Document:

Exhibit 10.1

BLUE
RIDGE PAPER PRODUCTS INC.

ANNUAL PERFORMANCE and SALES INCENTIVE PLAN

 

(Participant Name)

TARGET INCENTIVE
(% OF BASE SALARY):  %

PAYOUT PERIOD
(check appropriate boxes):

o            QUARTERLY

o            SEMI-ANNUAL

o            ANNUAL

JANUARY 1, 2006 THROUGH
DECEMBER 31, 2006

This
document contains confidential information for use only within Blue Ridge Paper
Products Inc. The reproduction or distribution of this document, either
electronically or in hard copy, without the prior approval of the
Vice-President of Human Resources of Blue Ridge Paper Products Inc. is strictly
prohibited.

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PURPOSE

The Annual Performance
Incentive Plan (PIP Plan) and Sales Incentive Plan (SIP) is designed to provide
incentive compensation to individuals who make an important contribution to the
Company’s performance. Specific Plan objectives are to:

1)              Reward selected
individuals for enhancing shareholder value by creating a strong linkage of pay
to performance, and achievement of Company and business objectives;

2)              Attract, motivate
and retain highly talented and competent individuals by providing a competitive
range of performance based payout opportunities; and

3)              Provide significant
financial award potential for achieving outstanding performance.

The Blue Ridge PIP/SIP
Plan is an integral part of each participants total compensation package, and
when combined with base salary, results in incentive opportunities that are an
important component of your total compensation and benefits package.

GENERAL
PLAN DESCRIPTION

The Plan provides the opportunity
for selected individuals to receive cash awards based on achievement of
significant goals and objectives during the relevant period that are
aligned with overall corporate goals and objectives. Incentive award
opportunities are expressed as a percent of base salary and may be earned by a
Participant provided the Participant achieves the agreed upon goals and
objectives within the relevant time frame, subject to Plan Administration
guidelines herein.

At the beginning of, or
during, the Plan year, certain key employees may be selected to participate in
the Plan. Participation in the Plan is subject to approval by the CEO. Such
approval must be obtained prior to offering the opportunity to participate in
the Plan to any employee or applicant for employment.

Each participant will be
informed of his/her target incentive award, expressed as a percent of salary,
and the individual and their immediate supervisor will agree upon the goals and
objectives for that individual to achieve in the relevant period, whether those
be quarterly, semi-annual or annual, or a combination of each. Within ninety
(90) days of the beginning of each calendar year, an “Award Grid” for the
relevant year will be published.

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For the year 2006, the
Award Grid will be based on the Company’s EBITDA performance in the relevant
period. The grid will be used to determine the payout multiple for which
participants are eligible during the relevant time period. Attached to this
document are the relevant Award Grids for 2006.

PLAN
DESIGN AND OPERATION

Corporate Officers will
recommend to the CEO and VP-Human Resources (HR), those positions, and
incumbents in those positions, within their respective business units, that
have a significant impact on the operating success of their organization. Factors
such as salary grade, level of financial responsibility, ability to impact
results, ability to establish objectively measurable goals for the position,
etc. will be considered in making those recommendations. The final decision as
to whether a particular individual will be selected as a Plan Participant
resides with the CEO and VP-HR. Once selected, employees will be notified in
writing of their selection as a participant in the Plan.

I.                                         Prior
to the beginning of the relevant period.

Prior to, or as soon as
possible after the beginning of the relevant period, each Participant will,
with the approval of his/her immediate supervisor, establish performance
objectives and goals that warrant incentive compensation. Such goals and
objectives should be specific, measurable, achievable in the requisite time
frame, and require effort above and beyond that required for the individual to
perform the essential functions of the position.  Personal professional goals, such as career
development activities are not to be included in this program.

Goals and objectives
established under the Plan shall be in alignment with overall Company and
business unit, goals and objectives, and will include performance in variables
and measures such as SAFETY, Quality, Cost, Productivity, Sales Volume, etc.,
as appropriate.

Continuous improvement
activities, such as 6 Sigma, Lean Manufacturing, or EBITDA Enhancement project
projects should also be considered. Such goals and objectives should be
essentially within the ability of the individual to influence the achievement
of those goals.

Each agreed upon goal
should be assigned a relative weighting for the period, and the sum of the
weighting of all goals/objectives will equal 100%. This should be communicated
with the Participant at the beginning of the period.

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II.                                     At
the conclusion of the relevant period.

Each supervisor of a
Participant will review whether such goals and objectives were achieved at the
conclusion of the relevant time frame, and evaluate the effectiveness of the individual’s
achievement of those goals, using the following rating scale (refer to
Incentive Award Grid attachment):

4.               Outstanding—
the individual’s results demonstrably exceed the Superior level with
performance exceeding all goals and expectations. Achieving this level of
performance requires significant “stretch”.

3.               Superior—the
accomplishment of goals for the period with as good or better than expected
results, and generally requires considerable effort above and beyond the
completion of essential functions of the position. Most goals are met or
surpassed.

2.               Acceptable—performance
demonstrates progress relative to goals in the short term and on a year-to-year
comparative basis, but still falls below the Superior level. Performance at
level requiring little “stretch.”

1.               Marginal—performance
judged minimally acceptable in the short term, is unacceptable in the
longer-term and requires corrective action. Overall performance at this level
results in no payout.

A Sample Payout
Calculation is attached to aid you in calculating the payout for an individual
Participant.

Incentive Awards will
normally be distributed as soon as practical following the end of the relevant
time frame, which is either quarterly, semi-annually or annually. Such time
depends on the filing of Company results with the SEC, and determination of
whether the Company’s financial performance justifies the payment of incentive
awards for that time frame.

PLAN ADMINISTRATION

The Plan shall be
administered jointly by the VP-HR and the CEO, whose decisions are final. The
VP-HR will be responsible for the administrative procedures governing the Plan,
including ensuring that each Participant is informed and understands the
operation of the Plan and their individual responsibilities under the Plan. Each
Corporate Officer shall submit appropriate documentation to the CEO reflecting
the proposed incentive award for the eligible participants in their respective
business units. Such documentation will include the proposed payout for each
individual and be signed by the responsible Corporate Officer confirming that
each Participant did in fact earn the proposed incentive award.

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The following
administrative procedures govern the operation of the Plan:

1. All individual payouts
are subject to approval by the CEO.

2. Incentive awards will
be made in cash, by separate check, with applicable payroll deductions.

3. A new Participant who
begins participation during the Incentive Year may be eligible for a pro-rata
incentive award from the date of entry into the Plan, provided such
participation is for at least one calendar quarter.

4. In case of death,
total disability or retirement under a BRPP retirement plan, a pro-rata
incentive award can be made.

5. A Participant who is
terminated and who subsequently received severance pay under a BRPP severance
plan may be eligible for a pro-rata incentive award. Management will determine
the amount of the pro-rata incentive award based upon the facts and
circumstances related to the participant’s termination as well as the amount of
time actively employed during the Incentive period.

6. Any Participant who
resigns or is terminated during the relevant Incentive period (except as
provided above), or prior to the payment of awards for that period, will not be
entitled to any incentive award attributable to that Incentive period.

7. Any Participant who
violates the Company’s Code of Conduct shall forfeit any claim to unpaid
Incentive award(s).

8. BRPP reserves the
right to offset any funds to which it has a “claim of right” from any incentive
award due a terminating or terminated Participant.

9. Nothing herein shall
be construed as an agreement or commitment to employ any Participant or to
employ a Participant for any fixed period of time, or constitute a commitment
by BRPP that any Participant will continue to receive an incentive award or
will continue as a Participant in the Plan. No Participant or his/her legal
representatives, beneficiaries, or heirs will have any right or interest in the
Plan or in its continuance, or in the Participant’s continued participation in
the Plan.

10. BRPP reserves the
right to amend or terminate the Plan at any time, without prior notice to any
Participant.

11. Incentive Awards will
normally be distributed as soon as practical following the end of the relevant
time frame, which is either quarterly, semi-annually or annually.

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DEFINITIONS

1. Base Salary—shall mean base salary,
including overtime (if applicable) earned
by the Participant during the relevant Plan time frame, and shall not include
premiums, allowances, expense reimbursements, commissions, incentives, notice,
severance, or termination pay.

2. EBITDA—Earnings Before Interest, Taxes,
Depreciation, and Amortization.

3. Exclusions means the automatic exclusion of
the following from relevant financial data for purposes of measuring corporate
performance:

·                  Extraordinary
or unusual charges (GAAP definition)

·                  Changes
in generally accepted accounting (GAAP) principles

·                  Gains
or losses from discontinued operations (GAAP) definition

·                  Restructuring
charges

·                  Any
other extraordinary or unusual changes that are quantified and identified
separately on the face of the Income Statement for the relevant time frame.

4. Relevant period—shall mean the time frame
during which Participant’s goals and accomplishments of same are measured for
the purposes of determining whether an incentive award has been earned and can
be recommended. There are 3 relevant time frames:

·                  Quarterly

·                  Semi-Annual

·                  Annual

Supervisors and
Participant’s may agree to have goals established to be accomplished in various
time frames during the year. In such cases, the Supervisor must calculate
earned payouts for the relevant time frame by utilizing the appropriate payout
grid.

5. Participant in the Plan shall mean any
individual designated by Corporate Officers of the Company and approved by the
CEO.

6. Total Disability is as defined under the
BRPP Long Term Disability (LTD) Plan.

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Sample calculation of an incentive award

Assumptions:  Participant’s base salary is $50,000 and
he/she is in 10% target incentive category, and has 4 goals to
accomplish during the 1st quarter and EBITDA for the quarter is less
than $7.0 million. NOTE: The same methodology applies to semi-annual, or annual
goals. Be sure to use the correct payout calculation grid.

Step 1: Rate the
Participant’s performance against each goal for that period, using the rating
definitions in Section II of the Plan, and weight each goal relative to
its importance/impact in the period:

Goal #1: Rating =  “3.0”, with
20% weight =     .6

Goal #2: Rating =  “2.5”, with
20% weight =     .5

Goal #3: Rating =  “3.5”, with
30% weight = 1.05

Goal #4: Rating =  “2.5”, with 30%
weight =   .75

100%

Overall rating = sum of individual ratings   =  2.9

Step 2. Refer to the
appropriate PIP Grid for that Participant, which is either quarterly,
semi-annual, or annual.

Step 3. The percent
payout for the rating earned by the individual in this example is 1.50%. 

(2.9 rating, with <$7.0M EBITDA, 1st Qtr. = 1.50% payout.)

Step 4. Multiply the %
Payout times the individual’s annual salary and that will be the dollar amount
of the Participant’s payout for that period. Here’s the payout for the
individual in the example:  1.50% X
$50,000 = $750.

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Please comply with the
following Acknowledgement and return it (hard copy) promptly to the Vice
President-Human Resources at the following address:

Darrell Douglas

VP-Human Resources

41 Main Street

Canton,
NC 28716

ACKNOWLEDGEMENT

By signing below, you
acknowledge that you have read and fully understand the foregoing Blue Ridge
Paper Products Inc. Annual Performance and Sales Incentive Plan, including the
administrative procedures governing the Plan. You further acknowledge that you
are in agreement with and accept all of the terms, conditions, and provisions
contained herein.

Name (Printed):
_______________________________________

Name (signature):
_____________________________________

Date: _______________________________________________

 8Exhibit 10.1

ADVANCED
MAGNETICS, INC.

AMENDED AND
RESTATED 2000 STOCK PLAN

1.     Purpose and Eligibility

The purpose of
this Amended and Restated 2000 Stock Plan (the “Plan”) of Advanced
Magnetics, Inc. (the “Company”) is to provide stock options and
other equity interests in the Company (each an “Award”) to employees,
officers, directors, consultants and advisors of the Company and its
Subsidiaries, all of whom are eligible to receive Awards under the Plan. Any
person to whom an Award has been granted under the Plan is called a “Participant.”  Additional definitions are contained in Section 8.

2.     Administration

(a)  Administration by Board of Directors. The
Plan will be administered by the Board of Directors of the Company (the “Board”).
The Board, in its sole discretion, shall have the authority to grant and amend
Awards, to adopt, amend and repeal rules relating to the Plan and to
interpret and correct the provisions of the Plan and any Award. All decisions
by the Board shall be final and binding on all interested persons. Neither the
Company nor any member of the Board shall be liable for any action or
determination relating to the Plan.

(b)  Appointment of Committees. To the
extent permitted by applicable law, the Board may delegate any or all of its
powers under the Plan to one or more committees or subcommittees of the Board
(a “Committee”). All references in the Plan to the “Board” shall
mean such Committee or the Board.

(c)  Delegation to Executive Officers. To
the extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to grant Awards and exercise such
other powers under the Plan as the Board may determine; provided
that the Board shall fix the maximum number of Awards to be granted
and the maximum number of shares issuable to any one Participant pursuant to
Awards granted by such executive officers.

3.     Stock Available for Awards

(a)  Number of Shares. Subject to adjustment
under Section 3(c), the aggregate number of shares of common stock, par
value $0.01 per share, of the Company (the “Common Stock”)  that may be issued pursuant to the Plan is
2,000,000 shares. If any Award expires, or is terminated, surrendered or
forfeited, in whole or in part, the unissued Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. If shares of
Common Stock issued pursuant to the Plan are repurchased by, or are surrendered
or forfeited to, the Company at no more than cost, such shares of Common Stock
shall again be available for the grant of Awards under the Plan; provided, however, that the cumulative number of such shares
that may be so reissued under the Plan will not exceed 2,000,000 shares. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.

(b)  Per-Participant Limit. Subject to
adjustment under Section 3(c), no Participant may be granted Awards during
any one fiscal year to purchase more than 500,000 shares of Common Stock.

(c)  Adjustment to Common Stock. In the
event of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off,
split-up, or other similar change in capitalization or event, (i) the
number and class of securities available for Awards under the Plan and the
per-Participant share limit, (ii) the number and class of securities,
vesting schedule and exercise price per share subject to each outstanding
Option, (iii) the repurchase price per security subject to repurchase, and
(iv) the terms of each other outstanding stock-based Award shall be
adjusted by the Company (or substituted Awards may be made) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is appropriate. If Section 7(e)(i) applies for any event, this Section 3(c) shall
not be applicable.

4.     Stock Options

(a)  General. The Board may grant options to
purchase Common Stock (each, an “Option”) and determine the number of
shares of Common Stock to be covered by each Option, the exercise price of each
Option and the conditions and limitations applicable to the exercise of each
Option and the Common Stock issued upon the exercise of each Option, including
vesting provisions, repurchase provisions and restrictions relating to
applicable federal or state securities laws, as it considers advisable.

(b)  Incentive Stock Options. An Option that
the Board intends to be an “incentive stock option” as defined in Section 422
of the Code (an “Incentive Stock Option”) shall be granted only to
employees of the Company and shall be subject to and shall be construed
consistently with the requirements of Section 422 of the Code. The Board
and the Company shall have no liability if an Option or any part thereof that
is intended to be an Incentive Stock Option does not qualify as such. An Option
or any part thereof that does not qualify as an Incentive Stock Option is
referred to herein as a “Nonqualified Stock Option”.

(c)  Exercise Price. The Board shall
establish the exercise price (or determine the method by which the exercise
price shall be determined) at the time each Option is granted and specify it in
the applicable option agreement.

(d)  Duration of Options. Each Option shall
be exercisable at such times and subject to such terms and conditions as the
Board may specify in the applicable option agreement.

(e)  Exercise of Option. Options may be
exercised only by delivery to the Company of a written notice of exercise
signed by the proper person together with payment in full as specified in Section 4(f) for
the number of shares for which the Option is exercised.

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(f)   Payment Upon Exercise. Common Stock
purchased upon the exercise of an Option shall be paid for by one or any
combination of the following forms of payment:

(i)           by check payable to the order of the
Company;

(ii)          except as otherwise explicitly
provided in the applicable option agreement, and only if the Common Stock is
then publicly traded, delivery of an irrevocable and unconditional undertaking
by a creditworthy broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or delivery by the Participant to the Company of a copy
of irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price; or

(iii)         to the extent explicitly provided in
the applicable option agreement, by (x) delivery of shares of Common Stock
owned by the Participant valued at fair market value (as determined by the
Board or as determined pursuant to the applicable option agreement), (y) delivery
of a promissory note of the Participant to the Company (and delivery to the
Company by the Participant of a check in an amount equal to the par value of
the shares purchased), or (z) payment of such other lawful consideration
as the Board may determine.

5.     Restricted Stock

(a)  Grants. The Board may grant Awards
entitling recipients to acquire shares of Common Stock, subject to (i) delivery
to the Company by the Participant of a check in an amount at least equal to the
par value of the shares purchased, and (ii) the right of the Company to
repurchase all or part of such shares at their issue price or other stated or
formula price from the Participant in the event that conditions specified by
the Board in the applicable Award are not satisfied prior to the end of the
applicable restriction period or periods established by the Board for such
Award (each, a “Restricted Stock Award”).

(b)  Terms and Conditions. The Board shall
determine the terms and conditions of any such Restricted Stock Award. Any
stock certificates issued in respect of a Restricted Stock Award shall be
registered in the name of the Participant and, unless otherwise determined by
the Board, deposited by the Participant, together with a stock power endorsed
in blank, with the Company (or its designee). After the expiration of the
applicable restriction periods, the Company (or such designee) shall deliver
the certificates no longer subject to such restrictions to the Participant or,
if the Participant has died, to the beneficiary designated by a Participant, in
a manner determined by the Board, to receive amounts due or exercise rights of
the Participant in the event of the Participant’s death (the “Designated
Beneficiary”). In the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant’s estate.

6.     Other Stock-Based Awards

The Board shall
have the right to grant other Awards based upon the Common Stock having such
terms and conditions as the Board may determine, including, without limitation,
the grant of shares based upon certain conditions, the 

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grant of securities
convertible into Common Stock and the grant of stock appreciation rights,
phantom stock awards or stock units.

7.     General Provisions Applicable to Awards

(a)  Transferability of Awards. Except as
the Board may otherwise determine or provide in an Award, Awards shall not be
sold, assigned, transferred, pledged or otherwise encumbered by the person to
whom they are granted, either voluntarily or by operation of law, except by
will or the laws of descent and distribution, and, during the life of the
Participant, shall be exercisable only by the Participant. References to a
Participant, to the extent relevant in the context, shall include references to
authorized transferees.

(b)  Documentation. Each Award under the
Plan shall be evidenced by a written instrument in such form as the Board shall
determine or as executed by an officer of the Company pursuant to authority
delegated by the Board. Each Award may contain terms and conditions in addition
to those set forth in the Plan; provided that
such terms and conditions do not contravene the provisions of the Plan.

(c)  Board Discretion. The terms of each
type of Award need not be identical, and the Board need not treat Participants
uniformly.

(d)  Termination of Status. The Board shall
determine the effect on an Award of the disability, death, retirement,
authorized leave of absence or other change in the employment or other status
of a Participant and the extent to which, and the period during which, the
Participant, or the Participant’s legal representative, conservator, guardian
or Designated Beneficiary, may exercise rights under the Award.

(e)  Acquisition of the Company

(i)           Consequences of an Acquisition.

Unless otherwise
expressly provided in the applicable Option or Award, upon the occurrence of an
Acquisition, the Board or the board of directors of the surviving or acquiring
entity (as used in this Section 7(e)(i), also the “Board”), shall, as
to outstanding Awards (on the same basis or on different bases, as the Board
shall specify), make appropriate provision for the continuation of such
Awards by the Company or the assumption of such Awards by the surviving or
acquiring entity and by substituting on an equitable basis for the shares then
subject to such Awards either (a) the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares
of stock of the surviving or acquiring corporation or (c) such other
securities as the Board deems appropriate, the fair market value of which (as
determined by the Board in its sole discretion) shall not materially differ
from the fair market value of the shares of Common Stock subject to such Awards
immediately preceding the Acquisition. In
addition to or in lieu of the foregoing, with respect to outstanding Options,
the Board may, upon written notice to the affected optionees, provide that one
or more Options then outstanding shall become immediately exercisable in full
and that such Options must be

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exercised
within a specified number of days of the date of such notice, at the end of
which period such Options shall terminate; or provide that one or more Options
then outstanding shall become immediately exercisable in full and shall be
terminated in exchange for a cash payment equal to the excess of the fair
market value (as determined by the Board in its sole discretion) for the shares
subject to such Options over the exercise price thereof.

An “Acquisition”
shall mean: (x) the sale of the Company by merger in which the
stockholders of the Company in their capacity as such no longer own a majority
of the outstanding equity securities of the Company (or its successor); or (y) any
sale of all or substantially all of the assets or capital stock of the Company
(other than in a spin-off or similar transaction) or (z) any other
acquisition of the business of the Company, as determined by the Board.

(ii)          Assumption of Options Upon Certain
Events. In connection with a merger or consolidation of an entity with the
Company or the acquisition by the Company of property or stock of an entity,
the Board may grant Awards under the Plan in substitution for stock and
stock-based awards issued by such entity or an affiliate thereof. The
substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances.

(iii)         Parachute Awards.
Notwithstanding the provisions of Section 7(e)(i), if, in connection with
an Acquisition described therein, a tax under Section 4999 of the Code
would be imposed on the Participant (after taking into account the exceptions
set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code), then
the number of Awards which shall become exercisable, realizable or vested as
provided in such section shall be reduced (or delayed), to the minimum extent
necessary, so that no such tax would be imposed on the Participant (the Awards
not becoming so accelerated, realizable or vested, the “Parachute Awards”);
provided, however, that if the “aggregate
present value” of the Parachute Awards would exceed the tax that, but for
this sentence, would be imposed on the Participant under Section 4999 of
the Code in connection with the Acquisition, then the Awards shall become
immediately exercisable, realizable and vested without regard to the provisions
of this sentence. For purposes of the preceding sentence, the “aggregate
present value” of an Award shall be calculated on an after-tax basis (other
than taxes imposed by Section 4999 of the Code) and shall be based on
economic principles rather than the principles set forth under Section 280G
of the Code and the regulations promulgated thereunder. All determinations
required to be made under this Section 7(e)(iii) shall be made by the
Company.

(f)   Withholding. Each Participant shall
pay to the Company, or make provisions satisfactory to the Company for payment
of, any taxes required by law to be withheld in connection with Awards to such
Participant no later than the date of the event creating the tax liability. The
Board may allow Participants to satisfy such tax obligations in whole or in
part by transferring shares of Common Stock, including shares retained from the
Award creating the tax obligation, valued at their fair market value (as
determined by the Board or as determined pursuant to the applicable option
agreement). The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to a Participant.

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(g)  Amendment of Awards. The Board may
amend, modify or terminate any outstanding Award including, but not limited to,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization, and converting an Incentive Stock Option
to a Nonqualified Stock Option; provided that, the
Participant’s consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

(h)  Conditions on Delivery of Stock. The
Company will not be obligated to deliver any shares of Common Stock pursuant to
the Plan or to remove restrictions from shares previously delivered under the
Plan until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company’s counsel,
all other legal matters in connection with the issuance and delivery of such
shares have been satisfied, including any applicable securities laws and any
applicable stock exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements
of any applicable laws, rules or regulations.

(i)   Acceleration. The Board may at any
time provide that any Options shall become immediately exercisable in full or
in part, that any Restricted Stock Awards shall be free of some or all
restrictions, or that any other stock-based Awards may become exercisable in
full or in part or free of some or all restrictions or conditions, or otherwise
realizable in full or in part, as the case may be, despite the fact that the
foregoing actions may (i) cause the application of Sections 280G and 4999
of the Code if a change in control of the Company occurs, or (ii) disqualify
all or part of the Option as an Incentive Stock Option.

8.     Miscellaneous

(a)  Definitions.

(i)           “Company” for purposes of
eligibility under the Plan, shall include any present or future subsidiary
corporations of Advanced Magnetics, Inc., as defined in Section 424(f) of
the Code (a “Subsidiary”), and any present or future parent corporation
of Advanced Magnetics, Inc., as defined in Section 424(e) of the
Code. For purposes of Awards other than Incentive Stock Options, the term “Company”
shall include any other business venture in which the Company has a direct or
indirect significant interest, as determined by the Board in its sole
discretion.

(ii)          “Code” means the Internal Revenue
Code of 1986, as amended, and any regulations promulgated thereunder.

(iii)         “employee” for purposes of
eligibility under the Plan (but not for purposes of Section 4(b)) shall
include a person to whom an offer of employment has been extended by the Company.

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(b)  No Right To Employment or Other Status.
No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to
continued employment or any other relationship with the Company. The Company
expressly reserves the right at any time to dismiss or otherwise terminate its
relationship with a Participant free from any liability or claim under the
Plan.

(c)  No Rights As Stockholder. Subject to
the provisions of the applicable Award, no Participant or Designated
Beneficiary shall have any rights as a stockholder with respect to any shares
of Common Stock to be distributed with respect to an Award until becoming the
record holder thereof.

(d)  Effective Date and Term of Plan. Subject
to the approval of the stockholders of the Company, the Plan shall be effective
as of the date on which it was adopted by the Board. No Awards shall be granted
under the Plan after the completion of ten years from the date on which the
Plan was adopted by the Board, but Awards previously granted may extend beyond
that date.

(e)  Amendment of Plan. The Board may amend,
suspend or terminate the Plan or any portion thereof at any time.

(f)   Governing Law. The provisions of the
Plan and all Awards made hereunder shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.

(g)  Application. Notwithstanding the
foregoing, it is intended that all Awards granted hereunder shall be excluded
from the application of Section 409A of the Code and if any provision of
this Plan or any Award hereunder is subject to Section 409A of the Code,
the Plan or Award shall be modified in order to achieve such intent.

Adopted by the Board of Directors on

November 15, 2005, subject to Stockholder

approval

To be Voted Upon by the Stockholders on

February 7, 2006.

 7

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