Document:

Exhibit
      10.1 

     

    
      
        

      

    

    FIRST
      AMENDMENT 

    
      
        

      

    

     

    As
      of
      October 11, 2006

    

    THIS
      FIRST AMENDMENT (this “First
      Amendment”)
      is
      made to the:

     

    
      	 	
              (a)

            	
              July
                10, 2006 Secured Promissory Note (the “DSSF
                Note”)
                in favor of DEERFIELD
                SPECIAL SITUATIONS FUND, L.P.,
                a
                Delaware limited partnership (“DSSF”)
                by FAMILYMEDS
                GROUP, INC. f/k/a DRUGMAX, INC.
                (the “Borrower”),
                a Nevada corporation;

            

    

     

    
      	 	
              (b)

            	
              July
                10, 2006 Secured Promissory Note (the “DSSIL
                Note” and
                collectively with the DSSF Note, the “Note”)
                in favor of Deerfield
                Special Situations Fund International Limited,
                a
                British Virgin Islands company (“DSSIL”)
                by Borrower; and

            

    

     

    
      	 	
              (c)

            	
              the
                Investor Rights Agreement dated as of June 23, 2006 by and among
                DSSF and
                DDIL (collectively, the “Lender”)
                and Borrower (the “Investor
                Rights Agreement”).

            

    

     

    RECITALS:

     

    Under
      the
      terms of the Note, in lieu of making any interest payments in cash during the
      First Year and/or the Second Year (as defined in the Note), Borrower may issue
      and deliver to Lender a number of registered and freely tradable shares of
      common stock. Borrower currently is unable to issue freely tradable shares.
      

     

    AGREEMENTS:

     

    In
      consideration of the mutual covenants contained herein and benefits to be
      derived herefrom, it is hereby agreed as follows: 

     

    1.    Amendment
      to Note. The
      Note
      is hereby amended as follows:

     

    (a)   by
      deleting Section 4 in its entirety and substituting the following in its
      stead:

     

    4.    Interest
      Payments in Stock.
      

    

    (a)    Notwithstanding
      anything to the contrary set forth above, in lieu of making any interest
      payments in cash during the First Year and/or Second Year, Borrower may, issue
      and deliver to Lender, on the date the first quarterly interest payment is
      due
      for such year, a number of shares of common stock, par value $0.001 per
      share, of
      Borrower (“Common
      Stock”)
      equal
      to the quotient of (a) the dollar amount of such interest payment due for such
      entire year, divided by (b) the Adjusted Share Price. “Adjusted
      Share Price”
      means an
      amount equal to ninety percent (90%) of the lesser of (x) the average of the
      daily market prices for the Common Stock for the 30 consecutive trading days
      immediately before September 1, 2006 for the First Year and September 1, 2007
      for the Second Year and (y) the daily market price for the Common Stock on
      September 1, 2006 for the First Year and of the September 1, 2007 for the Second
      Year. The “daily
      market price”
      for each
      such trading day means (i) the closing bid price on such day on the principal
      stock exchange (including Nasdaq) on which such Common Stock is then listed
      or
      admitted to trading, or quoted, as applicable, (ii) if no sale takes place
      on
      such day on any such exchange, the last reported closing bid price on such
      day
      as officially quoted on any such exchange (including Nasdaq), (iii) if the
      Common Stock is not then listed or admitted to trading on any stock exchange,
      the last reported closing bid price on such day in the over-the-counter market,
      as furnished by the National Association of Securities Dealers Automatic
      Quotation System or the National Quotation Bureau, Inc. Lender hereby
      acknowledges that Borrower has elected to pay the First Year’s
      interest in shares of Common Stock and the parties hereby agree that the
      Adjusted Share Price for the first year is $3.68 and, thus, that the total
      number of shares of Common Stock to be issued to Lender for the First
      Years’
      interest
      is 58,878 (the “First
      Year Shares”).
      The
      number of shares issued to pay the interest on the Note during the Second Year
      (and any securities issued or issuable upon any stock dividend, stock split,
      recapitalization, or similar event with respect to such shares) shall be
      referred to as the “Second
      Year Shares.”
      Notwithstanding the foregoing, in no event may Borrower make any interest
      payment hereunder in shares of Common Stock after the occurrence of an Event
      of
      Default (as defined below) or if the daily market price for the Common Stock
      cannot be determined as described above. If the Borrower elects to pay the
      Second Year interest in shares of Common Stock, it must provide written notice
      of such election to Lender at least thirty (30) days prior to September 1,
      2007.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)    With
      regard to the First Year Shares, Borrower shall promptly instruct its transfer
      agent to deliver to Lender four certificates, with each certificate representing
      one quarter of the total number of shares for the First Year’s
      interest. Similarly, if Borrower elects to pay the Second Year’s
      interest in shares of Common Stock, the Second Year Shares shall be represented
      by four equal certificates, one representing each quarterly interest payment
      during such year. Upon delivery of the certificates for the First Year Shares,
      Lender shall immediately return to Borrower the $46,575.34 cash interest payment
      made by Borrower on or about September 20, 2006. Lender hereby waives any late
      fees or penalties regarding such first quarterly payment.

     

    (c)    The
      Parties agree that the certificates representing the shares that may be issued
      hereunder shall contain a customary transfer legend in substantially the
      following format:

     

    
      	 	 	
              THE
                SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
                THE
                SECURITIES ACT OF 1933, AS AMENDED, OR ANY SIMILAR SECURITIES STATUTE.
                THIS CERTIFICATE MAY ONLY BE TRANSFERRED UPON REGISTRATION OF THE
                SHARES
                UNDER THE FOREGOING ACT AND APPLICABLE REGULATIONS ADOPTED THEREUNDER
                OR
                UPON THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY
                TO
                THE COMPANY THAT SUCH REGISTRATION IS NOT
                REQUIRED.

            

    

     

    2.    Amendment
      to Investor Rights Agreement. 

     

    (a)    First
      Year Shares. The
      definition of “Registrable
      Securities”
      in the
      Investor Rights Agreement is hereby amended to include all of the First Year
      Shares (as defined in Section 1(a) of this First Amendment). On August 23,
      2006,
      Borrower filed a Form S-3 registration statement with the SEC, which
      registration statement has not yet been declared effective. Borrower shall
      file
      a pre-effective amendment to such registration statement within five business
      days following the date of this First Amendment to include the First Year Shares
      in such registration statement and shall use its reasonable best efforts to
      cause such registration statement to be declared effective under the Securities
      Act of 1933 (the “Securities
      Act”)
      as
      promptly as possible after the filing thereof, but in any event within 30 days
      following the date of this First Amendment; provided, however, that the parties
      agree that, notwithstanding anything to the contrary, Borrower shall not request
      effectiveness of such registration statement until after Lender has physically
      received the certificates representing the First Year Shares. 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b)    Second
      Year Shares. If
      Borrower pays any of the interest accruing in the Second Year (as defined in
      Note) in Common Stock, Borrower agrees to register the resale of such shares
      by
      preparing and filing with the Securities and Exchange Commission (the
“Commission”)
      not
      later than five days following September 1, 2007 (the “Filing
      Date”)
      a
      registration statement or registration statements (as necessary) on Form S-3
      covering the resale of all of the Second Year Shares (as defined in Section
      1(a)
      of this First Amendment), in an amount sufficient to cover the resale of such
      shares. In the event that Form S-3 is unavailable for such a registration,
      the
      Borrower shall use such other form as is available and appropriate for such
      a
      registration. The Borrower shall use its reasonable best efforts to cause such
      registration statement to be declared effective under the Securities Act as
      promptly as possible after the filing thereof, but in any event within 90 days
      following the date such registration statement is filed (such day referred
      to
      herein as the “Effective
      Date”).
      The
      Borrower shall use its reasonable best efforts to keep such registration
      statement effective pursuant to Rule 415 at all times until such date as is
      the
      earlier of (i) the date on which all of the Second Year Shares have been sold
      pursuant to a registration statement and (ii) the date on which the Second
      Year
      Shares (in the opinion of counsel to Lender and acceptable to legal counsel
      for
      the Borrower) may be immediately sold without restriction (including without
      limitation as to volume restrictions by each holder thereof) and without
      registration under the Securities Act (the “Registration
      Period”).
      All of
      the rights and obligations of the parties contained in Sections 3 through 11
      of
      the Investor Rights Agreement shall apply to the Second Year Shares as modified
      by this paragraph.

     

    3.    Lock
      Up Agreement. Lender
      shall not sell or otherwise transfer any of the Common Stock issued in lieu
      of
      cash interest payments pursuant to the Note until the respective quarterly
      interest payment represented by such shares has come due. Accordingly, each
      of
      the certificates issued to represent such shares, other than the certificate
      representing the interest payment due on September 1, 2006, shall contain a
      legend stating that: 

     

    
      	 	 	
              THE
                SHARES REPRESENTED
                BY
                THIS CERTIFICATE ARE SUBJECT TO A FIRST AMENDMENT DATED OCTOBER 11,
                2006
                TO AN INVESTOR RIGHTS AGREEMENT AND PROMISSORY NOTES BETWEEN THE
                COMPANY
                AND THE SHAREHOLDER CONTRACTUALLY RESTRICTING THE SALE OR TRANSFER
                OF THE
                SHARES REPRESENTED BY THIS CERTIFICATE UNTIL [_____________]”

            

    

    

    The
      forgoing blank shall be filled in with the respective interest payment
      date.

    

    4.    Representations. 

     

    Each
      Lender hereby represents and warrants to Borrower that:

     

    (a)    It
      is
      acquiring the shares for its own account and not with a view to, or for sale
      in
      connection with, any distribution thereof, nor with the intention of
      distributing or reselling the same and such Lender has no present or
      contemplated agreement, undertaking, arrangement, obligation, indebtedness
      or
      commitment providing for the disposition thereof; provided, however, that by
      making the representation herein, such Lender does not agree to hold any of
      the
      securities for any minimum or other specific term (except as contemplated
      hereby) and reserves the right to dispose of the securities at any time in
      accordance with or pursuant to a registration statement or an exemption under
      the Securities Act;

     

    (b)    It
      is
      aware that none of the shares have been registered under the Securities Act
      or
      under applicable state securities or blue sky laws;

     

    I It
      is an
“Accredited
      Investor”
      as such
      term is defined in Rule 501 of Regulation D, as promulgated under the Securities
      Act;

     

    (d)    Either
      alone or together with its representatives, it has such knowledge,
      sophistication and experience in business and financial matters so as to be
      capable of evaluating the merits and risks of the prospective investment in
      the
      shares, has so evaluated the merits and risks of such investment and is able
      to
      bear the economic risk of an investment in the shares and, at the present time,
      is able to afford a complete loss of such investment; and

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (e)    It
      has
      been afforded (i) the opportunity to ask questions as it has deemed necessary
      of, and to receive answers from, representatives of the Borrower concerning
      the
      terms and conditions of the offering of the shares and the merits and risks
      of
      investing in the shares; (ii) access to information about the Borrower and
      its
      subsidiaries and their respective financial condition, results of operations,
      businesses, properties, management and prospects sufficient to enable it to
      evaluate its investment; and (iii) the opportunity to obtain such additional
      information that the Borrower possesses or can acquire without unreasonable
      effort or expense that is necessary to make an informed investment decision
      with
      respect to the investment.

     

    5.    Miscellaneous.

     

    (a)    This
      First Amendment may be executed in several counterparts and by each party on
      a
      separate counterpart, each of which when so executed and delivered shall be
      an
      original, and all of which together shall constitute one agreement. Signature
      pages with facsimile signatures may be treated as originals.

     

    (b)    This
      First Amendment expresses the entire understanding of the parties with respect
      to the transactions contemplated hereby. No prior negotiations or discussions
      shall limit, modify, or otherwise affect the provisions hereof.

     

    (c)    Any
      determination that any provision of this First Amendment or any application
      hereof is invalid, illegal, or unenforceable in any respect and in any instance
      shall not affect the validity, legality, or enforceability of such provision
      in
      any other instance, or the validity, legality, or enforceability of any other
      provision of this First Amendment.

     

    (d)    Except
      as
      expressly amended hereby, the Note and the Investor Rights Agreement shall
      continue to be, and shall remain, unaltered and in full force and effect in
      accordance with their terms. To the extent that any term or provision of this
      Amendment is or may be deemed expressly inconsistent with any term or provision
      in the Note, the Investor Rights Agreement or any other document executed in
      connection therewith, the terms and provisions hereof shall
      control.

     

    (e)    This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York without giving effect to conflicts of law
      issues.

     

    [Remainder
      of this page intentionally left blank; signatures to follow]

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    [Signature
      page to First Amendment Dated October 11, 2006]

     

    
      
        	 	 	 
	
                BORROWER

              
	 	 
	 	FAMILYMEDS
                GROUP, INC.
	 
 	 
 	 
 
	 
                	By:  	        
                
	 	
                

              

      

      
        	 	Print
                Name:	 
	 	 	
                

              

      

      
        	 	Title:	
              
	 	 	
                
 

      

      
         

        
          
            	 	 	 
	
                    LENDER         
                      

                  
	 	 
	 	DEERFIELD
                    SPECIAL SITUATIONS FUND, L.P.
	 
 	 
 	 
 
	 
                    	By:  	        
                    
	 	
                    

                  

          

          
            	 	Print
                    Name:	 
	 	 	
                    

                  

          

          
            	 	Title:	
                  
	 	 	
                    
 

          

          
            
              
                	 	 	 
	 	 
	 	DEERFIELD
                        SPECIAL SITUATIONS FUND INTERNATIONAL,
                        LIMITED
	 
 	 
 	 
 
	 
                        	By:  	        
                        
	 	
                        

                      

              

              
                	 	Print
                        Name:	 
	 	 	
                        

                      

              

              
                	 	Title:	
                      
	 	 	
                        
 

              

               

              
                
                   

                

                
                  5CONVERSION SERVICES INTERNATIONAL, INC.

                               2003 INCENTIVE PLAN

SECTION 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

      1.1 ESTABLISHMENT. The Conversion Services International, Inc. 2003
Incentive Plan (the "PLAN") is hereby established effective as of December 1,
2003, by adoption of the Board, provided it is approved within 12 months of this
date by stockholders of the Company. Awards may be granted subject to
stockholder approval, but may not be exercised or otherwise settled in the event
stockholder approval is not obtained.

      1.2 PURPOSE. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by encouraging and facilitating
the ownership of LCS Group, Inc.'s ("COMPANY") common stock by persons
performing services for the Participating Company Group in order to enhance the
ability of the Company to attract, retain and reward such persons and motivate
them to contribute to the growth and profitability of the Participating Company
Group.

      1.3 TERM OF PLAN. The Plan shall be effective from the date that the Plan
is adopted by the Board of Directors of the Company and shall continue in effect
thereafter until the earlier of (a) its termination by the Board, or (b) the
date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan
and the agreements evidencing Options granted under the Plan have lapsed, or (c)
ten (10) years from its effective date. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the stockholders of the Company.

SECTION 2. DEFINITIONS AND CONSTRUCTION.

      2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:

      (a) "AWARD" means any award or grant of Restricted Shares or Options under
the Plan.

      (b) "BENEFICIARY" means the person, persons, trust, or trusts entitled by
will or by the laws of descent, to exercise a Participant's Option or other
rights under the Plan after the Participant's death.

      (c) "BOARD" means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, the term
"BOARD" also means such Committee(s).

      (d) A "CHANGE IN CONTROL" shall mean an Ownership Change Event or a series
of related Ownership Change Events (collectively, a "TRANSACTION") wherein the
stockholders of the Company, immediately before the Transaction, do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Company's voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting securities of
the Company or, in the case of a Transaction involving the sale, exchange or
transfer of all or substantially all of the Company's assets, the corporation or
other business entity to which the assets of the Company were transferred (the
"TRANSFEREE"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting securities of one or more corporations or
other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other
business entities. The Board shall have the right to determine whether multiple
sales or exchanges of the voting securities of the Company or multiple Ownership
Change Events are related, and its determination shall be final, binding and
conclusive.

<PAGE>

      (e) "CODE" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.

      (f) "COMMITTEE" means the Compensation Committee or other committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

      (g) "COMPANY" means LCS Group, Inc., a Delaware corporation, or any
successor corporation thereto.

      (h) "CONSULTANT" means a person engaged to provide consulting or advisory
services (other than as an employee or a director) to a Participating Company.

      (i) "DIRECTOR" means a member of the Board or of the board of directors of
any other Participating Company.

      (j) "DISABILITY" means the inability of the Participant to perform the
major duties of the Participant's position with the Participating Company Group
because of the sickness or injury of the Participant. The Determination of
whether or not a Participant is disabled for purposes of this Plan shall be made
by, and at the sole discretion of, the Committee.

      (k) "EMPLOYEE" means any person treated as an employee (including an
officer or a director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a director nor payment of a
director's fee shall alone be sufficient to constitute employment for purposes
of the Plan. The Company shall determine in good faith and in the sole exercise
of its discretion, whether an individual has become, or has ceased to be, an
Employee and the effective date of such individual's employment or termination
of employment, as the case may be. For purposes of an individual's rights, if
any, under the Plan as of the time of the Company's determination, all such
determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.

      (l) "FAIR MARKET VALUE" means, as of any date, the value of a share of
Stock or other property as determined by the Board, in its discretion, in good
faith without regard to any restriction other than a restriction which, by its
terms, will never lapse. If the Stock is not trading over a public exchange, the
"fair market value" shall take into account the latest private transaction in
which the Company sold stock to an informed and willing buyer, if any such
transaction exists. If the Stock is listed for trading over a public market,
"fair market value" of the Stock on a given day shall be the mean between the
highest and lowest quoted selling prices, regular way, of the Stock on the
NASDAQ or the exchange on which the Stock is listed, and if no trading occurs on
such date, the mean between the highest and lowest prices on the nearest trading
day before such date.

<PAGE>

      (m) "INCENTIVE STOCK OPTION" means an Option intended to be (as set forth
in the Option Agreement), and which qualifies as, an incentive stock option
within the meaning of Section 422(b) of the Code.

      (n) "NONQUALIFIED STOCK OPTION" means an Option not intended to be (as set
forth in the Option Agreement) or which does not qualify as an Incentive Stock
Option.

      (o) "OFFICER" means any person designated by the Board as an officer of
the Company.

      (p) "OPTION" means a right to purchase Stock pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock Option or a
Nonqualified Stock Option and may also, in the discretion of the Board, be
structured and granted as a Stock Appreciation Right. For purposes of this Plan,
a "STOCK APPRECIATION RIGHT" is the right of a holder thereof, on exercise of
the Stock Appreciation Right, to receive from the Company in cash or Stock an
amount equal to the excess of: (x) the Fair Market Value of the Stock covered by
the exercised portion of the Stock Appreciation Right, as of the date of such
exercise, over (y) the Fair Market Value of the Stock covered by the exercised
portion of the Stock Appreciation Right as of the date on which the Stock
Appreciation Right was granted.

      (q) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee setting forth the terms, conditions and restrictions pertaining to
the Option granted to the Optionee and to any shares of Stock acquired upon the
exercise thereof.

      (r) "OPTIONEE" means a Participant who has been awarded one or more
Options.

      (s) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any of
the following occurs with respect to the Company: (i) the direct or indirect
sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

      (t) "PARENT CORPORATION" means any present or future "parent corporation"
of the Company, as defined in Section 424(e) of the Code.

      (u) "PARTICIPANT" means any employee, consultant or director to whom an
Award has been made under the Plan.

      (v) "PARTICIPATING COMPANY" means the Company or any Parent Corporation or
Subsidiary Corporation.

      (w) "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.

      (x) "RESTRICTED SHARES" means shares awarded pursuant to a "RESTRICTED
SHARE AGREEMENT" between the Company and Participant setting forth the terms,
conditions or restrictions applicable to an Award of shares of Stock under the
Plan.

<PAGE>

      (y) "SERVICE" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an employee, a director
or a consultant. A Participant's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant's Service. Furthermore, a
Participant's Service with the Participating Company Group shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Participant's Service shall be deemed to have terminated
unless the Participant's right to return to Service with the Participating
Company Group is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as service for purposes of determining
vesting under the Participant's Option or Restricted Shares Agreement. The
Participant's Service shall be deemed to have terminated either upon an actual
termination of service or upon the corporation for which the Participant
performs services ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Participant's Service has terminated and the effective date of such termination.

      (z) "STOCK" means the common stock of the Company, as adjusted from time
to time in accordance with Section 4.2. Such Stock may be unrestricted or, at
the sole discretion of the Board, be made subject to restrictions relating to
employment and transferability.

      (aa) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.

      (bb) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the time an
Option is granted to the Optionee, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

      (cc) "VEST" or "VESTING", with respect to Options, means the date, event,
or act prior to which an Award is not, in whole or in part, exercisable except
at the sole discretion of the Board. With respect to Restricted Shares, "Vest"
or "Vesting" shall mean the date, event, or act prior to which an Award is, in
whole or in part, forfeitable.

2.2 CONSTRUCTION. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of the Plan.
Except when otherwise indicated by the context, the singular shall include the
plural and the plural shall include the singular. Use of the term "or" is not
intended to be exclusive, unless the context clearly requires otherwise.

SECTION 3. ADMINISTRATION.

3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the Board.
All questions of interpretation of the Plan or of any Option, Restricted Share,
or other right awarded hereunder shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in
the Plan or in such Option or right.

3.2 AUTHORITY OF OFFICERS. Any Officer shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of, or which is allocated to, the Company
herein, provided the Officer has apparent authority with respect to such matter,
right, obligation, determination or election.

<PAGE>

3.3 POWERS OF THE BOARD. In addition to any other powers set forth in the Plan
and subject to the provisions of the Plan, the Board shall have the full and
final power and authority, in its discretion to:

      (a) determine the persons to whom, and the time or times at which Awards
shall be granted, the types of Awards to be granted, and the number of shares of
Stock to be subject to each Award;

      (b) determine the terms, conditions and restrictions applicable to Awards;
approve one or more forms of Option, or Restricted Share Agreements;

      (c) amend, modify, extend, cancel or renew any Option or waive any
restrictions or conditions applicable to any Option or applicable to any shares
of Stock awarded or acquired upon the exercise thereof;

      d) correct any defect, supply any omission, or reconcile any inconsistency
in the and take such other actions with respect to the Plan as the Board may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

SECTION 4. SHARES SUBJECT TO PLAN.

4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be ten million (10,000,000) and shall consist of authorized
but unissued or reacquired shares of Stock, treasury shares, or any combination
thereof. If an outstanding Option for any reason expires or is terminated or
canceled or if shares of Stock are acquired upon the exercise or Award of an
Option or Restricted Share Agreement subject to a Company repurchase option and
are repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan.

4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the Share Issuance Limit set
forth in Section 4.1, in the exercise price per share of any outstanding
Options.

5. ELIGIBILITY AND LIMITATIONS.

5.1 PERSONS ELIGIBLE. Awards may be granted only to Employees, Consultants, and
Directors. For purposes of the foregoing sentence, "Employees," "Consultants",
and "Directors" shall include prospective Employees, prospective Consultants,
and prospective Directors to whom Options and Restricted Shares may be awarded
in connection with written offers of an employment or other service relationship
with the Participating Company Group.

5.2 OPTION AWARD RESTRICTIONS. Any person who is not an Employee on the
effective date of the Award of an Option to such person may be awarded only a
Nonqualified Stock Option. An Incentive Stock Option awarded to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company.

<PAGE>

5.3 FAIR MARKET VALUE LIMITATION. To the extent that Options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for Stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such Options which exceed such amount shall be treated as Nonqualified Stock
Options. For purposes of this Section 5.3, Options designated as Incentive Stock
Options shall be taken into account in the order in which they were awarded, and
the Fair Market Value of Stock shall be determined as of the time the Option
with respect to such Stock was awarded. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonqualified Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS AND RESTRICTED SHARES.

6.1 AWARD AGREEMENTS. Options shall be evidenced by Option Agreements specifying
the nature and number of shares of Stock covered thereby, and shall exist in
such form as the Board shall from time to time establish. An Award of Restricted
Shares shall be evidenced by a Restricted Share Agreement specifying the number
of shares issued and the restrictions thereon, and shall exist in such form as
the Board shall, from time to time, approve. Such Agreements may incorporate all
or any of the terms of the Plan by reference and shall comply with and be
subject to the terms and conditions herein.

6.2 OPTION VESTING AND EXERCISE PRICE. Each Option Agreement shall include a
vesting schedule describing the date, event, or act upon which an Option shall
vest, in whole or in part, with respect to all or a specified portion of the
shares covered by such Option. Each Option Agreement shall also convey the
exercise price for each Option or the means by which such price shall be
established, with such exercise price or method of establishment being
established in the discretion of the Board; provided, however, that: (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, and (b) no Option granted to a Ten Percent Owner Optionee shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.

6.3 EXERCISABILITY AND TERM OF OPTIONS. Options shall be exercisable as shall be
determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that: (a) no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years after the effective date of
grant of such Option, (b) no Incentive Stock Option awarded to a Ten Percent
Owner Optionee shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option, or (c) no Option awarded to a
prospective Employee, prospective Consultant or prospective Director may become
exercisable prior to the date on which such person commences Service with a
Participating Company.

<PAGE>

6.4 PAYMENT OF OPTION EXERCISE PRICE

      (a) FORMS OF CONSIDERATION AUTHORIZED. Payment of the exercise price for
the number of shares of Stock being purchased pursuant to any Option shall be
made in cash, by check or cash equivalent by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable
law.

      (b) LIMITATIONS ON FORMS OF CONSIDERATION.

            (i) CASHLESS EXERCISE. The Company reserves, at any and all times,
the right, in the Company's sole and absolute discretion, to establish, decline
to approve or terminate any program or procedures for the exercise of Options by
means of a cashless exercise.

            (ii) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine. The Board shall have the authority to permit or
require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company.

6.5 TAX WITHHOLDING. Upon the exercise of an Option or upon the vesting of
Restricted Shares, the Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to such Restricted Stock, Option, or the Stock
acquired upon the exercise thereof. Alternatively or in addition, in its
discretion, the Company shall have the right to require the Participant, through
payroll withholding, cash payment or otherwise, including by means of a Cashless
Exercise, to make adequate provision for any such tax withholding obligations of
the Participating Company Group arising in connection with the Restricted Stock,
Option, or the shares acquired upon the exercise thereof. The Fair Market Value
of any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company shall have no obligation to deliver
shares of Stock or to release shares of Stock from an escrow established
pursuant to any Agreement entered hereunder until the Participating Company
Group's tax withholding obligations have been satisfied by the Participant.

6.6 STOCK RESTRICTIONS. Shares issued under the Plan shall be subject to a right
of first refusal, one or more repurchase options, and such other conditions and
restrictions as determined by the Board in its discretion at the time an Option
or Restricted Share Award is made.

      (a) REPURCHASE RIGHTS. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

      (b) SERVICE VESTING AND TRANSFERABILITY. The Company shall have the right,
at the time of the Award, to place restrictions on Awards including upon shares
issued upon the exercise of an Option.

<PAGE>

      (c) RESTRICTED SHARE AWARDS. Subject to and consistent with the provisions
of this Plan, each Restricted Share shall be evidenced by a written Agreement
setting forth the terms and conditions pertaining to such Award, including the
number of shares awarded. Unless otherwise required by statute, Restricted
Shares may be awarded with or without payment of consideration by the
Participant. Each Restricted Share Agreement shall include a vesting schedule
describing the date, event, or act upon which Restricted Shares shall vest, in
whole or in part, with respect to all or a specified portion of the Shares
covered by the Award. No Restricted Share not yet vested is assignable or
transferable and any attempt at transfer or assignment of such Share, and any
attempt by a creditor to attach such Share, shall be null and void. Until the
date a Stock certificate is issued to a Participant, a Participant will have no
rights as a stockholder of the Company. No adjustments shall be made for
dividends of any kind or nature, distributions, or other rights for which the
record date is prior to the date such stock certificate is issued. Consistent
with the provisions of this Plan, the Board may in its discretion modify,
extend, or renew any Restricted Share Agreement, or accept cancellation of same
in exchange for the granting of a new Award. The preceding not withstanding, no
modification of a Restricted Share Agreement which is not vested shall, absent
the consent of the Participant, alter or impair any rights or obligations with
respect to such Agreement.

6.7 EFFECT OF TERMINATION OF SERVICE.

      (a) RESTRICTED SHARES. If a Participant's Service terminates for any
reason other than as a result of a Change in Control, such Participant's
Restricted Shares which are not vested at the time of Service termination shall
be forfeited. If a Participant's service terminates because of a Change of
Control and if an amount to be received by a Participant from this Plan would
otherwise constitute a "parachute payment" as defined in section 280G(b)(2) of
the Code, then any accelerated vesting due to a Change of Control or subsequent
termination of the Participant's Service shall be limited to the amount of
vesting that permits the Participant to receive, after application of the excise
tax imposed by section 4999 of the Code, the greater of: (1) A total parachute
payment that equals 2.99 times the Participant's base amount, as determined
under section 280G of the Code; or (2) full vesting of all unvested Restricted
Shares as of the date of the Participant's termination of employment.

      (b) OPTIONS. Subject to earlier termination of the Option as otherwise
provided herein, and unless otherwise provided by the Board in an Award and set
forth in the Agreement related thereto, an Option shall be exercisable after a
Participant's termination of Service only during the applicable time period
determined in accordance with the following provisions of this Section 6.10(b)
and thereafter shall terminate:

            (i) DISABILITY. If the Participant's Service terminates because of
the Disability of the Participant, an Option, to the extent unexercised and
exercisable on the date on which the Participant's Service terminated, may be
exercised by the Participant (or the Participant's guardian or legal
representative) at any time prior to the expiration of twelve (12) months after
the date on which the Participant's Service terminated, but in any event no
later than the date of expiration of the Option's term as set forth in the
Agreement evidencing such Option (the "EXPIRATION DATE").

            (ii) DEATH. If the Participant's Service terminates because of the
death of the Participant, an Option, to the extent unexercised and exercisable
on the date on which the Participant's Service terminated, may be exercised by
the Participant's legal representative or other person who acquired the right to
exercise the Option or Right by reason of the Participant's death at any time
prior to the expiration of twelve (12) months after the date on which the
Participant's Service terminated, but in any event no later than the Expiration
Date. The Participant's Service shall be deemed to have terminated on account of
death if the Participant dies within three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the Participant's
termination of Service.

<PAGE>

            (iii) OTHER TERMINATION OF SERVICE. If the Participant's Service
terminates for any reason, except Disability or death, an Option, to the extent
unexercised and exercisable by the Participant on the date on which the
Participant's Service terminated, may be exercised by the Participant at any
time prior to the expiration of three (3) months (or such longer period of time
as determined by the Board, in its discretion) after the date on which the
Participant's Service terminated, but in no event any later than the Expiration
Date.

      (c) RESERVATION OF RIGHTS. The grant of Awards under the Plan shall in no
way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

6.8 TRANSFERABILITY OF OPTIONS. During the lifetime of the Participant, an
Option shall be exercisable only by the Participant or by the Participant's
guardian or legal representative. No Option shall be assignable or transferable
by the Participant, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its sole
discretion, and as set forth in the Option Agreement evidencing such Option, a
Nonqualified Stock Option shall be assignable or transferable.

SECTION 7. CHANGE IN CONTROL.

7.1 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a Change in Control,
the surviving, continuing, successor, or purchasing corporation or other
business entity or parent thereof, as the case may be (the "ACQUIRING
CORPORATION"), may, without the consent of any Participant, either assume the
Company's rights and obligations under outstanding Options or substitute for
such outstanding Options substantially equivalent options or rights for, or in
relation to, the Acquiring Corporation's stock.

7.2 EFFECT OF CHANGE OF CONTROL ON RESTRICTED SHARE RIGHTS.

      (a) Restricted Shares outstanding under the Plan at the time of a Change
in Control shall automatically Vest in full immediately prior to the effective
date of such Change in Control and will no longer be subject to forfeiture risk
or to any repurchase right. However, Restricted Shares shall not vest on an
accelerated basis as a result of a Change in Control if and to the extent:

            (i) such Restricted Share Award, having been assumed by the
successor corporation (or parent thereof), is replaced with shares of the
capital stock of the successor corporation subject to substantially equivalent
restrictions or is otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction, and any repurchase rights of the
Company with respect to any unvested Restricted Shares are concurrently assigned
to such successor corporation (or parent thereof) or otherwise continued in
effect; or

            (ii) such Restricted Shares are to be replaced with a cash incentive
program of the Company or any successor corporation which preserves the value
existing on the unvested Restricted Shares at the time of the Change in Control
and provides for subsequent payout in accordance with the same Vesting schedule
applicable to those unvested Restricted Shares; or

<PAGE>

            (iii) the acceleration of such Restricted Share is subject to other
limitations imposed by the Plan Administrator at the time of the Restricted
Share grant.

      (b) Should, in the course of a Change in Control, the actual holders of
the Company's outstanding Stock receive cash consideration in exchange for such
Stock, the successor corporation may, in connection with the replacement of the
outstanding Restricted Shares under this Plan, substitute one or more shares of
its own common stock with a fair market value equivalent to the cash
consideration paid per share of Stock in such Change in Control and subject to
substantially equivalent restrictions as were in effect for the Restricted
Shares immediately before the Change in Control.

      (c) The foregoing notwithstanding, the Board shall have the discretion,
exercisable either at the time the Restricted Shares are granted or at any time
while the Restricted Shares remain unvested, to structure one or more Restricted
Shares so that those Restricted Shares shall automatically accelerate and Vest
in full upon the occurrence of a Change in Control. The Board shall also have
full power and authority, exercisable either at the time The Restricted Shares
are granted or at any time while the Restricted Shares remain unvested, to
structure such Restricted Share so that the shares will automatically Vest on an
accelerated basis should the Participant's employment or service terminate by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of any Change in Control in
which the Restricted Shares do not otherwise Vest. In addition, the Plan
Administrator may provide that one or more of the Company's outstanding
repurchase rights with respect to Restricted Shares held by the Participant at
the time of such Involuntary Termination shall immediately terminate on an
accelerated basis, and the Restricted Shares subject to those terminated rights
shall accordingly Vest at that time.

            (i) For purposes of this Section 8.2(c), an "INVOLUNTARY
TERMINATION" shall mean the termination of the Participant's service which
occurs by reason of: (1) such individual's involuntary dismissal or discharge by
the Company for reasons other than Misconduct, or (2) such individual's
voluntary resignation following (A) a change in his or her position with the
Company which materially reduces his or her duties and responsibilities or the
level of management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and target bonus
under any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (3) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected without the individual's consent.

            (ii) "MISCONDUCT" shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company or any other intentional misconduct by such person adversely affecting
the business or affairs of the Company in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Company may consider as grounds for the dismissal or discharge of any
Participant or other person in the Company's service.

SECTION 8. PROVISION OF INFORMATION.

      At least annually, copies of the Company's balance sheet and income
statement for the just completed fiscal year shall be made available to each
Participant.

<PAGE>

SECTION 9. TERMINATION OR AMENDMENT OF PLAN.

      The Plan shall terminate ten (10) years from its effective date. The Board
may terminate or amend the Plan at any time. No termination or amendment of the
Plan shall affect any then outstanding Award unless expressly provided by the
Board.

SECTION 10. REPURCHASE AND FIRST REFUSAL RIGHTS.

10.1 REPURCHASE RIGHTS. Should the Participant cease to be employed by or
provide services to the Company while holding one or more shares of Stock issued
pursuant to the exercise of an Option granted under this Plan or pursuant to a
Stock Award under the Plan, then those shares, to the extent any Restricted
Shares are no longer subject to forfeiture, shall be subject to repurchase by
the Company, at the Company's sole discretion, at the Fair Market Value of such
shares on the date of such repurchase and the Participant shall have no further
stockholder rights with respect to those shares. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise) shall be established by the Board.

10.2 FIRST REFUSAL RIGHTS. If imposed in the agreement, the Company shall have
the right of first refusal with respect to any proposed sale or other
disposition by the holder of any shares of Stock issued pursuant to an Award
granted under the Plan. Such right of first refusal shall be exercisable in
accordance with terms and conditions established by the Board.

SECTION 11. MISCELLANEOUS PROVISIONS.

11.1 NO RIGHTS OF STOCKHOLDER. Prior to the date on which an Option is
exercised, neither the Participant, nor a Beneficiary or any other successor in
interest will be, or will have any of the rights and privileges of, a
stockholder with respect to any Stock issuable upon the exercise of such Option.

11.2 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained herein shall be deemed
to give any person any right to employment by the Company or by a Participating
Company, or to interfere with the right of the Company or a Participating
Company to discharge any person at any time without regard to the effect that
such discharge will have upon such person's rights or potential rights, if any,
under the Plan. The provisions of the Plan are in addition to, and not a
limitation on, any rights a Participant may have against the Company or a
Participating Company by reason of any employment or other agreement with the
Company or a Participating Company.

11.3 SEVERABILITY. If any provision of this Plan is held to be illegal or
invalid for any reason, the remaining provisions are to remain in full force and
effect and are to be construed and enforced in accordance with the purposes of
the Plan as if the illegal or invalid provision or provisions did not exist.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]