercised by a Participant by giving notice of intent to exercise to the Company to the extent that the SAR is then, by its terms, exercisable. Upon the exercise of a Stand-Alone SAR, a Participant will be entitled to receive, in either cash and/or shares of Common Stock, as specified in the Award Agreement or determined by the Committee, an amount equal to the excess, if any, of (a) the Fair Market Value, as of the date the SAR (or portion thereof) is exercised, of the shares covered by the SAR (or portion thereof) over (b) the Fair Market Value of the shares covered by the SAR (or a portion thereof) as of the date the SAR was granted.

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9.2.1. Other Terms.

(a) Term of SAR. Unless otherwise provided in the applicable Award Agreement at the time of grant, the term of an SAR will be ten years, and in any event shall not exceed ten years.

(b) Exercisability. SARs will vest and become exercisable at such time or times and subject to such terms and conditions as will be determined by the Committee at the time of grant.

(c) Termination of Service. Unless otherwise provided by the Committee at the time of grant, SARs will be subject to the terms of Section 6.7 with respect to exercise following termination of Service.

Section 10. Restricted Shares.

10.1. In General. Subject to the other terms of the Plan, the Committee and, subject further to the delegating resolution, the persons authorized under Section 3.2 may grant Restricted Shares to eligible individuals and may impose conditions, including continued employment or performance conditions, on such shares as it deems appropriate. Each issued Restricted Share shall be evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan. The terms and conditions applicable to a Restricted Share issuance, including the vesting periods and conditions, the form of consideration payable, if any, and the Company’s right to repurchase unvested Restricted Shares upon a Participant’s termination
of employment shall be determined by the Committee; provided, however, that in no event shall the grant, issuance, retention, vesting and/or settlement of Restricted Shares that are based on performance criteria and level of achievement versus such criteria be subject to a performance period of less than one year and no condition that is based upon continued employment or the passage of time shall provide for vesting or settlement in full of a Restricted Share Award over a period of less than three years from the date the Award is made, other than as determined by the Committee in its sole discretion upon a Change in Control or upon the Participant’s death or cessation of Service other than for cause, provided, however, that up to 120,000 shares issuable under the Plan may be granted as Restricted Shares or Restricted Share Units with vesting based on continued employment or the passage of time over less than one year.

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10.2. Stockholder Rights. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to him or her as Restricted Shares under the Plan, whether or not his or her interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. Any new, additional or different shares of stock or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s
receipt of consideration or by reason of any Change in Control, shall be issued subject to (i) the same vesting requirements applicable to his or her unvested shares and (ii) such escrow arrangements as the Committee shall deem appropriate.

10.3. Unvested Shares May be Escrowed. Unvested Restricted Shares, including any unvested Restricted Shares purchased pursuant to the exercise of an Option, may, in the Committee’s discretion, be held in escrow by the Company until the Participant’s interest in such Restricted Shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing such unvested shares. 

10.4. Transferability of Shares. The Participant shall have no right to transfer any unvested shares of Common Stock issued to him or her under this Section 10. For purposes of this restriction, the term “transfer” shall include (without limitation) any sale, pledge, assignment, encumbrance, gift or other disposition of such shares, whether voluntary or involuntary. However, the Participant shall have the right to make a gift of unvested shares issued to him or her under this Section 10 to his or her spouse or issue, including adopted children, or to a trust established for such spouse or issue, provided the transferee of such shares delivers to the Company a written agreement to be bound by all the provisions of the Plan, including without limitation this Section 10,
and the Award Agreement applicable to the gifted shares.

Section 11. Restricted Share Units. Subject to the other terms of the Plan, the Committee and, subject further to the delegating resolution, the persons authorized under Section 3.2, may grant Restricted Share Units to eligible individuals and may impose conditions, including continued employment or performance conditions, on such units as it may deem appropriate. Each granted Restricted Share Unit shall be evidenced by an Award Agreement in the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan. Each granted Restricted Share Unit shall entitle the Participant to whom it is granted to a distribution from the Company in an amount equal to the Fair Market Value (at the time of the distribution) of
one share of Common Stock. Distributions may be made in cash and/or shares of Common Stock. All other terms governing Restricted Share Units, such as number of units granted, vesting, performance criteria, if any, time and form of payment and termination of units shall be set forth in the Award Agreement; provided, however, that in no event shall the grant, issuance, retention, vesting and/or settlement of Restricted Share Units that is based on performance criteria and level of achievement versus such criteria be subject to a performance period of less than one year and no condition that is based upon continued employment or the passage of time shall provide for vesting or settlement in full of a Restricted Share Award over a period of less than three years from the date the Award is made, other than as determined by the Committee upon a Change in Control or upon the Participant’s death or cessation of Service other than for cause, provided, however, that up to 120,000 shares
issuable under the Plan may be granted as Restricted Shares or Restricted Share Units with vesting based on continued employment or the passage of time over less than one year.

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Section 12. Change in Control. Notwithstanding anything to the contrary set forth in this Plan, upon or in anticipation of any Change in Control, the Board may (but shall not be required to), in its sole and absolute discretion and without the need for the consent of any Optionee or Participant, take one or more of the following actions contingent upon the occurrence of that Change in Control: 

12.1. cause any or all outstanding Options and SARs held by Participants affected by the Change in Control to become fully vested and immediately exercisable, in whole or in part; 

12.2. cause any or all outstanding Restricted Shares and Restricted Share Units held by Participants affected by the Change in Control to become non-forfeitable, in whole or in part;

12.3. cancel any Option held by a Participant affected by the Change in Control in exchange for an option to purchase common stock of any successor corporation;

12.4. cancel any or all Restricted Shares or Restricted Share Units held by Participants affected by the Change in Control in exchange for restricted shares of or restricted share units in respect of the common stock of any successor corporation;

12.5. redeem any or all Restricted Shares held by Participants affected by the Change in Control for cash and/or other substitute consideration with a value equal to the (a) the number of Restricted Shares to be redeemed multiplied by (b) the Fair Market Value of an unrestricted share of Common Stock on the date of the Change in Control;

12.6. cancel any Option or SAR held by a Participant affected by the Change in Control in exchange for cash and/or other substitute consideration with a value equal to (a) the number of shares subject to that Option or SAR, multiplied by (b) the difference between the Fair Market Value per share of Common Stock on the date of the Change in Control and the exercise price of that Option or SAR; and

12.7. cancel any Restricted Share Unit held by a Participant affected by the Change in Control in exchange for cash and/or other substitute consideration with a value equal to (a) the number of Restricted Share Units, multiplied by (b) the Fair Market Value per share of Common Stock on the date of the Change in Control. 

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Section
  13. Miscellaneous Provisions.

13.1. Amendment and Termination of the Plan and Awards. Except as provided herein, the Board has complete and exclusive power and authority to amend, modify or terminate the Plan (or any component thereof) in any or all respects whatsoever at any time. No such amendment, modification or termination shall adversely affect the material economic rights with respect to Awards then outstanding under the Plan, unless the Participant consents to such amendment, modification or termination. In addition, the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the total number of shares reserved for the purposes of the Plan and the maximum number of shares for which any one individual may be granted Awards for any given year under the Plan,
except for permitted adjustments under Section 5.4 of the Plan, (b) change the persons or class of persons eligible to receive Awards, (c) other than in connection with an adjustment under Section 5.4, reduce the exercise price of outstanding Options (including canceling previously awarded Options and regranting them with a lower exercise price), or (d) otherwise amend the Plan in any manner requiring stockholder approval by law or under the listing requirements of the NASDAQ National Market or other market or exchange on which the Common Stock is at the time listed or admitted to trading.

13.2. Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the Participant will pay to the Company, or make arrangements satisfactory to the Board regarding the payment of any federal, state or local taxes of any kind required by law to be withheld with respect to such amount. If determined by the Board, the minimum required withholding obligations may be settled with shares of Common Stock, including shares of Common Stock that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan will be conditioned on such payment or arrangements, and the Company will, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.

13.3. Qualifying Performance-Based Compensation.

13.3.1 General. The Committee may establish performance criteria and level of achievement versus such criteria that shall determine the number of shares of Common Stock to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on Qualifying Performance Criteria or other standards of financial performance and/or personal performance evaluations. In addition, the Committee may specify a percentage of an Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, provided that the performance criteria for any portion of an Award that is intended by the Committee to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria selected by the Committee and specified in writing at the time the Award is granted not later than ninety (90) days after the commencement of the period of service to which the performance goals relates, provided that the outcome is substantially uncertain at that time. The Committee shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code. Notwithstanding satisfaction of any performance goals, the number of shares of Common Stock issued under or the amount paid under an Award may, to the extent specified in the Award Agreement, be reduced by the Committee on the basis of
such further considerations as the Committee in its sole discretion shall determine.

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13.3.2 Qualifying Performance Criteria. For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, Subsidiary or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, either GAAP or non-GAAP, if applicable to the criteria, in each case as specified by the Committee in the Award: (i) cash flow; (ii) earnings
(including gross margin, earnings before interest and taxes, earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price; (vi) return on equity or average stockholder’s equity; (vii) total stockholder return; (viii) return on capital; (ix) return on assets or net assets; (x) return on investment; (xi) revenue; (xii) income or net income; (xiii) operating income or net operating income; (xiv) operating profit or net operating profit; (xv) operating margin; (xvi) return on operating revenue; (xvii) market share; (xviii) contract awards or backlog; (xix) overhead or other expense reduction; (xx) growth in stockholder value relative to the moving average of a peer group index; (xxi) credit rating; (xxii) strategic plan development and implementation; (xxiii) improvement in workforce diversity, and (xxiv) any other
similar criteria. The Committee may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of the following events that occurs during a performance period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; and (E) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year.

13.4.
  Effective Date and Term of Plan.

13.4.1.
  Effective Date.
  The Plan will become effective on the Plan Effective Date (as defined in Section
  1.2). 

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13.4.2.
  Term of the Plan.
  The Plan will continue in effect until
  the 10th anniversary of the Plan Effective Date; provided that any
  Option that is granted prior to such 10th anniversary may extend
  beyond that date.

13.5.
  No Employment or Service Rights.
  Neither the action of the Company in
  establishing the Plan, nor any action taken by the Committee hereunder, nor
  any provision of the Plan shall be construed so as to grant any individual the
  right to remain in the employ or service of the Company (or any Subsidiary)
  for any period of specific duration, and the Company (or any Subsidiary retaining
  the services of such individual) may terminate such individual’s employment
  or service at any time and for any reason, with or without cause. Nothing in
  the Plan will prevent the Board from adopting other or additional compensation
  arrangements, subject to stockholder approval if such approval is required;
  and such arrangements may be either generally applicable or applicable only
  in specific cases.

13.6
  Unfunded Status of Plan.
  The Plan is intended to be “unfunded.”
  With respect to any payments not yet made to a Participant by the Company, nothing
  contained herein will give any such Participant any rights that are greater
  than those of a general creditor of the Company. In its sole discretion, the
  Committee may authorize the creation of grantor trusts or other arrangements
  to meet the obligations created under the Plan with respect to Awards.

13.7.
  Representations; Legends.
  The Board may require each Participant to represent to and agree with the Company
  in writing that the Participant is acquiring securities of the Company for investment
  purposes and without a view to distribution thereof and as to such other matters
  as the Board believes are appropriate. The certificate evidencing any Award
  and any securities issued pursuant thereto may include any legend which the
  Board deems appropriate to reflect any restrictions on transfer and compliance
  with securities laws.

13.8.
  Regulatory Matters.
  The implementation of the Plan, the granting of any Award under the Plan and
  the issuance of any shares under the Plan shall be subject to the Company’s
  procurement of all approvals and permits required by regulatory authorities
  having jurisdiction over the Plan, the Awards granted under it, and the Common
  Stock issued pursuant to it. All certificates for Common Stock or other securities
  delivered under the Plan shall be subject to such share-transfer orders and
  other restrictions as the Board may deem advisable under the rules, regulations,
  and other requirements of the Securities Act of 1933, as amended, the Exchange
  Act, any stock exchange or automated quotation system upon which the Common
  Stock is then listed or quoted, and any other applicable federal or state securities
  laws.

13.9.
  Invalid Provisions.
  In the event that any provision of the Plan is found to be invalid or otherwise
  enforceable under any applicable law, such invalidity or unenforceability shall
  not be construed as rendering any other provision contained herein as invalid
  or unenforceable, and all such other provisions shall be given full force and
  effect to the same extent as though the invalid or unenforceable provision was
  not contained in the Plan.

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13.10. Board Action. Notwithstanding anything to the contrary set forth in the Plan, any and all actions of the Committee, taken under or in connection with the Plan and any agreements, instruments, documents, certificates or other writings entered into, executed, granted, issued and/or delivered pursuant to the terms hereof, will be subject to and limited by any and all votes, consents, approvals, waivers or other actions of all or certain stockholders of the Company or other persons required by:

13.10.1.
  the Company’s Certificate of Incorporation (as the same may be amended
  and/or restated from time to time);

13.10.2.
  the Company’s Bylaws (as the same may be amended and/or restated from time
  to time); and

13.10.3. any other agreement, instrument, document or writing now or hereafter existing, between or among the Company and its stockholders or other persons (as the same may be amended from time to time).

13.11. Governing Law. The Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the application of the principles of conflicts of laws.

13.12. Successors and Assigns. The provisions of the Plan shall inure to the benefit of, and be binding upon, the Company and its successors or assigns and the Participants and Optionees, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees.

 13.13. Notices. Any notice to be given to the Company pursuant to the provisions of the Plan shall be addressed to the Company in care of its Secretary (or such other person as the Company may designate from time to time) at its principal executive office, and any notice to be given to a Participant will be delivered personally or addressed to him or her at the address given beneath his or her signature on his or her Award Agreement, or at such other address as such Participant may hereafter designate in writing to the Company. Any such notice will be deemed duly given on the date and at the time delivered via personal, courier or recognized overnight delivery service or, if sent via facsimile, on the date
and at the time faxed with confirmation of delivery or, if mailed, on the date five days after the date of the mailing (which will be by regular, registered or certified mail). Delivery of a notice by telecopy (with confirmation) will be permitted and will be considered delivery of a notice notwithstanding that it is not an original that is received.

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