Document:

EX-4.2
                           STOCK INCENTIVE PLAN

                           FREESTAR TECHNOLOGIES
                           STOCK INCENTIVE PLAN

     1.  GENERAL PROVISIONS.

     1.1  Purpose.

     The Freestar Technologies Stock Incentive Plan ("Plan") is
intended
to allow designated directors, officers, employees, and certain non-
employees (all of whom are sometimes collectively referred to herein as
"Employees") of Freestar Technologies, a Nevada corporation
("Freestar")
and its Subsidiaries (as that term is defined below) which it may have
from time to time (Freestar and such Subsidiaries are referred to
herein
as the "Company") to receive certain options ("Stock Options") to
purchase Freestar's common stock, one tenth of one cent ($0.001) par
value ("Common Stock"), and to receive grants of Common Stock  subject
to
certain restrictions ("Awards").  As used in this Plan, the term
"Subsidiary" shall mean each corporation which is a "subsidiary
corporation" of Freestar within the meaning of Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code").  The purpose of
this Plan is to provide Employees with equity-based compensation
incentives to make significant and extraordinary contributions to the
long-term performance and growth of the Company, and to attract and
retain Employees of exceptional ability.

     1.2  Administration.

     1.2.1  The Plan shall be administered by the Compensation
Committee
(the "Committee") of, or appointed by, the Board of Directors of
Freestar
(the "Board").  The Committee shall select one of its members as
Chairman
and shall act by vote of a majority of a quorum, or by unanimous
written
consent.  A majority of its members shall constitute a quorum.  The
Committee shall be governed by the provisions of Freestar's Bylaws and
of
Nevada law applicable to the Board, except as otherwise provided herein
or determined by the Board.

     1.2.2  The Committee shall have full and complete authority, in
its
discretion, but subject to the express provisions of the Plan:  to
approve the Employees nominated by the management of the Company to be
granted Awards or Stock Options; to determine the number of Awards or
Stock Options to be granted to an Employee; to determine the time or
times at which Awards or Stock Options shall be granted; to establish
the
terms and conditions upon which Awards or Stock Options may be
exercised;
to remove or adjust any restrictions and conditions upon Awards or
Stock
Options; to specify, at the time of grant, provisions relating to
exercisability of Stock Options and to accelerate or otherwise modify
the
exercisability of any Stock Options; and to adopt such rules and regu-
lations and to make all other determinations deemed necessary or
desirable for the administration of the Plan.  All interpretations and
constructions of the Plan by the Committee, and all of its actions
hereunder, shall be binding and conclusive on all persons for all
purposes.

     1.2.3  The Company hereby agrees to indemnify and hold harmless
each
Committee member and each Employee of the Company, and the estate and
heirs of such Committee member or Employee, against all claims,
liabilities, expenses, penalties, damages or other pecuniary losses,
including legal fees, which such Committee member or Employee, his or
her
estate or heirs may suffer as a result of his or her responsibilities,
obligations or duties in connection with the Plan, to the extent that
insurance, if any, does not cover the payment of such items.  No member
of the Committee or the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Award
or
Stock Option granted pursuant to the Plan.

     1.3  Eligibility and Participation.

     Employees eligible under the Plan shall be approved by the
Committee
from those Employees who, in the opinion of the management of the
Company, are in positions which enable them to make significant and
extraordinary contributions to the long-term performance and growth of
the Company.  In selecting Employees to whom Stock Options or Awards
may
be granted, consideration shall be given to factors such as employment
position, duties and responsibilities, ability, productivity, length of
service, morale, interest in the Company and recommendations of
supervisors.

     1.4  Shares Subject to the Plan.

     The maximum number of shares of Common Stock that may be issued
pursuant to the Plan shall be Fifteen Million (15,000,000) subject to
adjustment pursuant to the provisions of paragraph 4.1.  If shares of
Common Stock awarded or issued under the Plan are reacquired by the
Company due to a forfeiture or for any other reason, such shares shall
be
cancelled and thereafter shall again be available for purposes of the
Plan.  If a Stock Option expires, terminates or is cancelled for any
reason without having been exercised in full, the shares of Common
Stock
not purchased thereunder shall again be available for purposes of the
Plan.

     2.  PROVISIONS RELATING TO STOCK OPTIONS.

     2.1  Grants of Stock Options.

     The Committee may grant Stock Options in such amounts, at such
times, and to such Employees nominated by the management of the Company
as the Committee, in its discretion, may determine.   Stock Options
granted under the Plan shall constitute "incentive stock options"
within
the meaning of Section 422 of the Code, if so designated by the
Committee
on the date of grant.  The Committee shall also have the discretion to
grant Stock Options which do not constitute incentive stock options,
and
any such Stock Options shall be designated non-statutory stock options
by
the Committee on the date of grant.  The aggregate fair market value
(determined as of the time an incentive stock option is granted) of the
Common Stock with respect to which incentive stock options are exercis-
able for the first time by any Employee during any one calendar year
(under all plans of the Company and any parent or subsidiary of the
Company) may not exceed the maximum amount permitted under Section 422
of
the Code (currently one hundred thousand dollars ($100,000.00)).  Non-
statutory stock options shall not be subject to the limitations
relating
to incentive stock options contained in the preceding sentence.  Each
Stock Option shall be evidenced by a written agreement (the "Option
Agreement") in a form approved by the Committee, which shall be
executed
on behalf of the Company and by the Employee to whom the Stock Option
is
granted, and which shall be subject to the terms and conditions of this
Plan.  In the discretion of the Committee, Stock Options may include
provisions (which need not be uniform), authorized by the Committee in
its discretion, that accelerate an Employee's rights to exercise Stock
Options following a "Change in Control," as such term is defined in
paragraph 3.1 hereof.  The holder of a Stock Option shall not be
entitled
to the privileges of stock ownership as to any shares of Common Stock
not
actually issued to such holder.

     2.2  Purchase Price.

     The purchase price (the "Exercise Price") of shares of Common
Stock
subject to each non-statutory Stock Option ("Option Shares") shall be
equal to whatever price is established by the Committee, in its sole
discretion, on the date of the grant.  The Exercise Price of incentive
Stock Options shall be the fair market value of the options on the date
of the grant thereof.  For an Employee holding stock possessing more
than
ten percent (10%) percent of the total combined voting power of all
classes of stock of the Company, the Exercise Price of an incentive
Stock Option shall be at least one hundred ten percent (110%) of the
fair market value of the Common Stock and such option.

     2.3  Option Period.

     The Stock Option period (the "Term") shall commence on the date of
grant of the incentive Stock Option and shall be ten (10) years or such
shorter period as is determined by the Committee; the Term for an
incentive Stock Option granted to an Employee holding stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company shall be five (5) years from the date
such option is granted.  The Term for Non-statutory Stock Options shall
be whatever period, if any, is set by the Board.  Each Stock Option
shall
provide that it is exercisable over its term in such periodic
installments as the Committee in its sole discretion may determine.
Such
provisions need not be uniform.  Notwithstanding the foregoing, but
subject to the provisions of paragraphs 1.2.2 and 2.1, Stock Options
granted to Employees who are subject to the reporting requirements of
Section 16(a) of the Exchange Act ("Section 16 Reporting Persons")
shall
not be exercisable until at least six (6) months and one day from the
date the Stock Option is granted.

     2.4  Exercise of Options.

     2.4.1  Each Stock Option may be exercised in whole or in part (but
not
as to fractional shares) by delivering it for surrender or endorsement
to
the Company, attention of the Corporate Secretary, at the principal
office of the Company, together with payment of the Exercise Price and
an
executed Notice and Agreement of Exercise in the form prescribed by
paragraph 2.4.2.  Payment may be made (i) in cash, (ii) by cashier's or
certified check, (iii) by surrender of previously owned shares of the
Company's Common Stock valued pursuant to paragraph 2.2 (if the
Committee
authorizes payment in stock in its discretion), (iv) by withholding
from
the Option Shares which would otherwise be issuable upon the exercise
of
the Stock Option that number of Option Shares equal to the exercise
price
of the Stock Option, if such withholding is authorized by the Committee
in its discretion, (v) in the discretion of the Committee, by the
delivery to the Company of the optionee's promissory note secured by
the
Option Shares, bearing interest at a rate sufficient to prevent the
imputation of interest under Sections 483 or 1274 of the Code, and
having
such other terms and conditions as may be satisfactory to the
Committee,
or (vi) cashless exercise program as established by Freestar.

     2.4.2  Exercise of each Stock Option is conditioned upon the
agreement
of the Employee to the terms and conditions of this Plan and of such
Stock Option as evidenced by the Employee's execution and delivery of a
Notice and Agreement of Exercise in a form to be determined by the
Committee in its discretion.  Such Notice and Agreement of Exercise
shall
set forth the agreement of the Employee that:  (a) no Option Shares
will
be sold or otherwise distributed in violation of the Securities Act of
1933 (the "Securities Act") or any other applicable federal or state
securities laws, (b) each Option Share certificate may be imprinted
with
legends reflecting any applicable federal and state securities law
restrictions and conditions, (c) the Company may comply with said
securities law restrictions and issue "stop transfer" instructions to
its
Transfer Agent and Registrar without liability, (d) if the Employee is
a
Section 16 Reporting Person, the Employee will furnish to the Company a
copy of each Form 4 or Form 5 filed by said Employee and will timely
file
all reports required under federal securities laws, and (e) the
Employee
will report all sales of Option Shares to the Company in writing on a
form prescribed by the Company.

     2.4.3  No Stock Option shall be exercisable unless and until any
applicable registration or qualification requirements of federal and
state securities laws, and all other legal requirements, have been
fully
complied with.  The Company will use reasonable efforts to maintain the
effectiveness of a Registration Statement under the Securities Act for
the issuance of Stock Options and shares acquired thereunder, but there
may be times when no such Registration Statement will be currently
effective.  The exercise of Stock Options may be temporarily suspended
without liability to the Company during times when no such Registration
Statement is currently effective, or during times when, in the
reasonable
opinion of the Committee, such suspension is necessary to preclude
violation of any requirements of applicable law or regulatory bodies
having jurisdiction over the Company.  If any Stock Option would expire
for any reason except the end of its term during such a suspension,
then
if exercise of such Stock Option is duly tendered before its
expiration,
such Stock Option shall be exercisable and exercised (unless the
attempted exercise is withdrawn) as of the first day after the end of
such suspension.  The Company shall have no obligation to file any
Registration Statement covering resales of Option Shares.

     2.5  Restrictions on Transfer.

     Each Stock Option granted under this Plan shall be transferable
only
by will or the laws of descent and distribution.  No interest of any
Employee under the Plan shall be subject to attachment, execution,
garnishment, sequestration, the laws of bankruptcy or any other legal
or
equitable process.  Each Stock Option granted under this Plan shall be
exercisable during an Employee's lifetime only by such Employee or by
such Employee's legal representative.

     3.  PROVISIONS RELATING TO AWARDS.

     3.1  Grant of Awards.

     Subject to the provisions of the Plan, the Committee shall have
full
and complete authority, in its discretion, but subject to the express
provisions of this Plan, to (i) grant Awards pursuant to the Plan, (ii)
determine the number of shares of Common Stock subject to each Award
("Award Shares"), (iii) determine the terms and conditions (which need
not be identical) of each Award, including the consideration (if any)
to
be paid by the Employee for such Common Stock, which may, in the
Committee's discretion, consist of the delivery of the Employee's
promissory note meeting the requirements of paragraph 2.4.1, (iv)
establish and modify performance criteria for Awards, and (v) make all
of
the determinations necessary or advisable with respect to Awards under
the Plan.  Each award under the Plan shall consist of a grant of shares
of Common Stock subject to a restriction period (after which the
restrictions shall lapse), which shall be a period commencing on the
date
the award is granted and ending on such date as the Committee shall
determine (the "Restriction Period").  The Committee may provide for
the
lapse of restrictions in installments, for acceleration of the lapse of
restrictions upon the satisfaction of such performance or other
criteria
or upon the occurrence of such events as the Committee shall determine.

     3.2  Incentive Agreements.

     Each Award granted under the Plan shall be evidenced by a written
agreement (an "Incentive Agreement") in a form approved by the
Committee
and executed by the Company and the Employee to whom the Award is
granted.  Each Incentive Agreement shall be subject to the terms and
conditions of the Plan and other such terms and conditions as the
Committee may specify.

     3.3  Waiver of Restrictions.

     The Committee may modify or amend any Award under the Plan or
waive
any restrictions or conditions applicable to such Awards; provided,
however, that the Committee may not undertake any such modifications,
amendments or waivers if the effect thereof materially increases the
benefits to any Employee, or adversely affects the rights of any
Employee
without his or her consent.

     3.4  Terms and Conditions of Awards.

     3.4.1  Upon receipt of an Award of shares of Common Stock under
the
Plan, even during the Restriction Period, an Employee shall be the
holder
of record of the shares and shall have all the rights of a shareholder
with respect to such shares, subject to the terms and conditions of the
Plan and the Award.

     3.4.2  Except as otherwise provided in this paragraph 3.4, no
shares
of Common Stock received pursuant to the Plan shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period applicable to such shares.  Any purported
disposition
of such Common Stock in violation of this paragraph 3.4.2 shall be null
and void.

     3.4.3  The Committee may require under such terms and conditions
as it
deems appropriate or desirable that (i) the certificates for Common
Stock
delivered under the Plan are to be held in custody by the Company or a
person or institution designated by the Company until the Restriction
Period expires, (ii) such certificates shall bear a legend referring to
the restrictions on the Common Stock pursuant to the Plan, and (iii)
the
Employee shall have delivered to the Company a stock power endorsed in
blank relating to the Common Stock.

     4.  MISCELLANEOUS PROVISIONS.

     4.1  Adjustments Upon Change in Capitalization.

     4.1.1  The number and class of shares subject to each outstanding
Stock Option, the Exercise Price thereof (but not the total price), the
maximum number of Stock Options that may be granted under the Plan, the
minimum number of shares as to which a Stock Option may be exercised at
any one time, and the number and class of shares subject to each
outstanding Award, shall be proportionately adjusted in the event of
any
increase or decrease in the number of the issued shares of Common Stock
which results from a split-up or consolidation of shares, payment of a
stock dividend or dividends exceeding a total of five percent (5%) for
which the record dates occur in any one fiscal year, a recapitalization
(other than the conversion of convertible securities according to their
terms), a combination of shares or other like capital adjustment, so
that
(i) upon exercise of the Stock Option, the Employee shall receive the
number and class of shares such Employee would have received had such
Employee been the holder of the number of shares of Common Stock for
which the Stock Option is being exercised upon the date of such change
or
increase or decrease in the number of issued shares of the Company, and
(ii) upon the lapse of restrictions of the Award Shares, the Employee
shall receive the number and class of shares such Employee would have
received if the restrictions on the Award Shares had lapsed on the date
of such change or increase or decrease in the number of issued shares
of
the Company.

     4.1.2  Upon a reorganization, merger or consolidation of the
Company
with one or more corporations as a result of which  is not the
surviving
corporation or in which Freestar survives as a wholly-owned subsidiary
of
another corporation, or upon a sale of all or substantially all of the
property of the Company to another corporation, or any dividend or
distribution to shareholders of more than ten percent (10%) of the
Company's assets, adequate adjustment or other provisions shall be made
by the Company or other party to such transaction so that there shall
remain and/or be substituted for the Option Shares and Award Shares
provided for herein, the shares, securities or assets which would have
been issuable or payable in respect of or in exchange for such Option
Shares and Award Shares then remaining, as if the Employee had been the
owner of such shares as of the applicable date.  Any securities so
substituted shall be subject to similar successive adjustments.

     4.2  Withholding Taxes.

     The Company shall have the right at the time of exercise of any
Stock Option, the grant of an Award, or the lapse of restrictions on
Award Shares, to make adequate provision for any federal, state, local
or
foreign taxes which it believes are or may be required by law to be
withheld with respect to such exercise ("Tax Liability"), to ensure the
payment of any such Tax Liability.  The Company may provide for the
payment of any Tax Liability by any of the following means or a
combination of such means, as determined by the Committee in its sole
and
absolute discretion in the particular case:  (i) by requiring the
Employee to tender a cash payment to the Company, (ii) by withholding
from the Employee's salary, (iii) by withholding from the Option Shares
which would otherwise be issuable upon exercise of the Stock Option, or
from the Award Shares on their grant or date of lapse of restrictions,
that number of Option Shares or Award Shares having an aggregate fair
market value (determined in the manner prescribed by paragraph 2.2) as
of
the date the withholding tax obligation arises in an amount which is
equal to the Employee's Tax Liability or (iv) by any other method
deemed
appropriate by the Committee.  Satisfaction of the Tax Liability of a
Section 16 Reporting Person may be made by the method of payment
specified in clause (iii) above only if the following two conditions
are
satisfied:

     (a)  the withholding of Option Shares or Award Shares and the
exercise of the related Stock Option occur at least six (6) months and
one day following the date of grant of such Stock Option or Award; and

     (b)  the withholding of Option Shares or Award Shares is made
either
(i) pursuant to an irrevocable election ("Withholding Election") made
by
such Employee at least six months in advance of the withholding of
Options Shares or Award Shares, or (ii) on a day within a ten (10) day
"window period" beginning on the third business day following the date
of
release of the Company's quarterly or annual summary statement of sales
and earnings.

Anything herein to the contrary notwithstanding, a Withholding Election
may be disapproved by the Committee at any time.

     4.3  Relationship to Other Employee Benefit Plans.

     Stock Options and Awards granted hereunder shall not be deemed to
be
salary or other compensation to any Employee for purposes of any
pension,
thrift, profit-sharing, stock purchase or any other employee benefit
plan
now maintained or hereafter adopted by the Company.

     4.4  Amendments and Termination.

     The Board of Directors may at any time suspend, amend or terminate
this Plan.  No amendment, except as provided in paragraph 2.8, or
modification of this Plan may be adopted, except subject to stockholder
approval, which would: (a) materially increase the benefits accruing to
Employees under this Plan, (b) materially increase the number of
securities which may be issued under this Plan (except for adjustments
pursuant to paragraph 4.1 hereof), or (c) materially modify the
requirements as to eligibility for participation in the Plan.

     4.5  Successors in Interest.

     The provisions of this Plan and the actions of the Committee shall
be binding upon all heirs, successors and assigns of the Company and of
Employees.

     4.6  Other Documents.

     All documents prepared, executed or delivered in connection with
this Plan (including, without limitation, Option Agreements and
Incentive
Agreements) shall be, in substance and form, as established and
modified
by the Committee; provided, however, that all such documents shall be
subject in every respect to the provisions of this Plan, and in the
event
of any conflict between the terms of any such document and this Plan,
the
provisions of this Plan shall prevail.

     4.7  No Obligation to Continue Employment.

     This Plan and grants hereunder shall not impose any obligation on
the Company to continue to employ any Employee.  Moreover, no provision
of this Plan or any document executed or delivered pursuant to this
Plan
shall be deemed modified in any way by any employment contract between
an
Employee (or other employee) and the Company.

     4.8  Misconduct of an Employee.

     Notwithstanding any other provision of this Plan, if an Employee
commits fraud or dishonesty toward the Company or wrongfully uses or
discloses any trade secret, confidential data or other information
proprietary to the Company, or intentionally takes any other action
materially inimical to the best interests of the Company, as determined
by the Committee, in its sole and absolute discretion, such Employee
shall forfeit all rights and benefits under this Plan.

     4.9  Term of Plan.

     This Plan was adopted by the Board effective October 25, 2001.  No
Stock Options or Awards may be granted under this Plan after October
25,
2011.

     4.10  Governing Law.

     This Plan shall be construed in accordance with, and governed by,
the laws of the State of Nevada.

     4.11  Shareholder Approval.

     No Stock Option shall be exercisable, or Award granted, unless and
until the Directors of the Company have approved this Plan and all
other
legal requirements have been fully complied with.  In addition, no
incentive Stock Option shall be granted until approved by a majority of
the issued and outstanding Common Stock of the Freestar.

     4.12  Assumption Agreements.

     The Company will require each successor, (direct or indirect,
whether by purchase, merger, consolidation or otherwise), to all or
substantially all of the business or assets of the Company, prior to
the
consummation of each such transaction, to assume and agree to perform
the
terms and provisions remaining to be performed by the Company under
each
Incentive Agreement and Stock Option and to preserve the benefits to
the
Employees thereunder.  Such assumption and agreement shall be set forth
in a written agreement in form and substance satisfactory to the
Committee (an "Assumption Agreement"), and shall include such
adjustments, if any, in the application of the provisions of the
Incentive Agreements and Stock Options and such additional provisions,
if
any, as the Committee shall require and approve, in order to preserve
such benefits to the Employees.  Without limiting the generality of the
foregoing, the Committee may require an Assumption Agreement to include
satisfactory undertakings by a successor:

     (a)  to provide liquidity to the Employees at the end of the
Restriction Period applicable to Common Stock awarded to them under the
Plan, or on the exercise of Stock Options;

     (b)  if the succession occurs before the expiration of any period
specified in the Incentive Agreements for satisfaction of performance
criteria applicable to the Common Stock awarded thereunder, to refrain
from interfering with the Company's ability to satisfy such performance
criteria or to agree to modify such performance criteria and/or waive
any
criteria that cannot be satisfied as a result of the succession;

     (c)  to require any future successor to enter into an Assumption
Agreement; and

     (d)  to take or refrain from taking such other actions as the
Committee may require and approve, in its discretion.

The Committee referred to in this paragraph 4.12 is the Committee
appointed by a Board of Directors in office prior to the succession
then
under consideration.

     4.13  Compliance With Rule 16b-3.

     Transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3.  To the extent that any provision
of
the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed
advisable
by the Committee.

IN WITNESS WHEREOF, this Plan has been executed as of the 25th day
of October, 2001.

Freestar Technologies

By: /s/  Paul Egan
Paul Egan, PresidentPrepared by MERRILL CORPORATION

EXHIBIT 10.1

VERSICOR INC.

2001 STOCK OPTION PLAN

1.  Purposes.

      (a) The

purpose of the Plan is to provide a means by which selected Employees and

Directors of and Consultants to the Company and its Affiliates may be given an

opportunity to benefit from increases in the value of the stock of the Company

through the granting of (i) Incentive Stock Options,

(ii) Nonstatutory Stock Options, (iii) stock bonuses,

(iv) rights to purchase restricted stock, and (v) stock appreciation

rights, all as defined below.

      (b) The

Company, by means of the Plan, seeks to retain the services of persons who are

now Employees or Directors of or Consultants to the Company or its Affiliates,

to secure and retain the services of new Employees, Directors and Consultants,

and to provide incentives for such persons to exert maximum efforts for the

success of the Company and its Affiliates.

      (c) The

Company intends that the Stock Awards issued under the Plan shall, in the

discretion of the Board or any Committee to which responsibility for

administration of the Plan has been delegated pursuant to subsection 3(c), be

either (i) Options granted pursuant to Section 6 hereof, including

Incentive Stock Options and Nonstatutory Stock Options, (ii) stock bonuses

or rights to purchase restricted stock granted pursuant to Section 7

hereof, or (iii) stock appreciation rights granted pursuant to

Section 8 hereof. All Options shall be separately designated Incentive

Stock Options or Nonstatutory Stock Options at the time of grant, and in such

form as issued pursuant to Section 6, and a separate certificate or

certificates will be issued for shares purchased on exercise of each type of

Option.

2.  Definitions.

      (a) "Affiliate" means

any parent corporation or subsidiary corporation, whether now or hereafter

existing, as those terms are defined in Sections 424(e) and

(f) respectively, of the Code.

      (b) "Board" means the

Board of Directors of the Company.

      (c) "Cause" means

(unless otherwise expressly provided in the applicable Stock Award Agreement,

or another applicable contract with the Stock Award holder that defines such

term for purposes of determining the effect that a "for cause"

termination has on the holder's Stock Awards) that the Company, acting in good

faith based upon the information then known to the Company, determines that the

Stock Award holder has: (1) repeatedly failed to perform in a material

respect his obligations under any employment agreement with the Company without

proper reason and has not cured such failure in a reasonable time after

receiving notice from the Company, (2) willfully engaged in illegal

conduct or gross misconduct that is materially injurious to the Company, or

(3) breached the provisions of any confidentiality agreement or

confidentiality provisions of any employment agreement with the Company.

      For purposes of this provision, no act or

failure to act, on the part of the Stock Award holder, shall be considered

"willful" unless it is done, or omitted to be done, by the Stock

Award holder in bad faith or without reasonable belief that the Stock Award

holder's action or omission was in the best interests of the Company. Any act,

or failure to act, based upon authority given pursuant to a resolution duly

adopted by the Board or upon the instructions of the chief executive officer or

a senior officer of the Company or based upon the advice of counsel for the

Company shall be conclusively presumed to be done, or omitted to be done, by

the Stock Award holder in good faith and in the best interests of the Company.

No termination of the Stock Award holder for Cause will be effective unless

adopted pursuant to a resolution duly adopted by the affirmative vote of not

less than a majority of the entire membership of the Board at a meeting of the

Board called and held for such purpose, and communicated to the Stock Award holder

by written notice that explains the basis on which Cause has been found.

      (d) "Change in Control"

means any of the following:

           (i) Approval

by the stockholders of the Company of the dissolution or liquidation of the

Company;

          (ii) Approval

by the stockholders of the Company of an agreement to merge or consolidate, or

otherwise reorganize, with or into one or more entities that are not

subsidiaries or other affiliates, as a result of which less than 50% of the

outstanding voting securities of the surviving or resulting entity immediately

after the reorganization are, or will be, owned, directly or indirectly, by

stockholders of the Company immediately before such reorganization (assuming

for purposes of such determination that there is no change in the record

ownership of the Company's securities from the record date for such approval

until such reorganization and that such record owners hold no securities of the

other parties to such reorganization, but including in such determination any

securities of the other parties to such reorganization held by affiliates of

the Company);

          (iii) Approval

by the stockholders of the Company of the sale of substantially all of the

Company's business and/or assets to a person or entity which is not a

subsidiary or other affiliate;

          (iv) Any

"person" (as such term is used in Sections 13(d) and 14(d) of the

Securities Exchange Act of 1934 (the "Exchange Act") but excluding

any person described in and satisfying the conditions of Rule 13d-1(b)(1)

thereunder), becomes the "beneficial owner" (as defined in

Rule 13d-3 under the Exchange Act), directly or indirectly, of securities

of the Company representing more than 40% of the combined voting power of the

Company's then outstanding securities entitled to then vote generally in the

election of directors of the Company; or

          (v) During

any period not longer than two consecutive years, individuals who at the

beginning of such period constituted the Board of Directors of the Company

cease to constitute at least a majority thereof, unless the election, or the

nomination for election by the Corporation's stockholders, of each new Board

member was approved by a vote of at least three-fourths of the Board members

then still in office who were Board members at the beginning of such period

(including for these purposes, new members whose election or nomination was so

approved.

      (e) "Code" means the

Internal Revenue Code of 1986, as amended.

      (f)  "Committee" means

a Committee appointed by the Board in accordance with subsection 3(c) of the

Plan.

      (g) "Company" means

Versicor Inc., a Delaware corporation.

      (h) "Concurrent Stock Appreciation Right"

or "Concurrent

Right" means a right granted pursuant to subsection 8(b)(2)

of the Plan.

      (i)  "Consultant"

means any person, including an advisor, engaged by the Company or an Affiliate

to render consulting services and who is compensated for such services,

provided that the term "Consultant" shall not include Directors who

are paid only a director's fee by the Company or who are not compensated by the

Company for their services as Directors.

      (j)  "Continuous Status as an Employee,

Director or Consultant" means that the service of an

individual to the Company, whether as an Employee, Director or Consultant, is

not interrupted or terminated. The Board or the chief executive officer of the

Company may determine, in that party's sole discretion, whether Continuous

Status as an Employee, Director or Consultant shall be considered interrupted

in the case of: (i) any leave of absence approved by the Board or the

chief executive officer of the Company, including sick leave, military leave,

or any other personal leave; or (ii) transfers between the Company,

Affiliates or their successors.

      (k) "Covered Employee"

means the chief executive officer and the four (4) other highest

compensated officers of the Company for whom total compensation is required to

be reported to stockholders under the Exchange Act, as determined for purposes

of Section 162(m) of the Code.

      (l)  "Director" means

a member of the Board.

      (m) "Employee" means

any person, including Officers and Directors, employed by the Company or any

Affiliate of the Company. Neither service as a Director nor payment of a

director's fee by the Company shall be sufficient to constitute

"employment" by the Company.

      (n) "Exchange Act"

means the Securities Exchange Act of 1934, as amended.

      (o) "Fair Market Value"

means the last reported sales price on the relevant date of a share of the

Company's common stock as listed in the Western Edition of the Wall Street

Journal, or if there are no reported sales on such date, then the last reported

sales price on the next preceding day on which such a sale is transacted.

      (p) "Incentive Stock Option"

means an Option intended to qualify as an incentive stock option within the

meaning of Section 422 of the Code and the regulations promulgated

thereunder.

      (q) "Independent Stock Appreciation Right"

or "Independent

Right" means a right granted pursuant to subsection 8(b)(3)

of the Plan.

      (r) "Non-Employee Director"

means a Director who either (i) is not a current Employee or Officer of

the Company or its parent or subsidiary, does not receive compensation

(directly or indirectly) from the Company or its parent or subsidiary for

services rendered as a consultant or in any capacity other than as a Director

(except for an amount as to which disclosure would not be required under Item

404(a) of Regulation S-K promulgated pursuant to the Securities Act

("Regulation S-K")), does not possess an interest in any other

transaction as to which disclosure would be required under Item 404(a) of

Regulation S-K, and is not engaged in a business relationship as to which

disclosure would be required under Item 404(b) of Regulation S-K; or

(ii) is otherwise considered a "non-employee director" for

purposes of Rule 16b-3.

      (s) "Nonstatutory Stock Option"

means an Option not intended to qualify as an Incentive Stock Option under

Section 422 of the Code.

      (t)  "Officer" means a

person who is an officer of the Company within the meaning of Section 16

of the Exchange Act and the rules and regulations promulgated thereunder.

      (u) "Option" means a

stock option granted pursuant to the Plan.

      (v) "Optionee" means

a person to whom an Option is granted pursuant to the Plan or, if applicable,

such other person who holds an outstanding Option.

      (w) "Outside Director"

means a Director who either (i) is not a current employee of the Company

or an "affiliated corporation" (within the meaning of the Treasury

regulations promulgated under Section 162(m) of the Code), is not a former

employee of the Company or an "affiliated corporation" receiving

compensation for prior services (other than benefits under a tax qualified

pension plan), was not an officer of the Company or an "affiliated

corporation" at any time, and is not currently receiving direct or

indirect remuneration from the Company or an "affiliated corporation"

for services in any capacity other than as a Director, or (ii) is

otherwise considered an "outside director" for purposes of

Section 162(m) of the Code.

      (x) "Plan" means this

2001 Stock Option Plan.

      (y) "Rule 16b-3"

means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,

as in effect with respect to the Company at the time discretion is being exercised

regarding the Plan.

      (z) "Securities Act"

means the Securities Act of 1933, as amended.

      (aa) "Stock Appreciation Right"

means any of the various types of rights which may be granted under

Section 8 of the Plan.

      (bb) "Stock Award"

means any right granted under the Plan, including any Option, any stock bonus,

any right to purchase restricted stock, and any Stock Appreciation Right.

      (cc) "Stock Award Agreement"

means a written agreement between the Company and a holder of a Stock Award

evidencing the terms and conditions of an individual Stock Award grant. Each

Stock Award Agreement shall be subject to the terms and conditions of the Plan.

      (dd) "Tandem Stock Appreciation Right"

or "Tandem Right"

means a right granted pursuant to subsection 8(b)(1) of the Plan.

3.  Administration.

      (a) The

Plan shall be administered by the Board unless and until the Board delegates

administration to a Committee, as provided in subsection 3(c).

      (b) The

Board shall have the power, subject to, and within the limitations of, the

express provisions of the Plan:

           (i) To

determine from time to time which of the persons eligible under the Plan shall

be granted Stock Awards; when and how each Stock Award will be granted; whether

a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock Option, a

stock bonus, a right to purchase restricted stock, a Stock Appreciation Right,

or a combination of the foregoing; when and how each Stock Award shall be

granted; and the provisions of each Stock Award granted (which need not be

identical), including the time or times when a person shall be permitted to

receive stock pursuant to a Stock Award and the number of shares with respect

to which a Stock Award shall be granted to each such person.

          (ii) To

construe and interpret the Plan and Stock Awards granted under it, and to

establish, amend and revoke rules and regulations for its administration. The

Board, in the exercise of this power, may correct any defect, omission or

inconsistency in the Plan or in any Stock Award Agreement, in a manner and to

the extent it shall deem necessary or expedient to make the Plan fully

effective.

          (iii) To

amend the Plan or a Stock Award as provided in Section 13; provided,

however, that the Board shall not have the power to reprice any Stock Award

once granted, except for adjustments resulting from a stock split, reverse

stock split, or similar change to the outstanding capital stock, as provided in

Section 12.

          (iv) Generally,

to exercise such powers and to perform such acts as the Board deems necessary

or expedient to promote the best interests of the Company that are not in

conflict with the provisions of the Plan.

      (c) The

Board may delegate administration of the Plan to a committee of the Board

composed of not fewer than two (2) members (the "Committee"),

all of the members of which Committee may be, in the discretion of the Board,

Non-Employee Directors and/or Outside Directors. If administration is delegated

to a Committee, the Committee shall have, in connection with the administration

of the Plan, the powers theretofore possessed by the Board, including the power

to delegate to a subcommittee of two (2) or more members any of the

administrative powers the Committee is authorized to exercise (any references

in this Plan to the Board shall thereafter be to the Committee or such a

subcommittee), subject, however, to such resolutions, not inconsistent with the

provisions of the Plan, as may be adopted from time to time by the Board. The

Board may abolish the Committee at any time and revest in the Board the

administration of the Plan. Notwithstanding anything in this Section 3 to

the contrary, the Board or the Committee may delegate to a committee of one or

more members of the Board the authority to grant Stock Awards to eligible

persons who (1) are not then subject to Section 16 of the Exchange

Act and/or (2) are either (i) not then Covered Employees and are not

expected to be Covered Employees at the time of recognition of income resulting

from such Stock Award, or (ii) not persons with respect to whom the

Company wishes to comply with Section 162(m) of the Code.

 

4.  Shares Subject To The Plan.

      (a) Subject

to the provisions of Section 12 relating to adjustments upon changes in

stock, the stock that may be issued pursuant to Stock Awards shall not exceed

in the aggregate one million two hundred thousand (1,200,000) shares of the

Company's common stock. If any Stock Award shall for any reason expire or

otherwise terminate, in whole or in part, without having been exercised in

full, the stock not acquired under such Stock Award shall revert to and again

become available for issuance under the Plan. Shares subject to Stock

Appreciation Rights exercised in accordance with Section 8 of the Plan

shall not be available for subsequent issuance under the Plan.

      (b) The

stock subject to the Plan may be unissued shares or reacquired shares, bought

on the market or otherwise.

5.  Eligibility.

      (a) Incentive

Stock Options and Stock Appreciation Rights appurtenant thereto may be granted

only to Employees. Stock Awards other than Incentive Stock Options and Stock

Appreciation Rights appurtenant thereto may be granted to Employees, Directors

or Consultants.

      (b) No

person shall be eligible for the grant of an Incentive Stock Option if, at the

time of grant, such person owns (or is deemed to own pursuant to

Section 424(d) of the Code) stock possessing more than ten percent (10%)

of the total combined voting power of all classes of stock of the Company or of

any of its Affiliates unless the exercise price of such Option is at least one

hundred ten percent (110%) of the Fair Market Value of such stock at the date

of grant and the Option is not exercisable after the expiration of five

(5) years from the date of grant.

      (c) Subject

to the provisions of Section 12 relating to adjustments upon changes in

stock, no person shall be eligible to be granted Options and Stock Appreciation

Rights covering more than three hundred thousand (300,000) shares of the

Company's common stock in any twelve (12) month period. Subject to the provisions

of Section 12 relating to adjustments upon changes in stock, no person

shall be eligible to be granted Stock Awards covering in the aggregate more

than three hundred thousand (300,000) shares of the Company's common stock in

any twelve (12) month period.

6.  Option Provisions.

      Each Option

shall be in such form and shall contain such terms and conditions as the Board

shall deem appropriate. The provisions of separate Options need not be

identical, but each Option shall include (through incorporation of provisions

hereof by reference in the Option or otherwise) the substance of each of the

following provisions:

      (a) Term.  No Option shall be

exercisable after the expiration of ten (10) years from the date it was

granted.

      (b) Price.  The exercise price of

each Incentive Stock Option shall be not less than one hundred percent (100%)

of the Fair Market Value of the stock subject to the Option on the date the

Option is granted; the exercise price of each Nonstatutory Stock Option shall

be not less than eighty-five percent (85%) of the Fair Market Value of the

stock subject to the Option on the date the Option is granted.

Notwithstanding

the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory

Stock Option) may be granted with an exercise price lower than that set forth

in the preceding sentence if such Option is granted pursuant to an assumption

or substitution for another option in a manner satisfying the provisions of

Section 424(a) of the Code.

      (c) Consideration.  The purchase price

of stock acquired pursuant to an Option shall be paid, to the extent permitted

by applicable statutes and regulations, either (i) in cash at the time the

Option is exercised, or (ii) at the discretion of the Board or the

Committee, at the time of the grant of the Option, (A) by delivery to the

Company of other common stock of the Company, (B) according to a deferred

payment arrangement, except that payment of the common stock's "par

value" (as defined in the Delaware General Corporation Law) shall not be

made by deferred payment, or other arrangement (which may include, without

limiting the generality of the foregoing, the use of other common stock of the

Company) with the person to whom the Option is granted or to whom the Option is

transferred pursuant to subsection 6(d), or (C) in any other form of legal

consideration that may be acceptable to the Board.

      In the case of

any deferred payment arrangement, interest shall be compounded at least

annually and shall be charged at the minimum rate of interest necessary to

avoid the treatment as interest, under any applicable provisions of the Code,

of any amounts other than amounts stated to be interest under the deferred

payment arrangement.

      (d) Transferability.  An Incentive

Stock Option shall not be transferable except by will or by the laws of descent

and distribution, and shall be exercisable during the lifetime of the person to

whom the Incentive Stock Option is granted only by such person. A Nonstatutory

Stock Option shall only be transferable by the Optionee upon such terms and

conditions as are set forth in the Stock Award Agreement for such Option, as

the Board or the Committee shall determine in its discretion or pursuant to a

domestic relations order. The person to whom the Option is granted may, by delivering

written notice to the Company, in a form satisfactory to the Company, designate

a third party who, in the event of the death of the Optionee, shall thereafter

be entitled to exercise the Option.

      (e) Vesting.  The total number of

shares of stock subject to an Option may, but need not, be allotted in periodic

installments (which may, but need not, be equal). The Stock Award Agreement may

provide that from time to time during each of such installment periods, the

Option may become exercisable ("vest") with respect to some or all of

the shares allotted to that period, and may be exercised with respect to some

or all of the shares allotted to such period and/or any prior period as to

which the Option became vested but was not fully exercised. The Option may be

subject to such other terms and conditions on the time or times when it may be

exercised (which may be based on performance or other criteria) as the Board

may deem appropriate. The provisions of this subsection 6(e) are subject to any

Option provisions governing the minimum number of shares as to which an Option

may be exercised.

      (f) Termination of Employment or Relationship as a

Director or Consultant.  In the event an Optionee's

Continuous Status as an Employee, Director or Consultant terminates (other than

upon the Optionee's death or disability), the Optionee may exercise his or her

Option (to the extent that the Optionee was entitled to exercise it as of the

date of termination) but only within such period of time ending on the earlier

of (i) the date three (3) months following the termination of the

Optionee's Continuous Status as an Employee, Director or Consultant (or such

longer or shorter period, which shall not be less than thirty (30) days,

specified in the Stock Award Agreement), or (ii) the expiration of the

term of the Option as set forth in the Stock Award Agreement. If, at the date

of termination, the Optionee is not entitled to exercise his or her entire

Option, the shares covered by the unexercisable portion of the Option shall revert

to and again become available for issuance under the Plan. If, after

termination, the Optionee does not exercise his or her Option within the time

specified in the Stock Award Agreement, the Option shall terminate, and the

shares covered by such Option shall revert to and again become available for

issuance under the Plan.

      An Optionee's

Stock Award Agreement may also provide that if the exercise of the Option

following the termination of the Optionee's Continuous Status as an Employee,

Director, or Consultant (other than upon the Optionee's death or disability)

would result in liability under Section 16(b) of the Exchange Act, then

the Option shall terminate on the earlier of (i) the expiration of the

term of the Option set forth in the Stock Award Agreement, or (ii) the

tenth (10th) day after the last date on which such exercise would result in

such liability under Section 16(b) of the Exchange Act. Finally, an

Optionee's Stock Award Agreement may also provide that if the exercise of the Option

following the termination of the Optionee's Continuous Status as an Employee,

Director or Consultant (other than upon the Optionee's death or disability)

would be prohibited at any time solely because the issuance of shares would

violate the registration requirements under the Securities Act, then the Option

shall terminate on the earlier of (i) the expiration of the term of the

Option set forth in the first paragraph of this subsection 6(f), or

(ii) the expiration of a period of three (3) months after the termination

of the Optionee's Continuous Status as an Employee, Director or Consultant

during which the exercise of the Option would not be in violation of such

registration requirements.

      (g) Disability of Optionee.  In the

event an Optionee's Continuous Status as an Employee, Director or Consultant

terminates as a result of the Optionee's disability, the Optionee may exercise

his or her Option (to the extent that the Optionee was entitled to exercise it

as of the date of termination), but only within such period of time ending on

the earlier of (i) the date twelve (12) months following such

termination (or such longer or shorter period, which in no event shall be less

than six (6) months, specified in the Stock Award Agreement), or

(ii) the expiration of the term of the Option as set forth in the Stock

Award Agreement. If, at the date of termination, the Optionee is not entitled

to exercise his or her entire Option, the shares covered by the unexercisable

portion of the Option shall revert to and again become available for issuance

under the Plan. If, after termination, the Optionee does not exercise his or

her Option within the time specified herein, the Option shall terminate, and

the shares covered by such Option shall revert to and again become available for

issuance under the Plan.

      (h) Death of Optionee.  In the event

of the death of an Optionee during, or within a period specified in the Stock

Award Agreement after the termination of, the Optionee's Continuous Status as

an Employee, Director or Consultant, the Option may be exercised (to the extent

the Optionee was entitled to exercise the Option as of the date of death) by

the Optionee's estate, by a person who acquired the right to exercise the

Option by bequest or inheritance or by a person designated to exercise the

option upon the Optionee's death pursuant to subsection 6(d), but only within

the period ending on the earlier of (i) the date eighteen (18) months

following the date of death (or such longer or shorter period, which in no

event shall be less than six (6) months, specified in the Stock Award

Agreement), or (ii) the expiration of the term of such Option as set forth

in the Stock Award Agreement. If, at the time of death, the Optionee was not

entitled to exercise his or her entire Option, the shares covered by the

unexercisable portion of the Option shall revert to and again become available

for issuance under the Plan. If, after death, the Option is not exercised

within the time specified herein, the Option shall terminate, and the shares

covered by such Option shall revert to and again become available for issuance

under the Plan.

      (i) Early Exercise.  The Option may,

but need not, include a provision whereby the Optionee may elect at any time

while an Employee, Director or Consultant to exercise the Option as to any part

or all of the shares subject to the Option prior to the full vesting of the

Option. Any unvested shares so purchased shall be subject to a repurchase right

in favor of the Company, with the repurchase price to be equal to the original

purchase price of the stock, or to any other restriction the Board determines

to be appropriate; provided, however,

that (i) the right to repurchase at the original purchase price shall be

exercisable only within (A) the ninety (90) day period following the

termination of employment or the relationship as a Director or Consultant, or

(B) such longer period as may be agreed to by the Company and the

Optionee, and (ii) such right shall be exercisable only for cash or

cancellation of purchase money indebtedness for the shares. Should the right of

repurchase be assigned by the Company, the assignee shall pay the Company cash

equal to the difference between the original purchase price and the stock's

Fair Market Value if the original purchase price is less than the stock's Fair

Market Value.

 

      (j) Re-Load Options.  Without in any

way limiting the authority of the Board or Committee to make or not to make

grants of Options hereunder, the Board or Committee shall have the authority

(but not an obligation) to include as part of any Stock Award Agreement a

provision entitling the Optionee to a further Option (a "Re-Load

Option") in the event the Optionee exercises the Option evidenced by the

Stock Award Agreement, in whole or in part, by surrendering other shares of

Common Stock in accordance with this Plan and the terms and conditions of the

Stock Award Agreement. Any such Re-Load Option (i) shall be for a number

of shares equal to the number of shares surrendered as part or all of the

exercise price of such Option; (ii) shall have an expiration date which is

the same as the expiration date of the Option the exercise of which gave rise

to such Re-Load Option; and (iii) shall have an exercise price which is

equal to one hundred percent (100%) of the Fair Market Value of the Common

Stock subject to the Re-Load Option on the date of exercise of the original

Option.

      Any such Re-Load

Option may be an Incentive Stock Option or a Nonstatutory Stock Option, as the

Board or Committee may designate at the time of the grant of the original

Option: provided, however, that

the designation of any Re-Load Option as an Incentive Stock Option shall be

subject to the one hundred thousand dollar ($100,000) annual limitation on

exercisability of Incentive Stock Options described in subsection 11(d) of the

Plan and in Section 422(d) of the Code. Notwithstanding anything in the

preceding paragraph to the contrary, a Re-Load Option which is granted to a 10%

stockholder (as described in subsection 5(b)) and which is intended as an Incentive

Stock Option shall have an exercise price which is equal to one hundred ten

percent (110%) of the Fair Market Value of the stock subject to the Re-Load

Option on the date of exercise of the original Option and shall have a term

which is no longer than five (5) years.

      There shall be

no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be

subject to the availability of sufficient shares under subsection 4(a) and the

limits on the grants of Options under subsection 5(c) and shall be subject to

such other terms and conditions as the Board or Committee may determine which

are not inconsistent with the express provisions of the Plan regarding the

terms of Options.

7.  Terms Of Stock Bonuses And

Purchases Of Restricted Stock.

      Each stock bonus

or restricted stock purchase agreement shall be in such form and shall contain

such terms and conditions as the Board or the Committee shall deem appropriate.

The terms and conditions of stock bonus or restricted stock purchase agreements

may change from time to time, and the terms and conditions of separate

agreements need not be identical, but each stock bonus or restricted stock

purchase agreement shall include (through incorporation of provisions hereof by

reference in the agreement or otherwise) the substance of each of the following

provisions as appropriate:

      (a) Purchase Price.  The purchase

price under each restricted stock purchase agreement shall be such amount as

the Board or Committee shall determine and designate in such Stock Award

Agreement. The Board or the Committee may determine that eligible participants

in the Plan may be awarded stock pursuant to a stock bonus agreement in

consideration for past services actually rendered to the Company or for its

benefit.

      (b) Transferability.  Rights under a

stock bonus or restricted stock purchase agreement shall be transferable by the

grantee only upon such terms and conditions as are set forth in the applicable

Stock Award Agreement, as the Board or the Committee shall determine in its

discretion, so long as stock awarded under such Stock Award Agreement remains

subject to the terms of the agreement.

      (c) Consideration.  The purchase

price of stock acquired pursuant to a stock purchase agreement shall be paid

either: (i) in cash at the time of purchase; (ii) at the discretion

of the Board or the Committee, according to a deferred payment arrangement,

except that payment of the common stock's "par value" (as defined in

the Delaware General Corporation Law) shall not be made by deferred payment, or

other arrangement with the person to whom the stock is sold; or (iii) in

any other form of legal consideration that may be acceptable to the Board or

the Committee in its discretion. Notwithstanding the foregoing, the Board or

the Committee to which administration of the Plan has been delegated may award

stock pursuant to a stock bonus agreement in consideration for past services

actually rendered to the Company or for its benefit.

      (d) Vesting.  Shares of stock sold or

awarded under the Plan may, but need not, be subject to a repurchase option in

favor of the Company in accordance with a vesting schedule to be determined by

the Board or the Committee.

      (e) Termination of Employment or Relationship as a

Director or Consultant.  In the event a Participant's

Continuous Status as an Employee, Director or Consultant terminates, the

Company may repurchase or otherwise reacquire, subject to the limitations

described in subsection 7(d), any or all of the shares of stock held by

that person which have not vested as of the date of termination under the terms

of the stock bonus or restricted stock purchase agreement between the Company

and such person.

8.  Stock Appreciation Rights.

      (a) The

Board or Committee shall have full power and authority, exercisable in its sole

discretion, to grant Stock Appreciation Rights under the Plan to Employees or

Directors of or Consultants to, the Company or its Affiliates. To exercise any

outstanding Stock Appreciation Right, the holder must provide written notice of

exercise to the Company in compliance with the provisions of the Stock Award

Agreement evidencing such right.

      (b) Three

types of Stock Appreciation Rights shall be authorized for issuance under the

Plan:

          (i) Tandem Stock Appreciation Rights.  Tandem

Stock Appreciation Rights will be granted appurtenant to an Option, and shall,

except as specifically set forth in this Section 8, be subject to the same

terms and conditions applicable to the particular Option grant to which it

pertains. Tandem Stock Appreciation Rights will require the holder to elect

between the exercise of the underlying Option for shares of stock and the

surrender, in whole or in part, of such Option for an appreciation

distribution. The appreciation distribution payable on the exercised Tandem

Right shall be in cash (or, if so provided, in an equivalent number of shares

of stock based on Fair Market Value on the date of the Option surrender) in an

amount up to the excess of (A) the Fair Market Value (on the date of the

Option surrender) of the number of shares of stock covered by that portion of

the surrendered Option in which the Optionee is vested over (B) the

aggregate exercise price payable for such vested shares.

          (ii) Concurrent Stock Appreciation Rights.  Concurrent

Rights will be granted appurtenant to an Option and may apply to all or any

portion of the shares of stock subject to the underlying Option and shall,

except as specifically set forth in this Section 8, be subject to the same

terms and conditions applicable to the particular Option grant to which it

pertains. A Concurrent Right shall be exercised automatically at the same time

the underlying Option is exercised with respect to the particular shares of

stock to which the Concurrent Right pertains. The appreciation distribution

payable on an exercised Concurrent Right shall be in cash (or, if so provided,

in an equivalent number of shares of stock based on Fair Market Value on tile

date of the exercise of the Concurrent Right) in an amount equal to such

portion as shall determined by the Board or the Committee at the time of the

grant of the excess of (A) the aggregate Fair Market Value (on the date of

the exercise of the Concurrent Right) of the vested shares of stock purchased

under the underlying Option which have Concurrent Rights appurtenant to them

over (B) the aggregate exercise price paid for such shares.

          (iii) Independent Stock Appreciation Rights.  Independent

Rights will be granted independently of any Option and shall, except as

specifically set forth in this Section 8, be subject to the same terms and

conditions applicable to Nonstatutory Stock Options as set forth in

Section 6. They shall be denominated in share equivalents. The

appreciation distribution payable on the exercised Independent Right shall be

not greater than an amount equal to the excess of (A) the aggregate Fair

Market Value (on the date of the exercise of the Independent Right) of a number

of shares of Company stock equal to the number of share equivalents in which

the holder is vested under such Independent Right, and with respect to which

the holder is exercising the Independent Right on such date, over (B) the

aggregate Fair Market Value (on the date of the grant of the Independent Right)

of such number of shares of Company stock. The appreciation distribution payable

on the exercised Independent Right shall be in cash or, if so provided, in an

equivalent number of shares of stock based on Fair Market Value on the date of

the exercise of the Independent Right.

9.  Covenants Of The Company.

      (a) During

the terms of the Stock Awards, the Company shall keep available at all times

the number of shares of stock required to satisfy such Stock Awards.

      (b) The

Company shall seek to obtain from each regulatory commission or agency having

jurisdiction over the Plan such authority as may be required to issue and sell

shares of stock upon exercise of the Stock Award; provided, however, that this

undertaking shall not require the Company to register under the Securities Act

either the Plan, any Stock Award or any stock issued or issuable pursuant to

any such Stock Award. If, after reasonable efforts, the Company is unable to

obtain from any such regulatory commission or agency the authority which

counsel for the Company deems necessary for the lawful issuance and sale of

stock under the Plan, the Company shall be relieved from any liability for

failure to issue and sell stock upon exercise of such Stock Awards unless and

until such authority is obtained.

10. Use Of Proceeds From Stock.

      Proceeds from

the sale of stock pursuant to Stock Awards shall constitute general funds of

the Company.

11. Miscellaneous.

      (a) Subject

to any applicable provisions of the California Corporate Securities Law of 1968

and related regulations relied upon as a condition of issuing securities

pursuant to the Plan, the Board shall have the power to accelerate the time at

which a Stock Award may first be exercised or the time during which a Stock

Award or any part thereof will vest pursuant to subsection 6(e), 7(d) or

8(b) notwithstanding the provisions in the Stock Award stating the time at

which it may first be exercised or the time during which it will vest.

      (b) Neither

an Employee, Director or Consultant nor any person to whom a Stock Award is

transferred under subsection 6(d), 7(b), or 8(b) shall be deemed to be the

holder of, or to have any of the rights of a holder with respect to, any shares

subject to such Stock Award unless and until such person has satisfied all

requirements for exercise of the Stock Award pursuant to its terms.

      (c) Nothing

in the Plan or any instrument executed or Stock Award granted pursuant thereto

shall confer upon any Employee, Director, Consultant or other holder of Stock

Awards any right to continue in the employ of the Company or any Affiliate (or

to continue acting as a Director or Consultant) or shall affect the right of

the Company or any Affiliate to terminate the employment of any Employee with

or without cause the right of the Company's Board of Directors and/or the

Company's stockholders to remove any Director as provided in the Company's

By-Laws and the provisions of the Delaware General Corporation Law, or the

right to terminate the relationship of any Consultant subject to the terms of

such Consultant's agreement with the Company or Affiliate.

      (d) To the

extent that the aggregate Fair Market Value (determined at the time of grant)

of stock with respect to which Incentive Stock Options are exercisable for the

first time by any Optionee during any calendar year under all plans of the

Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the

Options or portions thereof which exceed such limit (according to the order in

which they were granted) shall be treated as Nonstatutory Stock Options.

      (e) To the

extent provided by the terms of a Stock Award Agreement, the person to whom a

Stock Award is granted may satisfy any federal, state or local tax withholding

obligation relating to the exercise or acquisition of stock under a Stock Award

by any of the following means or by a combination of such means: (1) tendering

a cash payment; (2) authorizing the Company to withhold shares from the

shares of the common stock otherwise issuable to the participant as, a result

of the exercise or acquisition of stock under the Stock Award; or

(3) delivering to the Company owned and unencumbered shares of the common

stock of the Company.

12. Adjustments Upon Changes in

Stock.

      (a) If any

change is made in the stock subject to the Plan, or subject to any Stock Award

(through merger, consolidation, reorganization, recapitalization,

reincorporation, stock dividend, dividend in property other than cash, stock

split, liquidating dividend, combination of shares, exchange of shares, change

in corporate structure or other transaction not involving the receipt of

consideration by the Company), the Plan will be appropriately adjusted in the

type(s) and maximum number of securities subject to the Plan pursuant to

subsection 4(a) and the maximum number of securities subject to award to

any person during any calendar year pursuant to subsection 5(c), and the

outstanding Stock Awards will be appropriately adjusted in the type(s) and

number of securities and price per share of stock subject to such outstanding

Stock Awards. Such adjustments shall be made by the Board or the Committee, the

determination of which shall be final, binding and conclusive. (The conversion

of any convertible securities of the Company shall not be treated as a

"transaction not involving the receipt of consideration by the

Company.")

      (b) In the

event of: (1) a dissolution, liquidation or sale of all or substantially

all of the assets of the Company; (2) a merger or consolidation in which

the Company is not the surviving corporation; or (3) a reverse merger in

which the Company is the surviving corporation but the shares of the Company's

common stock outstanding immediately preceding the merger are converted by

virtue of the merger into other property, whether in the form of securities,

cash or otherwise; then: (i) any surviving corporation or acquiring

corporation shall assume any Stock Awards outstanding under the Plan or shall

substitute similar stock awards (including an award to acquire the same

consideration paid to the stockholders in the transaction described in this

subsection 12(b)) for those outstanding under the Plan, or (ii) in the

event any surviving corporation or acquiring corporation refuses to assume such

Stock Awards or to substitute similar stock awards for those outstanding under

the Plan, (A) with respect to Stock Awards held by persons then performing

services as Employees, Directors or Consultants and subject to any applicable

provisions of the California Corporate Securities Law of 1968 and related

regulations relied upon as a condition of issuing securities pursuant to the

Plan, the vesting of such Stock Awards (and, if applicable, the time during

which such Stock Awards may be exercised) shall be accelerated prior to such

event and the Stock Awards terminated if not exercised (if applicable) after

such acceleration and at or prior to such event, and (B) with respect to

any other Stock Awards outstanding under the Plan, such Stock Awards shall be

terminated if not exercised (if applicable) prior to such event.

      (c) Change

in Control Vesting. Unless otherwise provided in the applicable Stock Award Agreement,

each Stock Award shall be subject to the special change in control vesting

provisions set forth in clause (1) below if the conditions set forth

therein are satisfied (notwithstanding any other Continuous Status as an

Employee, Director or Consultant vesting provisions herein to the contrary, but

subject to any limited exercise period following a termination of such status

as may be provided for herein or in the applicable Stock Award Agreement).

          (i) If

a Stock Award holder's Continuous Status as an Employee, Director or Consultant

is terminated by the Company or an Affiliate upon or within one year after a

Change in Control (as defined below), and the termination is not the result of

the holder's death or disability and is not a termination by the Company or an

Affiliate for Cause (as defined below), then, subject to the other provisions

of this Section 12, all outstanding Stock Awards held by the holder shall

be deemed fully vested immediately prior to such termination.

13. Amendment Of The Plan And Stock Awards.

      (a) The

Board at any time, and from time to time, may amend the Plan. However, except

as provided in Section 12 relating to adjustments upon changes in stock,

no amendment shall be effective unless approved by the stockholders of the Company

to the extent approval is necessary for the Plan to satisfy the requirements of

Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities

exchange listing requirements.

      (b) The

Board may in its sole discretion submit any other amendment to the Plan for

stockholder approval, including, but not limited to, amendments to the Plan

intended to satisfy the requirements of Section 162(m) of the Code and the

regulations promulgated thereunder regarding the exclusion of performance-based

compensation from the limit on corporate deductibility of compensation paid to

certain executive officers.

      (c) It is

expressly contemplated that the Board may amend the Plan in any respect the

Board deems necessary or advisable to provide eligible Employees with the maximum

benefits provided or to be provided under the provisions of the Code and the

regulations promulgated thereunder relating to Incentive Stock Options and/or

to bring the Plan and/or Incentive Stock Options granted under it into

compliance therewith.

      (d) Rights

and obligations under any Stock Award granted before amendment of the Plan

shall not be impaired by any amendment of the Plan unless (i) the Company

requests the consent of the person to whom the Stock Award was granted and

(ii) such person consents in writing.

      (e) The

Board at any time, and from time to time, may amend the terms of any one or

more Stock Award; provided, however, that the rights and obligations under any

Stock Award shall not be impaired by any such amendment unless (i) the

Company requests the consent of the person to whom the Stock Award was granted

and (ii) such person consents in writing; provided further, that the Board

shall not have the power to reprice any Stock Award once granted, except for

adjustments resulting from a stock split, reverse stock split, or similar

change to the outstanding capital stock, as provided in Section 11.

14. Termination

Or Suspension Of The Plan.

      (a) The

Board may suspend or terminate the Plan at any time. Unless sooner terminated,

the Plan shall terminate ten (10) years from the date the Plan is adopted

by the Board or approved by the stockholders of the Company, whichever is

earlier. No Stock Awards may be granted under the Plan while the Plan is

suspended or after it is terminated.

      (b) Rights

and obligations under any Stock Award granted while the Plan is in effect shall

not be impaired by suspension or termination of the Plan, except with the

written consent of the person to whom the Stock Award was granted.

15. Effective Date of Plan.

      The Plan shall

become effective as determined by the Board, but no Stock Awards granted under

the Plan shall be exercised unless and until the Plan has been approved by the

stockholders of the Company, which approval shall be within twelve

(12) months before or after the date the Plan is adopted by the Board.

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