Document:

Exhibit
4.2

CERTIFICATE OF AMENDMENT OF

CERTIFICATE OF INCORPORATION

OF

HOVNANIAN
ENTERPRISES, INC.

It is hereby certified that:

1.             The name of the
corporation (hereinafter called the “Corporation”) is Hovnanian Enterprises,
Inc.

 

2.             The Certificate of
Incorporation of the Corporation is hereby amended by (a) deleting paragraph
FOURTH thereof in its entirety and substituting in lieu thereof the following
new paragraph FOURTH:

FOURTH:  The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 100,100,000, of
which 87,000,000 shares shall be Class A Common Stock having a par value of one
cent ($0.01) per share, 13,000,000 shares shall be Class B Common Stock having
a par value of one cent ($0.01) per share and 100,000 shares shall be Preferred
Stock having a par value of one cent ($0.01) per share.

At the close of business on
the effective date of this amendment (the “Effective Date”), and without any
further action on the part of the Corporation or its stockholders, each whole
share of the Corporation’s Common Stock, $0.01 par value (the “Old Common
Stock”), then issued (including shares held in the treasury of the Corporation)
shall automatically be reclassified, changed and converted into one-half (1/2)
fully paid and nonassessable share of Class A Common Stock and one-half (1/2)
fully paid and nonassessable share of Class B Common Stock (a “New Stock
Unit”).  No fractional shares of Class A
Common Stock or Class B Common Stock will be issued or established.  Instead, holders of certificates evidencing
an odd number of shares of Old Common Stock will have the right to receive (i)
a number of New Stock Units equal to the number of shares of Old Common Stock
will have the right to receive (i) a number of New Stock Units equal to the
number of shares of Old Common Stock minus one and (ii) cash in respect of a
single New Stock Unit in an amount equal to the greater of (a) the average
closing price of a share of Old Common Stock on the American Stock Exchange for
the fifteen trading days immediately preceding the Effective Date and (b) the
closing price of a share of Old Common Stock on the American Stock Exchange on
the trading day immediately preceding the Effective Date.  As soon as practicable after the Effective
Date, the Corporation’s transfer agent shall mail to each record holder of
Class A Common Stock and Class B Common Stock a letter of transmittal.  New certificates 

 

 

representing
shares of Class A Common Stock and Class B Common Stock and, if applicable, checks
in lieu of fractional shares will be issued to the record holders of Class A
Common Stock and Class B Common Stock upon delivery of a properly executed
letter of transmittal accompanied by certificates representing shares of Old
Common Stock.

(a)  Common
Stock.  The Powers, preferences,
limitations and relative rights of the Class A Common Stock and Class B Common
Stock shall be as follows:

(1)  Voting Rights
and Powers.

Except as otherwise
specifically provided in this Certificate of Incorporation or as otherwise
required by law, with respect to all matters upon which stockholders are
entitled to vote or to which stockholders are entitled to give consent, the
holders of the outstanding shares of Class A Common Stock and the holders of
the outstanding shares of Class B Common Stock shall vote together without
regard to class, and every holder of the outstanding shares of Class A Common
Stock shall be entitled to cast thereon one (1) vote in person or by proxy for
each share of Class A Common Stock held in his name, and every holder of the
outstanding shares of Class B Common Stock shall be entitled to cast thereon
ten (10) votes in person or by proxy for each share of Class B Common Stock
held in his name; provided, however, that each share of Class B Common Stock
held of record by a person who, to the extent of the Corporation’s knowledge,
is a broker or dealer in securities, a clearing house, a bank, trust company,
savings and loan association or other financial institution, or who is a voting
trustee or a nominee of any of the foregoing, or who otherwise holds shares of
record as a nominee of the beneficial owner of such shares (all such shares
being referred to herein as being held in nominee name) shall be entitled to
only one vote per share held; and provided, further, however, that the holder
of any such share held in nominee name shall be entitled, notwithstanding the
limitation of the foregoing proviso, to the number of votes to which such
holder otherwise would be entitled at any meeting of stockholders of the
Corporation, to the extent such holder shall establish to the satisfaction of
the Corporation that such share of Class B Common Stock has been held
continuously since the date of issuance for the benefit or account of the same
named beneficial owner of such shares (as defined in Paragraph (4)(E) hereof)
or any Permitted Transferee thereof (as defined in Paragraph (4)(A)
hereof).  A beneficial owner of shares
of Class B Common Stock whose shares are held in nominee name and who wishes to
cast the number of votes provided by the first sentence of this paragraph shall
comply with the following procedure to effect a determination by the
Corporation of his entitlement to such number of votes:  if such record holder is a broker or dealer
in securities, a clearing house, a bank, trust company, savings and loan
association or other financial institution, or a voting trustee or a nominee of
any of the foregoing, such record holder shall file with the transfer agent for
the Class B Common Stock a certificate on a form which will be mailed to such
holder by such transfer agent on request, certifying, as to the shares
identified by such holder, the information specified in the second proviso of
this Paragraph (1); if such record holder is a nominee of a beneficial owner
not included in the categories mentioned in the preceding clause, such record
holder shall file with the transfer agent for the Class B Common Stock an
affidavit to the same effect as the certificate specified in the preceding 

 

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clause.  Any certificate or affidavit filed for
purposes of this Paragraph (1) only if received by the transfer agent not less
than 3 nor more than 20 business days prior to the date of the meeting at which
the holder desires to exercise such voting rights or the last day by which such
holder may give consent in writing to stockholder action in lieu of a
meeting.  If such certificate or
affidavit is not timely filed or shall not establish to the satisfaction of the
Corporation the facts stated therein, then such shares of Class B Common Stock
shall be entitled to one vote per share. 
The Corporation shall use its best efforts, if the Corporation believes
such a certificate or affidavit does not establish to the Corporation’s
satisfaction the facts stated therein, to mail to the person filing such
certificate or affidavit a notice to such effect within seven business days
after the receipt by the transfer agent of any such certificate or affidavit.  Any determination of which shares of Class B
Common Stock shall be entitled to more than one vote per share shall be made by
the Board of Directors or any duly appointed committee of the Board of
Directors.  The Board of Directors is expressly
authorized to adopt and apply such rules, procedures and policies, by the
adoption of By-law provisions or otherwise, as it may deem appropriate or
convenient to carry out, clarify and apply the provisions of this Paragraph (1)
relating to the determination of which shares of Class B Common Stock shall be
entitled to more than one vote per share. 
Any determination made pursuant to such rules, procedures or policies
shall be final.

(2)  Dividends;
Distributions Upon Dissolution.

(A)  Subject to the rights of the holders of any
outstanding Preferred Stock, and subject to any other provisions of the
Certificate of Incorporation, holders of Class A Common Stock and Class B
Common Stock shall be entitled to receive such dividends and other
distributions (including stock splits or divisions of stock) in cash, stock or
property of the Corporation as may be declared thereon by the Board of
Directors from time to time out of assets or funds of the Corporation legally
available therefor, provided that in the case of special cash dividends or distributions
or dividends or distributions payable in Preferred Stock, holders of Class A
Common Stock and Class B Common Stock shall be entitled to share ratably as a
single class, and provided, further, that in the case of regular cash
dividends, no such dividend shall be declared or paid on one class of Common
Stock unless a cash dividend is simultaneously declared and paid on the other
class of Common Stock, and any such dividend will be paid on the Class A Common
Stock in an amount per share of Class A Common Stock equal to 110% of the
amount of such dividend paid on each share of Class B Common Stock (rounded
down, if necessary, to the nearest one-hundredth of a cent), and provided,
further, that in the case of dividends or other distributions payable in stock
of the Corporation other than Preferred Stock, including distributions pursuant
to stock splits or divisions of stock of the Corporation other than Preferred
Stock, which occur after the Effective Date, only shares of Class A Common
Stock shall be distributed with respect to Class A Common Stock and only shares
of Class B Common Stock in an amount per share equal to the amount per share
paid with respect to the Class A Common Stock shall be distributed with respect
to Class B Common Stock, and provided, further, that neither class of Common
Stock may be combined or reclassified (including any reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation) unless the other class of Common Stock is likewise
combined or reclassified, and that, in the 

 

3

 

case
of any such combination or reclassification of Class A Common Stock, the shares
of Class B Common Stock shall also be combined or reclassified so that the
number of issued shares of Class B Common Stock immediately following such
shall bear the same relationship to the number of issued shares immediately
prior to such combination or reclassification as the number of issued shares of
Class A Common Stock immediately following such combination or reclassification
bears to the number of issued shares of Class A Common Stock immediately prior
to such combination or reclassification.

(B)  In the event the Corporation shall be
liquidated (either partially or completely), dissolved or wound up, whether
voluntarily or involuntarily, the holders of the Class A Common Stock and the
Class B Common Stock shall be entitled to share ratably as a single class in
the net assets of the Corporation available to the holders of Common Stock;
that is, an equal amount of net assets shall be distributed in respect of each
share of Class A Common Stock and Class B Common Stock.

(3)  Conversion of Class B Common Stock into
Class A Common Stock.

(A)  Each share of Class B Common Stock may at
any time or from time to time, at the option of the holder thereof, be
converted into one (1) fully paid and nonassessable share of Class A Common
Stock.  Such conversion right shall be
exercised by the surrender to the Corporation, or a duly appointed and acting
transfer or exchange agent, of the certificate representing such share of Class
B Common Stock to be converted at any time during normal business hours at the
principal executive offices of the Corporation (to the attention of the Secretary
of the Corporation), or if an agent for the transfer or exchange of shares of
Class B Common Stock is then duly appointed and acting (said agent being
referred to in this Article FOURTH as the “Class B Transfer Agent”) then at the
designated office of the Class B Transfer Agent, accompanied by a written
notice of the election by the holder thereof to convert and (if so required by
the Corporation or the Class B Transfer Agent) by such other instruments of
transfer as the Corporation or the Class B Transfer Agent may deem appropriate,
in each case duly executed by such holder or his duly authorized attorney and
accompanied by payment of the amount of any Transfer Tax required pursuant to
Paragraph (3) (D) below.

(B)  As promptly as practicable after the surrender
for conversion of a certificate representing share of Class B Common Stock in
the manner provided in Paragraph (3)(A) above, including the payment in cash of
any Transfer Tax required by the provisions of Paragraph (3)(D) below, the
Corporation shall deliver or cause to be delivered at the principal executive
office of the Corporation or the designated office of the Class B Transfer
Agent to the holder so surrendering such certificate for conversion, or upon
the written order of the holder of such certificate, a certificate or
certificates representing the number of full shares of Class A Common Stock
issuable upon such conversion, issued in such name or names as such holder may
direct.  If the notice of conversion
delivered by a holder of shares of Class B Common Stock specifies that less
than all of such shares are to be converted into shares of Class A Common
Stock, the Corporation shall deliver or cause to be delivered, in accordance
with the provisions of the preceding sentence, a new certificate or
certificates evidencing the remaining shares of Class B Common Stock, issued in
such name or names as such holder may direct. 
Any conversion of shares of 

 

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Class
B Common Stock into shares of Class A Common Stock shall be deemed to have been
made immediately prior to the close of business on the date of the surrender
for conversion of the certificate representing shares of Class B Common Stock,
accompanied by the requisite notice of conversion, other instruments of
transfer and payment of Transfer Taxes, and all rights of the holder of such
shares of Class B Common Stock, as such holder, shall cease at such time and
the person or persons in whose name or names the certificate or certificates
representing the shares of Class A Common Stock are to be issued shall be
treated for all purposes at such time as having become the record holder or
holders of the shares of Class A Common Stock into which such shares of Class B
Common Stock are converted; provided, however, that in the event any such
surrender of shares of Class B Common Stock for conversion is made on any date
when the stock transfer records of the Corporation shall be closed, the person
or persons in whose name or names the certificate or certificates representing
shares of Class A Common Stock are to be issued upon such conversion will
become the record holder or holders of the shares of Class A Common Stock for
all purposes immediately prior to the close of business on the next succeeding
day on which such stock transfer records are open.

(C)  The Corporation will at all times reserve
and keep available, solely for the purpose of issuance upon conversion of
shares of Class B Common Stock, such number of shares of Class A Common Stock
as shall be issuable upon the conversion of all such outstanding shares;
provided, however, that nothing contained herein shall be construed to preclude
the Corporation from satisfying its obligations in respect of the conversion of
shares of Class B Common Stock by delivery of purchased shares of Class A
Common Stock which are held in the treasury of the Corporation.  If any shares of Class A Common Stock
required to be reserved for purposes of conversion hereunder require registration
with or approval of any governmental authority under any federal or state law
before such shares of Class A Common stock may be issued upon conversion, the
Corporation shall use its best efforts to cause such shares to be duly
registered or approved for issuance as expeditiously as practicable.  The Corporation will endeavor to list the
shares of Class A Common Stock required to be delivered upon conversion prior
to such delivery upon each national securities exchange, if any, upon which the
shares of Class A Common Stock are listed at the time of such delivery.  All shares of Class A Common Stock which
shall be issued upon conversion of the Class B Common Stock will, upon
issuance, be fully paid and nonassessable and not subject to any preemptive
rights.

(D)  The issuance of certificates for shares of
Class A Common Stock upon conversion of shares of Class B Common Stock, and the
issuance of certificates for remaining shares of Class B Common Stock upon
conversion of less than all of the shares represented by any certificate, shall
be made without charge to the stockholder for any stock transfer tax or stamp
tax or other similar tax (“Transfer Tax”) in respect of the conversion of
shares of Class B Common Stock into Class A Common Stock or the issuance or
exchange of stock certificates in respect thereof; provided, however, that, if
any certificate for shares of Class A Common Stock is to be issued in a name
other than that of the record holder of the share or shares of Class B Common
Stock converted, the person or persons requesting the issuance thereof shall
pay to the Corporation the amount of any Transfer Tax which may be payable in
respect of any such transfer, exchange or 

 

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issuance
or shall establish to the satisfaction of the Corporation that such tax has
been paid or is not payable.

(E)  All issued shares of Class B Common Stock
shall be deemed, without further action on the part of any person, to be
immediately and automatically converted into shares of Class A Common Stock, on
the terms provided by Paragraph (3)(A) through (3)(D) above, and stock
certificates formerly representing shares of Class B Common Stock shall
thereupon and thereafter be deemed to represent a like number of shares of
Class A Common Stock until surrendered for certificates explicitly representing
shares of Class A Common Stock in each of the instances set forth below:

(i)    All of the shares of Class B Common Stock
shall be automatically so converted into shares of Class A Common Stock if and
when on any record date for determining the stockholders entitled to
participate in any dividend or distribution on the Common Stock of the
Corporation, or any annual or special meeting of stockholders or action of
common stockholders by written consent, the number of issued and outstanding
shares of Class B Common Stock is less than five percent (5%) of the aggregate
number of shares of Class A Common Stock and Class B Common Stock then
outstanding.

(ii)   All of the shares of Class B Common Stock
shall be automatically so converted into shares of Class A Common Stock, as of
a record date set by the Board of Directors for such purpose, in the event that
the Board of Directors, by resolution adopted by the affirmative vote of a
majority of the members thereof, shall determine that there has been a material
adverse change in the liquidity of the market for, or the marketability of, the
then outstanding shares of Class A Common Stock due to a delisting of the Class
A Common Stock from a national securities exchange or the cessation of the
quotation of bids for the Class A Common Stock in any quotation system operated
by an association of securities dealers, or due to requirements of federal or
state law applicable to trading in the Class A Common Stock, attributable to
the existence of the Class A Common Stock and Class B Common Stock.

In the event that all issued
shares of Class B Common Stock shall be converted into shares of Class A Common
Stock in accordance with this Paragraph (3)(E), the Class B Common Stock shall
automatically be cancelled and shall no longer be authorized for issuance.

(F)  Except as provided in Paragraph (3) (E)
above, shares of Class B Common Stock that are converted into shares of Class A
Common Stock shall be restored to the status of authorized but unissued shares
of Class B Common Stock and may again be issued by the Corporation as permitted
in accordance with the terms of the Certificate of Incorporation.

 

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(4)          Restrictions
on Transfer of the Class B Common Stock.

(A)  The record owner of shares of Class B Common
Stock (hereinafter referred to as a “Class B Stockholder”) may transfer the
shares of Class B Common Stock of such Class B Stockholder, whether by sale,
assignment, gift or otherwise, only to a Permitted Transferee of such Class B
Stockholder and no Class B Stockholder may otherwise transfer any interest in
any shares of Class B Common Stock and the Corporation shall not register any
other attempted transfer of ownership of shares of Class B Common Stock. For
purposes of the Certificate of Incorporation:

(i)  A “Permitted Transferee” shall be, if the
Class B Stockholder is an individual, (A) the estate or any legatee, heir or
distributee upon death of the Class B Stockholder; (B) the spouse or former
spouse of the class B Stockholder; (C) any parent or grandparent and any lineal
descendant (including any adopted child) of any parent or grandparent of the
Class B Stockholder or of such Class B Stockholder’s spouse; (D) any guardian
or custodian (including a custodian for purposes of the Uniform Gift to Minors
Act or Uniform Transfers to Minors Act) for, or any executor, administrator,
conservator or other legal representative of, the Class B Stockholder or any
Permitted Transferee thereof; (E) the trustee of a trust (including a voting
trust), and any savings or retirement account, such as an individual retirement
account for purposes of federal income tax laws, whether or not involving a
trust, principally for the benefit of such Class B Stockholder and/or any
Permitted Transferee thereof, including any trust in respect of which such
Class B Stockholder or any Permitted Transferee thereof has any general or
special testamentary power of appointment or general or special
non-testamentary power of appointment limited to any Permitted Transferee or
Permitted Transferees thereof; (F) any organization contributions to which are
deductible for federal income, estate or gift tax purposes (hereinafter
referred to as a “Charitable Organization”) established by such Class B
Stockholder and/or any Permitted Transferee or Permitted Transferees thereof;
(G) any corporation, partnership or other business entity if substantially all
the beneficial ownership thereof is held by the Class B Stockholder and/or any
Permitted Transferee or Permitted Transferees thereof; provided, however, that
if the Class B Stockholder who made such transfer, and all Permitted
Transferees thereof, cease, for whatever reason, to hold substantially all of
the beneficial ownership of such corporation, partnership or other business
entity, then any and all shares of Class B Common Stock owned by such
corporation, partnership or other business entity shall be deemed to be
converted automatically, without further action by or on behalf of any person,
into shares of Class A Common Stock as provided by Paragraphs (3) (A) through
(3) (D) above and such corporation, partnership or other business entity shall
no longer be a Class B Stockholder, and (H) the corporation.

(ii)
A “Permitted Transferee” shall be, if the Class B Stockholder is a corporation,
partnership or other business entity, (A) any employee benefit plan, or trust
thereunder or therefor, sponsored by the class B Stockholder; (B) the trustee
of a trust (including any voting or liquidating trust) principally for the
benefit of such Class B Stockholder and/or any Permitted Transferee or
Permitted 

 

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Transferees
thereof; (C) any Charitable Organization established by such Class B
Stockholder and/or any Permitted Transferee or Permitted Transferees thereof;
(D) any corporation, partnership or other business entity which, directly or
indirectly, is in control of, is controlled by or is under common control with
such Class B Stockholder and/or any Permitted Transferee or Permitted
Transferees thereof; (E) the stockholders of the corporation, partners of the
partnership or other owners of equity interests in any other business entity
who receives such shares, by way of dividend or distribution (upon dissolution,
liquidation or otherwise), provided that such transfer will not result in
beneficial ownership of such shares by persons who did not have substantially
all of the beneficial ownership of such corporation, partnership or business
entity prior to the time such corporation, partnership or business entity that
acquired beneficial ownership of such shares of Class B Common Stock (other
than by any such person who is a Permitted Transferee of a stockholder, partner
or other owner of equity interests in the business entity who continued to have
such beneficial ownership of the corporation, partnership or other business
entity), and such shares of Class B Common Stock are distributed to such
persons substantially pro rata to their interests in such corporation,
partnership or other business entity; (F) any successor thereto by operation of
law pursuant to a merger, consolidation or similar transaction; and (G) the
Corporation.

(iii)    A
“Permitted Transferee” shall be, if the Class B Stockholder is any person who
holds shares of Class B Common Stock for the beneficial ownership of another
(including any broker or dealer in securities, any clearing house, any bank,
trust company, savings and loan association or other financial institution, any
other nominee, any trustee, any savings plan or account or related trust, such
as an individual retirement account principally for the benefit of any
individual or any employee benefit plan, or trust thereunder or therefor, of
any corporation, partnership or other business entity, including any employee
stock ownership, investment, option, bonus, purchase or incentive plan of the
Corporation), (A) the person or persons for whose benefit the Class B
Stockholder holds such shares of Class B Common Stock (the “beneficiary”), (B)
any person who would be a Permitted Transferee of the beneficiary if the
beneficiary were a Class B Stockholder or (C) if the Class B Stockholder is an
employee benefit plan, or trust thereunder or therefor, any person who is a
participant in such plan, provided such transfer is made in accordance with
such plan.

Notwithstanding anything to
the contrary set forth herein, any holder of Class B Common Stock may pledge
his shares of Class B Common Stock to a pledgee pursuant to a bona fide pledge
of such shares as collateral security for indebtedness due to the pledgee,
provided that such shares may not be transferred to or registered in the name
of the pledgee unless such pledgee is a Permitted Transferee. In the event of
foreclosure or other similar action by the pledgee, such pledged shares of
Class B Common Stock shall be deemed to be converted automatically, without any
act or deed on the part of the Corporation or any other person, into shares of
Class A Common Stock as provided in Paragraphs (3)(A) through (3)(D) above,
unless within five business days after such 

 

8

 

foreclosure
or similar event such pledged shares are returned to the pledgor or transferred
to a Permitted Transferee of the pledgor.

Notwithstanding anything to
the contrary set forth herein, the foregoing provisions of this Paragraph (4)
(A) shall not be deemed to restrict or prevent any transfer of shares of Class
B Common Stock by operation of law upon incompetence, death, dissolution or
bankruptcy of any Class B Stockholder or any provision of law providing for, or
judicial order of, forfeiture, seizure or impoundment.

(B)  Any transfer of any interest in shares of
Class B Common Stock made in violation of Paragraph (4) (A) shall result,
without further action on the part of any person, in the automatic conversion
of such shares of Class B Common Stock into shares of Class A Common Stock, in
accordance with the provisions of Section 3 above.

(C)  The Corporation and the Class B Transfer
Agent may, as a condition to the transfer or the registration of any transfer
of shares of Class B Common Stock permitted by Paragraph (4) (A) above, require
the furnishing of such affidavits or other proof as they deem necessary to
establish that the transferee is a Permitted Transferee. Should any such
transferor wish to contest any decision by the Corporation as to whether such
transferee is a Permitted Transferee, the final determination shall be made by
the Board of Directors of the Corporation, in its sole and absolute discretion.

(D)  The Corporation shall note on the
certificates for shares of Class B Common Stock the restrictions on transfer
and registration of transfer imposed by the provisions of this Section 4.

(E)  For purposes of Article FOURTH, the term
“beneficial ownership” in respect of shares of Class B Common Stock shall mean
possession of the power and authority, either singly or jointly with another,
to vote or dispose of or to direct the voting or disposition of such shares,
other than in a fiduciary capacity, and the term “beneficial owner” in respect
of shares of Class B Common Stock shall mean the person or persons who possess
such power and authority. “Beneficial ownership” for purposes of clause (i)(G)
Paragraph (4) (A) above shall mean the power to control a corporation,
partnership or other business entity and to receive the economic benefits of
its enterprise. Unless otherwise approved by the Board of Directors, a Class B
Stockholder and the Permitted Transferees thereof shall be deemed to have
“substantially all” of the beneficial ownership of a corporation, partnership
or other business entity for purposes of clause (i)(G) of Paragraph (4) (A)
only if they have beneficial ownership of at least 90% of each class of
ownership interest therein. The Board of Directors is expressly authorized to
adopt and apply such rules, procedures and policies, by the adoption of By-law
provisions or otherwise, as it may deem appropriate or convenient to carry out,
clarify and apply the provisions of Paragraph (4) (A) through (4) (C) above and
this Paragraph (4) (E) relating to the determination of who is the beneficial
owner of any shares of Class B Common Stock and what constitutes beneficial
ownership of “substantially all” of a trust, corporation, partnership or other
business entity.

(5)   Merger; Consolidation.

 

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In the event of a merger or
consolidation to which the Corporation is a party (whether or not the
Corporation is the surviving corporation), each share of Class A Common Stock
and Class B Common Stock shall receive the same per share consideration
pursuant to such merger or consolidation. Nothing contained in this Paragraph
(5) shall limit or restrict any conversion of shares of Class B Common Stock
into shares of Class A Common Stock permitted by Section 4 above.

(6)
Other Rights.

Except as otherwise required
by the General Corporation Law of the State of Delaware or as otherwise
provided in the Certificate of Incorporation, each share of Class A Common
Stock and each share of Class B Common Stock shall have identical powers,
preferences and rights.

(b)  Preferred
Stock. The Board of Directors of the Corporation is hereby
authorized to issue, from time to time, shares of Preferred Stock in series and
to fix the number of shares in each series and the designations, powers,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations, or restrictions thereon,
including, without limitation, any of the following: (i) provisions relating to
voting rights of each share in such series, including multiple or fractional
votes per share; (ii) provisions relating to the call or redemption thereof,
including, without limitation, the times and prices for such calls or
redemptions and provisions relating to sinking funds therefor and the
retirement thereof, if any; (iii) provisions relating to the right to receive
dividends, including, without limitation, participation in dividends with
shares of any other class or series of capital stock of the Corporation and/or
preferential dividends, the rate of such dividends, whether such dividends
shall be cumulative or noncumulative and the conditions on which such dividends
shall be accrued and paid, and any preferential rights thereto or rights in
relation to dividends payable on any other classes or series of stock of the
Corporation; (iv) the rights thereof upon the dissolution of, or upon any
distribution of the assets of, the Corporation; and (v) provisions relating to
the conversion thereof into, or the exchange thereof for, shares of any class
or any other series of the same class of stock of the Corporation or exchange
for any other security of the corporation or any other company.

and
(b) deleting paragraph SEVENTH thereof in its entirety and substituting in lieu
thereof the following new paragraph SEVENTH:

SEVENTH: Election of
Directors need not be by written ballot unless the By-laws of the Corporation
so provide. At any time when any shares of Class B Common Stock are
outstanding, thirty-three and one-third percent (33-1/3%) of the Directors of
the Corporation, as fixed from time to time in accordance with the By-laws of
the Corporation, shall be independent Directors. In the event that thirty-three
and one-third percent (33-1/3%) of the number of Directors is not a whole
number, the number of Directors who shall be independent Directors shall be
rounded up to the nearest whole number. For purposes of this Article SEVENTH,
the term “independent Director” means a Director who is neither (i) an officer
of the Corporation or of any entity which, directly or indirectly, is in
control of, is controlled by or is under common control with the 

 

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Corporation
nor (ii) a record or beneficial owner (as determined in accordance with
Paragraph (a) (4) (E) of Article FOURTH hereof) of five percent (5%) or more of
the aggregate number of outstanding shares of the Corporation’s Class A Common
Stock and Class B Common Stock.

3.  The amendment of the Certificate of
Incorporation of the Corporation herein certified was duly adopted, pursuant to
the provisions of Section 242 of the General Corporation Law of the State of
Delaware, by the Board of Directors of the Corporation on June 19, 1992.

4.  The amendment of the Certificate of
Incorporation of the Corporation herein certified was duly adopted, pursuant to
the provisions of Section 242 of the General Corporation Law of the State of
Delaware, by the Stockholders of the Corporation on September 11, 1992.

 

Signed
on September 11, 1992

	
   

  	
   

  	
   

  	
  /s/
  Peter S. Reinhart

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Peter
  S. Reinhart

  	
   

  
	
   

  	
   

  	
   

  	
  Senior
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
  &
  General Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Timothy P. Mason

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  	
   

  
	
  Timothy P. Mason

  	
   

  	
   

  	
   

  	
   

  

 

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Exhibit 4.5    
    

 
 
  AS AMENDED JUNE 4, 2003
  
    VISTA MEDICAL TECHNOLOGIES, INC.
  
    1997 STOCK OPTION/STOCK ISSUANCE PLAN    
    

 
 

ARTICLE ONE
  
    GENERAL PROVISIONS    
    

I.    PURPOSE
OF THE PLAN 

        This
1997 Stock Option/Stock Issuance Plan is intended to promote the interests of Vista Medical Technologies, Inc., a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. 

        Capitalized
terms shall have the meanings assigned to such terms in the attached Appendix. 

II.    STRUCTURE
OF THE PLAN 

        A.    The
Plan shall be divided into three separate equity programs: 

	•
	the
Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock,

	•
	the
Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), and

	•
	the
Automatic Option Grant Program under which eligible non- employee Board members shall automatically receive option grants at periodic intervals to purchase
shares of Common Stock. 

        B.    The
provisions of Articles One and Five shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. 

III.    ADMINISTRATION
OF THE PLAN 

        A.    Prior
to the Section 12 Registration Date, the Discretionary Option Grant and Stock Issuance Programs shall be administered by the Board. Beginning with the
Section 12 Registration Date, the Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders. 

        B.    Administration
of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive discretionary option grants or direct stock issuances under the Plan or any other stock option, stock appreciation, stock
bonus or other stock plan of the Corporation (or any Parent or Subsidiary). 

        C.    Members
of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time.
The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. 

        D.    Each
Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to
establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant 

 

and
Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in
the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option or stock issuance thereunder. 

        E.    Service
on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled
to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. 

        F.     Administration
of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that program, and no Plan Administrator shall
exercise any discretionary functions with respect to any option grants or stock issuances made under this program. 

IV.    ELIGIBILITY 

        A.    The
persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 

        (i)    Employees,

        (ii)   non-employee
members of the Board or the board of directors of any Parent or Subsidiary, and 

        (iii)  consultants
and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 

        B.    Each
Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine, (i) with respect to the option
grants under the Discretionary Option Grant Program, which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding and (ii) with respect to stock issuances under the Stock Issuance Program,
which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration for such shares. 

        C.    The
Plan Administrator shall have the absolute discretion either to grant options in accordance with the Discretionary Option Grant Program or to effect stock issuances
in accordance with the Stock Issuance Program. 

        D.    The
individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to non-employee Board members who are elected or
appointed to the Board after the Effective Date. A non- employee Board member who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible
to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but shall be eligible to receive periodic option grants
under the Automatic Option Grant Program while he or she continues to serve as a non-employee Board member. 

V.    STOCK
SUBJECT TO THE PLAN 

        A.    The
stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open
market. The maximum 

2

 

number
of shares of Common Stock reserved for issuance over the term of the Plan shall not exceed 1,092,500 shares. 

        B.    No
one person participating in the Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than 50,000 shares of
Common Stock in the aggregate per calendar year, beginning with the 1997 calendar year. 

        C.    Shares
of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan) shall be available for subsequent issuance
under the Plan to the extent those options expire or terminate for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option
or stock issuance. Notwithstanding the above, no additional adjustment shall be made to any shares or class of shares with respect to any transaction occurring prior to the completion of an offering
of shares of the Common Stock of the Company to the public pursuant to an effective registration statement. 

        D.    If
any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock
issuances under this Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan and
(v) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive. 

 
 

ARTICLE TWO
  
    DISCRETIONARY OPTION GRANT PROGRAM    
    

I.    OPTION
TERMS 

        Each
option shall be evidenced by one or more documents in the form approved by the Plan Administrator; PROVIDED, however, that each such document shall comply with the terms specified
below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. 

        A.    EXERCISE
PRICE. 

        1.     The
exercise price per share shall be fixed by the Plan Administrator but shall not be less than eighty-five percent (85%) of the Fair Market Value per share
of Common Stock on the 

3

 

option
grant date, provided that the Plan Administrator may fix the exercise price at less than 85% if the optionee, at the time of the option grant, shall have made a payment to the Company
(including payment made by means of a salary reduction) equal to the excess of the Fair Market Value of the Common Stock on the option grant date over such exercise price. 

        2.     The
exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Five and the documents
evidencing the option, be payable in one or more of the forms specified below: 

        (i)    cash
or check made payable to the Corporation, 

        (ii)   shares
of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or 

        (iii)  to
the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to
complete the sale. 

        Except
to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

        B.    EXERCISE
AND TERM OF OPTIONS.    Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined
by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. 

        C.    EFFECT
OF TERMINATION OF SERVICE. 

        1.     The
following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: 

        (i)    Any
option outstanding at the time of the Optionee's cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. 

        (ii)   Any
option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by the personal representative of the Optionee's estate or
by the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. 

        (iii)  Should
the Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be outstanding. 

        (iv)  During
the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the
option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, 

4

 

terminate
and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 

        2.     The
Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: 

        (i)    extend
the period of time for which the option is to remain exercisable following the Optionee's cessation of Service from the limited exercise period otherwise in
effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or 

        (ii)   permit
the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock
for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the
Optionee continued in Service. 

        D.    STOCKHOLDER
RIGHTS.    The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of the purchased shares. 

        E.    REPURCHASE
RIGHTS.    The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right. 

        F.     LIMITED
TRANSFERABILITY OF OPTIONS.    During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death. However, a Non-Statutory Option may be assigned in whole or in part
during the Optionee's lifetime. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to
the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. 

II.    INCENTIVE
OPTIONS 

        The
terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Five
shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to the terms of this
Section II. 

        A.    ELIGIBILITY.    Incentive
Options may only be granted to Employees. 

        B.    EXERCISE
PRICE.    The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date. 

        C.    DOLLAR
LIMITATION.    The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any
one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the 

5

 

foregoing
limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 

        D.    10%
STOCKHOLDER.    If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 

III.    CORPORATE
TRANSACTION/CHANGE IN CONTROL 

        A.    In
the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to
be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof),
(ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its
determination shall be final, binding and conclusive. 

        B.    All
outstanding repurchase rights shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 

        C.    Immediately
following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof). 

        D.    Each
option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (i) the exercise price payable per share under each outstanding option, PROVIDED the aggregate
exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan and
(iii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under the
Plan per calendar year. 

        E.    The
Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in the event
the Optionee's Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the EARLIER of
(i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the 

6

 

Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full. 

        F.     The
Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in the event
the Optionee's Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-vested shares until the EARLIER of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate, and the shares subject to those terminated repurchase rights
shall accordingly vest in full. 

        G.    The
portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws. 

        H.    The
outstanding options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

IV.    CANCELLATION
AND REGRANT OF OPTIONS 

        The
Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding
options under the Discretionary Option Grant Program (including outstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or different
number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new grant date. 

V.    STOCK
APPRECIATION RIGHTS 

        A.    The
Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. 

        B.    The
following terms shall govern the grant and exercise of tandem stock appreciation rights: 

        (i)    One
or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying
option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the
option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares. 

        (ii)   No
such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender or at any earlier time.
If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 

7

 

        (iii)  If
the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option
(or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the LATER of (a) five (5) business days after the receipt of the rejection
notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more
than ten (10) years after the option grant date. 

        C.    The
following terms shall govern the grant and exercise of limited stock appreciation rights: 

        (i)    One
or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. 

        (ii)   Upon
the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the
unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at
the time exercisable for vested shares of Common Stock. In return for the surrendered option, the Optionee shall receive a cash distribution from the Corporation in an amount equal to the excess of
(A) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date. 

        (iii)  Neither
the approval of the Plan Administrator nor the consent of the Board shall be required in connection with such option surrender and cash distribution. 

        (iv)  The
balance of the option (if any) shall remain outstanding and exercisable in accordance with the documents evidencing such option. 

 
 

ARTICLE THREE
  
    STOCK ISSUANCE PROGRAM    
    

I.    STOCK
ISSUANCE TERMS 

        Shares
of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be
evidenced by a Stock Issuance Agreement which complies with the terms specified below. 

        A.    PURCHASE
PRICE. 

        1.     The
purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the issuance date. 

        2.     Subject
to the provisions of Section I of Article Five, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of
consideration which the Plan Administrator may deem appropriate in each individual instance: 

        (i)    cash
or check made payable to the Corporation, or 

        (ii)   past
services rendered to the Corporation (or any Parent or Subsidiary). 

        B.    VESTING
PROVISIONS. 

        1.     Shares
of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest
in one or more installments over the Participant's period of Service or upon attainment of specified 

8

 

performance
objectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely: 

        (i)    the
Service period to be completed by the Participant or the performance objectives to be attained, 

        (ii)   the
number of installments in which the shares are to vest, 

        (iii)  the
interval or intervals (if any) which are to lapse between installments, and 

        (iv)  the
effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule, shall be determined by the Plan
Administrator and incorporated into the Stock Issuance Agreement. 

        2.     Any
new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to
receive with respect to the Participant's unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 

        3.     The
Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not
the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 

        4.     Should
the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares. 

        5.     The
Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall result in the immediate vesting of the
Participant's interest in the shares as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives. 

II.    CORPORATE
TRANSACTION/CHANGE IN CONTROL 

        A.    All
of the Corporation's outstanding repurchase/cancellation rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent (i) those repurchase/cancellation rights are to be assigned to
the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed in the Stock Issuance
Agreement. 

9

 

        B.    The
Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's
repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the Participant's Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not
to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those repurchase/cancellation rights are assigned to the successor corporation (or parent
thereof). 

        C.    The
Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's
repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the Participant's Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not
to exceed eighteen (18) months) following the effective date of any Change in Control. 

III.    SHARE
ESCROW/LEGENDS 

        Unvested
shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those unvested shares. 

 
 

ARTICLE FOUR
  
    AUTOMATIC OPTION GRANT/ISSUANCE PROGRAM    
    

I.    OPTION
TERMS 

        A.    GRANT
DATES.    On the date of each Annual Stockholders Meeting held after the Effective Date, option grants shall be made to (i) each new Eligible
Director who is elected to the Board at that particular Annual Meeting and (ii) each continuing Eligible Director who is elected to the Board at that particular Annual Meeting. Each automatic
option grant shall be a Non-Statutory Option. Each Eligible Director shall be granted an option to purchase 3,750 shares of Common Stock at the Annual Meeting at which he or she is first
elected to the Board and an option to purchase 1,250 shares of Common Stock at each Annual Meeting thereafter at which he or she is elected to the Board. There shall be no limit on the number of such
automatic option grants any one Eligible Director may receive over his or her period of Board service, and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received a stock option grant from the Corporation prior to the Effective Date shall be eligible to receive one or more such annual
option grants over their period of continued Board service. 

        B.    EXERCISE
PRICE FOR OPTION SHARES. 

        1.     The
exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the date of the Annual Stockholders
Meeting with respect to which the option is granted. 

        2.     The
exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

        C.    OPTION
TERM.    Each option shall have a term of ten (10) years measured from the option grant date. 

10

 

        D.    EXERCISE
AND VESTING OF OPTIONS.    Each option shall be exercisable only with respect to option shares with respect to which the automatic option grant has
become vested. Provided that the non-employee director continues to be a Member of the Board, the 3,750 share option grant shall vest over four years in successive equal monthly
installments from the date of grant and the 1,250 share option grants shall vest at the end of each additional year of Service completed by the optionee. No portion of the automatic option grant shall
vest after the optionee has ceased to be a member of the Board. 

        E.    TERMINATION
OF BOARD SERVICE.    The following provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve
as a Board member: 

        (i)    The
Optionee (or, in the event of Optionee's death, the personal representative of the Optionee's estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and distribution) shall have a twelve (12)-month period following the date of such cessation of Board service in which to
exercise each such option. 

        (ii)   During
the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the
option is exercisable at the time of the Optionee's cessation of Board service. 

        (iii)  Should
the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. 

        (iv)  In
no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Board service for any reason other than death or Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares. 

II.    CORPORATE
TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER 

        A.    In
the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in
full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully- vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic option
grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). 

        B.    In
connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in
full so that each such option shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Each such option shall remain exercisable for such fully-vested option shares until the expiration
or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. 

        C.    Upon
the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his
or her outstanding automatic option grants. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to 

11

 

the
excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in
those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall be required in connection with such option surrender and cash distribution. 

        D.    Each
option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, PROVIDED the aggregate exercise price payable for such securities shall
remain the same. 

        E.    The
grant of options under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

III.    REMAINING
TERMS 

        The
remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant
Program. 

 
 

ARTICLE FIVE
  
    MISCELLANEOUS    
    

I.    FINANCING

        The
Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under
the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the
sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by
the Optionee or the Participant in connection with the option exercise or share purchase. 

II.    TAX
WITHHOLDING 

        A.    The
Corporation's obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to
the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. 

        B.    The
Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan (other
than the options granted or the shares issued under the Automatic Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats: 

        STOCK
WITHHOLDING:    The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory
Option or the vesting of 

12

 

such
shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder. 

        STOCK
DELIVERY:    The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common
Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder. 

III.    EFFECTIVE
DATE AND TERM OF THE PLAN 

        A.    The
Plan shall become effective immediately upon the Plan Effective Date. Options may be granted under the Discretionary Option Grant or Automatic Option Grant Program at
any time on or after the Plan Effective Date. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12) months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease
to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. 

        B.    The
Plan shall serve as the successor to the Predecessor Plan, and no further option grants or direct stock issuances shall be made under the Predecessor Plan after the
Section 12 Registration Date. All options outstanding under the Predecessor Plan on the Section 12 Registration Date shall be incorporated into the Plan at that time and shall be treated
as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 

        C.    One
or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate Transactions and
Changes in Control, may, in the Plan Administrator's discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions. 

        D.    The
Plan shall terminate upon the EARLIEST of (i) the tenth anniversary of the Plan Effective Date, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such plan termination, all
outstanding option grants and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances. 

IV.    AMENDMENT
OF THE PLAN 

        A.    The
Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall
adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such
amendment or modification. In addition, certain amendments may require stockholder approval if so determined by the Board or pursuant to applicable laws or regulations. 

        B.    Options
to purchase shares of Common Stock may be granted under the Discretionary Option Grant and shares of Common Stock may be issued under the Stock Issuance Program
that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until
there is obtained any required approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis 

13

 

of
such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for
any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding. 

V.    USE
OF PROCEEDS 

        Any
cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 

VI.    REGULATORY
APPROVALS 

        A.    The
implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted
option or (ii) under the Stock Issuance Program shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the
Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it. 

        B.    No
shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements
of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 

VII.    NO
EMPLOYMENT/SERVICE RIGHTS 

        Nothing
in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without cause. 

[Remainder
of This Page Intentionally Left Blank] 

14

 
 
 

APPENDIX    
    

        The following definitions shall be in effect under the Plan: 

        A.    AUTOMATIC
OPTION GRANT PROGRAM shall mean the automatic option grant program in effect under the Plan. 

        B.    BOARD
shall mean the Corporation's Board of Directors. 

        C.    CHANGE
IN CONTROL shall mean a change in ownership or control of the Corporation effected through either of the following transactions: 

        (i)    the
acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does
not recommend such stockholders to accept, or 

        (ii)   a
change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such
election or nomination. 

        D.    CODE
shall mean the Internal Revenue Code of 1986, as amended. 

        E.    COMMON
STOCK shall mean the Corporation's common stock. 

        F.     CORPORATE
TRANSACTION shall mean either of the following stockholder-approved transactions to which the Corporation is a party: 

        (i)    a
merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 

        (ii)   the
sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. 

        G.    CORPORATION
shall mean Vista Medical Technologies, Inc., a Delaware corporation, and its successors. 

        H.    DISCRETIONARY
OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan. 

        I.     ELIGIBLE
DIRECTOR shall mean a non-employee Board member eligible to participate in the Automatic Option Grant Program in accordance with the eligibility
provisions of Article One. 

        J.     EMPLOYEE
shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance. 

        K.    EXERCISE
DATE shall mean the date on which the Corporation shall have received written notice of the option exercise. 

15

 

        L.    FAIR
MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 

        (i)    If
the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be deemed equal to the closing selling price per share of
Common Stock on the date in question, as such price is reported on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

        (ii)   If
the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be deemed equal to the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding
date for which such quotation exists. 

        (iii)  For
purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is
to be sold in the initial public offering pursuant to the Underwriting Agreement. 

        (iv)  For
purposes of any option grants made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, after taking into account
such factors as it deems appropriate. 

        M.   HOSTILE
TAKE-OVER shall mean the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such stockholders to accept. 

        N.    INCENTIVE
OPTION shall mean an option which satisfies the requirements of Code Section 422. 

        O.    INVOLUNTARY
TERMINATION shall mean the termination of the Service of any individual which occurs by reason of: 

        (i)    such
individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or 

        (ii)   such
individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent. 

        P.     MISCONDUCT
shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all 

16

 

the
acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary). 

        Q.    1934
ACT shall mean the Securities Exchange Act of 1934, as amended. 

        R.    NON-STATUTORY
OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. 

        S.     OPTIONEE
shall mean any person to whom an option is granted under the Discretionary Option Grant or the Automatic Option Grant Program. 

        T.     PARENT
shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken
chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other
corporations in such chain. 

        U.    PARTICIPANT
shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 

        V.     PERMANENT
DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic
Option Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason
of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. 

        W.    PLAN
shall mean the Corporation's 1997 Stock Option/Stock Issuance Plan, as set forth in this document. 

        X.    PLAN
ADMINISTRATOR shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction. 

        Y.    PLAN
EFFECTIVE DATE shall mean the date on which the Plan was adopted by the Board. 

        Z.    PREDECESSOR
PLAN shall mean the Corporation's pre-existing Stock Option Plan in effect immediately prior to the Plan Effective Date hereunder. 

        AA.    PRIMARY
COMMITTEE shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders. 

        AB.    SECONDARY
COMMITTEE shall mean a committee of two (2) or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to eligible persons other than Section 16 Insiders. 

        AC.    SECTION
12 REGISTRATION DATE shall mean the date on which the Common Stock is first registered under Section 12(g) or Section 15 of the 1934 Act. 

        AD.    SECTION
16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 

17

 

        AE.    SERVICE
shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 

        AF.    STOCK
EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange. 

        AG.    STOCK
ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock
Issuance Program. 

        AH.    STOCK
ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan. 

        AI.    SUBSIDIARY
shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. 

        AJ.    TAKE-OVER
PRICE shall mean the GREATER of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by
the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i)
price per share. 

        AK.    TAXES
shall mean the Federal, state and local income and employment tax liabilities incurred by the holder of Non-Statutory Options or unvested shares of
Common Stock in connection with the exercise of those options or the vesting of those shares. 

        AL.    10%
STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Corporation (or any Parent or Subsidiary). 

        AM.    UNDERWRITING
AGREEMENT shall mean the agreement between the Corporation and the underwriter or underwriters managing the initial public offering of the Common Stock. 

        AN.    UNDERWRITING
DATE shall mean the date on which the Underwriting Agreement is executed and priced in connection with an initial public offering of the Common Stock. 

18

QuickLinks

Exhibit 4.5

1997 STOCK OPTION/STOCK ISSUANCE PLAN

ARTICLE ONE GENERAL PROVISIONS

ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM

ARTICLE THREE STOCK ISSUANCE PROGRAM

ARTICLE FOUR AUTOMATIC OPTION GRANT/ISSUANCE PROGRAM

ARTICLE FIVE MISCELLANEOUS

APPENDIX

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