Document:

Exhibit
        10.2

      Portions
        of this exhibit marked [*] are omitted and are requested to be treated
        confidentially.

    

     

    

    
      

      INDUSTRY-UNIVERSITY
        COOPERATIVE

      RESEARCH
        AGREEMENT

      

      

      THIS
        AGREEMENT, effective
        this 16th day of March 2005, by and between The Pennsylvania State University
        College of Medicine and The Milton S. Hershey Medical Center (hereinafter
        referred to collectively as "University") and INNOVIVE Pharmaceuticals, Inc.,
        (hereinafter referred to as "Contractor").

      

      RECITALS:

      

      	1.  	
              The
                research program contemplated by this agreement is of mutual interest
                and
                benefit to the University and Contractor, will further the multiple
                missions of University (instruction, research, and public service
                including patient care) in a manner consistent with its status as
                a
                non-profit, tax-exempt, educational University, and may derive benefits
                for the Contractor, the University, and society by the advancement
                of
                science and human health through
                discovery;

            

      

      	2.  	
              Contractor
                has entered into a license agreement with The Penn State Research
                Foundation, (hereinafter referred to as “License Agreement”, and
                Contractor has agreed to provide additional funding to University
                on an
                annual basis to support the research efforts of Drs. Ian S. Zagon,
                Patricia J. McLaughlin and Jill P. Smith, employees of University,
                as
                Co-Principal Investigators or individually as Principal
                Investigators;

            

      

      	3.  	
              Contractor
                has expressed a desire to engage the University to create or further
                enhance technologies through this funding that will assist in Contractor's
                development and commercialization of new products and/or
                processes;

            

      

      	4.  	
              University
                and employees acknowledge that the terms and conditions as specified
                in
                said License Agreement will influence and determine in part the granting
                of rights to intellectual property and improvements created under
                this
                Agreement and such granting of rights to intellectual property will
                be
                consistent with License Agreement, with University policy, and with
                applicable laws and regulations.

            

      

      NOW,
        THEREFORE,
        in
        consideration of the premises and mutual covenants set forth below, the parties
        hereto agree to the following:

       

       

      	Article
              1 -   	
              Definitions

            

      

      As
        used
        herein, the following terms shall have the following meanings:

      

      	1.1  	
              "Project"/"Research"
                shall mean the description of the project as described in Attachment
                I
                hereof, under the direction of Drs. Ian S. Zagon, Patricia J. McLaughlin
                and Jill P. Smith as Co-Principal Investigators or individually as
                Principal Investigators. Said attachment shall be reviewed at least
                annually by the parties and amended from time to time upon mutual
                agreement of the parties.

            

      

      	1.2  	
              "Contract
                Period" is June 1, 2005 through May 31, 2006. The Contract Period
                shall be
                renewed for one year on each June 1 on which the License Agreement
                is in
                force.

            

      

      	1.3  	
              “FIELD
                OF USE”, shall be defined as stated in License
                Agreement.

            

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      	1.4  	
              “PATENT
                RIGHTS” shall be defined as stated in License
                Agreement.

            

      

      	1.5  	
              “IMPROVEMENTS”
                shall be defined as stated in License
                Agreement.

            

      

      	1.6  	
              "New
                University Intellectual Property" shall mean certain inventions and/or
                discoveries, other than IMPROVEMENTS, conceived and/or reduced to
                practice
                by one or more employees of University in performance of this Project
                and
                resulting patents, divisions, continuations, or substitutions of
                such
                applications and all reissues thereof.

            

      

      	1.7  	
              "Proprietary
                Information" means any written information and data marked proprietary
                or
                non-written information and data disclosed which is identified at
                the time
                of disclosure as proprietary and is reduced to writing and transmitted
                to
                the other party within sixty (60) days of such non-written
                disclosure.

            

      

      

      	Article
              2 -   	
              Research
                Work

            

      

      	2.1  	
              University
                shall commence the performance of Project in accordance with the
                first day
                of Contract Period and shall use reasonable best efforts to perform
                such
                Project substantially in accordance with the terms and conditions
                of this
                Agreement. Anything in this Agreement to the contrary notwithstanding,
                Contractor and University may at any time amend Project by mutual
                written
                agreement.

            

      

      	2.2  	
              Contractor
                may at Contractor’s option and at Contractor’s expense in addition to the
                Fiscal Considerations provided by Article 4, provide any trial compound
                or
                control compound to be used in any clinical trial undertaken as a
                portion
                of the Research. University agrees not to make use in a clinical
                trial of
                any alternative source for any trial or control compounds provided
                by
                Contractor unless required (i) by law, (ii) for the well being of
                a human
                subject, or (iii) by obligation to a third party. University shall
                apprise
                Contractor of any third party obligation reasonably known to University
                before the start of any clinical trial sponsored herein. Contractor
                shall
                in good faith plan for availability of compounds to properly support
                clinical trials based upon protocols to be provided in advance by
                University.

            

      

      

      	Article
              3 -   	
              Reports

            

      

      The
        Co-
        Principal Investigators shall furnish Contractor technical report upon
        completion of Project and as described in Project statement of
        work.

      

      

      	Article
              4 -   	
              Fiscal
                Considerations

            

      

      	4.1  	
              It
                is agreed to and understood by the parties hereto that total costs
                to
                Contractor hereunder shall be [*] dollars ($[*]) per annum. Payment
                for
                annual costs shall be made by Contractor within 30 days of receipt
                of
                invoice to be provided by University not more than 30 days prior
                to the
                start of each annual contract period. 

            

      

      	4.2  	
              University
                shall retain title to any equipment purchased with funds provided
                by
                Contractor under this Agreement. 

            

      

      

      	Article
              5 -   	
              Publicity

            

      

      Neither
        party will use the name of the other party, nor of any member of the other
        party's employees, in any publicity, advertising, or news release without
        the
        prior written approval of an authorized representative of that
        party.

      

      [*]
        Confidential treatment requested; certain information omitted and filed
        separately with the SEC. 

      

      
        
           

        

        
          Page
            2

          
            

          

        

        
           

        

         

        
          

          	Article 6
                  -   	
                  
                    Publication

                  

                

           

        

      

      	6.1  	
              It
                is the purpose of this Article 6, in conjunction with Article 7 -
                Confidentiality, to balance the Contractor's need to protect commercially
                feasible technologies, products, processes and licensed patent rights
                with
                the University's responsibility to freely disseminate scientific
                findings
                for the advancement of knowledge, and to further the interests of
                both
                parties in making therapeutic materials and processes available to
                the
                public. University recognizes that the public dissemination of information
                based upon the research performed under this agreement cannot contain
                Contractor’s Proprietary Information nor should it jeopardize Contractor's
                ability to commercialize intellectual property developed hereunder
                or
                licensed to Contractor under License Agreement. Further, University
                acknowledges that commercially sensitive information related to the
                design
                or composition of specified products or processes is not of general
                interest, while its confidentiality may be critical to the
                commercialization of said products or processes. Similarly, Contractor
                recognizes that the scientific results of University Research must
                be
                publishable and, subject to the confidentiality provisions of this
                Agreement, may be publicly presented or
                published.

            

      

      	6.2  	
              University
                acknowledges that University is bound by Paragraph 6.3 of the License
                Agreement. 

            

      

      	6.3  	
              University
                agrees not to publish or otherwise disclose Contractor’s Proprietary
                Information. Contractor agrees that University, subject to review
                by
                Contractor, shall have the right to publish results of the Project
                that
                are not proprietary to the design or composition of specified products
                or
                processes derived from the project. Contractor shall be furnished
                a copy
                of any proposed publication or presentation at least 30 days before
                submission of such proposed publication or presentation. During that
                time,
                Contractor shall have the right to review the material for Proprietary
                Information provided by the Contractor and to assess the patentability
                of
                any invention described in the material. If both parties agree that
                a
                patent application should be filed, the publication or presentation
                shall
                be delayed an additional sixty (60) days or until a patent application
                is
                filed, whichever is sooner. At Contractor's request, Proprietary
                Information provided by Contractor shall be
                deleted.

            

      

      

      	Article
              7 -   	
              Confidentiality

            

      

      	7.1  	
              During
                the Contract Period, the parties may be disclosing Proprietary Information
                to each other. Prior
                to disclosure by Contractor, Contractor shall notify the investigator
                identified in Article 13 as the contact for notices as to Technical
                Matters of its intent to disclose proprietary information; and University
                Principal Investigator shall have the right to decline receipt of
                said
                information. Said Proprietary Information shall be sent only to the
                Principal Investigators or Co-Principal Investigators but may be
                shared
                among them and, as necessary for conduct of the Research, among those
                under their immediate supervision.
                Each party agrees to treat Proprietary Information received from
                the other
                with the same degree of secrecy with which it treats its own Proprietary
                Information, but not less than a reasonable amount of secrecy, and
                further
                agrees not to disclose without prior written consent from the disclosing
                party such Proprietary Information to a third party other than the
                receiving party’s consultants or agents who are bound by the same
                obligation of confidentiality as the receiving party is bound pursuant
                to
                this agreement.. 

            

      

      	7.2  	
              The
                foregoing obligations of non-disclosure do not apply to Proprietary
                Information which the recipient can demonstrate through the production
                of
                tangible evidence:

            

      

      	(a)  	
              was
                known to the recipient prior to the disclosure
                hereunder;

            

       

      	(b)  	
              was
                received from a third party not under an obligation of confidence
                to
                recipient;

            

       

      	(c)  	
              is
                in the public domain at the time of disclosure hereunder or subsequently
                entered the public domain without the fault of the
                recipient;

            

       

      	(d)  	
              has
                been independently developed by an employee of recipient that has
                not had
                access directly or indirectly to such Proprietary Information, and
                recipient can substantiate any claim of independent development by
                written
                evidence; or

            

       

      	(e)  	
              is
                required to be disclosed by law, provided, however, the recipient
                shall
                give notice to the other party prior to such disclosure so that such
                other
                party has the opportunity to pursue equitable relief to prevent or
                restrict such disclosure..

            

       

      
        
           

        

        
          Page
            3

          
            

          

        

        
           

        

      

      

      	7.3  	
              Unless
                otherwise agreed to in writing, neither party shall have any obligation
                of
                secrecy under this Agreement after the [*] anniversary of the conclusion
                of the annual Contract Period in which the disclosure
                occurs.

            

      

      

      	Article
              8 -   	
              Intellectual
                Property

            

      

      	8.1  	
              The
                purpose of Articles 8 and 9 is to balance Contractor's ability to
                reasonably exploit, with due competitive advantage, the commercial
                viability of technologies, products, or processes with University's
                responsibility to ensure the broadest public benefit from the results
                of
                University Research.
                University
                recognizes that one of the prime reasons Contractor has entered this
                Research Agreement is an effort to secure, through the creation or
                enhancement of technologies, a market position with regard to its
                products
                or processes. At the same time, Contractor recognizes that University
                has
                an obligation to utilize the knowledge and technology generated by
                University Research in a manner which maximizes societal benefit
                and
                economic development and which provides for the education of graduate
                and
                undergraduate students.

            

      

      	8.2  	
              All
                rights and title to New University Intellectual Property shall belong
                to
                University and shall be subject to the terms and conditions of this
                Agreement.

            

      

      	8.3  	
              Copyright
                to copyrightable materials, including computer software, resulting
                from
                the Research funded under this Agreement shall vest in
                University.

            

      

      	8.4  	
              University
                will promptly disclose to Contractor in writing any New University
                Intellectual Property developed during the Research performed hereunder.
                Such disclosure(s) shall be sufficiently detailed for Contractor
                to assess
                the commercial viability of the intellectual property and shall be
                provided and maintained by Contractor in confidence pursuant to the
                terms
                of Article 7. 

            

      

      	8.5  	
              For
                60 days from first disclosure of any New University Intellectual
                Property
                to Contractor, such time period to be extended at University’s discretion,
                Contractor may direct University to file, prosecute and maintain
                patent
                applications on said New University Intellectual Property in the
                United
                States and in additional jurisdictions of Contractor’s choosing. Such
                filing, prosecution and maintenance shall be done using counsel of
                University’s choosing, with due consideration of Contractor’s comments.
                Contractor will notify University no later than three (3) months
                before
                applicable bar dates, as to any additional countries in which it
                wishes
                University to seek patent protection, provided however, that neither
                party
                shall have any liability to the other if Contractor should fail to
                provide
                such notices on a timely basis. Contractor shall reimburse University
                for
                all reasonable costs associated with filing, prosecution, and maintenance
                of patent applications and patents Contractor has directed University
                to
                file. University shall keep Contractor advised as to all developments
                with
                respect to application(s) and shall supply copies of all papers received
                and filed in connection with the prosecution in sufficient time for
                Contractor to comment. Contractor's comments shall be taken into
                consideration. Contractor may at any time notify University in writing
                of
                its intent to cease reimbursement of costs associated with any or
                all
                patent applications, at which time Contractor shall remain obligated
                to
                reimburse University for costs incurred through the date University
                receives said notice and Contractor’s rights and options and University’s
                obligations with regard to the patent applications and resulting
                patents
                shall cease.

            

      

       

      [*]
        Confidential treatment requested; certain information omitted and filed
        separately with the SEC. 

       

      
        
           

        

        
          Page
            4

          
            

          

        

        
           

        

         

      

      Grant
        of
        Rights

      

      	8.6  	
              Contractor’s
                license to IMPROVEMENTS are provided by Article 2 of the License
                Agreement. Nothing in this Cooperative Research Agreement shall be
                construed to restrict in any fashion Contractor’s license to IMPROVEMENTS
                as provided in the License Agreement. 

            

      

      	8.7  	
              University
                hereby grants to Contractor a royalty-free nonexclusive license for
                Contractor’s non-commercial use of New University Intellectual Property
                for research purposes.

            

      

      	8.8  	
              Subject
                to Article 2.8 of the License Agreement, University hereby grants
                to
                Contractor an exclusive option for a period of [*] days from disclosure
                under Paragraph 8.4 to negotiate additional license to New University
                Intellectual Property made in the performance of the research Project.
                Said license shall be non-exclusive or exclusive (to the extent the
                University is free to do so) within the Contractor's field of commercial
                interest. Terms and conditions of said license, including specification
                of
                Contractor’s field of use, sublicensing rights, and royalties, are to be
                negotiated in good faith and agreed upon between University and
                Contractor. Contractor shall have upon exercise of Contractor’s option [*]
                days to negotiate a license, which period can be extended by mutual
                agreement. In the event the parties fail to reach a mutually acceptable
                license agreement within the above specified negotiation period,
                University shall be entitled to negotiate in good faith with one
                or more
                third parties a license under any New University Intellectual
                Property.

            

      

      	8.9  	
              University
                reserves, and shall reserve in any license anticipated hereunder,
                the
                right to use New University Intellectual Property for its own research
                and
                educational purposes. University further reserves, and shall reserve
                in
                any license anticipated hereunder, the right on behalf of all nonprofit
                entities to use for their own research and educational purposes only
                any
                research tools embodied in New University Intellectual
                Property.

            

      

      	8.10  	
              University
                hereby grants to Contractor a royalty-free license for Contractor’s
                non-commercial use of materials to which University owns copyright,
                including computer software, resulting from the Research funded under
                this
                Agreement. University shall grant Contractor an option to license
                any such
                material(s) it wishes to develop for commercial purposes on reasonable
                terms and conditions, including a reasonable royalty, as the parties
                agree
                in a subsequent writing.

            

      

      	8.11  	
              Contractor
                understands that University must comply with the provisions of the
                Bayh-Dole Act. To the extent that government's approval may be deemed
                necessary to transfer license rights hereunder to Contractor, Contractor
                shall provide whatever reasonable assistance is required, and will
                reimburse University for all external costs associated
                therewith.

            

      

      
         

        	Article 9
                -   	
                Termination

              

         

      

      	9.1  	
              University
                may terminate this Agreement upon ninety (90) days’ prior written notice
                to Contractor.

            

      

      	9.2  	
              In
                the event that the either party hereto shall commit any material
                breach of
                or default in any terms or conditions of this Agreement, and also
                shall
                fail to reasonably remedy such default or breach within sixty (60)
                days
                after receipt of written notice thereof, the non-breaching party
                may, at
                its option and in addition to any other remedies which it may have
                at law
                or in equity, terminate this Agreement by sending notice of termination
                in
                writing to the other party to such effect. Termination shall be effective
                as of the day of the receipt of such
                notice.

            

      

      	9.3  	
              Termination
                of this Agreement by either party for any reason shall not affect
                the
                rights and obligations of the parties accrued prior to the effective
                date
                of termination of this Agreement, including rights and obligations
                of the
                parties under the License Agreement, except insofar as Contractor's
                breach
                of contract for failure to make payments under Article 4 shall cause
                Contractor to forfeit its rights under Article 9 of this Agreement.
                The
                rights and obligations of Article 7 of this Agreement shall survive
                termination.

            

      

      [*]
        Confidential treatment requested; certain information omitted and filed
        separately with the SEC. 

       

      
        
           

        

        
          Page
            5

          
            

          

        

        
           

        

      

       

      	Article
              10 -   	
              Independent
                Contractor

            

      

      	10.1  	
              In
                the performance of all services hereunder, University shall be deemed
                to
                be and shall be an independent contractor.

            

      

      	10.2  	
              Neither
                party is authorized or empowered to act as agent for the other for
                any
                purpose and shall not on behalf of the other enter into any contract,
                warranty, or representation as to any matter. Neither shall be bound
                by
                the acts or conduct of the other.

            

      

      

      	Article
              11 -   	
              Indemnity

            

      

      Each
        party assumes all risks of personal injury, bodily injury including death,
        and
        property damage caused by the negligent acts or omissions of that party.
        Except
        as provided above, Contractor shall fully indemnify and hold harmless University
        against all claims arising out of Contractor's use,
        commercialization, or distribution of information, materials or products
        which
        result in whole or in part from the research performed pursuant to this
        Agreement. Contractor will hold University harmless from any claims arising
        from
        third party claims that the work performed hereunder infringes third party
        intellectual property rights. University has no knowledge of any such
        claims.

      

      

      	Article
              12 -   	
              Notices

            

      

      Notices,
        invoices, communications, and payments hereunder shall be deemed made if
        given
        by overnight courier or by registered or certified envelope, post prepaid,
        and
        addressed to the party to receive such notice, invoice or communication at
        the
        address given below or such other address as may hereafter be designated
        by
        notice in writing:

      

      
        	If to Contractor: 	Steven Kelly 	 
	 	President and Chief Executive
                Officer 	Phone:  212-554-4381
	 	787 Seventh Avenue, 48th
                Floor 	Fax:  212-554-4490
	 	New York, NY 10019	E-mail: skelly@innovivepharma.com
	 	 	 
	If to University: 	Kathryn Kaylor, M.P.A. 	 
	 	Director, Office of Research
                Affairs 	Phone: 717-531-8495
	 	The Pennsylvania State
                University	Fax: 717-531-5352
	 	500 University Drive H138	E-mail: ora@hmc.psu.edu
	 	Hershey, PA 17033	 
	 	 	 
	If Payment Matters: 	Research Accounting 	Phone: 814-865-7525
	 	The Pennsylvania State
                University 	Fax: 814-865-3910
	 	313 Rider Building	E-mail: Res-Acct@psu.edu
	 	120 South Burrowes Street	 
	 	University Park, PA 16801	 
	 	 	 
	If Technical Issue: 	 	 
	
                PI 

              	Ian S. Zagon, Ph.D.	 
	
                Title

              	Professor of Neuroscience	 
	
                Campus
                  Address

              	500 University Drive	 
	
                City/State/Zip

              	Hershey, PA 17033	 
	 	 	 

      

      Notice
        given pursuant to this Article shall be effective as of the day of receipt
        of
        notice.

      

      
        
           

        

        
          Page
            6

          
            

          

        

        
           

        

      

       

      
        

        	Article
                13 -   	
                
                  Governing
                    Law

                

              

         

      

      This
        Agreement shall be governed and construed in accordance with laws of the
        Commonwealth of Pennsylvania.

      

      

      	Article
              14 -   	
              Dispute
                resolution

            

      

      Except
        for the right of either party to apply to a court of competent jurisdiction
        for
        a temporary restraining order, a preliminary injunction, or other equitable
        relief to preserve the status quo or prevent irreparable harm, any and all
        claims, disputes or controversies arising under, out of, or in connection
        with
        this Agreement, including any dispute relating to patent validity or
        infringement, which the parties shall be unable to resolve within sixty (60)
        days, shall be mediated in good faith. The party raising such dispute shall
        promptly advise the other party of such claim, dispute or controversy in
        a
        writing, which describes in reasonable detail the nature of such dispute.
        By not
        later than five (5) business days after the recipient has received such notice
        of dispute, each party shall have selected for itself a representative who
        shall
        have the authority to bind such party, and shall additionally have advised
        the
        other party in writing of the name and title of such representative. By not
        later than ten (10) business days after the date of such notice of dispute,
        the
        party against whom the dispute shall be raised shall select a mediation firm
        in
        Pennsylvania and such representatives shall schedule a date with such firm
        for a
        mediation hearing. The parties shall enter into good faith mediation and
        shall
        share the costs equally. If the representatives of the parties have not been
        able to resolve the dispute within fifteen (15) business days after such
        mediation hearing, the parties shall have the right to pursue any other remedies
        legally available to resolve such dispute in either the Centre County Court
        of
        Common Pleas or in the United States District Court for the Middle District
        of
        Pennsylvania, to whose jurisdiction for such purposes University and Contractor
        each hereby irrevocably consents and submits. 

      

      

      	Article
              15 -   	
              General
                Provisions

            

      

      	15.1  	
              Non-assignability
                --
                The rights and obligations of the parties under this Agreement shall
                not
                be assignable without written permission of the other
                party.

            

      

      	15.2  	
              Severability
                --
                If any provision hereof is held unenforceable or void, the remaining
                provisions shall be enforced in accordance with their
                terms.

            

      

      	15.3  	
              Entire
                Agreement
                --
                This Agreement and the License Agreement contain the entire and only
                agreement between the parties respecting the subject matter hereof
                and
                supersedes or cancels all previous negotiations, agreements, commitments
                and writings between the parties on the subject of this Agreement
                and the
                License Agreement. Should processing of this agreement require issuance
                of
                a purchase order or other contractual document, all terms and conditions
                of said document are hereby deleted in entirety. This Agreement may
                not be
                amended in any manner except by an instrument in writing signed by
                the
                duly authorized representatives of each of the parties hereto. It
                is
                expressly agreed that if there is any inconsistency between this
                Agreement
                and the License Agreement, the terms of the License Agreement shall
                be
                controlling and supersede the terms of this
                Agreement.

            

      

      	15.4  	
              Export
                Control Regulations
                --
                Contractor agrees that it shall comply with all applicable export
                control
                regulations of the United States of America. Contractor shall be
                responsible for obtaining all information regarding such regulations
                that
                is necessary for Contractor to comply with such
                regulations.

            

      

      

      
        
           

        

        
          Page
            7

          
            

          

        

        
           

        

         

      

      IN
        WITNESS WHEREOF,
        the
        parties have caused these presents to be executed in duplicate as of the
        day and
        year first above written.

      
        	By An Authorized Official of
                University	By An Authorized Official of
                Contractor
	 	 
	/s/ Vincent A. Falvo	/s/ Steven Kelly
	 	 
	Name: Vincent
                A. Falvo	Name:
                Steven Kelly
	 	 
	Title: Associate
                Controller	Title:
                President and CEO
	 	 
	Date: 3/16/05 	Date: 3/15/05 
	 	 
	THE MILTON S. HERSHEY MEDICAL
                CENTER	 
	 	 
	BY: /s/
                Kevin J. Haley	 
	 	 
	NAME: Kevin
                J. Haley, Interim	 
	 	 
	TITLE: Chief
                Financial Officer	 
	 	 
	DATE:   3/16/05	 
	 	 

      

       

      
        
           

        

        
          Page
            8

          
            

          

        

        
           

        

      

      ATTACHMENT
        I

      

      Project
        Description

      

      Research
        relating to therapeutic use of opioid growth factor (OGF), to be defined
        in a
        revision of this Attachment I to be mutually determined by the parties on
        or
        before June 1, 2005.

       

       

      
        
           

        

        
          Page
            9Unassociated Document

    

      Exhibit
        10.3

    

     

    

      INNOVIVE
        PHARMACEUTICALS, INC.

      

      2004
        Stock Option Plan

      

      1.   Purpose.   The
        purpose of the 2004
        Stock Option Plan (the “Plan”)
        of
        Innovive Pharmaceuticals, Inc. (the “Company”)
        is to
        increase shareholder value and to advance the interests of the Company by
        furnishing a variety of economic incentives (“Incentives”)
        designed to attract, retain and motivate employees, directors, officers and
        consultants. Incentives may consist of opportunities to purchase or receive
        shares of Common Stock, $0.001 par value, of the Company (“Common
        Stock”),
        on
        terms determined under this Plan.

       

      2.   Administration.
        

      

      2.1   The
        Plan
        shall be administered by a committee of the Board of Directors of the Company
        (the “Committee”).
        The
        Committee shall consist of not less than two directors of the Company who
        shall
        be appointed from time to time by the board of directors of the Company.
        Each
        member of the Committee shall be a “non-employee director” within the meaning of
        Rule 16b-3 of the Exchange Act of 1934, as amended (together with the rules
        and
        regulations promulgated thereunder, the “Exchange
        Act”),
        and
        an “outside director” as defined in Section 162(m) of the Internal Revenue Code
        of 1986, as amended (the “Code”).
        The
        Committee shall have complete authority to determine all provisions of all
        Incentives awarded under the Plan (as consistent with the terms of the Plan),
        to
        interpret the Plan, and to make any other determination which it believes
        necessary and advisable for the proper administration of the Plan. The
        Committee’s decisions and matters relating to the Plan shall be final and
        conclusive on the Company and its participants. No member of the Committee
        will
        be liable for any action or determination made in good faith with respect
        to the
        Plan or any Incentives granted under the Plan. The Committee will also have
        the
        authority under the Plan to amend or modify the terms of any outstanding
        Incentives in any manner; provided, however, that the amended or modified
        terms
        are permitted by the Plan as then in effect and that any recipient of an
        Incentive adversely affected by such amended or modified terms has consented
        to
        such amendment or modification. No amendment or modification to an Incentive,
        however, whether pursuant to this Section 2 or any other provisions of the
        Plan,
        will be deemed to be a re-grant of such Incentive for purposes of this Plan.
        If
        at any time there is no Committee, then for purposes of the Plan the term
        “Committee” shall mean the Company’s Board of Directors.

      

      2.2   In
        the
        event of (i) any reorganization, merger, consolidation, recapitalization,
        liquidation, reclassification, stock dividend, stock split, combination of
        shares, divestiture (including a spin-off) or any other similar change in
        corporate structure or capitalization, (ii) any purchase, acquisition,
        sale
        or disposition of all or substantially all of the assets or a substantial
        business or (iii) any other similar occurrence, in each case with respect
        to the
        Company or any other affiliate of the Company whose performance is relevant
        to
        the grant or vesting of an Incentive, the Committee (or, if the Company is
        not
        the surviving corporation in any such transaction, the board of directors
        of the
        surviving corporation) may, without the consent of any affected participant,
        amend or modify the vesting criteria of any outstanding Incentive that is
        based
        in whole or in part on the financial performance of the Company (or any
        subsidiary or division thereof) or such other entity so as equitably to reflect
        such event, with the desired result that the criteria for evaluating such
        financial performance of the Company or such other entity will be substantially
        the same (in the sole discretion of the Committee or the board of directors
        of
        the surviving corporation) following such event as prior to such event;
        provided, however, that the amended or modified terms are permitted by the
        Plan
        as then in effect.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      3.   Eligible
        Participants.   Employees
        of the Company
        or its subsidiaries (including officers and employees of the Company or its
        subsidiaries), directors and consultants, advisors or other independent
        contractors who provide services to the Company or its subsidiaries (including
        members of the Company’s scientific advisory board) shall become eligible to
        receive Incentives under the Plan when designated by the Committee. Participants
        may be designated individually or by groups or categories (for example, by
        pay
        grade) as the Committee deems appropriate. Participation by officers of the
        Company or its subsidiaries and any performance objectives relating to such
        officers must be approved by the Committee. Participation by others and any
        performance objectives relating to others may be approved by groups or
        categories (for example, by pay grade) and authority to designate participants
        who are not officers and to set or modify such targets may be delegated.
        

      4.   Types
        of Incentives.   Incentives
        under the Plan
        may be granted in any one or a combination of the following forms: (a) Incentive
        Stock Options and Nonstatutory Stock Options (Section 6); (b) stock appreciation
        rights (“SARs”)
        (Section 7); (c) stock awards (Section 8); (d) restricted stock (Section
        8); and
        (e) performance shares (Section 9). Incentive Stock Options may only be granted
        to employees of the Company. Officers and directors who are not also employees
        of the Company may not be granted Incentive Stock Options.

      

      5.   Shares
        Subject to the Plan.

      

      5.1.   Number
        of Shares.   Subject
        to adjustment as
        provided in Section 11.6, the number of shares of Common Stock which may
        be
        issued under the Plan shall not exceed 925,000 shares of Common Stock. Of
        such
        aggregate number of shares of Common Stock that may be issued under the Plan,
        the maximum number of shares that may be issued as Incentive Stock Options
        under
        Section 422 of the Code is 925,000. Any shares of Common Stock available
        for
        issuance as Incentive Stock Options may be alternatively issued as other
        types
        of Incentives under the Plan. Shares of Common Stock that are issued under
        the
        Plan or that are subject to outstanding Incentives will be applied to reduce
        the
        maximum number of shares of Common Stock remaining available for issuance
        under
        the Plan. 

      

      5.2.   Cancellation.   To
        the extent that cash
        in lieu of shares of Common Stock is delivered upon the exercise of an SAR
        pursuant to Section 7.4, the Company shall be deemed, for purposes of applying
        the limitation on the number of shares, to have issued the greater of the
        number
        of shares of Common Stock which it was entitled to issue upon such exercise
        or
        on the exercise of any related option. In the event that a stock option or
        SAR
        granted hereunder expires or is terminated or canceled unexercised or unvested
        as to any shares of Common Stock, such shares may again be issued under the
        Plan
        either pursuant to stock options, SARs or otherwise. In the event that shares
        of
        Common Stock are issued as restricted stock or pursuant to a stock award
        and
        thereafter are forfeited or reacquired by the Company pursuant to rights
        reserved upon issuance thereof, such forfeited and reacquired shares may
        again
        be issued under the Plan, either as restricted stock, pursuant to stock awards
        or otherwise. The Committee may also determine to cancel, and agree to the
        cancellation of, stock options in order to make a participant eligible for
        the
        grant of a stock option at a lower price than the option to be
        canceled.

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      6.   Stock
        Options.   A
        stock option is a right
        to purchase shares of Common Stock from the Company. The Committee may designate
        whether an option is to be considered an Incentive Stock Option or a
        Nonstatutory Stock Option. To the extent that any Incentive Stock Option
        granted
        under the Plan ceases for any reason to qualify as an “Incentive Stock Option”
        for purposes of Section 422 of the Code, such Incentive Stock Option will
        continue to be outstanding for purposes of the Plan but will thereafter be
        deemed to be a Nonstatutory Stock Option. Each stock option granted by the
        Committee under this Plan shall be subject to the following terms and
        conditions:

      

      6.1.   Price.   The
        option price per
        share shall be determined by the Committee, subject to adjustment under Section
        11.6.

      

      6.2.   Number.   The
        number of shares of
        Common Stock subject to the option shall be determined by the Committee,
        subject
        to adjustment as provided in Section 11.6. The number of shares of Common
        Stock
        subject to a stock option shall be reduced in the same proportion that the
        holder thereof exercises a SAR if any SAR is granted in conjunction with
        or
        related to the stock option. No individual may receive options to purchase
        more
        than 300,000 shares in any year. 

       

      6.3.   Duration
        and Time for Exercise.   Subject
        to earlier
        termination as provided in Section 11.4, the term of each stock option shall
        be
        determined by the Committee but shall not exceed ten years and one day from
        the
        date of grant. Each stock option shall become exercisable at such time or
        times
        during its term as shall be determined by the Committee at the time of grant.
        The Committee may accelerate the exercisability of any stock
        option.

      

      6.4.   Manner
        of Exercise.   Subject
        to the conditions
        contained in this Plan and in the agreement with the recipient evidencing
        such
        option, a stock option may be exercised, in whole or in part, by giving written
        notice to the Company, specifying the number of shares of Common Stock to
        be
        purchased and accompanied by the full purchase price for such shares. The
        exercise price shall be payable (a) in United States dollars upon exercise
        of
        the option and may be paid by cash; uncertified or certified check; bank
        draft;
        or (b) at the discretion of the Committee, by delivery of shares of Common
        Stock
        that are already owned by the participant in payment of all or any part of
        the
        exercise price, which shares shall be valued for this purpose at the Fair
        Market
        Value on the date such option is exercised. The shares of Common Stock delivered
        by the participant pursuant to Section 6.4(b) must have been held by the
        participant for a period of not less than six months prior to the exercise
        of
        the option, unless otherwise determined by the Committee. Prior to the issuance
        of shares of Common Stock upon the exercise of a stock option, a participant
        shall have no rights as a shareholder. Except as otherwise provided in the
        Plan,
        no adjustment will be made for dividends or distributions with respect to
        such
        stock options as to which there is a record date preceding the date the
        participant becomes the holder of record of such shares, except as the Committee
        may determine in its discretion.

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

      6.5.   Incentive
        Stock Options.   Notwithstanding
        anything
        in the Plan to the contrary, the following additional provisions shall apply
        to
        the grant of stock options which are intended to qualify as Incentive Stock
        Options (as such term is defined in Section 422 of the Code):

      

      (a)   The
        aggregate Fair Market Value (determined as of the time the option is granted)
        of
        the shares of Common Stock with respect to which Incentive Stock Options
        are
        exercisable for the first time by any participant during any calendar year
        (under the Plan and any other incentive stock option plans of the Company
        or any
        subsidiary or parent corporation of the Company) shall not exceed $100,000.
        The
        determination will be made by taking incentive stock options into account
        in the
        order in which they were granted. 

      

      (b)   Any
        Incentive Stock Option certificate authorized under the Plan shall contain
        such
        other provisions as the Committee shall deem advisable, but shall in all
        events
        be consistent with and contain all provisions required in order to qualify
        the
        options as Incentive Stock Options.

      (c)   All
        Incentive Stock Options must be granted within ten years from the earlier
        of the
        date on which this Plan was adopted by board of directors or the date this
        Plan
        was approved by the Company’s shareholders. 

      

      (d)   Unless
        sooner exercised, all Incentive Stock Options shall expire no later than
        10
        years after the date of grant. No Incentive Stock Option may be exercisable
        after ten (10) years from its date of grant (five (5) years from its date
        of
        grant if, at the time the Incentive Stock Option is granted, the Participant
        owns, directly or indirectly, more than 10% of the total combined voting
        power
        of all classes of stock of the Company or any parent or subsidiary corporation
        of the Company).

      

      (e)   The
        exercise price for Incentive Stock Options shall be not less than 100% of
        the
        Fair Market Value of one share of Common Stock on the date of grant; provided
        that the exercise price shall be 110% of the Fair Market Value if, at the
        time
        the Incentive Stock Option is granted, the participant owns, directly or
        indirectly, more than 10% of the total combined voting power of all classes
        of
        stock of the Company or any parent or subsidiary corporation of the
        Company.

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      7.   Stock
        Appreciation Rights.   An
        SAR is a right to
        receive, without payment to the Company, a number of shares of Common Stock,
        cash or any combination thereof, the amount of which is determined pursuant
        to
        the formula set forth in Section 7.4. An SAR may be granted (a) with respect
        to
        any stock option granted under this Plan, either concurrently with the grant
        of
        such stock option or at such later time as determined by the Committee (as
        to
        all or any portion of the shares of Common Stock subject to the stock option),
        or (b) alone, without reference to any related stock option. Each SAR granted
        by
        the Committee under this Plan shall be subject to the following terms and
        conditions:

      

      7.1.   Number;
        Exercise Price.   Each
        SAR granted to any
        participant shall relate to such number of shares of Common Stock as shall
        be
        determined by the Committee, subject to adjustment as provided in Section
        11.6.
        In the case of an SAR granted with respect to a stock option, the number
        of
        shares of Common Stock to which the SAR pertains shall be reduced in the
        same
        proportion that the holder of the option exercises the related stock option.
        The
        exercise price of an SAR will be determined by the Committee, in its discretion,
        at the date of grant but may not be less than 100% of the Fair Market Value
        of
        one share of Common Stock on the date of grant.

      

      7.2.   Duration.   Subject to
        earlier
        termination as provided in Section 11.4, the term of each SAR shall be
        determined by the Committee but shall not exceed ten years and one day from
        the
        date of grant. Unless otherwise provided by the Committee, each SAR shall
        become
        exercisable at such time or times, to such extent and upon such conditions
        as
        the stock option, if any, to which it relates is exercisable. The Committee
        may
        in its discretion accelerate the exercisability of any SAR.

      

      7.3.   Exercise.   An
        SAR may be exercised,
        in whole or in part, by giving written notice to the Company, specifying
        the
        number of SARs which the holder wishes to exercise. Upon receipt of such
        written
        notice, the Company shall, within 90 days thereafter, deliver to the exercising
        holder certificates for the shares of Common Stock or cash or both, as
        determined by the Committee, to which the holder is entitled pursuant to
        Section
        7.4.

       

      7.4.   Payment.   Subject
        to the right of
        the Committee to deliver cash in lieu of shares of Common Stock (which, as
        it
        pertains to officers and directors of the Company, shall comply with all
        requirements of the Exchange Act), the number of shares of Common Stock which
        shall be issuable upon the exercise of an SAR shall be determined by
        dividing:

      

      (a)   the
        number of shares of Common Stock as to which the SAR is exercised multiplied
        by
        the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
        of Common Stock subject to the SAR on the exercise date exceeds (1) in the
        case
        of an SAR related to a stock option, the exercise price of the shares of
        Common
        Stock under the stock option or (2) in the case of an SAR granted alone,
        without
        reference to a related stock option, an amount which shall be determined
        by the
        Committee at the time of grant, subject to adjustment under Section 11.6);
        by

      

      (b)   the
        Fair
        Market Value of a share of Common Stock on the exercise date.

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      In
        lieu
        of issuing shares of Common Stock upon the exercise of a SAR, the Committee
        may
        elect to pay the holder of the SAR cash equal to the Fair Market Value on
        the
        exercise date of any or all of the shares which would otherwise be issuable.
        No
        fractional shares of Common Stock shall be issued upon the exercise of an
        SAR;
        instead, the holder of the SAR shall be entitled to receive a cash adjustment
        equal to the same fraction of the Fair Market Value of a share of Common
        Stock
        on the exercise date or to purchase the portion necessary to make a whole
        share
        at its Fair Market Value on the date of exercise.

      

      8.   Stock
        Awards and Restricted Stock.   A
        stock award consists of
        the transfer by the Company to a participant of shares of Common Stock, without
        other payment therefor, as additional compensation for services to the Company.
        The participant receiving a stock award will have all voting, dividend,
        liquidation and other rights with respect to the shares of Common Stock issued
        to a participant as a stock award under this Section 8 upon the participant
        becoming the holder of record of such shares. A share of restricted stock
        consists of shares of Common Stock which are sold or transferred by the Company
        to a participant at a price determined by the Committee (which price shall
        be at
        least equal to the minimum price required by applicable law for the issuance
        of
        a share of Common Stock) and subject to restrictions on their sale or other
        transfer by the participant, which restrictions and conditions may be determined
        by the Committee as long as such restrictions and conditions are not
        inconsistent with the terms of the Plan. The transfer of Common Stock pursuant
        to stock awards and the transfer and sale of restricted stock shall be subject
        to the following terms and conditions:

      

      8.1.   Number
        of Shares.   The
        number of shares to
        be transferred or sold by the Company to a participant pursuant to a stock
        award
        or as restricted stock shall be determined by the Committee.

      

      8.2.   Sale
        Price.   The
        Committee shall
        determine the price, if any, at which shares of restricted stock shall be
        sold
        or granted to a participant, which may vary from time to time and among
        participants and which may be below the Fair Market Value of such shares
        of
        Common Stock at the date of sale.

       

      8.3.   Restrictions.   All
        shares of restricted
        stock transferred or sold hereunder shall be subject to such restrictions
        as the
        Committee may determine, including, without limitation any or all of the
        following:

      

      (a)   a
        prohibition against the sale, transfer, pledge or other encumbrance of the
        shares of restricted stock, such prohibition to lapse at such time or times
        as
        the Committee shall determine (whether in annual or more frequent installments,
        at the time of the death, disability or retirement of the holder of such
        shares,
        or otherwise);

      

      (b)   a
        requirement that the holder of shares of restricted stock forfeit, or (in
        the
        case of shares sold to a participant) resell back to the Company at his or
        her
        cost, all or a part of such shares in the event of termination of his or
        her
        employment or consulting engagement during any period in which such shares
        are
        subject to restrictions; or

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      (c)   such
        other conditions or restrictions as the Committee may deem
        advisable.

      

      8.4.   Escrow.   In
        order to enforce the
        restrictions imposed by the Committee pursuant to Section 8.3, the participant
        receiving restricted stock shall enter into an agreement with the Company
        setting forth the conditions of the grant. Shares of restricted stock shall
        be
        registered in the name of the participant and deposited, together with a
        stock
        power endorsed in blank, with the Company. Each such certificate shall bear
        a
        legend in substantially the following form:

      

      The
        transferability of this certificate and the shares of Common Stock represented
        by it are subject to the terms and conditions (including conditions of
        forfeiture) contained in the 2004 Stock Option Plan of Innovive Pharmaceuticals,
        Inc., (the “Company”), and an agreement entered into between the registered
        owner and the Company. A copy of the 2004 Stock Option Plan and the agreement
        is
        on file in the office of the secretary of the Company.

      

      8.5.   End
        of
        Restrictions.   Subject
        to Section 11.5,
        at the end of any time period during which the shares of restricted stock
        are
        subject to forfeiture and restrictions on transfer, such shares will be
        delivered free of all restrictions to the participant or to the participant’s
        legal representative, beneficiary or heir.

       

      8.6.   Shareholder.   Subject
        to the terms and
        conditions of the Plan, each participant receiving restricted stock shall
        have
        all the rights of a shareholder with respect to shares of stock during any
        period in which such shares are subject to forfeiture and restrictions on
        transfer, including without limitation, the right to vote such shares. Dividends
        paid in cash or property other than Common Stock with respect to shares of
        restricted stock shall be paid to the participant currently. Unless the
        Committee determines otherwise in its sole discretion, any dividends or
        distributions (including regular quarterly cash dividends) paid with respect
        to
        shares of Common Stock subject to the restrictions set forth above will be
        subject to the same restrictions as the shares to which such dividends or
        distributions relate. In the event the Committee determines not to pay dividends
        or distributions, the Committee will determine in its sole discretion whether
        any interest will be paid on such dividends or distributions. In addition,
        the
        Committee in its sole discretion may require such dividends and distributions
        to
        be reinvested (and in such case the participant consents to such reinvestment)
        in shares of Common Stock that will be subject to the same restrictions as
        the
        shares to which such dividends or distributions relate.

      

      9.   Performance
        Shares.   A
        performance share
        consists of an award which shall be paid in shares of Common Stock, as described
        below. The grant of a performance share shall be subject to such terms and
        conditions as the Committee deems appropriate, including the
        following:

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      9.1.   Performance
        Objectives.   Each
        performance share
        will be subject to performance objectives for the Company or one of its
        operating units to be achieved by the participant before the end of a specified
        period. The number of performance shares granted shall be determined by the
        Committee and may be subject to such terms and conditions, as the Committee
        shall determine. If the performance objectives are achieved, each participant
        will be paid in shares of Common Stock or cash as determined by the Committee.
        If such objectives are not met, each grant of performance shares may provide
        for
        lesser payments in accordance with formulas established in the
        award.

      

      9.2.   Not
        Shareholder.   The
        grant of performance
        shares to a participant shall not create any rights in such participant as
        a
        shareholder of the Company, until the payment of shares of Common Stock with
        respect to an award.

      

      9.3.   No
        Adjustments.   No
        adjustment shall be
        made in performance shares granted on account of cash dividends which may
        be
        paid or other rights which may be issued to the holders of Common Stock prior
        to
        the end of any period for which performance objectives were
        established.

      

      9.4.   Expiration
        of Performance Share.   If
        any participant’s
        employment or consulting engagement with the Company is terminated for any
        reason other than normal retirement, death or disability prior to the
        achievement of the participant’s stated performance objectives, all the
        participant’s rights on the performance shares shall expire and terminate unless
        otherwise determined by the Committee. In the event of termination of employment
        or consulting by reason of death, disability, or normal retirement, the
        Committee, in its own discretion may determine what portions, if any, of
        the
        performance shares should be paid to the participant.

      

      10.   Change
        of Control.

      

      10.1   Change
        in Control.   For
        purposes of this
        Section 10, a “Change
        in Control”
        of the
        Company will mean the following:

       

      (a)   the
        sale,
        lease, exchange or other transfer, directly or indirectly, of substantially
        all
        of the assets of the Company (in one transaction or in a series of related
        transactions) to a person or entity that is not controlled by the Company;
        

       

      (b)   the
        approval by the shareholders of the Company of any plan or proposal for the
        liquidation or dissolution of the Company;

       

      (c)   if
        any
        person becomes after the effective date of the Plan the “beneficial owner” (as
        defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
        (i)
        20% or more, but not 50% or more, of the combined voting power of the Company’s
        outstanding securities ordinarily having the right to vote at elections of
        directors, unless the transaction resulting in such ownership has been approved
        in advance by the Continuing Directors (as defined below), or (ii) 50% or
        more
        of the combined voting power of the Company’s outstanding securities ordinarily
        having the right to vote at elections of directors (regardless of any approval
        by the Continuing Directors); provided that a traditional institutional or
        venture capital financing transaction shall be excluded from this
        definition;

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

      

      (d)   a
        merger
        or consolidation to which the Company is a party if the shareholders of the
        Company immediately prior to effective date of such merger or consolidation
        have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
        immediately following the effective date of such merger or consolidation,
        of
        securities of the surviving corporation representing (i) 50% or more, but
        less
        than 80%, of the combined voting power of the surviving corporation’s then
        outstanding securities ordinarily having the right to vote at elections of
        directors, unless such merger or consolidation has been approved in advance
        by
        the Continuing Directors, or (ii) less than 50% of the combined voting
        power of the surviving corporation’s then outstanding securities ordinarily
        having the right to vote at elections of directors (regardless of any approval
        by the Continuing Directors); or

       

      (e)   after
        the
        date the Company’s securities are first sold in a registered public offering,
        the Continuing Directors cease for any reason to constitute at least a majority
        of the Board. 

       

      10.2   Continuing
        Directors.   For
        purposes of this
        Section 10, “Continuing
        Directors”
        of the
        Company will mean any individuals who are members of the Board on the effective
        date of the Plan and any individual who subsequently becomes a member of
        the
        Board whose election, or nomination for election by the Company’s shareholders,
        was approved by a vote of at least a majority of the Continuing Directors
        (either by specific vote or by approval of the Company’s proxy statement in
        which such individual is named as a nominee for director without objection
        to
        such nomination).

       

      10.3   Acceleration
        of Incentives.   Without
        limiting the
        authority of the Committee under the Plan, if a Change in Control of the
        Company
        occurs whereby the acquiring entity or successor to the Company does not
        assume
        the Incentives or replace them with substantially equivalent incentive awards
        (as determined by the Committee in its reasonable discretion), unless otherwise
        provided by the Committee in its sole discretion in the agreement evidencing
        an
        Incentive at the time of grant, then, as of the date of the Change of Control
        (a) all outstanding options and SARs will vest and will become immediately
        exercisable in full and will remain exercisable for the remainder of their
        terms, regardless of whether the participant to whom such options or SARs
        have
        been granted remains in the employ or service of the Company or any subsidiary
        of the Company or any acquiring entity or successor to the Company; (b) the
        restrictions on all shares of restricted stock awards shall lapse immediately;
        and (c) all performance shares shall be deemed to be met and payment made
        immediately.

       

      10.4   Cash
        Payment for Options.   If
        a Change in Control of
        the Company occurs, then the Committee, if approved by the Committee in its
        sole
        discretion either in an agreement evidencing an option at the time of grant
        or
        at any time after the grant of an option, and without the consent of any
        participant affected thereby, may determine that:

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      (a)   some
        or
        all participants holding outstanding options will receive, with respect to
        some
        or all of the shares of Common Stock subject to such options, as of the
        effective date of any such Change in Control of the Company, cash in an amount
        equal to the excess of the Fair Market Value of such shares immediately prior
        to
        the effective date of such Change in Control of the Company over the exercise
        price per share of such options; and

       

      (b)   any
        options as to which, as of the effective date of any such Change in Control,
        the
        Fair Market Value of the shares of Common Stock subject to such options is
        less
        than or equal to the exercise price per share of such options, shall terminate
        as of the effective date of any such Change in Control.

       

      
        	 	
                If
                  the Committee makes a determination as set forth in subparagraph
                  (a) of
                  this Section 10.4, then as of the effective date of any such Change
                  in
                  Control of the Company such options will terminate as to such shares
                  and
                  the participants formerly holding such options will only have the
                  right to
                  receive such cash payment(s). If the Committee makes a determination
                  as
                  set forth in subparagraph (b) of this Section 10.4, then as of
                  the
                  effective date of any such Change in Control of the Company such
                  options
                  will terminate, become void and expire as to all unexercised shares
                  of
                  Common Stock subject to such options on such date, and the participants
                  formerly holding such options will have no further rights with
                  respect to
                  such options.

              

      

      

      11.   General.

      

      11.1.   Effective
        Date.   The
        Plan will become
        effective upon approval by the Company’s board of directors. 

      

      11.2.   Duration.   The
        Plan shall remain in
        effect until all Incentives granted under the Plan have either been satisfied
        by
        the issuance of shares of Common Stock or the payment of cash or been terminated
        under the terms of the Plan and all restrictions imposed on shares of Common
        Stock in connection with their issuance under the Plan have lapsed. No
        Incentives may be granted under the Plan after the tenth anniversary of the
        date
        the Plan is approved by the shareholders of the Company.

      

      11.3.   Non-transferability
        of Incentives.   Except,
        in the event of
        the holder’s death, by will or the laws of descent and distribution to the
        limited extent provided in the Plan or the Incentive, unless approved by
        the
        Committee, no stock option, SAR, restricted stock or performance award may
        be
        transferred, pledged or assigned by the holder thereof, either voluntarily
        or
        involuntarily, directly or indirectly, by operation of law or otherwise,
        and the
        Company shall not be required to recognize any attempted assignment of such
        rights by any participant. During a participant’s lifetime, an Incentive may be
        exercised only by him or her or by his or her guardian or legal
        representative.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

         

      

      11.4.   Effect
        of Termination or Death.   In
        the event that a
        participant ceases to be an employee of or consultant to the Company, or
        the
        participants other service with the Company is terminated, for any reason,
        including death, any Incentives may be exercised or shall expire at such
        times
        as may be determined by the Committee in its sole discretion in the agreement
        evidencing an Incentive. Notwithstanding the other provisions of this
        Section 11.4, except as may be set forth in an agreement evidencing
        an
        Incentive, upon a participant’s termination of employment or other service with
        the Company and all subsidiaries, the Committee may, in its sole discretion
        (which may be exercised at any time on or after the date of grant, including
        following such termination), cause options and SARs (or any part thereof)
        then
        held by such participant to become or continue to become exercisable and/or
        remain exercisable following such termination of employment or service and
        Restricted Stock Awards, Performance Shares and Stock Awards then held by
        such
        participant to vest and/or continue to vest or become free of transfer
        restrictions, as the case may be, following such termination of employment
        or
        service, in each case in the manner determined by the Committee; provided,
        however, that no Incentive may remain exercisable or continue to vest beyond
        its
        expiration date. Any Incentive Stock Option that remains unexercised more
        than
        one (1) year following termination of employment by reason of death or
        disability or more than three (3) months following termination for any reason
        other than death or disability will thereafter be deemed to be a Nonstatutory
        Stock Option. 

       

      11.5.   Additional
        Conditions.   Notwithstanding
        anything
        in this Plan to the contrary: (a) the Company may, if it shall determine
        it
        necessary or desirable for any reason, at the time of award of any Incentive
        or
        the issuance of any shares of Common Stock pursuant to any Incentive, require
        the recipient of the Incentive, as a condition to the receipt thereof or
        to the
        receipt of shares of Common Stock issued pursuant thereto, to deliver to
        the
        Company a written representation of present intention to acquire the Incentive
        or the shares of Common Stock issued pursuant thereto for his or her own
        account
        for investment and not for distribution; and (b) if at any time the Company
        further determines, in its sole discretion, that the listing, registration
        or
        qualification (or any updating of any such document) of any Incentive or
        the
        shares of Common Stock issuable pursuant thereto is necessary on any securities
        exchange or under any federal or state securities or blue sky law, or that
        the
        consent or approval of any governmental regulatory body is necessary or
        desirable as a condition of, or in connection with the award of any Incentive,
        the issuance of shares of Common Stock pursuant thereto, or the removal of
        any
        restrictions imposed on such shares, such Incentive shall not be awarded
        or such
        shares of Common Stock shall not be issued or such restrictions shall not
        be
        removed, as the case may be, in whole or in part, unless such listing,
        registration, qualification, consent or approval shall have been effected
        or
        obtained free of any conditions not acceptable to the Company. Notwithstanding
        any other provision of the Plan or any agreements entered into pursuant to
        the
        Plan, the Company will not be required to issue any shares of Common Stock
        under
        this Plan, and a participant may not sell, assign, transfer or otherwise
        dispose
        of shares of Common Stock issued pursuant to any Incentives granted under
        the
        Plan, unless (a) there is in effect with respect to such shares a
        registration statement under the Securities Act of 1933, as amended (the
        “Securities
        Act”),
        and
        any applicable state or foreign securities laws or an exemption from such
        registration under the Securities Act and applicable state or foreign securities
        laws, and (b) there has been obtained any other consent, approval
        or permit
        from any other regulatory body which the Committee, in its sole discretion,
        deems necessary or advisable. The Company may condition such issuance, sale
        or
        transfer upon the receipt of any representations or agreements from the parties
        involved, and the placement of any legends on certificates representing shares
        of Common Stock, as may be deemed necessary or advisable by the Company in
        order
        to comply with such securities law or other restrictions. The Committee may
        restrict the rights of participants to the extent necessary to comply with
        Section 16(b) of the Exchange Act, the Internal Revenue Code or any other
        applicable law or regulation. The grant of an Incentive award pursuant to
        the
        Plan shall not limit in any way the right or power of the Company to make
        adjustments, reclassifications, reorganizations or changes of its capital
        or
        business structure or to merge, exchange or consolidate or to dissolve,
        liquidate, sell or transfer all or any part of its business or
        assets.

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      11.6.   Adjustment.   In
        the event of any
        merger, consolidation or reorganization of the Company with any other
        corporation or corporations, there shall be substituted for each of the shares
        of Common Stock then subject to the Plan, including shares subject to
        restrictions, options, or achievement of performance share objectives, the
        number and kind of shares of stock or other securities to which the holders
        of
        the shares of Common Stock will be entitled pursuant to the transaction.
        In the
        event of any recapitalization, reclassification, stock dividend, stock split,
        combination of shares or other similar change in the corporate structure
        of the
        Company or capitalization of the Company, the exercise price of an outstanding
        Incentive and the number of shares of Common Stock then subject to the Plan,
        including shares subject to restrictions, options or achievements of performance
        shares, shall be adjusted in proportion to the change in outstanding shares
        of
        Common Stock in order to prevent dilution or enlargement of the rights of
        the
        participants. In the event of any such adjustments, the purchase price of
        any
        option, the performance objectives of any Incentive, and the shares of Common
        Stock issuable pursuant to any Incentive shall be adjusted as and to the
        extent
        appropriate, in the discretion of the Committee, to provide participants
        with
        the same relative rights before and after such adjustment.

      

      11.7.   Incentive
        Plans and Agreements.   Except
        in the case of
        stock awards, the terms of each Incentive shall be stated in a plan or agreement
        approved by the Committee. The Committee may also determine to enter into
        agreements with holders of options to reclassify or convert certain outstanding
        options, within the terms of the Plan, as Incentive Stock Options or as
        Nonstatutory Stock Options and in order to eliminate SARs with respect to
        all or
        part of such options and any other previously issued options.

      

      11.8.   Withholding.

      

      (a)   The
        Company shall have the right to (i) withhold and deduct from any payments
        made
        under the Plan or from future wages of the participant (or from other amounts
        that may be due and owing to the participant from the Company or a subsidiary
        of
        the Company), or make other arrangements for the collection of, all legally
        required amounts necessary to satisfy any and all foreign, federal, state
        and
        local withholding and employment-related tax requirements attributable to
        an
        Incentive, or (ii) require the participant promptly to remit the amount of
        such
        withholding to the Company before taking any action, including issuing any
        shares of Common Stock, with respect to an Incentive. At any time when a
        participant is required to pay to the Company an amount required to be withheld
        under applicable income tax laws in connection with a distribution of Common
        Stock or upon exercise of an option or SAR, the participant may satisfy this
        obligation in whole or in part by electing (the “Election”)
        to
        have the Company withhold from the distribution shares of Common Stock having
        a
        value up to the amount required to be withheld. The value of the shares to
        be
        withheld shall be based on the Fair Market Value of the Common Stock on the
        date
        that the amount of tax to be withheld shall be determined (“Tax
        Date”).

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      (b)   Each
        Election must be made prior to the Tax Date. The Committee may disapprove
        of any
        Election, may suspend or terminate the right to make Elections, or may provide
        with respect to any Incentive that the right to make Elections shall not
        apply
        to such Incentive. An Election is irrevocable.

       

      (c)   If
        a
        participant is an officer or director of the Company within the meaning of
        Section 16 of the Exchange Act, then an Election is subject to the following
        additional restrictions:

      

      (1)   No
        Election shall be effective for a Tax Date which occurs within six months
        of the
        grant or exercise of the award, except that this limitation shall not apply
        in
        the event death or disability of the participant occurs prior to the expiration
        of the six-month period.

      

      (2)   The
        Election must be made either six months prior to the Tax Date or must be
        made
        during a period beginning on the third business day following the date of
        release for publication of the Company’s quarterly or annual summary statements
        of sales and earnings and ending on the twelfth business day following such
        date.

      

      (d)   If
        the
        option granted to a participant hereunder is an Incentive Stock Option, and
        if
        the participant sells or otherwise disposes of any of the shares of Common
        Stock
        acquired pursuant to the Incentive Stock Option on or before the later of
        (1) the date two years after the date of grant, or (2) the
        date one
        year after the date of exercise, the participant shall immediately notify
        the
        Company in writing of such disposition. The participant agrees that the
        participant may be subject to income tax withholding by the Company on the
        compensation income recognized by the participant from the early disposition
        by
        payment in cash or out of the current earnings paid to the
        participant.

      

      11.9.   No
        Continued Employment, Engagement or Right to Corporate Assets.   No
        participant under the
        Plan shall have any right, because of his or her participation, to continue
        in
        the employ of the Company for any period of time or to any right to continue
        his
        or her present or any other rate of compensation. Nothing contained in the
        Plan
        shall be construed as giving an employee, a consultant, such persons’
        beneficiaries or any other person any equity or interests of any kind in
        the
        assets of the Company or creating a trust of any kind or a fiduciary
        relationship of any kind between the Company and any such person.

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

      

      11.10.   Deferral
        Permitted.   Payment
        of cash or
        distribution of any shares of Common Stock to which a participant is entitled
        under any Incentive shall be made as provided in the Incentive. Payment may
        be
        deferred at the option of the participant if provided in the
        Incentive.

      

      11.11.   Amendment
        of the Plan.   The
        Board may amend,
        suspend or discontinue the Plan at any time; provided, however, that no
        amendments to the Plan will be effective without approval of the shareholders
        of
        the Company if shareholder approval of the amendment is then required pursuant
        to Section 422 of the Code, the regulations promulgated thereunder or the
        rules
        of any stock exchange or Nasdaq or similar regulatory body. No termination,
        suspension or amendment of the Plan may adversely affect any outstanding
        Incentive without the consent of the affected participant; provided, however,
        that this sentence will not impair the right of the Committee to take whatever
        action it deems appropriate under the Plan. 

      

      11.12.   Definition
        of Fair Market Value.   For
        purposes of this
        Plan, the “Fair
        Market Value”
        of a
        share of Common Stock at a specified date shall, unless otherwise expressly
        provided in this Plan, be the amount which the Committee or the board of
        directors of the Company determines in good faith in the exercise of its
        reasonable discretion to be 100% of the fair market value of such a share
        as of
        the date in question; provided, however, that notwithstanding the foregoing,
        if
        such shares are listed on a U.S. securities exchange or are quoted on the
        Nasdaq
        National Market System or Nasdaq SmallCap Stock Market (“Nasdaq”),
        then
        Fair Market Value shall be determined by reference to the last sale price
        of a
        share of Common Stock on such U.S. securities exchange or Nasdaq on the
        applicable date. If such U.S. securities exchange or Nasdaq is closed for
        trading on such date, or if the Common Stock does not trade on such date,
        then
        the last sale price used shall be the one on the date the Common Stock last
        traded on such U.S. securities exchange or Nasdaq.

      

      11.13   Breach
        of Confidentiality, Assignment of Inventions, or Non-Compete
        Agreements.   Notwithstanding
        anything
        in the Plan to the contrary, in the event that a participant materially breaches
        the terms of any confidentiality, assignment of inventions, or non-compete
        agreement entered into with the Company or any subsidiary of the Company,
        whether such breach occurs before or after termination of such participant’s
        employment or other service with the Company or any subsidiary, the Committee
        in
        its sole discretion may immediately terminate all rights of the participant
        under the Plan and any agreements evidencing an Incentive then held by the
        participant without notice of any kind.

      

      11.13   Governing
        Law.   The
        validity,
        construction, interpretation, administration and effect of the Plan and any
        rules, regulations and actions relating to the Plan will be governed by and
        construed exclusively in accordance with the laws of the State of Minnesota,
        notwithstanding the conflicts of laws principles of any
        jurisdictions.

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

      11.14   Successors
        and Assigns.   The
        Plan will be binding
        upon and inure to the benefit of the successors and permitted assigns of
        the
        Company and the participants in the Plan.

      

      11.15   Lock-up
        Agreement.   Each
        recipient of
        securities here-under agrees, in connection with the first registration with
        the
        United States Securities and Exchange Commission under the Securities Act
        of
        1933, as amended, of the public sale of the Company's Common Stock, not to
        sell,
        make any short sale of, loan, grant any option for the purchase of or otherwise
        dispose of any securities of the Company (other than those included in the
        registration) without the prior written consent of the Company or such
        underwriters, as the case may be, for such period of time (not to exceed
        180
        days) from the effective date of such registration as the Company or the
        underwriters, as the case may be, shall specify. Each such recipient agrees
        that
        the Company may instruct its transfer agent to place stop-transfer notations
        in
        its records to enforce this Section. Each such recipient agrees to execute
        a
        form of agreement reflecting the foregoing restrictions as requested by the
        underwriters managing such offering.

      

      

      
        
          
          

        

        
          15

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