Document:

Exhibit 10.1

 

INOVIO BIOMEDICAL CORPORATION

 

VOTING TRUST AGREEMENT

 

This Agreement dated as of June 1,
2009 is by and among Inovio Biomedical Corporation, a Delaware corporation, the
stockholders listed on Schedule I hereto (the “Stockholders”), and Simon
Benito, Tee Khiang Ng and Dr. Morton Collins as voting trustees hereunder (the “Trustees”).

 

Effective as of the date
hereof, VGX Pharmaceuticals, Inc. (“Old VGX”) merged with and into an
acquisition subsidiary of Inovio Biomedical Corporation (the “Company”) and the
shares of Old VGX were converted into the right to receive shares of the
Company as merger consideration in accordance with the terms and provisions of
the Agreement and Plan of Merger dated as of July 7, 2008, as amended on December 5,
2008 (the “Merger Agreement”). As a result of the merger, Old VGX became a
wholly owned subsidiary of the Company.

 

The purpose of this
Agreement is to enable the Voting Trustees to vote the Shares (as defined
herein) with respect to all matters submitted to a vote of the stockholders of
the Company in accordance with the terms hereof.

 

In consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:

 

1.             The parties to this Agreement intend to create a voting
trust within the meaning of Section 218(a) of the General Corporation
Law of the State of Delaware, and as such shall promptly file a copy of
this Agreement in the registered office of the Company located in the State of
Delaware, including all counterparts as executed, all supplements and
amendments thereto and shall hold the Agreement, as executed, supplemented and
amended, for inspection by the Stockholders upon request.

 

2.             Each Stockholder hereby assigns and transfers to the
Trustees all shares of the Company’s Common Stock listed opposite such
Stockholder’s respective name on Schedule I hereto (the “Shares”), and
shall immediately deposit the certificates representing the Shares with the
Trustees and receive in exchange therefor one or more voting trust certificates,
substantially in the form of Exhibit A hereto, representing the Shares
deposited with the Trustees (the “Voting Trust Certificates”), to be held
subject to all terms of this Agreement. The Trustees shall deliver the stock
certificates so deposited to the Company for cancellation and for new share
certificates, fully paid, non-assessable and representing the Shares,
registered in the name of the Trustees, including a legend to the effect that
such certificates have been issued pursuant to this Agreement, and the Company
shall transfer the Shares on the books of the Company to the name of the
Trustees, with a similar notation as to the effect of this Agreement.

 

3.             While this Agreement is in effect, the Trustees shall
have the legal title to the Shares and be entitled to exercise, in person or by
their nominee or proxy, all rights and powers in respect to any or all such
Shares, including the right to vote thereon and to take part in or consent to
any corporate or stockholders’ action of any kind whatsoever, whether ordinary
or extraordinary, in accordance with all of the terms and conditions set forth
in this Agreement. The right to vote shall include the right to vote for the
election of directors and in favor of or against any resolution or proposed action
of any character whatsoever, which may be presented at any meeting or require
the consent of stockholders of the Company, including, but not limited to any
proposed Change of Control (as defined elsewhere herein). It is expressly
understood and agreed that the holders of Voting Trust Certificates shall not
have any right, either under said Voting Trust Certificates or under this
Agreement, or under any agreement express or implied, or otherwise, with
respect to any Shares held by the Trustees hereunder to vote such Shares or to
take part in or consent to any corporate action, or to do or perform any other
act or thing which the holders of the Company’s Common Stock are now or may
hereafter become entitled to do or perform. The Trustees shall have the right
to waive any notice of meeting or other notices due in respect of the Shares.
Except as provided in Section 11 hereof, the Trustees shall

 

 

have no authority to sell, transfer or
otherwise dispose of, convey any interest in or encumber any of the Shares
deposited under this Agreement.

 

4.             On any matter, including the election of directors,
presented to the stockholders of the Company for a vote, the Trustees shall
vote the Shares in the same proportion as the shares voted on the matter by the
other stockholders of the Company. For purposes of this section, a “vote” shall
include, with respect to the election of directors, a vote “for” and a vote to “withhold
authority,” and with respect to any other matter, a vote “for”, “against” or “abstain.”
With respect to a consent solicitation, the Trustees shall provide a consent
with respect to the percentage of Shares deposited hereunder in the same
proportion as the consents received with respect to all outstanding shares of
the Company.

 

5.             During the term hereof, the holders of the Voting Trust
Certificates shall not have legal title to any part of the Shares and, except
pursuant to Section 11 hereof, shall not be entitled to transfer or convey
any interest in, including, without limitation, any encumbrance on, the Shares
or the Voting Trust Certificates. No creditor of any holder of a Voting Trust
Certificate shall be able to obtain legal title to or exercise legal or
equitable remedies with respect to the Shares or the Voting Trust Certificates.

 

6.             Except as otherwise provided herein, upon the
declaration of any dividends by the Company with respect to the Shares
deposited with the Trustees hereunder the Trustees shall cause all such
dividends to be distributed by the Company pro rata among the Stockholders as
if such holders themselves held the Shares represented by their Voting Trust
Certificates.

 

7.             Except as otherwise provided herein, upon declaration of
any pro rata distributions of additional shares of capital stock of the Company
declared by the Company with respect to the Shares deposited with the Trustees
hereunder, each Stockholder agrees that such pro rata stock distributions shall
be issued in the name of the Trustees as additional deposits hereunder and the
Trustees shall issue additional Voting Trust Certificates therefor.

 

8.             In the event of dissolution or liquidation of the
Company during the term of this Agreement in such manner as to entitle the
holders of Voting Trust Certificates to liquidating dividends, the Trustees
shall cause all such liquidating dividends to be distributed by the Company pro
rata among the Stockholders as if such holders themselves held the Shares
represented by their Voting Trust Certificates.

 

9.             In the event that the Company presents evidence
satisfactory to the Trustees that it has acquired the beneficial ownership of
any Shares represented by a Voting Trust Certificate, the Trustees shall
immediately refrain from exercising any voting rights with respect to such
Shares and, upon surrender of the Voting Trust Certificate in question to the
Trustees with evidence satisfactory to the Trustees of its transfer to the
Company, the Trustees shall take all steps necessary to transfer legal title to
such Shares to the Company and the Company shall cancel such Shares and restore
them to the status of authorized but unissued shares.

 

10.           This Agreement shall expire upon the earlier of: (i) with
respect to all Stockholders, the date which is ten years from the date of this
Agreement; (ii) with respect to all Stockholders, upon a Change of
Control, as defined herein; (iii) with respect to a Stockholder, the death
of the Stockholder; (iv) with respect to a Stockholder, termination of the
Stockholder’s employment with the Company for any reason other than for Cause,
as defined in the Stockholder’s then existing employment agreement with the
Company, or if the Stockholder does not have such an employment agreement with
the Company, as defined herein; provided, however, that if such Stockholder is
Joseph Kim, this Agreement shall terminate with respect to all Stockholders; or
(v) with respect to all Stockholders, the acquisition by the Company of
the beneficial ownership of all Shares represented by Voting Trust Certificates
pursuant to this Agreement.

 

2

 

11.           Notwithstanding anything to the contrary set forth in this
Agreement, and subject to the further restrictions of any applicable lock-up
agreements or other restrictive covenants as reflected on the certificates
representing the Shares, each Stockholder shall have the right to cause the
Trustees to sell Shares deposited by that Stockholder, or to tender Shares in
the event of a tender offer or exchange offer, for the benefit of the
Stockholder, if the following conditions are satisfied:

 

(a)           In the case of a sale of the Shares,
the Shares are sold in open market transactions in accordance with the
provisions of Rule 144 under the Securities Act of 1933 (the “Securities
Act”), or any successor provision, or pursuant to an effective registration
statement under the Securities Act;

 

(b)           In the case of a tender offer or
exchange offer, the Shares are tendered in accordance with the terms of the
tender offer or exchange offer; and

 

(c)           In either case, such Shares are not
being transferred (i) if the Stockholder is an entity, to an affiliate,
subsidiary, director, officer, employee, agent or representative of the
Stockholders, (ii) if the Stockholders is an individual, to an immediate
family member, including such Stockholder’s spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-law, sister-in-law,
son-in-law, daughter-in-law, and anyone who resides in such person’s home
(other than domestic employees), (iii) to any person or party whose
ownership of the Shares would provide continued beneficial ownership of the
Shares by the selling Stockholder pursuant to Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (as now or hereafter amended, the “Exchange
Act”).

 

If the foregoing conditions
are satisfied, the respective Stockholder may provide written notice to the
Trustees directing them to (i) sell the number of Shares or (ii) tender
the Shares, in each case in accordance with the written instructions of the
Stockholder contained in the notice. The Trustees shall use reasonable good
faith efforts to cause the sale or tender, as the case may be, of such Shares
in accordance with such instructions. Upon completion of the sale or tender of
such Shares, (i) the Trustees shall pay promptly the net proceeds from the
sale or tender of such Shares to the respective Stockholder, (ii) the
Trustees shall promptly notify the Company of such sale or tender, if not
previously notified, (iii) such Shares shall no longer be subject to the
terms and conditions of this Agreement or the voting trust.

 

12.           For purposes of this Agreement, a “Change of Control”
shall mean (A) the acquisition of shares of the Company by any “person” or
“group” (as such terms are used in Rule 13d-3 under the Exchange Act) in a
transaction or series of transactions that result in such person or group
directly or indirectly becoming the beneficial owner of 40% or more of the
Company’s voting capital stock after the date of this Agreement, (B) the
consummation of a merger or other business combination after which the holders
of voting capital stock of the Company do not collectively own 60% or more of
the voting capital stock of the entity surviving such merger or other business
combination, (C) the sale, lease, exchange or other transfer in a
transaction or series of transactions of all or substantially all of the assets
of the Company or (D) as the result of or in connection with any cash
tender offer or exchange offer, merger or other business combination, sale of
assets or contested election of directors or any combination of the foregoing
transactions (a “Transaction”), the persons who constituted a majority of the
members of the Board of Directors of the Company (the “Board”) on the date of
this Agreement and persons whose election as members of the Board was approved
by such members then still in office or whose election was previously so
approved after the date of this Agreement, but before the event that
constitutes a Change of Control, no longer constitute such a majority of the
members of the Board then in office. A Transaction constituting a Change of
Control shall only be deemed to have occurred upon the closing of the
Transaction. The term “Change of Control” shall not include the merger under
the Merger Agreement.

 

3

 

13.           For purposes of this Agreement, the term “Cause” shall
mean (1) conviction of the Stockholder of any felony; (2) participation
by the Stockholder in any fraud or act of dishonesty against the Company; (3) material
violation by the Stockholder of (i) any contract between the Company and
the Stockholder, or (ii) any statutory duty of Stockholder to the Company;
(4) conduct of the Stockholder that, based upon a good faith and
reasonable factual investigation and determination by the Board, demonstrates
the Stockholder’s gross unfitness to serve; or (5) the continued, willful
refusal or failure by the Stockholder to perform any material duties reasonably
requested by the Board; provided, however, that in the case of conduct
described in clauses (3), (4) and (5) hereof, such conduct shall
not constitute “Cause” unless (a) the Board shall have given the
Stockholder written notice setting forth with specificity (i) the conduct
deemed to constitute “Cause,” (ii) reasonable action that would remedy the
objectionable conduct and (iii) a reasonable time (not less than ten days)
within which the Stockholder may take such remedial action, and (b) the
Stockholder shall not have taken such specified remedial action within such
specified reasonable time.

 

14.           If any mutilated Voting Trust Certificate is surrendered
to the Trustees, or the Trustees receive evidence to their satisfaction that
any Voting Trust Certificate has been destroyed, lost or stolen, and upon proof
of ownership satisfactory to the Trustees together with such security or
indemnity, in the case of a destroyed, lost or stolen Voting Trust Certificate,
as may be requested by the Trustees to be held harmless, the Trustees shall
execute and deliver a new Voting Trust Certificate representing the same number
of Shares as the Voting Trust Certificate so mutilated, destroyed lost or
stolen, with such notations, if any, as the Trustees shall determine.

 

15.           Upon the termination of this Agreement, the Trustees shall
request that the Company issue certificates representing the Shares deposited
hereunder in the names of the holders of record of the Voting Trust
Certificates and shall deliver such certificates to the holders of Voting Trust
Certificates in the proportion of their respective holdings, upon presentation
and surrender to the Trustees of the Voting Trust Certificates therefor. If the
Trustees for any reason shall be unable to complete such deliveries within
30 days after the termination of this Agreement, the Trustees may then deposit
with the Company such stock certificates, along with written authority to the
Company to deliver them in exchange for the Voting Trust Certificates; and upon
such deposit, all further liability of the Trustees for the delivery of such
stock certificates and the delivery or payment of dividends upon surrender of
the Voting Trust Certificates, shall cease, and the Trustees shall not be
required to take any further action hereunder.

 

16.           The Trustees may serve as directors, officers, employees
or consultants of the Company and be compensated therefor, and may hold stock
in the Company or become a creditor of the Company or otherwise deal with it in
good faith. The Trustees may hold or dispose of Voting Trust Certificates
issued to them or otherwise acquire additional Voting Trust Certificates to the
same extent as any other Stockholder.

 

17.           The Trustees shall serve hereunder without compensation.
The Trustees shall have the right to incur and pay such reasonable expenses and
charges and to employ and pay such agents, attorneys and counsel as they may
deem necessary and proper. The Company shall reimburse any such expenses or
charges incurred by and due to the Trustees.

 

18.           In the event of the death, resignation or legal
incompetence of a Trustee, a designee successor Trustee or Trustees shall be
appointed by the remaining Trustees from the other independent members of the
Board (as determined pursuant to any national securities exchange rules and
regulations then applicable to the Company). The term “Trustee” as used in his
Agreement shall apply equally to the Trustees named herein and to their
successors hereunder.

 

19.           Each of the Trustees, by signing a counterpart of this
Agreement, accepts the voting trust herein created and his or her role as a
Trustee therefor, including the duties and responsibilities of 

 

4

 

each Trustee to the other Trustees and to the
beneficiaries of this voting trust as set forth in this Agreement, and shall
act solely as a Trustee hereunder and not in any individual capacity.

 

20.           The Trustees shall not be liable for any act or omission
as Trustees hereunder taken or omitted in good faith and without gross
negligence, including acting upon any signature, instrument, notice,
resolution, request, consent, order or certificate or other written
documentation reasonably and in good faith believed by the Trustees to be
genuine and signed by the proper party or parties thereto. No Trustee shall be
responsible for any act or omission by any predecessor or successor Trustee.
The Company shall indemnify each Trustee against all costs, charges, expenses,
losses, liabilities, actions, suits and damages incurred by any or all of them
in the or arising from the administration of this voting trust or the exercise
of any power conferred upon the Trustee by this Agreement, except to the extent
such cost, charge, expense, loss, liability, action, suit or damage is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the Trustee’s gross negligence or willful misconduct.

 

21.           The Company by executing this Agreement consents to all
the terms and conditions hereof, and agrees that it will take all action
necessary or appropriate for carrying out the terms hereof.

 

22.           This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators and permitted successors and assigns.

 

23.           This Agreement constitutes the entire understanding among
the parties hereto with respect to the subject matter hereof. The invalidity or
unenforceability, in part or in whole, or any provision hereof shall not affect
the validity or enforceability of the remainder of such provision or any other
provision hereof. A court of competent jurisdiction may reduce or limit the
scope of any provision hereof in order to make such provision enforceable.

 

24.           This Agreement may be executed in several counterparts
each of which shall be deemed an original, but all of which together shall constitute
one and the same document.

 

25.           Any notice that may be given under this Agreement shall be
in writing and be deemed given when delivered by hand, confirmed facsimile
transmission, or nationally recognized overnight courier or, if mailed, one day
after mailing by registered or certified mail, return receipt requested, to the
Company at its principal executive office address, or to the Trustees or the
Stockholders at their respective addresses stated on the signature pages or
Schedule I to this Agreement, or at such other address as any of them may
by similar notice designate.

 

26.           This Agreement may be amended, and additional parties may
be added, by written agreement signed by the Company, the holders of a majority
in interest of the Stockholders and the Trustees; provided, however, that the
Trustees shall give each Stockholder notice of any such amendment, and a
Stockholder who did not approve the amendment may opt out of the amendment, so
that the amendment shall not be applicable to such Stockholder, by providing
written notice to the Trustees no later than ten business days after the date
that the Trustees shall have been deemed to have given the notice of amendment
to the Stockholder.

 

27.           This Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Delaware without giving
effect to conflicts of laws.

 

5

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to by duly executed as of the date
first written above.

 

	
   

  	
  INOVIO BIOMEDICAL CORPORATION

  
	
   

  	
  By:

  	
  /s/ Avtar Dhillon

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
  /s/ Simon Benito

  
	
   

  	
  Simon Benito, Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Tee Khiang Ng

  
	
   

  	
  Tee Khiang Ng, Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Morton Collins

  
	
   

  	
  Dr. Morton Collins, Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact Information for Trustees

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Inovio Biomedical Corporation

  
	
   

  	
   

  	
  11494 Sorrento Valley Road

  
	
   

  	
   

  	
  San Diego, California 92121.

  
	
   

  	
  Fax Number:

  	
  (858)597-0451

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signatures of Stockholders

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ J. Joseph Kim

  	
   

  	
   

  	
   

  
	
  Dr. J. Joseph Kim, Stockholder

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Young Park

  	
   

  	
   

  	
   

  
	
  Young Park, Stockholder

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ David Weiner

  	
   

  	
   

  	
   

  
	
  David Weiner, Stockholder

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Michael Kaufman

  	
   

  	
   

  	
   

  
	
  Michael Kaufman, Stockholder

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Bryan Chang

  	
   

  	
   

  	
   

  
	
  Bryan Chang, Stockholder

  	
   

  	
   

  	
   

  
					

 

6

 

SCHEDULE I

 

	
  Name and Address of Stockholder

  	
   

  	
  Number of Shares Deposited

  	
   

  
	
  J. Joseph Kim

  	
   

  	
  3,450,000

  	
   

  
	
  Young Park

  	
   

  	
  1,000,000

  	
   

  
	
  David Weiner

  	
   

  	
  2,700,000

  	
   

  
	
  Michael Kaufman

  	
   

  	
  300,000

  	
   

  
	
  Bryan Chung

  	
   

  	
  550,000

  	
   

  
	
   

  	
   

  	
  8,000,000

  	
   

  

 

All addresses provided as 450 Sentry Parkway East, Suite 102, Blue
Bell, Pennsylvania 19422.

 

 

EXHIBIT A

 

THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED OR TRANSFERRED
UNLESS (1)(A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) EFFECTED IN ACCORDANCE
WITH AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION AND (2) CONSISTENT
WITH THE TERMS AND CONDITIONS ON TRANSFER SET FORTH IN THE VOTING TRUST
AGREEMENT AS DEFINED HEREIN.

 

INOVIO BIOMEDICAL CORPORATION

 

Voting
Trust Certificate

 

	
  No.

  	
   

  	
   

  	
  Shares

  	
   

  

 

This certifies that                                      has
deposited                          shares of common stock,
par value $             per share, of
Inovio Biomedical Corporation (the “Company”), a Delaware corporation, with the
undersigned Trustees, under the Inovio Biomedical Corporation Voting Trust
Agreement dated as of                                     , 2009, as
may be amended from time to time (the “Voting Trust Agreement”) among the
Company, the Trustees and the Stockholders named therein, a copy of which will
be furnished to the holder hereof without charge upon written request therefor
to the Trustees, and shall be entitled to a certificate or certificates
representing such shares upon termination of the Voting Trust Agreement in
accordance with its terms. Prior to the delivery of such certificates upon such
termination, the undersigned Trustees shall possess and be entitled to
exercise, in the manner and to the extent provided in the Voting Trust
Agreement, all of the rights of every kind of the holder of this certificate
with respect to the shares so deposited.

 

The holder of this
Certificate has acquired it to hold as evidence of an investment and without a
view towards distribution. This Certificate, including the interest represented
hereby, is transferable only on the books of the Trustees upon presentation and
surrender hereof in accordance with the terms of the Voting Trust Agreement.

 

The holder of this
Certificate takes the same subject to all terms and conditions of the Voting
Trust Agreement and is bound by and entitled to the benefit of such Voting Trust
Agreement.

 

IN WITNESS WHEREOF, the
Trustees have caused this Certificate to be signed as of this                          day of             , 2009.

 

	
   

  	
   

  
	
   

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Trustee

  

 

A-1Exhibit 10.2

 

INOVIO BIOMEDICAL CORPORATION

AMENDED AND RESTATED 2000 STOCK OPTION PLAN

(as amended by the Board of Directors through July 2, 2008

with approvals by stockholders through May 29, 2009)

 

1.    INTERPRETATION

 

        1.1   Defined
Terms—For the purposes of this Plan, the following terms
shall have the following meanings:

 

        (a)   “Affiliate” means a Parent
Corporation or a Subsidiary Corporation of a corporation;

 

        (b)   “Associate” means, where used to
indicate a relationship with any Person,

 

        (i)    any
relative of that Person,

 

        (ii)   any
person of the opposite sex to whom that Person is married or with whom that
Person is living in a conjugal relationship outside marriage,

 

        (iii)  any
relative of a Person mentioned in clause (ii) who has the same home
as that Person,

 

        (iv)  any
partner of that Person,

 

        (v)   any
trust or estate in which such Person has a substantial beneficial interest or
as to which such Person serves as trustee or in a similar capacity, or

 

        (vi)  any
corporation of which such Person beneficially owns, directly or indirectly,
voting securities carrying more than 10 percent of the voting rights
attached to all outstanding voting securities of the corporation;

 

        (c)   “Beneficial Owner” of a security
includes any Person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has voting power over the
security or the power to dispose or direct the disposition of the security, and
any Person who uses a trust or other arrangement with the purpose or effect of
divesting such Person of beneficial ownership as part of a plan to evade the
reporting requirements of section 13 of the Exchange Act shall be deemed
to be the Beneficial Owner of the security;

 

        (d)   “Board” means the Board of
Directors of Inovio Biomedical Corporation;

 

        (e)   “Change of Control” means, and
shall be deemed to have occurred upon the occurrence of any one of the
following events:

 

        (i)    the
acquisition in one or more transactions, other than from the Company, by an
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act), other than the Company, a Subsidiary
Corporation or any employee benefit plan (or related trust) sponsored or
maintained by the Company or a Subsidiary Corporation, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a
number of Company Voting Securities in excess of twenty 

 

 

 

five percent (25%) of the Company Voting Securities
unless such acquisition has been approved by the Board;

 

        (ii)   any
election has occurred to persons to the Board that causes two-thirds of the
Board to consist of persons other than (i) persons who were members of the
Board on the Effective Date of the Plan and (ii) persons who were
nominated for election as members of the Board at a time when two-thirds of the
Board consisted of persons who were members of the Board on the Effective Date
of the Plan, provided, however, than any person nominated for election by a
Board at least two-thirds of whom constituted persons described in
clauses (i) and/or (ii) or by persons who were themselves
nominated by such Board shall, for this purpose, be deemed to have been
nominated by a Board composed of persons described in clause (i);

 

        (iii)  the
consummation (i.e. closing)
of a reorganization, merger or consolidation involving the Company, unless,
following such reorganization, merger or consolidation, all or substantially
all of the individuals and entities who were the respective beneficial owners
of the Outstanding Shares and Company Voting Securities immediately prior to
such reorganization, merger or consolidation, following such reorganization,
merger or consolidation beneficially own, directly or indirectly, more than
seventy five percent (75%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors or trustees,
as the case may be, of the entity resulting from such reorganization, merger or
consolidation in substantially the same proportion as their ownership of the
Outstanding Shares and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, as the case may be;

 

        (iv)  the
consummation (i.e. closing)
of a sale or other disposition of all or substantially all of the assets of the
Company, unless, following such sale or disposition, all or substantially all
of the individuals and entities who were the respective beneficial owners of
the Outstanding Shares and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, following such reorganization, merger
or consolidation beneficially own, directly or indirectly, as the case may be,
of the entity purchasing such assets in substantially the same proportion as
their ownership of the Outstanding Shares and Company Voting Securities immediately
prior to such sale or disposition, as the case may be; or

 

        (v)   a
complete liquidation or dissolution of the Company.

 

        (f)    “Code” means the United States
Internal Revenue Code of 1986, as amended from time to time;

 

        (g)   “Committee” means a committee of
the Board appointed in accordance with this Plan, or if no such committee is
appointed, the Board itself;

 

        (h)   “Company” means Inovio Biomedical
Corporation;

 

        (i)    “Company Voting Securities” means
the combined voting power of all outstanding voting securities of the Company
entitled to vote generally in the election of directors to the Board.

 

        (j)    “Covered Employee” means the chief
executive officer and the four (4) other highest compensated officers of
the Company for whom total compensation is required to be reported to
shareholders under the Exchange Act, as determined for purposes of Section 162(m) of
the Code;

 

2

 

        (k)   “Date of Grant” means the date on
which a grant of an Option is effective;

 

        (l)    “Direct or Indirect Ownership” of
securities by a Person is calculated in accordance with the following rules:

 

        (i)    the
Person shall be deemed to own stock owned, directly or indirectly, by or for
siblings (including half siblings), spouse, ancestors and lineal descendants,
and

 

        (ii)   stock
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust, shall be deemed to be owned proportionately by or for its shareholders,
partners or beneficiaries;

 

        (m)  “Disability”
means a medically determinable physical or mental impairment which causes an
individual to be unable to engage in any substantial gainful activity, as
determined by the Committee;

 

        (n)   “Disposition” includes a sale,
exchange, gift, or transfer of legal title, but does not include a pledge,
hypothecation, transfer from a decedent to an estate, transfer by bequest or
inheritance, or the other excepted circumstances referred to in
section 424(c) of the Code;

 

        (o)   “Effective Date” means the
Effective Date of the Plan, as adopted by the Board as of July 31, 2000,
subject to the approval of the shareholders of the Company;

 

        (p)   “Exchange Act” means the Securities
Exchange Act of 1934, as amended;

 

        (q)   “Fair Market Value” means:

 

        (i)    where
the Shares are listed for trading on a stock exchange or over the counter
market, the closing price of the Shares on the trading day immediately prior to
the date of grant on such stock exchange or over the counter market as may be
selected for such purpose by the Committee, or

 

        (ii)   where
the Shares are not listed for trading on a stock exchange or over the counter
market, the value which is determined by the Committee to be the fair value of
the Shares at the Date of Grant, taking into consideration all factors that the
Committee deems appropriate, including, without limitation, recent sale and
offer prices of the Shares in private transactions negotiated at arm’s length;

 

        (r)   “Guardian” means the guardian, if
any, appointed for an Optionee;

 

        (s)   “ISO” means an Option granted to an
employee of the Company or an Affiliate of the Company that is intended to
qualify as an “incentive stock option” for purposes of section 422 of the
Code and is therefore subject to favourable tax treatment under the Code;

 

        (t)    “ISO Optionee” means an Optionee to
whom an ISO has been granted;

 

        (u)   “Modification” means any change in
the terms of an Option which gives the Optionee additional benefits under the
Option within the meaning of section 424(h) of the Code, but such
change shall not include a change in the terms of an Option:

 

        (i)    in
the case of an Option not immediately exercisable in full, to accelerate the
time within which the Option may be exercised, or

 

3

 

        (ii)   attributable
to the issuance or assumption of an Option by reason of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation if the new Option or assumption of the old Option does not give the
Optionee additional benefits which he did not have under the old Option;

 

        (v)   “Non-Employee Director” means a
member of the Board who either (i) is not a current employee or officer
(within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder) of the Company or an Affiliate of the Company,
does not receive compensation (directly or indirectly) from the Company or an
Affiliate of the Company for services rendered as a consultant or in any
capacity other than as a director (except for an amount as to which disclosure
would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act (“Regulation S-K”), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged
in a business relationship as to which disclosure would be required under
Item 404(b) of Regulation S-K; or (ii) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3;

 

        (w)  “Non-ISO”
means an Option that is not intended to qualify as an “incentive stock option”
for purposes of section 422 of the Code;

 

        (x)   “Non-ISO Optionee” means an
Optionee to whom a Non-ISO has been granted;

 

        (y)   “Option”
means an option to purchase Shares granted pursuant to the terms of this Plan;

 

        (z)   “Option Agreement”
means a written agreement between an Optionee and the Company, specifying the
terms of the Option being granted to the Optionee under the Plan;

 

        (aa) “Option Price”
means the price at which an Option is exercisable to purchase Shares;

 

        (bb) “Optionee”
means a person to whom an Option has been granted;

 

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

 

        (dd) “Outstanding Shares”
means , at any time, the issued and outstanding Shares.

 

        (ee) “Parent Corporation”
means any corporation in an unbroken chain of corporations ending with Inovio
Biomedical Corporation if, at the Date of Grant, each corporation other than
Inovio Biomedical Corporation owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain;

 

        (ff)  “Person”    means
a natural person, company, government, or political subdivision or agency of a
government; and where two or more Persons act as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring, holding or
disposing of securities of an issuer, such syndicate or group shall be deemed
to be a Person;

 

4

 

        (gg) “Plan” means
this Stock Option Plan of the Company. The Plan was adopted by the Board as of July 31,
2000 and approved by the shareholders of the Company on August 7, 2000.
The Plan was amended by the Committee through July 2, 2008, subject to the
approval of the shareholders of the Company and required regulatory approvals;

 

        (hh) “Rule 16b-3”
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3
as in effect with respect to the Company at the time discretion is being
exercised regarding the Plan;

 

        (ii)   “Qualified Successor”
means a person who is entitled to ownership of an Option upon the death of an
Optionee, pursuant to a will or the applicable laws of descent and distribution
upon death;

 

        (jj)   “Securities Act”
means the Securities Act of 1933, as amended;

 

        (kk) “Shares”
means the common shares without par value in the capital of Inovio Biomedical
Corporation;

 

        (ll)   “Subsidiary Corporation”
means any corporation in an unbroken chain of corporations beginning with
Inovio Biomedical Corporation if, at the Date of Grant, each of the
corporations other than the last corporation owns stock possessing
50 percent or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain; and

 

        (mm)  “Term” means
the period of time during which an Option is exercisable.

 

2.    STATEMENT OF PURPOSE

 

        2.1   Principal
Purposes—The principal purposes of the Plan are to
provide the Company and its shareholders with the advantages of the incentive
inherent in stock ownership on the part of employees, officers, directors, and
consultants responsible for the continued success of the Company; to create in
such individuals a proprietary interest in, and a greater concern for, the
welfare and success of the Company; to encourage such individuals to remain
with the Company; and to attract new employees, officers, directors and
consultants to the Company.

 

        2.2   ISOs
and Non-ISOs—Under this Plan, the Company may grant
either ISOs or Non-ISOs. Each ISO granted hereunder is intended to constitute
an “incentive stock option,” for the purposes of section 422 of the Code,
and this Plan and each such ISO is intended to comply with all of the
requirements of Section 422 of the Code and of all other provisions of the
Code applicable to incentive stock options and to plans issuing the same. Each
Non-ISO granted hereunder is intended to constitute an Option that is not an “incentive
stock option” for the purposes of section 422 of the Code, and that does
not comply with the requirements of Section 422 of the Code.

 

3.    ADMINISTRATION

 

        3.1   Board
or Committee—The Plan shall be administered by the Board
or by a committee of the Board appointed in accordance with Section 3.2 or
3.4 below.

 

        3.2   Appointment
of Committee—The Board may at any time appoint a
Committee, consisting of not less than two of its members, to administer the
Plan on behalf of the Board in accordance with such terms and conditions as the
Board may prescribe, consistent with this Plan. Once appointed, the Committee
shall continue to serve until otherwise directed by the Board. From time to
time, the Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and appoint 

 

5

 

new members in their
place, fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan. In the discretion of the Board, a
Committee may consist solely of two (2) or more Non-Employee Directors,
and/or Outside Directors. Notwithstanding anything in this Section 3 to
the contrary, the Board or the Committee may delegate to a Committee of one or
more members of the Board the authority to grant Options to eligible persons
who (a) are not then subject to Section 16 of the Exchange Act and/or
(b) are either (i) not then Covered Employees and are not expected to
be Covered Employees at the time of recognition of income resulting from such
Options, or (ii) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code.

 

        3.3   Quorum
and Voting—A majority of the members of the Committee
shall constitute a quorum, and, subject to the limitations in this Section 3,
all actions of the Committee shall require the affirmative vote of members who
constitute a majority of such quorum.

 

        3.4   Committee
Complying with Section 162(m) of the Code—If
the Company is a “publicly held corporation” within the meaning of Section 162(m),
the Board may establish a Committee of “outside directors” within the meaning
of Section 162(m) to approve the grant of any Option which might
reasonably be anticipated to result in the payment of employee remuneration
that would otherwise exceed the limit on employee remuneration deductible for
income tax purposes pursuant to Section 162(m) of the Code.

 

        3.5   Powers
of Committee—Any Committee appointed under Section 3.2
or 3.4 above shall have the authority to do the following:

 

        (a)   administer
the Plan in accordance with its express terms;

 

        (b)   determine
all questions arising in connection with the administration, interpretation,
and application of the Plan, including all questions relating to the value of
the Shares;

 

        (c)   correct
any defect, supply any information, or reconcile any inconsistency in the Plan
in such manner and to such extent as shall be deemed necessary or advisable to
carry out the purposes of the Plan;

 

        (d)   prescribe,
amend, and rescind rules and regulations relating to the administration of
the Plan;

 

        (e)   determine
the duration and purposes of leaves of absence from employment which may be
granted to Optionees without constituting a termination of employment for
purposes of the Plan;

 

        (f)    do
the following with respect to the granting of Options:

 

        (i)    determine
the employees, officers, directors, or consultants to whom Options shall be
granted, based on the eligibility criteria set out in this Plan,

 

        (ii)   determine
whether such Options shall be ISOs or Non-ISOs,

 

        (iii)  determine
the terms and provisions of the Option Agreement to be entered into with any
Optionee (which need not be identical with the terms of any other Option
Agreement),

 

        (iv)  amend
the terms and provisions of Option Agreements, provided the Committee obtains:

 

6

 

        (A)  the
consent of the Optionee, if the amendment would adversely affect the rights, or
increase the obligations, of the Optionee under the Option, and

 

        (B)  the
approval of any stock exchange on which the Company is listed, if such approval
is required pursuant to the rules and policies of such stock exchange,

 

        (v)   determine
when Options shall be granted,

 

        (vi)  determine
the number of Shares subject to each Option,

 

        (vii) make
all other determinations necessary or advisable for administration of the Plan,
and

 

        (viii)  determine
the Fair Market Value of the Shares.

 

        3.6   Administration
by Committee—The Committee’s exercise of the authority
set out in Section 3.4 shall be consistent with the intent that ISOs
issued under the Plan be qualified under the terms of Section 422 of the
Code, and that Non-ISOs shall not be so qualified. All determinations made by
the Committee in good faith on matters referred to in Section 3.4 shall be
final, conclusive, and binding upon all Persons. The Committee shall have all
powers necessary or appropriate to accomplish its duties under this Plan. In
addition, the Committee’s administration of the Plan shall in all respects be
consistent with the policies and rules of any stock exchange or over the
counter market on which the Shares are listed.

 

4.    ELIGIBILITY

 

        4.1   Eligibility
for ISOs—An ISO may only be granted to a person who is an
employee of the Company or an Affiliate of the Company, including directors or
officers who are employees of the Company or an Affiliate of the Company.

 

        4.2   Eligibility
for Non-ISOs—Non-ISOs may be granted to any employee,
officer, director or consultant of the Company or an Affiliate of the Company.

 

        4.3   No
Violation of Securities Laws—No Option shall be granted
to any Optionee unless the Committee has determined that the grant of such
Option and the exercise thereof by the Optionee will not violate applicable
securities laws.

 

        4.4   Limit
on Maximum Grant to any Optionee—Notwithstanding anything
in this Plan to the contrary, no officer or employee of the Company or an
Affiliate of the Company shall receive Options exercisable for more than two
million one hundred thousand (2,100,000) Shares over any three year period,
nine hundred thirty-five thousand (935,000) Shares over any one year period or
5% of the outstanding Shares.

 

5.    SHARES SUBJECT TO THE PLAN

 

        5.1   Number
of Shares—The Committee, from time to time, may grant
Options to purchase an aggregate of up to four million seven hundred fifty
thousand (4,750,000) Shares, subject to regulatory approval, to be made
available from authorized, but unissued or reacquired, Shares. In calculating
the foregoing four million seven hundred fifty thousand (4,750,000) Shares, the
Committee shall include the 1,116,819 Shares subject to options outstanding as
of the Effective Date of the Plan. The foregoing number of Shares shall be
adjusted, where necessary, to take account of the events referred to in Section 11
hereof.

 

7

 

        5.2   Decrease
in Number of Shares Subject to Plan—Upon exercise of an
Option, the number of Shares thereafter available under the Plan and under the
Option shall decrease by the number of Shares as to which the Option was
exercised.

 

        5.3   Expiry
of Option—If an Option expires or terminates for any
reason without having been exercised in full, the unpurchased Shares subject
thereto shall again be available for the purposes of the Plan.

 

        5.4   Reservation
of Shares—The Company will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

 

6.    OPTION TERMS

 

        6.1   Option
Agreement—With respect to each Option to be granted to an
Optionee, the Committee shall specify the following terms in the Option Agreement
between the Company and the Optionee:

 

        (a)   whether
such Option is an ISO or a Non-ISO;

 

        (b)   the
number of Shares subject to purchase pursuant to such Option, provided that the
number of Shares reserved for issuance to any one person pursuant to Options
does not exceed 5% of the outstanding Shares;

 

        (c)   the
Date of Grant;

 

        (d)   the
Term, provided that:

 

        (i)    the
Term shall in no event be more than ten (10) years following the Date of
Grant; and

 

        (ii)   if
an ISO Option is granted to an Optionee who on the Date of Grant has Direct or
Indirect Ownership of more than 10% of the total combined voting power of all
classes of stock of the Company, the Term of the Option shall not exceed five (5) years;

 

        (e)   the
Option Price, provided that:

 

        (i)    the
Option Price shall not be less than the Fair Market Value of the Shares; and

 

        (ii)   if
an Option is granted to an Optionee who on the Date of Grant has Direct or
Indirect Ownership of more than 10% of the total combined voting power of all
classes of stock of the Company or an Affiliate of the Company, then the Option
Price shall be at least 110% of the Fair Market Value of the Shares on the Date
of Grant, with the proviso that, with respect to a non-ISO, this pricing
limitation shall not be applicable if the shares are listed on a national stock
exchange;

 

        (f)    any
vesting schedule upon which the exercise of an Option is contingent, including
discretion to;

 

        (i)    allow
full and immediate vesting upon the grant of such Option,

 

        (ii)   permit
partial vesting in stated percentage amounts based on the length of the Term of
such Option;

 

8

 

        (iii)  permit
full vesting after a stated period of time has passed from the Date of Grant;
and

 

        (iv)  permit
exercise of an Option for unvested Shares, provided however, that generally any
unvested Shares so purchased shall be subject to a repurchase right in favor of
the Company, with the repurchase price to be equal to the original purchase
price of the stock, or to any other restriction the Board determines to be
appropriate, but that (A) such repurchase right shall be exercisable only
within (I) the ninety (90) day period following the termination of
employment or the relationship as a director or consultant, or (II) such
longer period as may be agreed to by the Company and the Optionee (for example,
for purposes of satisfying the requirements of Section 1202(c)(3) of
the Code (regarding “qualified small business stock”)), and (B) such right
shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares; and

 

        (g)   such
other terms and conditions as the Committee deems advisable and are consistent
with the purposes of this Plan.

 

        6.2   No
Grant After Ten Years From Effective Date—No Option shall
be granted under the Plan later than ten (10) years from the Effective
Date of the Plan. Except as expressly provided herein, nothing contained in
this Plan shall require that the terms and conditions of Options granted under
the Plan be uniform.

 

        6.3   No
Disposition for Six Months—An Optionee who is subject to Section 16
of the Exchange Act and whose Option grant is not exempt from Section 16
under Rule 16b-3 shall not make a Disposition of any Shares issued upon
exercise of an Option unless at least six (6) months has elapsed between
the Date of Grant of the Option and the date of Disposition of the Shares issued
upon exercise of such Option. Notwithstanding the foregoing, other than
termination for just cause, if a sale within the applicable time periods set
forth in this Section 6 or Section 9 of Shares acquired upon the
exercise of an Option would subject the Optionee to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of
such Shares by the Optionee would no longer be subject to suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee’s termination of
employment, or (iii) the Option Expiry Date.

 

7.    LIMITATION ON GRANTS OF OPTIONS

 

        7.1   US$100,000
Limit on ISOs.—If the aggregate Fair Market Value (valued
as of the Date of Grant of each ISO) of:

 

        (a)   Shares
underlying ISOs which have been granted to an Optionee under this Plan and
which are exercisable for the first time during a calendar year, and

 

        (b)   Shares
underlying incentive stock options which have been granted to such Optionee
under any other plan of the Company or its Affiliates and which are exercisable
for the first time during that calendar year,

 

exceeds US$100,000, as
such amount may be adjusted from time to time under Section 422(d) of
the Code, then to the extent of such excess such options shall be treated as
options that are not “incentive stock options” for purposes of the Code.

 

8.    EXERCISE OF OPTION

 

        8.1   Method
of Exercise—Subject to any limitations or conditions
imposed upon an Optionee pursuant to the Option Agreement or Section 6
above, an Optionee may exercise an Option by giving 

 

9

 

written notice thereof to
the Company at its principal place of business, provided that any Options
granted after the Plan is approved by the required regulatory authorities but
prior to the date on which shareholder approval to the Plan is given, may not
be exercised unless and until the Plan receives shareholder approval.

 

        8.2   Payment
of Option Price—The notice described in Section 8.1
shall be accompanied by full payment of the aggregate Option Price to the
extent the Option is so exercised, and full payment of any amounts the Company
determines must be withheld for tax purposes from the Optionee pursuant to the
Option Agreement. Such payment shall be:

 

        (a)   in
lawful money (United States funds) by cheque;

 

        (b)   at
the discretion of the Committee and if such form of payment is permitted under
the corporate laws then governing the Company and if the Company has disclosed
to its shareholders that it will accept such payment for the exercise of
Options, by delivery of the Optionee’s personal recourse note bearing interest
at a rate deemed appropriate by the Committee;

 

        (c)   at
the discretion of the Committee, and subject to all applicable securities laws,
through delivery by the Optionee and/or withholding by the Company, of Shares
having a market value as of the date of exercise equal to the cash exercise
price of the Option plus any amounts that the Company determines must be
withheld from the Optionee for U.S. or Canadian tax purposes. The market value
of each of the Shares on the date of delivery shall be determined in good faith
by the Committee, which determination shall be binding for all purposes
hereunder; or

 

        (d)   at
the discretion of the Committee, by any combination of Sections 8.2(a) to
8.2(c) above.

 

        8.3   Issuance
of Stock Certificate—As soon as practicable after
exercise of an Option in accordance with Sections 8.1 and 8.2 above, the
Company shall issue a stock certificate evidencing the Shares with respect to
which the Option has been exercised. Until the issuance of such stock
certificate, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to such Shares, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 below.

 

        8.4   Tax
Withholding in General—The Company shall have the right
to deduct from any and all payments made under the Plan, or to require the
Optionee, through cash payment or otherwise, to make adequate provision for,
the federal, state, local and foreign taxes, if any, required by law to be
withheld by the Company with respect to an Option or the Shares acquired
pursuant thereto. The Company shall have no obligation to deliver Shares or to
release Shares from an escrow established pursuant to an Option Agreement until
the Company’s tax withholding obligations have been satisfied by the Optionee.

 

9.    TRANSFERABILITY OF OPTIONS

 

        9.1   Non-Transferable—Unless
otherwise specified in an Option Agreement, and except as provided otherwise in
this Section 9, Options are non-assignable and non-transferable.

 

        9.2   Death
of Optionee—If the employment of an Optionee as an
employee or consultant of the Company or an Affiliate of the Company, or the
position of an Optionee as a director of the Company or an Affiliate of the
Company, terminates as a result of Optionee’s death, any Options held by such
Optionee shall pass to the Qualified Successor of the Optionee, and shall be
exercisable by the Qualified Successor on or before the date which is the
earlier of twelve (12) months following the date of death or the last day
of the Term.

 

10

 

        9.3   Disability
of Optionee—If the employment of an Optionee as an
employee or consultant of the Company or an Affiliate of the Company, or the
position of an Optionee as a director of the Company or an Affiliate of the
Company, terminates as a result of the Optionee’s Disability, any Option held
by such Optionee that could have been exercised immediately prior to such
termination of service shall be exercisable by such Optionee, or by such
Optionee’s Guardian, on or before the date which is the earlier of twelve
(12) months following the termination of service of such Optionee, and the
last day of the Term.

 

        9.4   Disability
and Death of Optionee—If an Optionee who has ceased to be
employed by the Company or an Affiliate of the Company by reason of such
Optionee’s Disability dies within six (6) months after the termination of
such employment, any Option held by such Optionee that could have been
exercised immediately prior to such Optionee’s death shall pass to the
Qualified Successor of such Optionee, and shall be exercisable by the Qualified
Successor:

 

        (a)   in
the case of an ISO, on or before a date which is the earlier of six (6) months
following the death of such Optionee, and the last day of the Term, and

 

        (b)   in
the case of a Non-ISO, on or before a date which is the earlier of twelve
(12) months following the death of such Optionee, and the last day of the
Term.

 

        9.5   Deemed
Non-Interruption of Employment—Employment shall be deemed
to continue intact during any military or sick leave or other bona fide leave
of absence if the period of such leave does not exceed ninety (90) days
or, if longer, for so long as the Optionee’s right to re-employment with the
Company or an Affiliate of the Company is guaranteed either by statute or by
contract. If the period of such leave exceeds ninety (90) days and the
Optionee’s re-employment is not so guaranteed, then such Optionee’s employment
shall be deemed to have terminated ninety-one (91) days from the date such
leave commenced.

 

10.    TERMINATION OF OPTIONS

 

        10.1 Termination
of Options—To the extent not earlier exercised or
terminated in accordance with section 9 above, an Option shall terminate
at the earliest of the following dates:

 

        (a)   the
termination date specified for such Option in the Option Agreement;

 

        (b)   where
the Optionee’s position as an employee, officer, consultant or director of the
Company or an Affiliate of the Company is terminated for just cause, and the
Optionee has no continuing business relationship with the Company or an
Affiliate of the Company as an employee, officer, consultant or director, the
date of such termination for just cause;

 

        (c)   where
the Optionee’s position as an employee, officer, consultant or director of the
Company or an Affiliate of the Company terminates for a reason other than the
Optionee’s Disability, death, or termination for just cause, and the Optionee
has no continuing business relationship with the Company or an Affiliate of the
Company as an employee, officer, consultant or director:

 

        (i)    where
the Optionee is an Outside Director of the Company, then one (1) year
after such date of termination, or

 

        (ii)   where
the Optionee held any other position(s) with the Company, then ninety
(90) days after such date of termination, except for an Optionee who is
subject to restricted trading periods due to his or her status as an insider,
as determined by the Company, in which case the Option shall terminate one (1) year
or ninety (90) days, 

 

11

 

respectively, after the date the next trading window,
immediately following such date of termination of the Optionee, opens; and

 

        (d)   the
date of any sale, transfer, assignment or hypothecation, or any attempted sale,
transfer, assignment or hypothecation, of such Option in violation of Section 9.1
above.

 

        10.2 Vesting—In
the event that an Optionee’s position as an employee, officer, consultant or
director of the Company or of an Affiliate of the Company is terminated, and
the Optionee has no continuing business relationship with the Company or an
Affiliate of the Company as an employee, officer, consultant, or director, the
Option held by such Optionee shall cease to vest as at the date of termination,
regardless of whether the Optionee is subject to restricted trading periods due
to his or her status as an insider, as determined by the Company.

 

11.    ADJUSTMENTS TO OPTIONS

 

        11.1 Alteration
in Capital Structure—If there is a material alteration in
the capital structure of the Company resulting from a recapitalization, stock
split, reverse stock split, stock dividend, or otherwise, the Committee shall
make such adjustments to this Plan (and to the Options then outstanding under
this Plan) as the Committee determines to be appropriate and equitable under
the circumstances, so that the proportionate interest of each holder of any
such Option shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustments may include, without limitation (a) a
change in the number or kind of shares of stock of the Company covered by such
Options, or other property for which Shares are exchanged as part of such
adjustment, and (b) a change in the Option Price payable per share;
provided, however, that the aggregate Option Price applicable to the
unexercised portion of existing Options shall not be altered, it being intended
that any adjustments made with respect to such Options shall apply only to the
price per share and the number of shares subject thereto. For purposes of this Section 11.1,
neither (i) the issuance of additional shares of stock of the Company in
exchange for adequate consideration (including services), nor (ii) the
conversion of outstanding preferred shares of the Company into Shares shall be
deemed to be material alterations of the capital structure of the Company.

 

        11.2 Corporate
Reorganization—In the event of a reorganization as
defined in this Section 11.2 in which the Company is not the surviving or
acquiring corporation, or in which the Company is or becomes a wholly-owned
subsidiary of another corporation after the effective date of the
reorganization, outstanding Options shall be subject to the agreement governing
the reorganization, which may provide, without limitation, for the assumption
of each Option granted under this Plan or its parent or subsidiary, for the
substitution by surviving corporation or its parent or subsidiary of its own
options for such Options, for accelerated vesting and accelerated expiration,
or for settlement in cash or cash equivalents. In any event, the exercise
and/or vesting of any Option that was permissible solely be reason of this Section 11.2
shall be conditioned upon the consummation of the reorganization. For purposes
of this Section 11.2, “reorganization” shall mean any statutory merger,
statutory consolidation, sale of all or substantially all of the assets of the
Company, or sale, pursuant to an agreement with the Company, of securities of
the Company pursuant to which the Company is or becomes a wholly-owned
subsidiary of another corporation after the effective date of the
reorganization.

 

        11.3 Acceleration
of Vesting Schedule—The Committee shall have the right,
in its sole discretion, to accelerate the vesting schedule of any Option.

 

        11.4 Change of
Control—Unless otherwise provided by the Committee in the
applicable Option Agreement, in the event of a Change of Control, all Options
outstanding on the date of such Change of Control shall become immediately and
fully exercisable. The provisions of this Section 11.4 shall not be
applicable to any Options granted to an Optionee if any Change of Control
results from such Optionee’s 

 

12

 

beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of Shares or
Company Voting Securities.

 

        11.5 Determinations
to be Made By Committee—Adjustments and determinations
under this Section 11 shall be made by the Committee, whose decisions as
to what adjustments or determination shall be made, and the extent thereof,
shall be final, binding, and conclusive.

 

12.    TERMINATION AND AMENDMENT OF PLAN

 

        12.1 Termination
of Plan—Unless earlier terminated as provided in Section 12.2
below, the Plan shall terminate on, and no Option shall be granted under the
Plan, after the end of the day prior to the tenth (10th) anniversary of the Effective Date.

 

        12.2 Power of
Committee to Terminate or Amend Plan—Subject to the
approval of any stock exchange on which the Company is listed, the Committee
may terminate, suspend or amend the terms of the Plan; provided, however, that
no amendment shall be effective unless approved by the shareholders of the
Company within twelve (12) months before or after the adoption of the amendment,
where the amendment will: (a) increase the number of shares reserved for
Options under the Plan; (b) modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires shareholder
approval in order for the Plan to satisfy the requirements of Section 422
of the Code); or (c) modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements. Upon any termination, suspension or amendment of
the Plan, the Company shall notify the Optionees then holding Options under the
Plan of such termination, suspension or amendment, and upon receipt of such notification,
all Optionees will then be deemed to be bound by such termination, suspension
or the provisions of such amendment to the Plan, as the case may be.

 

        12.3 No Grant
During Suspension of Plan—No Option may be granted during
any suspension, or after termination, of the Plan. Amendment, suspension, or
termination of the Plan shall not, without the consent of the Optionee, impair
any rights or increase any obligations of the Optionee under any Option
previously granted prior to such amendment, suspension or termination.

 

13.    CONVERSION OF ISOS INTO NON-ISOS

 

        13.1 Conversion
of ISOs into Non-ISOs—At the written request of any ISO
Optionee, the Committee may in its discretion take such actions as may be
necessary to convert such Optionee’s ISOs (or any installments or portions of
installments thereof) that have not been exercised on the date of conversion
into Non-ISOs at any time prior to the expiration of such ISOs, regardless of
whether the Optionee is an employee of the Company or an Affiliate of the
Company at the time of such conversion. Such actions include, but shall not be
limited to, extending the exercise period of such ISOs. At the time of such
conversion, the Committee, with the consent of the Optionee, may impose such
conditions on the exercise of the resulting Non-ISOs as the Committee in its
discretion may determine, provided that such conditions are consistent with
this Plan. Nothing in the Plan shall be deemed to give any Optionee the right
to have such Optionee’s ISOs converted into Non-ISOs, and no such conversion
shall occur until and unless the Committee takes appropriate action, unless
such conversion is required by applicable law. The Committee, with the consent
of the Optionee, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.

 

14.    CONDITIONS PRECEDENT TO ISSUANCE OF SHARES

 

        14.1 Compliance
with Securities Laws—Options shall not be granted and
Shares shall not be issued pursuant to the exercise of any Option unless the
grant and exercise of such Option and the issuance and 

 

13

 

delivery of such Shares
comply with all relevant provisions of law, including, without limitation, the
Securities Act, the Exchange Act, any applicable state or provincial securities
law, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed or
otherwise traded.

 

        14.2 Regulatory
Approval to Issuance of Shares—The Company shall seek to
obtain from regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to issue and sell Shares upon the exercise of
any Option; provided, however, that this undertaking shall not require the
Company to register under the Securities Act (or any other applicable law for
the registration and sale of securities) either the Plan, any Option or any
Shares issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of any
such Options unless and until such authority is obtained.

 

15.    USE OF PROCEEDS

 

        15.1 Use of
Proceeds—Proceeds from the sale of Shares made pursuant
to the exercise of an Option shall constitute general funds of the Company and
shall be used for general corporate purposes.

 

16.    NOTICES

 

        16.1 Notices—All
notices, requests, demands and other communications required or permitted to be
given under this Plan and the Options granted under this Plan shall be in
writing and shall be either served personally on the party to whom notice is to
be given, in which case notice shall be deemed to have been duly given on the
date of such service; telefaxed, in which case notice shall be deemed to have
been duly given on the date the telefax is sent; or mailed to the party to whom
notice is to be given, by registered or certified first class mail, return
receipt requested, postage prepaid, and addressed to the party at his, her or
its most recent known address, in which case such notice shall be deemed to
have been duly given on the tenth (10th)
postal delivery day following the date of such mailing.

 

17.    MISCELLANEOUS PROVISIONS

 

        17.1 No
Obligation to Exercise—An Optionee shall be under no
obligation to exercise such Optionee’s Option.

 

        17.2 No
Obligation to Retain Optionee—Nothing contained in this
Plan shall obligate the Company or an Affiliate of the Company to retain an
Optionee as an employee, officer, director, or consultant for any period, nor
shall this Plan interfere in any way with the right of the Company or an
Affiliate of the Company to reduce such Optionee’s compensation.

 

        17.3 Binding
Agreement—The provisions of this Plan and each Option
Agreement with an Optionee shall be binding upon such Optionee and any
Qualified Successor or Guardian of such Optionee.

 

        17.4 Use of
Terms—Where the context so requires, references herein to
the singular shall include the plural, and vice versa.

 

        17.5 Headings—The
headings used in this Plan are for convenience of reference only and shall not
in any way affect or be used in interpreting any of the provisions of this
Plan.

 

18.    SHAREHOLDER APPROVAL OF PLAN

 

14

 

        18.1 Shareholder
Approval of Plan—This Plan must be approved by a majority
of the votes cast at a meeting of the shareholders of the Company, other than
votes attaching to securities beneficially owned by:

 

        (a)   insiders
of the Company, meaning directors, officers and greater than 10% shareholders;
and

 

        (b)   Associates
of persons referred to in subparagraph 18.1(a) above.

 

19.    MERGER OF FORMER STOCK OPTION PLANS

 

        19.1 Upon receipt of shareholder and
regulatory approval, the 1997 Stock Option Plan and the 1995 Stock
Option Plan of the Company, as amended, shall both be deemed to be merged
herein, such that all options outstanding under the 1997 Stock Option Plan
of the Company (the “1997 Options”) and the 1995 Stock Option Plan of
the Company (the “1995 Options”) shall be deemed to be outstanding under
the Plan to the same extent as if they were originally granted hereunder, and
shall be governed hereby and entitled to all of the benefits and obligations
herein. The Committee shall be authorized to amend, at any time and from time
to time, all or any of the 1997 Options and the 1995 Options as the
Committee may determine necessary or advisable or may otherwise deem
appropriate, to conform such agreements to this Plan.

 

15

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