Document:

Unassociated Document

    Exhibit
10.6

    

    AMENDED AND RESTATED
CONSULTING AGREEMENT

    

    THIS AMENDED AND RESTATED CONSULTING
AGREEMENT, dated as of July 19, 2010 (this "Agreement"), is by and
between David Barrett
("Consultant"), and
Ventrus BioSciences,
Inc., with principal executive offices at 787 7th Avenue,
48th
Floor, New York, NY 10019 ("Company") and supersedes the
prior Consulting Agreement among the parties dated June 2010.

    

    WITNESSETH:

    

    WHEREAS, Company is a
development stage biomedical and pharmaceutical company;

    

    WHEREAS, Consultant
provides expertise in financial matters;

    

    WHEREAS, Company desires
that it be able to call upon the knowledge and experience of Consultant for
consultation services and advice; and

    

    WHEREAS, Consultant is willing
to render such services to Company on the terms and conditions hereinafter set
forth in this Agreement.

    

    NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth, the
parties hereto agree as follows:

    

    Section 1.  Services. Consultant
agrees to serve as Chief Financial Officer of the Company. Consultant hereby
agrees that the
services shall be provided at such times and at such places as the Company shall
reasonably request, and in accordance with the highest prevailing industry
standards and practices for the performance of similar services. Consultant
agrees to provide services on a full-time basis.  Consultant’s services
shall include, but not be limited to, preparation and adjudication of financial
statements, drafting sections of a registration statement on Form S-1 to support
an initial public offering, managing the auditor relationship and preparing
materials required for the auditors to issue an opinion, establishing a database
for all Company documents, preparing other materials at the Company’s request,
signing financial statements and performing other duties consistent with the
role of Chief Financial Officer.

    

    Section 2.   Term of
Agreement. The retention of the
Consultant by the Company as provided in Section 1 above shall be for a period
of six (6) months from the date hereof, unless sooner terminated in accordance
herewith (the “Term”);
provided, however, that the Term shall be extended for an additional one-year
period upon mutual written agreement of both Consultant and Company. Notwithstanding anything
to the contrary contained herein, the Agreement may be terminated by Consultant
or the Company upon thirty (30) days prior written notice to the other
party.  Immediately upon receipt of such notice from the Company,
Consultant shall institute such termination procedures as may be specified in
the notice and shall use his/her best efforts to minimize the cost to Company
resulting from such termination.  Sections 5, 6, 7, 8, 9 and 10 shall
survive the expiration or termination of this Agreement.  Should the
parties hereto enter into an employment agreement in the future, the
commencement of such employment shall automatically terminate this
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Section 3. Compensation. As full compensation for
the daily performance by Consultant of his/her duties under this Agreement, the
Company shall pay Consultant 15,000 US $ per month, such payment to be made at
the end of each month.

    

    Section 4.  Expenses. 
The Company shall reimburse Consultant for all reasonable and necessary expenses
incurred by Consultant in connection with the Services provided
hereunder.

    

    Section
5.  Confidential
Information and Inventions.

     

    (a)           Consultant
recognizes and acknowledges that in the course of his/her duties Consultant is
likely to receive confidential or proprietary information owned by the Company,
its affiliates or third parties with whom the Company or any such affiliates has
an obligation of confidentiality.  Accordingly, during and after the Term,
Consultant shall use his/her best efforts to protect the confidentiality of the
Confidential and Proprietary Information and agrees to keep confidential and not
disclose or make accessible to any other person or use for any other purpose
other than in connection with the fulfillment of his/her duties under this
Agreement, any Confidential and Proprietary Information (as defined below) owned
by, or received by or on behalf of, the Company or any of its affiliates. 
“Confidential and Proprietary Information” shall include, but shall not be
limited to, confidential or proprietary scientific or technical information,
data, formulas and related concepts, business plans (both current and under
development), client lists, promotion and marketing programs, trade secrets, or
any other confidential or proprietary business information relating to
development programs, costs, revenues, marketing, investments, sales activities,
promotions, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company or of any affiliate or
client of the Company.  Consultant expressly acknowledges the trade secret
status of the Confidential and Proprietary Information and that the Confidential
and Proprietary Information constitutes a protectable business interest of the
Company.  Consultant agrees: (i) not to use any such Confidential and
Proprietary Information for himself/herself or others; and (ii) not to take any
Company material or reproductions (including but not limited to writings,
correspondence, notes, drafts, records, invoices, technical and business
policies, computer programs or disks) thereof from the Company’s offices at any
time during the Term, except as required in the execution of Consultant’s duties
to the Company.  Consultant agrees to return immediately all Company
material and reproductions (including but not limited, to writings,
correspondence, notes, drafts, records, invoices, technical and business
policies, computer programs or disks) thereof in his/her possession to the
Company upon request and in any event immediately upon termination or expiration
of the Term.

     

    (b)           Except
with prior written authorization by the Company, Consultant agrees not to
disclose or publish any of the Confidential and Proprietary Information, or any
confidential, scientific, technical or business information of any other party
to whom the Company or any of its affiliates owes an obligation of confidence,
at any time during or after the Term.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)           Consultant
agrees that all inventions, discoveries, improvements and patentable or
copyrightable works (“Inventions”) initiated,
conceived or made by him/her, either alone or in conjunction with others, in
connection with or as a result of performance of Services by Consultant during
the Term shall be the sole property of the Company to the maximum extent
permitted by applicable law and, to the extent permitted by law, shall be “works
made for hire” as that term is defined in the United States Copyright Act (17
U.S.C.A., Section 101).  The Company shall be the sole owner of all
patents, copyrights, trade secret rights, and other intellectual property or
other rights in connection therewith.  Consultant hereby assigns to the
Company all right, title and interest he/she may have or acquire in all such
Inventions.  Consultant further agrees to assist the Company in every
proper way (but at the Company’s expense) to obtain and from time to time
enforce patents, copyrights or other rights on such Inventions in any and all
countries, and to that end Consultant will execute all documents
necessary:

     

    (i)         to
apply for, obtain and vest in the name of the Company alone (unless the Company
otherwise directs) letters patent, copyrights or other analogous protection in
any country throughout the world and when so obtained or vested to renew and
restore the same; and

    (ii)        to
defend any opposition proceedings in respect of such applications and any
opposition proceedings or petitions or applications for revocation of such
letters patent, copyright or other analogous protection.

     

    (d)           Consultant
acknowledges that while performing the Services under this Agreement Consultant
may locate, identify and/or evaluate patented or patentable inventions having
commercial potential in the fields of hemorrhoids, anal fissures, and fecal
incontinence which may be of potential interest to the Company or one of its
affiliates (the “Third Party
Inventions”).  Consultant understands, acknowledges and agrees that
all rights to, interests in or opportunities regarding, all Third-Party
Inventions identified by the Company, any of its affiliates or either of the
foregoing persons’ officers, directors, employees, agents or consultants
(including the Consultant) during the Term shall be and remain the sole and
exclusive property of the Company or such affiliate and Consultant shall have no
rights whatsoever to such Third-Party Inventions and will not pursue for
himself/herself or for others any transaction relating to the Third-Party
Inventions which is not on behalf of the Company.

     

    (e)           Consultant
agrees that he/she will promptly disclose to the Company, or any persons
designated by the Company, all improvements and Inventions made or conceived or
reduced to practice or learned by him/her, either alone or jointly with others,
during the Term.

     

    (f)           Consultant
agrees that the Company shall be entitled to enjoin any breach of the
confidentiality and other obligations hereunder without having to post a bond in
addition to all other remedies it may have under applicable law. 
Consultant will notify the Company in writing immediately upon the occurrence of
any unauthorized release of any Confidential and Proprietary Information or
other breach of any of the obligations under this Section 5 of which it is or
becomes aware.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section 6.  Insider
Trading.  Consultant recognizes that in the course of his/her duties
hereunder, Consultant may receive from the Company or others information that
may be considered "material, nonpublic information" concerning a public company
that is subject to the reporting requirements of the Securities and Exchange Act
of 1934, as amended.  Consultant agrees NOT to: (a) purchase
or sell, directly or indirectly, any securities of any company while in
possession of relevant material, nonpublic information relating to such company
received from the Company or others in connection herewith; (b) provide Company
with information with respect to any public company that may be considered
material, nonpublic information without the prior written consent of the
Company; or (c) communicate any material, nonpublic information to any
other person in which it is reasonably foreseeable that such person is likely to
(i) purchase or sell securities of any company with respect to which such
information relates, or (ii) otherwise directly or indirectly benefit from such
information.  Without limiting any of the confidentiality and insider
trading obligations included in this Agreement, Consultant shall not discuss any
information concerning Company obtained by Consultant in the course of
performing the Services with any financial, securities or industry analyst or
with the media without the written agreement of Company.

    

    Section 7.  Representations,
Warranties and Covenants of Consultant.  The Consultant hereby
represents, warrants and covenants to the Company as follows:

     

    (a)           Neither
the execution or delivery of this Agreement nor the performance by Consultant of
his/her duties and other obligations hereunder violate or will violate any
statute, law, determination or award, or conflict with or constitute a default
or breach of any covenant or obligation under (whether immediately, upon the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which Consultant is a party or by which he/she
is bound.

     

    (b)           Consultant
has the full right, power and legal capacity to enter and deliver this
Agreement, as applicable, and to perform his/her duties and other obligations
hereunder.  This Agreement constitutes the legal, valid and binding
obligation of Consultant enforceable against him/her in accordance with its
terms.  No approvals or consents of any persons or entities are required
for Consultant to execute and deliver this Agreement, as applicable, or perform
his/her duties and other obligations hereunder.

    

    (c)           Consultant
represents that his/her performance of all the terms of this Agreement will not
breach any agreement to keep in confidence any confidential information or trade
secrets acquired by Consultant from any third party, and Consultant agrees not
to use any confidential information or trade secrets of any third party in
connection with the provision of the Services in violation of the agreements
under which he/she had access to or knowledge of such confidential information
or trade secrets.

    

    (d)              Consultant
hereby represents that he/she (i) has not been debarred by any relevant
professional organization and (ii) to the best of Consultant’s knowledge, is not
debarred or under consideration to be debarred by the Food and Drug
Administration (the “FDA”) from working in or
providing services to any pharmaceutical or biotechnology company under the
Generic Drug Enforcement Act of 1992.  Consultant shall notify the Company
immediately if, during the Term, Consultant comes under investigation by the FDA
for debarment or disqualification or is debarred or disqualified. 
Consultant shall notify the Company immediately if the FDA or any other
regulatory authority requests permission to or does inspect Consultant's records
in connection with the Services provided under this Agreement or any other
matter, and Consultant will deliver to the Company promptly all materials,
correspondence, statements, forms, and records which Consultant receives,
obtains or generates pursuant to any such inspection.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (e)              Consultant
will not use any confidential information or trade secrets of any third party in
his service to Company in violation of the terms of the agreements under which
he had access to or knowledge of such confidential information or trade
secrets.

    

    Section 8.  Intentionally
Omitted.

    

    Section 9.  Consultant
not an Employee.  Company and Consultant hereby acknowledge and
agree that Consultant shall perform the services hereunder as an independent
contractor and not as an employee or agent of Company or any Company
affiliate.  Consultant will be solely responsible for all taxes,
withholding and other similar statutory obligations.  Consultant shall not
represent that he/she is an employee of Company or any Company affiliate under
any circumstance.  In addition, nothing in this Agreement shall be
construed as establishing any joint venture, partnership or other business
relationship between the parties hereto or representing any commitment by either
party to enter into any other agreement by implication or otherwise except as
specifically stated herein.  Consultant shall not have any authority,
express or implied, to bind Company or any Company affiliate to any agreement,
contract, or other commitment.  Consultant further understands and agrees
that this Agreement is entered into by Company on a non-exclusive basis and that
Company and its affiliates remain free to deal with others and retain other
consultants, employees, brokers, finders and other agents in the same or similar
capacity as Consultant has been retained at any time at their own
option.

    

    Section 10.  Miscellaneous.

    

    (a)           This
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without giving effect to its principles
of conflicts of laws.

     

    (b)           Any
dispute arising out of, or relating to, this Agreement or the breach thereof
(other than Section 5 hereof), or regarding the interpretation thereof, shall be
finally settled by arbitration conducted in New York, New York in accordance
with the rules of the American Arbitration Association then in effect before a
single arbitrator appointed in accordance with such rules.  Judgment upon
any award rendered therein may be entered and enforcement obtained thereon in
any court having jurisdiction.  The arbitrator shall have authority to
grant any form of appropriate relief, whether legal or equitable in nature,
including specific performance.  For the purpose of any judicial proceeding
to enforce such award or incidental to such arbitration or to compel arbitration
and for purposes of Section 5 hereof, the parties hereby submit to the exclusive
jurisdiction of the competent courts located in New York, New York, and agree
that service of process in such arbitration or court proceedings shall be
satisfactorily made upon it if sent by registered mail addressed to it at the
address referred to in paragraph (g) below.  The costs of such arbitration
shall be borne proportionate to the finding of fault as determined by the
arbitrator.

     

    (c)           This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective heirs, legal representatives, successors and permitted
assigns.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)           This
Agreement, and Consultant’s rights and obligations hereunder, may not be
assigned, delegated or otherwise subcontracted by Consultant.  The Company
may assign its rights, together with its obligations, hereunder in connection
with any sale, transfer or other disposition of all or substantially all of its
business or assets.

     

    (e)           This
Agreement cannot be amended orally, or by any course of conduct or dealing, but
only by a written agreement signed by the parties hereto.

     

    (f) 
          The failure of
either party to insist upon the strict performance of any of the terms,
conditions and provisions of this Agreement shall not be construed as a waiver
or relinquishment of future compliance therewith, and such terms, conditions and
provisions shall remain in full force and effect.  No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.

     

    (g)           All
notices, demands or other communications desired or required to be given by any
party to any other party hereto shall be in writing and shall be deemed
effectively given upon (i) personal delivery to the party to be notified, (ii)
upon confirmation of receipt of telecopy or other electronic transmission, (iii)
one business day after deposit with a reputable overnight courier, prepaid for
priority overnight delivery, or (iv) five days after deposit with the United
States Post Office, postage prepaid, in each case to such party at the address
set forth above, or to such other addresses and to the attention of such other
individuals as any party shall have designated to the other parties by notice
given in the foregoing manner.

     

    (h)           This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof.  No representation, promise or inducement has been made by either
party that is not embodied in this Agreement, and neither party shall be bound
by or liable for any alleged representation, promise or inducement not so set
forth.

     

    (i)
           As used in
this Agreement, “affiliate” of a specified person or entity shall mean and
include any person or entity controlling, controlled by or under common control
with the specified Person.

     

    (j) 
          The section headings
contained herein are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.

     

    (k)           This
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which together shall constitute one and the
same instrument.

     

    (l)  
         As used in this Agreement,
the masculine, feminine or neuter gender, and the singular or plural, shall be
deemed to include the others whenever and wherever the context so
requires.  Additionally, unless the context requires otherwise, "or" is not
exclusive.

     

    [Remainder of Page Intentionally Left
Blank – Signature Page Follows]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first written above
by proper person thereunto duly authorized.

    

    
      
        	 
      	
                VENTRUS
      BIOSCIENCES, INC.

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ Russell Ellison,
M.D.

              
	 
      	
                Name:
      Russell Ellison, M.D.

              
	 
      	
                Title:
      Chief Executive Officer

              
	 
      	 
      
	 
      	
                David
      Barrett

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ David BarrettExhibit
10.7

    

    VENTRUS
BIOSCIENCES, INC.

     

    2007
STOCK INCENTIVE PLAN

     

    1.           Purposes of the
Plan.  The purposes of this Plan are to attract and retain the
best available personnel, to provide additional incentives to Employees,
Directors and Consultants and to promote the success of the Company’s
business.

     

    2.           Definitions.  The
following definitions shall apply as used herein and in the individual Award
Agreements except as defined otherwise in an individual Award
Agreement.  In the event a term is separately defined in an individual
Award Agreement, such definition shall supersede the definition contained in
this Section 2.

     

    (a)           “Administrator” means
the Board or any of the Committees appointed to administer the
Plan.

     

    (b)           “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.

     

    (c)           “Applicable Laws”
means the legal requirements relating to the Plan and the Awards under
applicable provisions of federal and state securities laws, the corporate laws
of California and, to the extent other than California, the corporate law of the
state of the Company’s incorporation, the Code, the rules of any applicable
stock exchange or national market system, and the rules of any non-U.S.
jurisdiction applicable to Awards granted to residents therein.

     

    (d)           “Assumed” means that
pursuant to a Corporate Transaction either (i) the Award is expressly
affirmed by the Company or (ii) the contractual obligations represented by the
Award are expressly assumed (and not simply by operation of law) by the
successor entity or its Parent in connection with the Corporate Transaction with
appropriate adjustments to the number and type of securities of the successor
entity or its Parent subject to the Award and the exercise or purchase price
thereof which at least preserves the compensation element of the Award existing
at the time of the Corporate Transaction as determined in accordance with the
instruments evidencing the agreement to assume the Award.

     

    (e)           “Award” means the
grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted
Stock Unit or other right or benefit under the Plan.

     

    (f)           “Award Agreement”
means the written agreement evidencing the grant of an Award executed by the
Company and the Grantee, including any amendments thereto.

     

    (g)           “Board” means the
Board of Directors of the Company.

     

    (h)           “Cause” means, with
respect to the termination by the Company or a Related Entity of the Grantee’s
Continuous Service, that such termination is for “Cause” as such term (or word
of like import) is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the
Grantee’s:  (i) performance of any act or failure to perform any
act in bad faith and to the detriment of the Company or a Related Entity;
(ii) dishonesty, intentional misconduct or material breach of any agreement
with the Company or a Related Entity; or (iii) commission of a crime
involving dishonesty, breach of trust, or physical or emotional harm to any
person; provided, however, that with regard to any agreement that defines
“Cause” on the occurrence of or in connection with a Corporate Transaction, such
definition of “Cause” shall not apply until a Corporate Transaction actually
occurs.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (i)           “Code” means the
Internal Revenue Code of 1986, as amended.

     

    (j)           “Committee” means any
committee composed of members of the Board appointed by the Board to administer
the Plan.

     

    (k)           “Common Stock” means
the Company’s Common Stock, as set forth in the Award Agreement.

     

    (l)           “Company” means
Ventrus Biosciences, Inc., a Delaware corporation, or any successor entity that
adopts the Plan in connection with a Corporate Transaction.

     

    (m)           “Consultant” means any
person (other than an Employee or a Director, solely with respect to rendering
services in such person’s capacity as a Director) who is engaged by the Company
or any Related Entity to render consulting or advisory services to the Company
or such Related Entity.

     

    (n)           “Continuous Service”
means that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant is not interrupted or
terminated.  In jurisdictions requiring notice in advance of an
effective termination as an Employee, Director or Consultant, Continuous Service
shall be deemed terminated upon the actual cessation of providing services to
the Company or a Related Entity notwithstanding any required notice period that
must be fulfilled before a termination as an Employee, Director or Consultant
can be effective under Applicable Laws.  A Grantee’s Continuous
Service shall be deemed to have terminated either upon an actual termination of
Continuous Service or upon the entity for which the Grantee provides services
ceasing to be a Related Entity.  Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entity, or any successor, in
any capacity of Employee, Director or Consultant, or (iii) any change in
status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as
otherwise provided in the Award Agreement).  An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave.  For purposes of each Incentive Stock Option granted
under the Plan, if such leave exceeds three (3) months, and reemployment upon
expiration of such leave is not guaranteed by statute or contract, then the
Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the
day three (3) months and one (1) day following the expiration of such three (3)
month period.

     

    (o)           [RESERVED]

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (p)           “Corporate
Transaction” means any of the following transactions, provided, however,
that the Administrator shall determine under parts (iv) and (v) whether multiple
transactions are related, and its determination shall be final, binding and
conclusive:

     

    (i)           a
merger or consolidation in which the Company is not the surviving entity, except
for a transaction the principal purpose of which is to change the state in which
the Company is incorporated;

     

    (ii)          the
sale, transfer or other disposition of all or substantially all of the assets of
the Company;

     

    (iii)         the
complete liquidation or dissolution of the Company;

     

    (iv)        any
reverse merger or series of related transactions culminating in a reverse merger
(including, but not limited to, a tender offer followed by a reverse merger) in
which the Company is the surviving entity but (A) the shares of Common
Stock outstanding immediately prior to such merger are converted or exchanged by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (B) in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company’s outstanding
securities are transferred to a person or persons different from those who held
such securities immediately prior to such merger or the initial transaction
culminating in such merger, but excluding any such
transaction or series of related transactions that the Administrator determines
shall not be a Corporate Transaction; or

     

    (v)         acquisition
in a single or series of related transactions by any person or related group of
persons (other than the Company or by a Company-sponsored employee benefit plan)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Company’s outstanding securities, but excluding any such
transaction or series of related transactions that the Administrator determines
shall not be a Corporate Transaction.

     

    (q)           “Covered Employee”
means an Employee who is a “covered employee” under Section 162(m)(3) of
the Code.

     

    (r)           “Director” means a
member of the Board or the board of directors of any Related
Entity.

     

    (s)           “Disability” means as
defined under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy.  If the Company or the Related Entity to
which the Grantee provides service does not have a long-term disability plan in
place, “Disability” means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee by reason of
any medically determinable physical or mental impairment for a period of not
less than ninety (90) consecutive days.  A Grantee will not be
considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its
discretion.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (t)           “Dividend Equivalent
Right” means a right entitling the Grantee to compensation measured by
dividends paid with respect to Common Stock.

     

    (u)           “Employee” means any
person, including an Officer or Director, who is in the employ of the Company or
any Related Entity, subject to the control and direction of the Company or any
Related Entity as to both the work to be performed and the manner and method of
performance.  The payment of a director’s fee by the Company or a
Related Entity shall not be sufficient to constitute “employment” by the
Company.

     

    (v)           “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    (w)           “Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:

     

    (i)           If
the Common Stock is listed on one or more established stock exchanges or
national market systems, including without limitation The NASDAQ Global Select
Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ
Stock Market LLC, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on the
principal exchange or system on which the Common Stock is listed (as determined
by the Administrator) on the date of determination (or, if no closing sales
price or closing bid was reported on that date, as applicable, on the last
trading date such closing sales price or closing bid was reported), as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;

     

    (ii)          If
the Common Stock is regularly quoted on an automated quotation system (including
the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market
Value shall be the closing sales price for such stock as quoted on such system
or by such securities dealer on the date of determination, but if selling prices
are not reported, the Fair Market Value of a share of Common Stock shall be the
mean between the high bid and low asked prices for the Common Stock on the date
of determination (or, if no such prices were reported on that date, on the last
date such prices were reported), as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or

     

    (iii)         In
the absence of an established market for the Common Stock of the type described
in (i) and (ii), above, the Fair Market Value thereof shall be determined by the
Administrator in good faith and in a manner consistent with Section 260.140.50
of Title 10 of the California Code of Regulations which requires that
consideration be given to (A) the price at which securities of reasonably
comparable corporations (if any) in the same industry are being traded, or (B)
if there are no securities of reasonably comparable corporations in the same
industry being traded, the earnings history, book value and prospects of the
issuer in light of market conditions generally.

     

    (x)           “Grantee” means an
Employee, Director or Consultant who receives an Award under the
Plan.

     

    (y)           “Immediate Family”
means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Grantee’s household (other than a tenant
or employee), a trust in which these persons (or the Grantee) have more than
fifty percent (50%) of the beneficial interest, a foundation in which these
persons (or the Grantee) control the management of assets, and any other entity
in which these persons (or the Grantee) own more than fifty percent (50%) of the
voting interests.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (z)           “Incentive Stock
Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code.

     

    (aa)         “Non-Qualified Stock
Option” means an Option not intended to qualify as an Incentive Stock
Option.

     

    (bb)        “Officer” means a
person who is an officer of the Company or a Related Entity within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

     

    (cc)        
“Option” means
an option to purchase Shares pursuant to an Award Agreement granted under the
Plan.

     

    (dd)        “Parent” means a
“parent corporation”, whether now or hereafter existing, as defined in
Section 424(e) of the Code.

     

    (ee)         “Performance-Based
Compensation” means compensation qualifying as “performance-based
compensation” under Section 162(m) of the Code.

     

    (ff)          “Plan” means this
Ventrus Biosciences, Inc. 2007 Stock Incentive Plan.

     

    (gg)        “Post-Termination Exercise
Period” means the period specified in the Award Agreement of not less
than thirty (30) days commencing on the date of termination (other than
termination by the Company or any Related Entity for Cause) of the Grantee’s
Continuous Service, or such longer period as may be applicable upon death or
Disability.

     

    (hh)        “Registration Date”
means the first to occur of (i) the closing of the first sale to the
general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended, of (A) the Common Stock or (B) the same class of
securities of a successor corporation (or its Parent) issued pursuant to a
Corporate Transaction in exchange for or in substitution of the Common Stock;
(ii) in the event of a Corporate Transaction, the date of the consummation
of the Corporate Transaction if the same class of securities of the successor
corporation (or its Parent) issuable in such Corporate Transaction shall have
been sold to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on or prior to the date of consummation of
such Corporate Transaction; or (iii) the date that the Company first becomes
subject to the reporting obligations of Section 12 of the Exchange
Act.

     

    (ii)           “Related Entity” means
any Parent or Subsidiary of the Company or any person, entity or third party
that directly, or indirectly through one of more intermediaries, controls, or is
controlled by, or is under common control with, Lindsay A. Rosenwald, M.D.
and/or Paramount Biosciences, LLC, a New York limited liability
company.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (jj)           “Replaced” means that
pursuant to a Corporate Transaction the Award is replaced with a comparable
stock award or a cash incentive program of the Company, the successor entity (if
applicable) or Parent of either of them which preserves the compensation element
of such Award existing at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same (or a more favorable) vesting
schedule applicable to such Award.  The determination of Award
comparability shall be made by the Administrator and its determination shall be
final, binding and conclusive.

     

    (kk)         “Restricted Stock”
means Shares issued under the Plan to the Grantee for such consideration, if
any, and subject to such restrictions on transfer, rights of first refusal,
repurchase provisions, forfeiture provisions, and other terms and conditions as
established by the Administrator.

     

    (ll)           “Restricted Stock
Units” means an Award which may be earned in whole or in part upon the
passage of time or the attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.

     

    (mm)       “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor
thereto.

     

    (nn)        “SAR” means a stock
appreciation right entitling the Grantee to Shares or cash compensation, as
established by the Administrator, measured by appreciation in the value of
Common Stock.

     

    (oo)        “Share” means a share
of the Common Stock.

     

    (pp)        “Subsidiary” means a
“subsidiary corporation”, whether now or hereafter existing, as defined in
Section 424(f) of the Code.

     

    3.           Stock Subject to the
Plan.

     

    (a)           Subject
to the provisions of Section 10 below, the maximum aggregate number of Shares
which may be issued pursuant to all Awards (including Incentive Stock Options)
is 6,000,000 Shares.  The Shares may be authorized, but unissued, or
reacquired Common Stock.

     

    (b)           Any
Shares covered by an Award (or portion of an Award) which is forfeited, canceled
or expires (whether voluntarily or involuntarily) shall be deemed not to have
been issued for purposes of determining the maximum aggregate number of Shares
which may be issued under the Plan.  Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited or repurchased by the Company, such Shares shall
become available for future grant under the Plan.  To the extent not
prohibited by the listing requirements of The Nasdaq Global Market (or other
established stock exchange or national market system on which the Common Stock
is traded) and Applicable Law, any Shares covered by an Award which are
surrendered (i) in payment of the Award exercise or purchase price or
(ii) in satisfaction of tax withholding obligations incident to the
exercise of an Award shall be deemed not to have been issued for purposes of
determining the maximum number of Shares which may be issued pursuant to all
Awards under the Plan, unless otherwise determined by the
Administrator.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    4.            Administration of the
Plan.

     

    (a)           Plan
Administrator.

     

    (i)           Administration with Respect
to Directors and Officers.  Prior to the Registration Date,
with respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.  On or after the
Registration Date, with respect to grants of Awards to Directors or Employees
who are also Officers or Directors of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws and to permit such grants and related transactions under the
Plan to be exempt from Section 16(b) of the Exchange Act in accordance with
Rule 16b-3.  Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the
Board.

     

    (ii)           Administration With Respect
to Consultants and Other Employees.  With respect to grants of
Awards to Employees or Consultants who are neither Directors nor Officers of the
Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a manner
as to satisfy the Applicable Laws.  Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board.

     

    (iii)           Administration With Respect
to Covered Employees.  Notwithstanding the foregoing, as of and
after the date that the exemption for the Plan under Section 162(m) of the
Code expires, as set forth in Section 20 below, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee making Awards
qualifying as Performance-Based Compensation.  In the case of such
Awards granted to Covered Employees, references to the “Administrator” or to a
“Committee” shall be deemed to be references to such Committee or
subcommittee.

     

    (b)           Multiple Administrative
Bodies.  The Plan may be administered by different bodies with
respect to Directors, Officers, Consultants, and Employees who are neither
Directors nor Officers.

     

    (c)           Powers of the
Administrator.  Subject to Applicable Laws and the provisions
of the Plan (including any other powers given to the Administrator hereunder),
and except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (i)          to
select the Employees, Directors and Consultants to whom Awards may be granted
from time to time hereunder;

     

    (ii)         to
determine whether and to what extent Awards are granted hereunder;

     

    (iii)        to
determine the number of Shares or the amount of other consideration to be
covered by each Award granted hereunder;

     

    (iv)        to
approve forms of Award Agreements for use under the Plan;

     

    (v)         to
determine the terms and conditions of any Award granted hereunder;

     

    (vi)        to
establish additional terms, conditions, rules or procedures to accommodate the
rules or laws of applicable non-U.S. jurisdictions and to afford Grantees
favorable treatment under such rules or laws; provided, however, that no Award
shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan;

     

    (vii)       to
amend the terms of any outstanding Award granted under the Plan, provided that
any amendment that would adversely affect the Grantee’s rights under an
outstanding Award shall not be made without the Grantee’s written consent;
provided, however, that an amendment or modification that may cause an Incentive
Stock Option to become a Non-Qualified Stock Option shall not be treated as
adversely affecting the rights of the Grantee;

     

    (viii)      to
construe and interpret the terms of the Plan and Awards, including without
limitation, any notice of award or Award Agreement, granted pursuant to the Plan; and

     

    (ix)         to
take such other action, not inconsistent with the terms of the Plan, as the
Administrator deems appropriate.

     

    The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator; provided
that the Administrator may not exercise any right or power reserved to the
Board.  Any decision made, or action taken, by the Administrator or in
connection with the administration of this Plan shall be final, conclusive and
binding on all persons having an interest in the Plan.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (d)           Indemnification. In
addition to such other rights of indemnification as they may have as members of
the Board or as Officers or Employees of the Company or a Related Entity,
members of the Board and any Officers or Employees of the Company or a Related
Entity to whom authority to act for the Board, the Administrator or the Company
is delegated shall be defended and indemnified by the Company to the extent
permitted by law on an after-tax basis against all reasonable expenses,
including attorneys’ fees, actually and necessarily incurred in connection with
the defense of any claim, investigation, action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any Award granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Company) or paid
by them in satisfaction of a judgment in any such claim, investigation, action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such claim, investigation, action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct;
provided, however, that within thirty (30) days after the institution of such
claim, investigation, action, suit or proceeding, such person shall offer to the
Company, in writing, the opportunity at the Company’s expense to defend the
same.

     

    5.           Eligibility.  Awards
other than Incentive Stock Options may be granted to Employees, Directors and
Consultants.  Incentive Stock Options may be granted only to Employees
of the Company or a Parent or a Subsidiary of the Company.  An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards.  Awards may be granted to such
Employees, Directors or Consultants who are residing in non-U.S. jurisdictions
as the Administrator may determine from time to time.

     

    6.           Terms and Conditions of
Awards.

     

    (a)           Types of Awards. The
Administrator is authorized under the Plan to award any type of arrangement to
an Employee, Director or Consultant that is not inconsistent with the provisions
of the Plan and that by its terms involves or might involve the issuance of
(i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions.  Such awards include, without limitation, Options,
SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend
Equivalent Rights, and an Award may consist of one such security or benefit, or
two (2) or more of them in any combination or alternative.

     

    (b)           Designation of
Award.  Each Award shall be designated in the Award
Agreement.  In the case of an Option, the Option shall be designated
as either an Incentive Stock Option or a Non-Qualified Stock
Option.  However, notwithstanding such designation, an Option will
qualify as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not
exceeded.  The $100,000 limitation of Section 422(d) of the Code
is calculated based on the aggregate Fair Market Value of the Shares subject to
Options designated as Incentive Stock Options which become exercisable for the
first time by a Grantee during any calendar year (under all plans of the Company
or any Parent or Subsidiary of the Company).  For purposes of this
calculation, Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares shall be
determined as of the grant date of the relevant Option.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (c)           Conditions of
Award.  Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria.  The performance criteria
established by the Administrator may be based on any one of, or combination of,
increase in share price, earnings per share, total shareholder return, return on
equity, return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator.  Partial achievement of
the specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.

     

    (d)           Acquisitions and Other
Transactions.  The Administrator may issue Awards under the
Plan in settlement, assumption or substitution for, outstanding awards or
obligations to grant future awards in connection with the Company or a Related
Entity acquiring another entity, an interest in another entity or an additional
interest in a Related Entity whether by merger, stock purchase, asset purchase
or other form of transaction.

     

    (e)           Deferral of Award
Payment.  The Administrator may establish one or more programs
under the Plan to permit selected Grantees the opportunity to elect to defer
receipt of consideration upon exercise of an Award, satisfaction of performance
criteria, or other event that absent the election would entitle the Grantee to
payment or receipt of Shares or other consideration under an
Award.  The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.

     

    (f)           Separate
Programs.  The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

     

    (g)           Individual Option and SAR
Limit.  Following the date that the exemption from application
of Section 162(m) of the Code described in Section 20 (or any
exemption having similar effect) ceases to apply to Awards, the maximum number
of Shares with respect to which Options and SARs may be granted to any Grantee
in any calendar year shall be one million (1,000,000) Shares.  In
connection with a Grantee’s commencement of Continuous Service, a Grantee may be
granted Options and SARs for up to an additional five hundred thousand (500,000)
Shares which shall not count against the limit set forth in the previous
sentence.  The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company’s capitalization pursuant to
Section 10, below.  To the extent required by Section 162(m)
of the Code or the regulations thereunder, in applying the foregoing limitations
with respect to a Grantee, if any Option or SAR is canceled, the canceled Option
or SAR shall continue to count against the maximum number of Shares with respect
to which Options and SARs may be granted to the Grantee.  For this
purpose, the repricing of an Option (or in the case of a SAR, the base amount on
which the stock appreciation is calculated is reduced to reflect a reduction in
the Fair Market Value of the Common Stock) shall be treated as the cancellation
of the existing Option or SAR and the grant of a new Option or SAR.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (h)           Early
Exercise.  The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award.  Any unvested Shares received pursuant to such exercise may
be subject to a repurchase right in favor of the Company or a Related Entity or
to any other restriction the Administrator determines to be
appropriate.

     

    (i)           Term of
Award.  The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof.  However, in the
case of an Incentive Stock Option granted to a Grantee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, the term of the Incentive Stock Option shall be
five (5) years from the date of grant thereof or such shorter term as may
be provided in the Award Agreement.  Notwithstanding the foregoing,
the specified term of any Award shall not include any period for which the
Grantee has elected to defer the receipt of the Shares or cash issuable pursuant
to the Award.

     

    (j)           Transferability of
Awards.   Incentive
Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Grantee, only by
the Grantee.   Other
Awards shall be transferable (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the Grantee, to the extent and
in the manner authorized by the Administrator by gift or pursuant to a domestic
relations order to members of the Grantee’s Immediate
Family.  Notwithstanding the foregoing, the Grantee may designate one
or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death
on a beneficiary designation form provided by the Administrator.

     

    (k)           Time of Granting
Awards.  The date of grant of an Award shall for all purposes
be the date on which the Administrator makes the determination to grant such
Award, or such other later date as is determined by the
Administrator.

     

    7.           Award Exercise or Purchase
Price, Consideration and Taxes.

     

    (a)           Exercise or Purchase
Price.  The exercise or purchase price, if any, for an Award
shall be as follows:

     

    (i)           In
the case of an Incentive Stock Option:

     

    (A)           granted
to an Employee who, at the time of the grant of such Incentive Stock Option owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary of the Company, the
per Share exercise price shall be not less than one hundred ten percent (110%)
of the Fair Market Value per Share on the date of grant; or

     

    (B)           granted
to any Employee other than an Employee described in the preceding paragraph, the
per Share exercise price shall be not less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (ii)           In
the case of a Non-Qualified Stock Option:

     

    (A)           granted
to a person who, at the time of the grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary of the Company, the per Share
exercise price shall be not less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant; or

     

    (B)           granted
to any person other than a person described in the preceding paragraph, the per
Share exercise price shall be not less than one-hundred percent (100%) of the
Fair Market Value per Share on the date of grant.

     

    (iii)           In
the case of Awards intended to qualify as Performance-Based Compensation, the
exercise or purchase price, if any, shall be not less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.

     

    (iv)           In
the case of the sale of Shares:

     

    (A)           granted
to a person who, at the time of the grant of such Award, or at the time the
purchase is consummated, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, the per Share purchase price shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the date of
grant; or

     

    (B)           granted
to any person other than a person described in the preceding paragraph, the per
Share purchase price shall be not less than eighty-five percent (85%) of the
Fair Market Value per Share on the date of grant.

     

    (v)           In
the case of other Awards, such price as is determined by the
Administrator.

     

    (vi)           Notwithstanding
the foregoing provisions of this Section 7(a), in the case of an Award issued
pursuant to Section  6(d), above, the exercise or purchase price for the
Award shall be determined in accordance with the provisions of the relevant
instrument evidencing the agreement to issue such Award.

     

    (b)           Consideration.  Subject
to Applicable Laws, the consideration to be paid for the Shares to be issued
upon exercise or purchase of an Award including the method of payment, shall be
determined by the Administrator.  In addition to any other types of
consideration the Administrator may determine, the Administrator is authorized
to accept as consideration for Shares issued under the Plan the following
provided that the portion of the consideration equal to the par value of the
Shares must be paid in cash or other legal consideration permitted by the
Delaware General Corporation Law.

     

    (i)           cash;

     

    (ii)          check;

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (iii)          delivery
of Grantee’s promissory note with such recourse, interest, security, and
redemption provisions as the Administrator determines as appropriate (but only
to the extent that the acceptance or terms of the promissory note would not
violate an Applicable Law);

     

    (iv)          surrender
of Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require which have a Fair Market Value on the
date of surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Award shall be exercised;

     

    (v)           with
respect to Options, if the exercise occurs on or after the Registration Date,
payment through a broker-dealer sale and remittance procedure pursuant to which
the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company sufficient funds to cover the aggregate exercise
price payable for the purchased Shares and (B) shall provide written directives
to the Company to deliver the certificates (or other evidence satisfactory to
the Company to the extent that the Shares are uncertificated) for the purchased
Shares directly to such brokerage firm in order to complete the sale
transaction; or

     

    (vi)          with
respect to Options, payment through a “net exercise” such that, without the
payment of any funds, the Grantee may exercise the Option and receive the net
number of Shares equal to (i) the number of Shares as to which the Option
is being exercised, multiplied by (ii) a fraction, the numerator of which
is the Fair Market Value per Share (on such date as is determined by the
Administrator) less the Exercise Price per Share, and the denominator of which
is such Fair Market Value per Share;

     

    (vii)         any
combination of the foregoing methods of payment.

     

    The
Administrator may at any time or from time to time, by adoption of or by
amendment to the standard forms of Award Agreement described in
Section 4(c)(iv), or by other means, grant Awards which do not permit all
of the foregoing forms of consideration to be used in payment for the Shares or
which otherwise restrict one or more forms of consideration.

     

    (c)           Taxes.  No
Shares shall be delivered under the Plan to any Grantee or other person until
such Grantee or other person has made arrangements acceptable to the
Administrator for the satisfaction of any non-U.S., federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares.  Upon
exercise or vesting of an Award the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations, including, but not
limited too, by surrender of the whole number of Shares covered by the Award
sufficient to satisfy the minimum applicable tax withholding obligations
incident to the exercise or vesting of an Award.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    8.           Exercise of
Award.

     

    (a)           Procedure for Exercise;
Rights as a Shareholder.

     

    (i)           Any
Award granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator under the terms of the Plan and
specified in the Award Agreement but in the case of an
Option, in no case at a rate of less than twenty percent (20%) per year over
five (5) years from the date the Option is granted, subject to reasonable
conditions such as continued employment.  Notwithstanding the
foregoing, in the case of an Option granted to an Officer, Director or
Consultant, the Award Agreement may provide that the Option may become
exercisable, subject to reasonable conditions such as such Officer’s, Director’s
or Consultant’s Continuous Service, at any time or during any period established
in the Award Agreement.

     

    (ii)           An
Award shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Award by the
person entitled to exercise the Award and full payment for the Shares with
respect to which the Award is exercised has been made, including, to the extent
selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b)(v).

     

    (b)           Exercise of Award Following
Termination of Continuous Service.  In the event of termination
of a Grantee’s Continuous Service for any reason other than Disability or death
(but not in the event of a Grantee’s change of status from Employee to
Consultant or from Consultant to Employee), such Grantee may, but only during
the Post-Termination Exercise Period (but in no event later than the expiration
date of the term of such Award as set forth in the Award Agreement), exercise
the portion of the Grantee’s Award that was vested at the date of such
termination or such other portion of the Grantee’s Award as may be determined by
the Administrator.  The Grantee’s Award Agreement may provide that
upon the termination of the Grantee’s Continuous Service for Cause, the
Grantee’s right to exercise the Award shall terminate concurrently with the
termination of Grantee’s Continuous Service.  In the event of a
Grantee’s change of status from Employee to Consultant, an Employee’s Incentive
Stock Option shall convert automatically to a Non-Qualified Stock Option on the
day three (3) months and one day following such change of status.  To
the extent that the Grantee’s Award was unvested at the date of termination, or
if the Grantee does not exercise the vested portion of the Grantee’s Award
within the Post-Termination Exercise Period, the Award shall
terminate.

     

    (c)           Disability of
Grantee.  In the event of termination of a Grantee’s Continuous
Service as a result of his or her Disability, such Grantee may, but only within
twelve (12) months from the date of such termination (or such longer period
as specified in the Award Agreement but in no event later than the expiration
date of the term of such Award as set forth in the Award Agreement), exercise
the portion of the Grantee’s Award that was vested at the date of such
termination; provided, however, that if such Disability is not a “disability” as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Non-Qualified Stock Option on the day three (3) months and one day
following such termination.  To the extent that the Grantee’s Award
was unvested at the date of termination, or if Grantee does not exercise the
vested portion of the Grantee’s Award within the time specified herein, the
Award shall terminate.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (d)           Death of
Grantee.  In the event of a termination of the Grantee’s
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination Exercise Period or during the twelve
(12) month period following the Grantee’s termination of Continuous Service as a
result of his or her Disability, the Grantee’s estate or a person who acquired
the right to exercise the Award by bequest or inheritance may exercise the
portion of the Grantee’s Award that was vested as of the date of termination,
within twelve (12) months from the date of death (or such longer period as
specified in the Award Agreement but in no event later than the expiration of
the term of such Award as set forth in the Award Agreement).  To the
extent that, at the time of death, the Grantee’s Award was unvested, or if the
Grantee’s estate or a person who acquired the right to exercise the Award by
bequest or inheritance does not exercise the vested portion of the Grantee’s
Award within the time specified herein, the Award shall terminate.

     

    (e)           Extension if Exercise
Prevented by Law.  Notwithstanding the foregoing, if the
exercise of an Award within the applicable time periods set forth in this
Section 8 is prevented by the provisions of Section 9 below, the Award
shall remain exercisable until one (1) month after the date the Grantee is
notified by the Company that the Award is exercisable, but in any event no later
than the expiration of the term of such Award as set forth in the Award
Agreement.

     

    9.           Conditions Upon Issuance of
Shares.

     

    (a)           If
at any time the Administrator determines that the delivery of Shares pursuant to
the exercise, vesting or any other provision of an Award is or may be unlawful
under Applicable Laws, the vesting or right to exercise an Award or to otherwise
receive Shares pursuant to the terms of an Award shall be suspended until the
Administrator determines that such delivery is lawful and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.  The Company shall have no obligation to effect any
registration or qualification of the Shares under federal or state
laws.

     

    (b)           As
a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any Applicable
Laws.

     

    10.           Changes in
Capitalization.

     

    (a)           Adjustments.  Subject
to any required action by the shareholders of the Company, the number of Shares
covered by each outstanding Award, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan, the exercise or purchase price
of each such outstanding Award, as well as any other terms that the
Administrator determines require adjustment shall be proportionately adjusted
for (i) any increase or decrease in the number of issued Shares resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, or similar transaction affecting the Shares,
(ii) any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to the Company’s Subordinated Class A Common Stock including a corporate
merger, consolidation, acquisition of property or stock, separation (including a
spin-off or other distribution of stock or property), reorganization,
liquidation (whether partial or complete) or any similar transaction; provided,
however that conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of
consideration.”  Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive.  Except
as the Administrator determines, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (b)           [RESERVED]

     

    11.           Corporate
Transactions.

     

    (a)           Termination of Award to
Extent Not Assumed in Corporate Transaction.  Effective upon
the consummation of a Corporate Transaction, all outstanding Awards under the
Plan shall terminate.  However, all such Awards shall not terminate to
the extent they are Assumed in connection with the Corporate
Transaction.

     

    (b)           Acceleration of Award Upon
Corporate Transaction.  The Administrator shall have the
authority, exercisable either in advance of any actual or anticipated Corporate
Transaction or Change in Control or at the time of an actual Corporate
Transaction or Change in Control and exercisable at the time of the grant of an
Award under the Plan or any time while an Award remains outstanding, to provide
for the full or partial automatic vesting and exercisability of one or more
outstanding unvested Awards under the Plan and the release from restrictions on
transfer and repurchase or forfeiture rights of such Awards in connection with a
Corporate Transaction or Change in Control, on such terms and conditions as the
Administrator may specify.  The Administrator also shall have the
authority to condition any such Award vesting and exercisability or release from
such limitations upon the subsequent termination of the Continuous Service of
the Grantee within a specified period following the effective date of the
Corporate Transaction or Change in Control.  The Administrator may
provide that any Awards so vested or released from such limitations in
connection with a Change in Control, shall remain fully exercisable until the
expiration or sooner termination of the Award.

     

    (c)           Effect of Acceleration on
Incentive Stock Options.  Any Incentive Stock Option
accelerated under this Section 11
in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not
exceeded.

     

    12.           Repurchase
Rights.  If the provisions of an Award Agreement grant to the
Company the right to repurchase Shares upon termination of the Grantee’s
Continuous Service, the Award Agreement shall (or may, with respect to Awards
granted or issued to Officers, Directors or Consultants) provide
that:

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (a)           the
right to repurchase must be exercised, if at all, within ninety (90) days of the
termination of the Grantee’s Continuous Service (or in the case of Shares issued
upon exercise of Awards after the date of termination of the Grantee’s
Continuous Service, within ninety (90) days after the date of the Award
exercise);

     

    (b)           the
consideration payable for the Shares upon exercise of such repurchase right
shall be made in cash or by cancellation of purchase money indebtedness within
the ninety (90) day periods specified in Section 12(a);

     

    (c)           the
amount of such consideration shall be equal to the original purchase price paid
by Grantee for each such Share or the Fair Market Value of the Shares to be
repurchased on the date of termination of Grantee’s Continuous Service;
provided, that if such Shares may be repurchased at the original purchase price,
such repurchase right shall lapse at the rate of at least twenty percent (20%)
of the Shares subject to the Award per year over five (5) years from the date
the Award is granted (without respect to the date the Award was exercised or
became exercisable); and

     

    (d)           the
right to repurchase Shares, other than a right to repurchase under which Shares
may be repurchased at the original purchase price, shall terminate on the date
that the Common Stock is (i) listed on one or more established stock exchanges
or national market systems, including without limitation The NASDAQ Global
Select Market, The NASDAQ Global Market or The NASDAQ Capital Market of The
NASDAQ Stock Market LLC or (ii) regularly quoted on an automated quotation
system (including the OTC Bulletin Board) or by a recognized securities
dealer.

     

    13.           Effective Date and Term of
Plan.  The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company.  It shall continue in effect for a term of ten (10) years
unless sooner terminated.  Subject to Section 18 below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming
effective.

     

    14.           Amendment, Suspension or
Termination of the Plan.

     

    (a)           The
Board may at any time amend, suspend or terminate the Plan. To the extent
necessary to comply with Applicable Laws, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

     

    (b)           No
Award may be granted during any suspension of the Plan or after termination of
the Plan.

     

    (c)           No
suspension or termination of the Plan (including termination of the Plan under
Section 13, above) shall adversely affect any rights under Awards already
granted to a Grantee.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    15.           Reservation of
Shares.

     

    (a)           The
Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     

    (b)           The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.

     

    16.           No Effect on Terms of
Employment/Consulting Relationship.  The Plan shall not confer
upon any Grantee any right with respect to the Grantee’s Continuous Service, nor
shall it interfere in any way with his or her right or the right of the Company
or a Related Entity to terminate the Grantee’s Continuous Service at any time,
with or without Cause, and with or without notice.  The ability of the
Company or any Related Entity to terminate the employment of a Grantee who is
employed at will is in no way affected by its determination that the Grantee’s
Continuous Service has been terminated for Cause for the purposes of this
Plan.

     

    17.           No Effect on Retirement and
Other Benefit Plans.  Except as specifically provided in a
retirement or other benefit plan of the Company or a Related Entity, Awards
shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or a Related Entity, and
shall not affect any benefits under any other benefit plan of any kind or any
benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation.  The Plan is not a
“Retirement Plan” or “Welfare Plan” under the Employee Retirement Income
Security Act of 1974, as amended.

     

    18.           Shareholder
Approval.  Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws.  Any Award
exercised before shareholder approval is obtained shall be rescinded if
shareholder approval is not obtained within the time prescribed, and Shares
issued on the exercise of any such Award shall not be counted in determining
whether shareholder approval is obtained.

     

    19.           Information to
Grantees.  The Company shall provide to each Grantee, during
the period for which such Grantee has one or more Awards outstanding, copies of
financial statements at least annually.  The Company shall not be
required to provide such information to persons whose duties in connection with
the Company assure them access to equivalent information.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    20.           Effect of
Section 162(m) of the Code.  Section 162(m) of the
Code does not apply to the Plan prior to the Registration Date or such earlier
time that the Company first becomes subject to the reporting obligations of
Section 12 of the Exchange Act.  Following the Registration Date or
such earlier time that the Company first becomes subject to the reporting
obligations of Section 12 of the Exchange Act, the Plan, and all Awards (except
Awards of Restricted Stock that vest over time) issued thereunder, are intended
to be exempt from the application of Section 162(m) of the Code, which
restricts under certain circumstances the Federal income tax deduction for
compensation paid by a public company to named executives in excess of
$1 million per year.  The exemption is based on Treasury
Regulation Section 1.162-27(f), in the form existing on the effective date
of the Plan, with the understanding that such regulation generally exempts from
the application of Section 162(m) of the Code compensation paid pursuant to
a plan that existed before a company becomes publicly held.  Under
such Treasury Regulation, this exemption is available to the Plan for the
duration of the period that lasts until the earliest of (i) the expiration
of the Plan, (ii) the material modification of the Plan, (iii) the
exhaustion of the maximum number of shares of Common Stock available for Awards
under the Plan, as set forth in Section 3(a), (iv) the first meeting of
shareholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which the Company first
becomes subject to the reporting obligations of Section 12 of the Exchange
Act, or (v) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.  To the extent that
the Administrator determines as of the date of grant of an Award that
(i) the Award is intended to qualify as Performance-Based Compensation and
(ii) the exemption described above is no longer available with respect to
such Award, such Award shall not be effective until any shareholder approval
required under Section 162(m) of the Code has been obtained.

     

    21.           Unfunded
Obligation.  Grantees shall have the status of general
unsecured creditors of the Company.  Any amounts payable to Grantees
pursuant to the Plan shall be unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974, as amended.  Neither the Company nor any
Related Entity shall be required to segregate any monies from its general funds,
or to create any trusts, or establish any special accounts with respect to such
obligations.  The Company shall retain at all times beneficial
ownership of any investments, including trust investments, which the Company may
make to fulfill its payment obligations hereunder.  Any investments or
the creation or maintenance of any trust or any Grantee account shall not create
or constitute a trust or fiduciary relationship between the Administrator, the
Company or any Related Entity and a Grantee, or otherwise create any vested or
beneficial interest in any Grantee or the Grantee’s creditors in any assets of
the Company or a Related Entity. The Grantees shall have no claim against the
Company or any Related Entity for any changes in the value of any assets that
may be invested or reinvested by the Company with respect to the
Plan.

     

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

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