Document:

Exhibit 4.4  

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED,
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS
NOT REQUIRED.

Warrants
and shares of Common Stock issued upon the exercise of the Warrants issued to residents of British Columbia and Ontario must also bear the following legend: 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THESE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE SEPTEMBER 10, 2004.

Warrant
No. WCPA-            

PLACEMENT
AGENT COMMON STOCK PURCHASE WARRANT 

To
Purchase            Shares of Common Stock of

GENETRONICS BIOMEDICAL CORPORATION 

        THIS
IS TO CERTIFY THAT                        , or registered assigns (the "Holder"), is entitled, during the Exercise Period (as
hereinafter defined), to purchase from Genetronics Biomedical
Corporation, a Delaware corporation (the "Company"), the Warrant Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, at a purchase price of $1.70 per
share, all on and subject to the terms and conditions hereinafter set forth. 

        1.     Definitions. As used in this Warrant, the following terms have the respective meanings set forth below: 

        "Affiliate" means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is
under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder of Warrants, any investment fund or
managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder. 

        "Appraised Value" means, in respect of any share of Common Stock on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or to the fact that the Company may have no
class of equity registered under the Exchange Act) as of the last day of the most recent fiscal month ending prior to such date specified, based on the value of the Company on a fully-diluted basis,
as determined by a nationally recognized investment banking firm selected by the Company's Board of Directors and having no prior relationship with the Company. 

        "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in
the State of California generally are authorized or required by law or other government actions to close. 

        "Change of Control" means the (i) acquisition by an individual or legal entity or group (as set forth in Section 13(d) of
the Exchange Act) of more than one-half of the voting rights or equity interests in the Company; or (ii) sale, conveyance, or other disposition of all or substantially all of the
assets, property or business of the Company or the merger into or consolidation with any other corporation (other than a wholly owned subsidiary corporation) or effectuation of any transaction or
series of related transactions where holders of the Company's voting securities prior to such transaction or series of transactions fail to continue to hold at least 50% of the voting power of the
Company. 

        "Closing Date" means May 10, 2004. 

 

        "Commission" means the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other
federal securities laws. 

        "Common Stock" means (except where the context otherwise indicates) the Common Stock, $0.001 par value per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common Stock may thereafter be changed or converted, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets on liquidation over any
other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4. 

        "Current Market Price" means, in respect of any share of Common Stock on any date herein specified, 

        (1)   if
there shall not then be a public market for the Common Stock, the higher of 

        (a)   the
book value per share of Common Stock at such date, and 

        (b)   the
Appraised Value per share of Common Stock at such date, 

        or

        (2)   if
there shall then be a public market for the Common Stock, the higher of (x) the book value per share of Common Stock at such date, and (y) the average
of the daily market prices for the 20 consecutive trading days immediately before such date. The daily market price (the "Daily Market Price") for each
such trading day shall be (i) the closing price on such day on the principal stock exchange (including Nasdaq) on which such Common Stock is then listed or admitted to trading, or quoted, as
applicable, (ii) if no sale takes place on such day on any such exchange, the last reported closing price on such day as officially quoted on any such exchange (including Nasdaq),
(iii) if the Common Stock is not then listed or admitted to trading on any stock exchange, the last reported closing bid price on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is
engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc. (the "NASD") selected mutually by the holder of this Warrant and the Company or, if they cannot agree upon such selection, as selected by two such
members of the NASD, one of which shall be selected by holder of this Warrant and one of which shall be selected by the Company. 

        "Current Warrant Price" means, in respect of a share of Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date. Until the Current Warrant Price is adjusted pursuant to the terms herein, the initial Current Warrant Price shall be $1.70 per share of
Common Stock. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time. 

        "Exercise Period" means the period during which this Warrant is exercisable pursuant to Section 2.1. 

        "Expiration Date" means May 10, 2009. 

2

 

        "GAAP" means generally accepted accounting principles in the United States of America as from time to time in effect. 

        "NASD" means the National Association of Securities Dealers, Inc., or any successor corporation thereto. 

        "Other Property" has the meaning set forth in Section 4.4. 

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, incorporated organization, association,
corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof). 

        "Preferred Stock Purchase Agreement" means that certain Preferred Stock and Warrant Purchase Agreement dated as of May 10, 2004
among the Company and the other parties named therein, pursuant to which this Warrant was originally issued. 

        "Restricted Common Stock" means shares of Common Stock which are, or which upon their issuance upon the exercise of any Warrant would be
required to be, evidenced by a certificate bearing the restrictive legend set forth in Section 3.2. 

        "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. 

        "Trading Day" means any day on which the primary market on which shares of Common Stock are listed is open for trading. 

        "Transfer" means any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act. 

        "Warrants" means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. 

        "Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price. 

        "Warrant Stock" means the            shares of Common Stock to be purchased upon the exercise hereof, subject to adjustment as
provided herein. 

        2.     Exercise of Warrant. 

        2.1.  Manner of Exercise. From and after the Closing Date, and until 5:00 P.M., New York time, on the Expiration Date
(the "Exercise Period"), the Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares of Warrant Stock purchasable hereunder. 

        In
order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Company at its principal office or at the office or agency designated by the Company pursuant to
Section 12, (i) an original written notice of Holder's election to exercise this Warrant, which notice shall specify the number of shares of Warrant Stock to be purchased,
(ii) payment of the Warrant Price as provided herein, and (iii) this Warrant. Such notice shall be substantially in the form of the subscription form appearing at the end of this Warrant
as Exhibit A, duly executed by the Holder or its agent or attorney. Upon receipt thereof, the Company shall, as promptly as practicable, and in
any event within three Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to the Holder a certificate or certificates representing the aggregate number of
full shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be,
to the extent possible, in such 

3

 

denomination
or denominations as the Holder shall request in the notice and shall be registered in the name of the Holder or such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have
become a Holder of record of such shares for all purposes, as of the date when the notice, together with the payment of the Warrant Price and this Warrant, is received by the Company as described
above. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Stock, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or at
the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. 

        If
the Company intentionally and willfully fails to deliver to the holder such certificate or certificates pursuant to this Section 2.1 (free of any restrictions on transfer or
legends, if such shares have been registered) in accordance herewith, prior to the seventh trading day after the receipt by the Company of (i) an original written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided herein, and (iii) this Warrant (the
"Date of Receipt"), the Company shall pay to such Holder, in cash, on a per diem basis, an amount equal to 2% of the value of the undelivered Warrant Stock (based on the Current Market Price of the
Common Stock on the Date of Receipt) per month until such delivery takes place. 

        Payment
of the Warrant Price may be made at the option of the Holder by: (i) certified or official bank check payable to the order of the Company, (ii) wire transfer to the
account of the Company or (iii) at any time following the date that is twelve (12) months after the Closing Date, the surrender and cancellation of a portion of shares of Common Stock
then held by the Holder or issuable upon exercise of this Warrant, which shall be valued and credited toward the total Warrant Price due the Company for the exercise of the Warrant based upon the
Current Market Price of the Common Stock, unless a Registration Statement (as defined in the Investor Rights Agreement) is then effective with respect to all shares of Common Stock issuable pursuant
to this Warrant and sales may be made pursuant to such Registration Statement. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued and, upon payment of the Warrant Price, shall be fully paid and nonassessable and not subject to any preemptive rights. 

        2.2.  Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any
Warrant. As to any fraction of a share which the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such
exercise, the Company shall pay an amount in cash equal to the Current Market Price per share of Common Stock on the date of exercise multiplied by such fraction. 

        2.3.  Continued Validity. A Holder of shares of Common Stock issued upon the exercise of this Warrant, in whole or in part
(other than a Holder who acquires such shares after the same have been publicly sold pursuant to a Registration Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which it would have been entitled as the Holder under Sections 10 and 13 of this Warrant. 

        2.4.  Restrictions on Exercise Amount. 

          (i)  Unless
a Holder delivers to the Company irrevocable written notice prior to the date of issuance hereof or sixty-one days prior to the effective date of
such notice that this Section 2.4(i) shall not apply to such Holder, the Holder may not acquire a number of shares of Warrant Stock to the extent that, upon such exercise, the number of
shares of Common Stock then beneficially owned by such holder and its Affiliates and any other persons or entities whose 

4

 

beneficial
ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act (including shares held by any "group" of which the holder is a
member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to
the limitation set forth herein) exceeds 4.95% of the total number of shares of Common Stock of the Company then issued and outstanding; provided that such threshold shall be 9.95% if on the date of
issuance of this Warrant the number of shares of Common Stock beneficially owned by such holder and its Affiliates and any other persons or entities whose beneficial ownership of Common Stock would be
aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act (including shares held by any "group" of which the holder is a member, but excluding shares beneficially owned by
virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) already exceeds
4.95% of the total number of shares of Common Stock of the Company issued and outstanding on the date hereof. For purposes hereof, "group" has the meaning set forth in Section 13(d) of the
Exchange Act and applicable regulations of the Securities and Exchange Commission, and the percentage held by the holder shall be determined in a manner consistent with the provisions of
Section 13(d) of the Exchange Act. Each delivery of a notice of exercise by a Holder will constitute a representation by such Holder that it has evaluated the limitation set forth in this
paragraph and determined, based on the most recent public filings by the Company with the Commission, that the issuance of the full number of shares of Warrant Stock requested in such notice of
exercise is permitted under this paragraph. 

         (ii)  In
the event the Company is prohibited from issuing shares of Warrant Stock as a result of any restrictions or prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other self-regulatory organization, the Company shall as soon as possible seek the approval of its stockholders and take
such other action to authorize the issuance of the full number of shares of Common Stock issuable upon exercise of this Warrant. 

        3.     Transfer, Division and Combination. 

        3.1.  Transfer. The Warrants and the Warrant Stock shall be freely transferable, subject to compliance with all applicable
laws, including, but not limited to the Securities Act. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant or the resale of the Warrant Stock, this
Warrant or the Warrant Stock, as applicable, shall not be registered under the Securities Act, the Company may require, as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant or the Warrant Stock as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such transfer
may be made without registration under the Securities Act, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the
Company and substantially in the form attached as Exhibit C hereto and (iii) that the transferee be an "accredited investor" as defined in
Rule 501(a) promulgated under the Securities Act. Transfer of this Warrant and all rights hereunder, in whole or in part, in accordance with the foregoing provisions, shall be registered on the
books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company referred to in Section 2.1 or the office or agency designated by
the Company pursuant to Section 12, together with a written assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Following a transfer that complies with the requirements of this Section 3.1, the
Warrant may be exercised by a new Holder for the purchase of shares of Common 

5

 

Stock
regardless of whether the Company issued or registered a new Warrant on the books of the Company. 

        3.2.  Restrictive Legends. Each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such certificate, unless, in each case, such Warrant Stock is eligible for resale without registration pursuant to
Rule 144(k) under the Exchange Act, shall be stamped or otherwise imprinted with legends in substantially the following form: 

"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED." 

Warrants
and shares of Common Stock issued upon the exercise of the Warrants issued to residents of British Columbia and Ontario must also bear the following legend: 

UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THESE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE SEPTEMBER 10, 2004. 

        3.3.  Division and Combination; Expenses; Books. This Warrant may be divided or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent
or attorney. Subject to compliance with Section 3.1 as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under this
Section 3. The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants. 

        4.     Adjustments. The number of shares of Common Stock for which this Warrant is exercisable, and the price at which such
shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Section 4. The Company shall give the Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 in accordance with Sections 5.1 and 5.2. 

        4.1.  Stock Dividends, Subdivisions and Combinations. If at any time while this Warrant is outstanding the Company shall: 

          (i)  declare
a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, 

         (ii)  subdivide
its outstanding shares of Common Stock into a larger number of shares of Common Stock, or 

        (iii)  combine
its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then: 

        (1)   the
number of shares of Common Stock acquirable upon exercise of this Warrant immediately after the occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares of Common Stock that would have been acquirable under this Warrant immediately prior to the record date for such dividend or
distribution or the effective date of such subdivision or combination 

6

 

would
own or be entitled to receive after such record date or the effective date of such subdivision or combination, as applicable, and 

        (2)   the
Current Warrant Price shall be adjusted to equal: 

        (A)  the
Current Warrant Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision or combination,
multiplied by the number of shares of Common Stock into which this Warrant is exercisable immediately prior to the adjustment, divided by 

        (B)  the
number of shares of Common Stock into which this Warrant is exercisable immediately after such adjustment. 

        Any
adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or
combination. 

        4.2.  Certain Other Distributions. If at any time while this Warrant is outstanding the Company shall cause the holders of its
Common Stock to be entitled to receive any dividend or other distribution of: 

          (i)  cash,

         (ii)  any
evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (other than cash or
additional shares of Common Stock as provided in Section 4.1 hereof), or 

        (iii)  any
warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property or
assets of any nature whatsoever, then: 

        (1)   the
number of shares of Common Stock acquirable upon exercise of this Warrant shall be adjusted to equal the product of the number of shares of Common Stock acquirable
upon exercise of this Warrant immediately prior to the record date for such dividend or distribution, multiplied by a fraction (x) the numerator of which shall be the Current Warrant Price per
share of Common Stock at the date of taking such record and (y) the denominator of which shall be such Current Warrant Price minus the amount allocable to one share of Common Stock of any such
cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Company) of any and all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable; and 

        (2)   the
Current Warrant Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted
to equal (x) the Current Warrant Price multiplied by the number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to the adjustment, divided by (y) the
number of shares of Common Stock acquirable upon exercise of this Warrant immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value
to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section 4.2 and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1. 

7

   
        4.3.  Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock into which this Warrant is exercisable and the Current Warrant Price provided for in Section 4: 

        (a)   When Adjustments to Be Made. The adjustments required by Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that any that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than
1% of the shares of Common Stock into which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount
(except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would
result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its
occurrence. 

        (b)   Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share. 

        (c)   When Adjustment Not Required. If the Company undertakes a transaction contemplated under this Section 4 and as a
result takes a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other benefits contemplated under
this Section 4 and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights
or other benefits contemplated under this Section 4, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled. 

        (d)   Escrow of Stock. If after any property becomes distributable pursuant to Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, a holder of this Warrant exercises the Warrant during such time, then such holder shall
continue to be entitled to receive any shares of Common Stock issuable upon exercise hereunder by reason of such adjustment and such shares or other property shall be held in escrow for the holder of
this Warrant by the Company to be issued to holder of this Warrant upon and to the extent that the event actually takes place. Notwithstanding any other provision to the contrary herein, if the event
for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled by the Company and escrowed property returned to the Company. 

        4.4.  Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. If there shall occur a Change of
Control, then the Holder of this Warrant shall be entitled, at such Holder's option, either: 

        (a)   upon
request of Holder delivered to the Company within 10 days of receipt of notice of such Change of Control pursuant to Section 5.2, to have the Company
(or any such successor or surviving entity) purchase this Warrant from the Holder for an aggregate purchase price, payable in cash on the effective date of consummation of such Change of Control,
equal to the product of (i) the difference between the Current Market Price and the Current Warrant Price, multiplied by (ii) the number of shares of Common Stock issuable upon exercise
of this Warrant immediately prior to the consummation of such Change of Control; or 

        (b)   if
pursuant to the terms of such Change of Control, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or
property of 

8

 

any
nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, and the Holder shall not have elected to have this Warrant purchased by the Company pursuant to Section 4.4(a) above,
then the Holder of this Warrant shall have the right thereafter to receive, upon the exercise of the Warrant, the number of shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and the Other Property receivable upon or as a result of such Change of Control by a holder of the number of shares of Common Stock into which this Warrant
is exercisable immediately prior to such event. 

        (c)   In
case of any such Change of Control described above, to the extent this Warrant has not been fully purchased by the Company pursuant to Section 4.4(a) above,
the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of contained in this
Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares of the Common Stock into which this Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in Section 4. For purposes of Section 4, common stock of the successor or acquiring corporation shall include stock of such corporation of any class which is not
preferred as to dividends or assets on liquidation over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4 shall similarly apply to successive Change of Control transactions. 

        4.5.  Other Action Affecting Common Stock. In case at any time or from time to time the Company shall take any action in
respect of its Common Stock, other than the payment of dividends permitted by Section 4 or any other action described in Section 4, then, unless such action will not have a materially
adverse effect upon the rights of the holder of this Warrant, the number of shares of Common Stock or other stock into which this Warrant is exercisable and/or the purchase price thereof shall be
adjusted in such manner as may be equitable in the circumstances; provided, that the mere authorization or issuance of additional shares of capital stock of the Company (other than pursuant to a stock
dividend) shall not be considered any action in respect of its Common Stock. 

        4.6.  Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any
transaction which, by reason of any adjustment hereunder, would cause the Current Warrant Price to be less than the par value per share of Common Stock. 

        4.7.  Stock Transfer Taxes. The issue of stock certificates upon exercise of this Warrant shall be made without charge to the
holder for any tax in respect of such issue. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in
any name other than that of the holder of this Warrant, and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 

        5.     Notices to Warrant Holders. 

        5.1.  Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Current Warrant Price, the
Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the Holder of this 

9

 

Warrant
a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at
any time of the Holder of this Warrant, furnish or cause to be furnished to such Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Current Warrant
Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the exercise of Warrants owned by
such Holder. 

        5.2.  Notice of Corporate Action. If at any time: 

        (a)   the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of
earnings or earned surplus
legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company) or other distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 

        (b)   there
shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of
the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation, or 

        (c)   there
shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; 

then,
in any one or more of such cases, the Company shall give to the Holder (i) at least 20 days' prior written notice of the date on which a record date shall be selected for such
dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation
or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least
20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take
place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable
upon such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if
addressed to the Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 16.2. 

        5.3.  No Rights as Stockholder. This Warrant does not entitle the Holder to any voting or other rights as a stockholder of the
Company prior to exercise and payment for the Warrant Price in accordance with the terms hereof. 

        6.     No Impairment. The Company shall not by any action, including, without limitation, amending its articles of incorporation
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the amount payable therefor upon such exercise 

10

 

immediately
prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Upon the request of the Holder, the Company will at any time during the period this
Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of this Warrant and the obligations of the Company hereunder. 

        7.     Reservation and Authorization of Common Stock; Registration With Approval of Any Governmental Authority. From and after
the Closing Date, the Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants (without regard to any ownership limitations provided in Section 2.4(i)). All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and fully paid and nonassessable, and not subject
to preemptive rights. Before taking any action which would cause an adjustment reducing the Current Warrant Price below the then par value, if any, of the shares of Common Stock issuable upon exercise
of the Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such
Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in
the Current Warrant Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued (other than as a result of a prior or contemplated distribution by the Holder of this Warrant), the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 

        8.     Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Company will in each such case take such a record and will
take such record as of the close of business on a Business Day. The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 

        9.     Registration Rights. The resale of the Warrant Stock shall be registered in accordance with the terms and conditions
contained in that certain Investor Rights Agreement dated of even date hereof, among the Holder, the Company and the other parties named therein (the "Investor Rights Agreement"). The Holder
acknowledges that pursuant to the Investor Rights Agreement, the Company has the right to request that the Holder furnish information regarding such Holder and the distribution of the Warrant Stock as
is required by law or the Commission to be disclosed in the Registration Statement (as such term is defined in the Investor Rights Agreement), and the Company may exclude from such registration the
shares of Warrant Stock acquirable hereunder if Holder fails to furnish such information within a reasonable time prior to the filing of each Registration Statement, supplemented prospectus included
therein and/or amended Registration Statement. 

        10.   Supplying Information. Upon any default by the Company of its obligations hereunder or under the Investor Rights
Agreement, the Company shall cooperate with the Holder in supplying such information as may be reasonably necessary for such Holder to complete and file any information 

11

 

reporting
forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrant or Restricted Common Stock. 

        11.   Loss or Mutilation. Upon receipt by the Company from the Holder of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity or security reasonably satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto and in case of mutilation upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to the Holder; provided, however,
that in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 

        12.   Office of the Company. As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency
(which may be the principal executive offices of the Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. 

        13.   Financial and Business Information. 

        13.1. Quarterly Information. The Company will deliver to the Holder, as soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of the Company, one copy of an unaudited consolidated balance sheet of the Company and its subsidiaries as at the
end of such quarter, and the related unaudited consolidated statements of income, retained earnings and cash flow of the Company and its subsidiaries for such quarter and, in the case of the second
and third quarters, for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year.
Such financial statements shall be prepared by the Company in accordance with GAAP and accompanied by the certification of the Company's chief executive officer or chief financial officer that such
financial statements present fairly the consolidated financial position, results of operations and cash flow of the Company and its subsidiaries as at the end of such quarter and for such
year-to-date period, as the case may be; provided, however, that the Company shall have no obligation to deliver such quarterly information under this Section 13.1 to
the extent it is publicly available; and provided further, that if such information contains material non-public information, the Company shall so notify the Holder prior to delivery
thereof and the Holder shall have the right to refuse delivery of such information. 

        13.2. Annual Information. The Company will deliver to the Holder as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, one copy of an audited consolidated balance sheet of the Company and its subsidiaries as at the end of such year, and audited consolidated statements
of income, retained earnings and cash flow of the Company and its subsidiaries for such year; setting forth in each case in comparative form the figures for the corresponding periods in the previous
fiscal year; all prepared in accordance with GAAP, and which audited financial statements shall be accompanied by an opinion thereon of the independent certified public accountants regularly retained
by the Company, or any other firm of independent certified public accountants of recognized national standing selected by the Company; provided, however, that the Company shall have no obligation to
deliver such annual information under this Section 13.2 to the extent it is publicly available; and provided further, that if such information contains material non-public
information, the Company shall so notify the Holder prior to delivery thereof and the Holder shall have the right to refuse delivery of such information. 

        13.3. Filings. The Company will file on or before the required date all regular or periodic reports (pursuant to the Exchange
Act) with the Commission and will deliver to Holder promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally. 

12

 

        14.   Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of the Holder for the purchase price of any Common Stock, whether such
liability is asserted by the Company or by creditors of the Company. 

        15.   Redemption at Company's Election. The Company may at the option of the Board, by at least thirty-days' prior written
notice to the Holder (the "Redemption Notice"), redeem this Warrant, in whole or in part, provided that
(i) the Daily Market Price for twenty consecutive trading days is equal to or greater than $6.30 and the average daily trading volume (subject to adjustment for stock dividends, subdivisions
and combinations) of the Common Stock for such twenty consecutive trading day period exceeds 100,000 shares, (ii) either (A) all of the Warrant Shares underlying this Warrant to be
redeemed are then registered under an effective registration statement or (B) may be sold pursuant to Rule 144 during a three-month period without registration under the Securities Act,
(iii) sufficient shares of Common Stock of the Company are authorized and reserved for issuance upon the full exercise of this Warrant, (iv) all of the Warrant Shares issuable upon
exercise of this Warrant are then listed on every stock exchange, market or bulletin board on which any Common Stock of the Company is then listed and (v) the Company is not in default of any
material provision of any Related Document (as defined in the Purchase Agreement). The Redemption Notice shall set forth a date, not less than thirty days after the date of the Redemption Notice, on
which the redemption of this Warrant shall occur (the "Redemption Date"). On the Redemption Date,
(i) the Company shall pay the Holder by certified check an amount equal to the product of (x) $0.01 (as adjusted in proportion to any adjustment to the Exercise Price pursuant to
Section 3 hereof) multiplied by (y) the number of Warrant Shares so redeemed; and (ii) the Holder shall deliver the original copy
of this Warrant marked "REDEEMED" to the Company. If the Company shall redeem this Warrant in part, the Company shall, at the Redemption Date, provided that the Holder shall have delivered the
original copy of this Warrant marked "REDEEMED" to the Company, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unredeemed shares of Common Stock called for by
this Warrant, which new Warrant shall in all other respects be identical with this Warrant. Nothing in this Section 15 shall prevent the exercise of the Warrants at any time prior to the
Redemption Date. 

        16.   Miscellaneous. 

        16.1. Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the
Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. If the Company fails to make, when due, any payments provided for hereunder, or fails to
comply with any other provision of this Warrant, the Company shall pay to the Holder such amounts as shall be sufficient to cover any third party costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder. 

        16.2. Notice Generally. All notices, requests, demands or other communications provided for herein shall be in writing and
shall be given in the manner and to the addresses set forth in the Preferred Stock Purchase Agreement. 

        16.3. Successors and Assigns. Subject to compliance with the provisions of Section 3.1, this Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. 

        16.4. Amendment. This Warrant may be modified or amended or the provisions of this Warrant waived with the written consent of
both the Company and the Holder. 

13

 

        16.5. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be modified to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 

        16.6. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose,
be deemed a part of this Warrant. 

        16.7. Governing Law. This Warrant and the transactions contemplated hereby shall be deemed to be consummated in the State of
New York and shall be governed by and interpreted in accordance with the local laws of the State of New York without regard to the provisions thereof relating to conflicts of laws. The Company hereby
irrevocably consents to the exclusive jurisdiction of the State and Federal courts located in New York City, New York in connection with any action or proceeding arising out of or relating to this
Warrant. In any such litigation the Company agrees that the service thereof may be made by certified or registered mail directed to the Company pursuant to Section 16.2. 

[Signature
Page Follows] 

14

 

        IN
WITNESS WHEREOF, Genetronics Biomedical Corporation has caused this Warrant to be executed by its duly authorized officer and attested by its Secretary. 

Dated:
May 20, 2004 

	 	 	 	 	GENETRONICS BIOMEDICAL CORPORATION
	 	 	 	 	 	 
	 	 	 	 	By:	/s/  AVTAR DHILLON      

	 	 	 	 	Name:	Avtar Dhillon
	 	 	 	 	Title:	Chief Executive Officer
	 	 	 	 	 	 
	Attest:	 	 	 
	 	 	 	 	 	 
	By:	 	/s/ Illegible
	 	 	 
	Name:

Title: Secretary	 	 	 

15

 
EXHIBIT
A 

SUBSCRIPTION
FORM 

[To
be executed only upon exercise of Warrant] 

        1.     The
undersigned hereby elects to purchase            shares of the Common Stock of Genetronics Biomedical Corporation pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price of such shares in full. 

        2.     The
undersigned hereby elects to convert the attached Warrant into Common Stock of Genetronics Biomedical Corporation through "cashless exercise" in the manner specified
in the Warrant; provided that this election may not be made less than twelve (12) months after the Closing Date (as defined in the attached Warrant) and provided further that this election may
not be made if a Registration Statement (as defined in the Investor Rights Agreement) is then effective with respect to all shares of Common Stock issuable pursuant to the attached Warrant and sales
may be made pursuant to such Registration Statement. This conversion is exercised with respect to                        of the
shares of Common Stock covered by the Warrant. 

        3.     Please
issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: 

	 	 	
 (Name)
	 	 	 
	 	 	

	 	 	 
	 	 	

	 	 	 
	 	 	
 (Address)

        [and,
if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for
the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned.] 

	
 (Name of Registered Owner)	 	 
	 	 	 
	
 (Signature of Registered Owner)	 	 
	 	 	 
	
 (Street Address)	 	 
	 	 	 
	
 (State) (Zip Code)	 	 

NOTICE:
The signature on this subscription must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever. 

16

 
EXHIBIT
B 

ASSIGNMENT
FORM 

FOR
VALUE RECEIVED the undersigned registered owner of this Warrant for the purchase of shares of common stock of Genetronics Biomedical Corporation hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of common stock set forth below: 

	
	 	 
	 	 	 
	
	 	 
	 	 	 
	
 (Name and Address of Assignee)	 	 
	 	 	 
	
 (Number of Shares of Common Stock)	 	 

and
does hereby irrevocably constitute and appoint                        attorney-in-fact to register such transfer on the books of
the Company, maintained for the purpose, with full
power of substitution in the premises. 

	Dated:	 	 	 
	 	
	 	 
	 	 	 	 
	
 (Print Name and Title)	 	 
	 	 	 	 
	
 (Signature)	 	 
	 	 	 	 
	
 (Witness)	 	 

NOTICE:
The signature on this assignment must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever. 

17

 
EXHIBIT
C 

        FORM
OF INVESTMENT REPRESENTATION LETTER 

In
connection with the acquisition of [warrants (the "Warrants") to purchase            shares of common stock of Genetronics Biomedical Corporation (the "Company"), par value $0.001
per share (the "Common Stock")][    shares of common stock of Genetronics Biomedical Corporation (the "Company"), par value $0.001 per share (the "Common Stock") upon
the exercise of warrants by            ], by                        
(the "Holder") from                        , the Holder hereby represents and warrants to the Company as follows: 

The
Holder (i) is an "Accredited Investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Act"); and
(ii) has the ability to bear the economic risks of such Holder's prospective investment, including a complete loss of Holder's
investment in the Warrants and the shares of Common Stock issuable upon the exercise thereof (collectively, the "Securities"). 

The
Holder, by acceptance of the Warrants, represents and warrants to the Company that the Warrants and all securities acquired upon any and all exercises of the Warrants are purchased for the
Holder's own account, and not with view to distribution of either the Warrants or any securities purchasable upon exercise thereof in violation of applicable securities laws. 

The
Holder acknowledges that (i) the Securities have not been registered under the Act, (ii) the Securities are "restricted securities" and the certificate(s) representing the Securities
shall bear the following legend, or a similar legend to the same effect, until (i) in the case of the shares of Common Stock underlying the Warrants, such shares shall have been registered for
resale by the Holder under the Act and effectively been disposed of in accordance with a registration statement that has been declared effective; or (ii) in the opinion of counsel for the
Company such Securities may be sold without registration under the Act: 

"[NEITHER]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE [NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE] HAVE [NOT] BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ALL SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE.
[NEITHER] THE SECURITIES REPRESENTED HEREBY [NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE] MAY [NOT] BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT." 

IN
WITNESS WHEREOF, the Holder has caused this Investment Representation Letter to be executed in its corporate name by its duly authorized officer this    day
of                        
200            . 

[Name]

	By:	 	 
	 	
	 
	Name:

Title:	 

18Exhibit
10.1

 

2004
EQUITY INCENTIVE PLAN

OF

DEPOMED, INC.

 

 

TABLE
OF CONTENTS

 

	
  1.

  	
  Purpose
  of this Plan

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions
  and Rules of Interpretation

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  	
  1

  
	
   

  	
  2.2

  	
  Rules of Interpretation

  	
  5

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Shares
  Subject to this Plan; Term of this Plan

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Number of Award Shares

  	
  5

  
	
   

  	
  3.2

  	
  Term
  of this Plan

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Administration

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  General

  	
  5

  
	
   

  	
  4.2

  	
  Authority of the Administrator

  	
  6

  
	
   

  	
  4.3

  	
  Scope of Discretion

  	
  7

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Participants
  Eligible to Receive Awards

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Eligible Participants

  	
  7

  
	
   

  	
  5.2

  	
  Section 162(m)
  Limitation

  	
  8

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Terms and Conditions
  of Options

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Price

  	
  8

  
	
   

  	
  6.2

  	
  Term

  	
  8

  
	
   

  	
  6.3

  	
  Vesting

  	
  8

  
	
   

  	
  6.4

  	
  Form and Method of Payment

  	
  9

  
	
   

  	
  6.5

  	
  Assignability of Options

  	
  10

  
	
   

  	
  6.6

  	
  Substitute Options

  	
  10

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Incentive
  Stock Options

  	
  10

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Stock Awards

  	
  11

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  General

  	
  11

  
	
   

  	
  8.2

  	
  Right of Repurchase

  	
  12

  

 

ii

 

	
   

  	
  8.3

  	
  Form of Payment

  	
  12

  
	
   

  	
  8.4

  	
  Nonassignability of
  Stock Awards

  	
  12

  
	
   

  	
  8.5

  	
  Substitute Stock Award

  	
  12

  
	
   

  	
  8.6

  	
  Maximum Number of Stock
  Awards

  	
  12

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Exercise of
  Awards

  	
  12

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  In General

  	
  12

  
	
   

  	
  9.2

  	
  Time
  of Exercise

  	
  12

  
	
   

  	
  9.3

  	
  Issuance of Award Shares

  	
  13

  
	
   

  	
  9.4

  	
  Termination

  	
  13

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Certain Transactions
  and Events

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  In General

  	
  14

  
	
   

  	
  10.2

  	
  Changes in Capital
  Structure

  	
  15

  
	
   

  	
  10.3

  	
  Fundamental Transactions

  	
  15

  
	
   

  	
  10.4

  	
  Changes
  in Control

  	
  16

  
	
   

  	
  10.5

  	
  Divestiture

  	
  16

  
	
   

  	
  10.6

  	
  Dissolution

  	
  16

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Automatic
  Option Grants to Non-Employee Directors

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Automatic Option Grants
  to Non-Employee Directors

  	
  17

  
	
   

  	
  11.2

  	
  Certain Transactions and
  Events

  	
  18

  
	
   

  	
  11.3

  	
  Limited Transferability of
  Options

  	
  18

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Withholding
  and Tax Reporting

  	
  19

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Tax Withholding Alternatives

  	
  19

  
	
   

  	
  12.2

  	
  Reporting
  of Dispositions

  	
  19

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Compliance
  with Law

  	
  19

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Amendment or
  Termination of this Plan or Outstanding Awards

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Amendment
  and Termination

  	
  20

  
	
   

  	
  14.2

  	
  Shareholder Approval

  	
  20

  
	
   

  	
  14.3

  	
  Effect

  	
  20

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Reserved Rights

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Nonexclusivity of this Plan

  	
  20

  

 

iii

 

	
   

  	
  15.2

  	
  Unfunded
  Plan

  	
  20

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Special Arrangements
  Regarding Award Shares

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Escrow
  of Stock Certificates

  	
  21

  
	
   

  	
  16.2

  	
  Repurchase
  Rights

  	
  21

  
	
   

  	
  16.3

  	
  Market
  Standoff

  	
  22

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Beneficiaries

  	
  22

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Miscellaneous

  	
  22

  
	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Governing Law

  	
  22

  
	
   

  	
  18.2

  	
  Determination
  of Value

  	
  22

  
	
   

  	
  18.3

  	
  Reservation
  of Shares

  	
  23

  
	
   

  	
  18.4

  	
  Electronic Communications

  	
  23

  
	
   

  	
  18.5

  	
  Notices

  	
  23

  

 

iv

 

2004
EQUITY INCENTIVE PLAN

OF

DEPOMED, INC.

 

(As
Adopted May 27, 2004)

 

1.                                       Purpose of this Plan

 

The purpose of this 2004
Equity Incentive Plan is to enhance the long-term shareholder value of Depomed,
Inc. by offering opportunities to eligible participants to share in the growth
in value of the equity of Depomed, Inc. and to provide incentives to eligible
Employees, Company Directors and Consultants to contribute to the success of
the Company.

 

2.                                       Definitions and Rules of Interpretation

 

2.1                                 Definitions.  This Plan uses the following defined terms:

 

(a)                                  “Administrator”  means
the Board, the Committee, or any officer or employee of the Company to whom the
Board or the Committee delegates authority to administer this Plan.

 

(b)                                 “Affiliate” means a
“parent” or “subsidiary” (as each is defined in Section 424 of the Code)
of the Company and any other entity that the Board or Committee designates as
an “Affiliate” for purposes of this Plan.

 

(c)                                  “Applicable Law”
means any and all laws of whatever jurisdiction, within or without the United
States, and the rules of any stock exchange or quotation system on which Shares
are listed or quoted, applicable to the taking or refraining from taking of any
action under this Plan, including the administration of this Plan and the
issuance or transfer of Awards or Award Shares.

 

(d)                                 “Award”
means a Stock Award or Option granted in accordance with the terms of this
Plan.

 

(e)                                  “Award Agreement” means
the document evidencing the grant of an Award.

 

(f)                                    “Award Shares” means
Shares covered by an outstanding Award or purchased under an Award.

 

(g)                                 “Awardee” means:
(i) a person to whom an Award has been granted, including a holder of a
Substitute Award, (ii) a person to whom an Award has been transferred in
accordance with all applicable requirements of Sections 6.5, 7(h), and 17, or
(iii) a person who holds Award Shares subject to a right of repurchase under
Section 16.2.

 

(h)                                 “Board” means the
board of directors of the Company.

 

1

 

(i)                                     “Change in Control”
means any transaction or event that the Board specifies as a Change in Control
under Section 10.4.

 

(j)                                     “Code” means the
Internal Revenue Code of 1986.

 

(k)                                  “Committee” means a
committee composed of Company Directors appointed in accordance with the
Company’s charter documents and Section 4.

 

(l)                                     “Company” means
Depomed, Inc., a California corporation.

 

(m)                               “Company Director”
means a member of the Board.

 

(n)                                 “Consultant” means an
individual who, or an entity or employee of any entity that, provides bona fide
services to the Company or an Affiliate not in connection with the offer or
sale of securities in a capital-raising transaction, but who is not an
Employee.

 

(o)                                 “Director” means a
member of the board of directors of the Company or an Affiliate.

 

(p)                                 “Divestiture” means
any transaction or event that the Board specifies as a Divestiture under
Section 10.5.

 

(q)                                 “Domestic Relations Order” means a “domestic relations order” as
defined in, and otherwise meeting the requirements of, Section 414(p) of
the Code, except that reference to a “plan” in that definition shall be to this
Plan.

 

(r)                                    “Employee” means a
regular employee of the Company or an Affiliate, including an Officer or
Director, who is treated as an employee in the personnel records of the Company
or an Affiliate, but not individuals who are classified by the Company or an
Affiliate as: (i) leased from or otherwise employed by a third party,
(ii) independent contractors, or (iii) intermittent or temporary
workers.  The Company’s or an
Affiliate’s classification of an individual as an “Employee” (or as not an
“Employee”) for purposes of this Plan shall not be altered retroactively even
if that classification is changed retroactively for another purpose as a result
of an audit, litigation or otherwise. 
An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any successor
to the Company or an Affiliate that assumes the Awardee’s Options under
Section 10.  Neither service as a
Director nor receipt of a director’s fee shall be sufficient to make a Director
an “Employee.”

 

(s)                                  “Exchange Act” means
the Securities Exchange Act of 1934.

 

(t)                                    “Executive” means, if
the Company has any class of any equity security registered under
Section 12 of the Exchange Act, an individual who is subject to
Section 16 of the Exchange Act or who is a “covered employee” under
Section 162(m) of the Code, in either case  because of the individual’s
relationship with the Company or an Affiliate. 
If the Company does not have any class of any equity security registered
under Section 12 of the Exchange Act, “Executive” means any (i) Director
or (ii) officer elected or appointed by the Board.

 

2

 

(u)                                 “Expiration Date” means,
with respect to an Award, the date stated in the Award Agreement as the
expiration date of the Award or, if no such date is stated in the Award
Agreement, then the last day of the maximum exercise period for the Award,
disregarding the effect of an Awardee’s Termination or any other event that
would shorten that period.

 

(v)                                 “Fair Market Value” means
the value of Shares as determined under Section 18.2.

 

(w)                               “Fundamental Transaction”
means any transaction or event described in Section 10.3.

 

(x)                                   “Grant Date” means
the date the Administrator approves the grant of an Award.  However, if the Administrator specifies that
an Award’s Grant Date is a future date or the date on which a condition is
satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.

 

(y)                                 “Incentive Stock Option”
means an Option intended to qualify as an incentive stock option under
Section 422 of the Code and designated as an Incentive Stock Option in the
Award Agreement for that Option.

 

(z)                                   “Nonstatutory Option”
means any Option other than an Incentive Stock Option.

 

(aa)                            “Non-Employee Director”
means any person who is a member of the Board but is not an Employee of the
Company or any Affiliate of the Company and has not been an Employee of the
Company or any Affiliate of the Company at any time during the preceding twelve
months.  Service as a Director does not
in itself constitute employment for purposes of this definition.

 

(bb)                          “Objectively Determinable
Performance Condition”  shall mean a performance condition
(i) that is established (A) at the time an Award is granted or
(B)  no later than the earlier of (1) 90 days after the beginning of
the period of service to which it relates, or (2) before the elapse of 25%
of the period of service to which it relates, (ii) that is uncertain of
achievement at the time it is established, and (iii) the achievement of
which is determinable by a third party with knowledge of the relevant
facts.  Examples of measures that may be
used in Objectively Determinable Performance Conditions include achievement of
a Company goal, net order dollars, net profit dollars, net profit growth, net
revenue dollars, revenue growth, individual performance, earnings per share,
return on assets, return on equity, and other financial objectives, objective
customer satisfaction indicators and efficiency measures, each with respect to
the Company and/or an Affiliate or individual business unit.

 

(cc)                            “Officer” means an
officer of the Company as defined in Rule 16a-1 adopted under the Exchange Act.

 

(dd)                          “Option” means a
right to purchase Shares of the Company granted under this Plan.

 

3

 

(ee)                            “Option Price” means
the price payable under an Option for Shares, not including any amount payable
in respect of withholding or other taxes.

 

(ff)                                “Option Shares” means
Shares covered by an outstanding Option or purchased under an Option.

 

(gg)                          “Plan” means this 2004
Equity Incentive Plan of Depomed, Inc.

 

(hh)                          “Purchase Price”
means the price payable under a Stock Award for Shares, not including any
amount payable in respect of withholding or other taxes.

 

(ii)                                  “Reverse Vesting” means that an
Option is or was fully exercisable but that, subject to a “reverse” vesting
schedule, the Company has a right to repurchase the Option Shares as specified
in Section 16.2(a), with the Company’s right of repurchase expiring in
accordance with a “forward” vesting schedule that would otherwise have
applied to the Option under which the Option Shares were purchased or in
accordance with some other vesting schedule described in the Award
Agreement.

 

(jj)                                  “Rule 16b-3” means
Rule 16b-3 adopted under Section 16(b) of the Exchange Act.

 

(kk)                            “Securities Act” means
the Securities Act of 1933.

 

(ll)                                  “Share” means a share
of the Common Stock of the Company or other securities substituted for the
Common Stock under Section 10.

 

(mm)                      “Stock Award”  means
an offer by the Company to sell shares subject to certain restrictions pursuant
to the Award Agreement as described in Section 8.  A Stock Award does not include an option.

 

(nn)                          “Substitute Award” means
a Substitute Option or Substitute Stock Award granted in accordance with the
terms of this Plan.

 

(oo)                          “Substitute Option” means
an Option granted in substitution for, or upon the conversion of, an option
granted by another entity to purchase equity securities in the granting entity.

 

(pp)                          “Substitute Stock Award” means
a Stock Award granted in substitution for, or upon the conversion of, a stock
award granted by another entity to purchase equity securities in the granting
entity.

 

(qq)                          “Ten Percent Shareholder”
means any person who, directly or by attribution under Section 424(d) of
the Code, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any Affiliate on the
Grant Date.

 

4

 

(rr)                                “Termination” means
that the Awardee has ceased to be, with or without any cause or reason, an
Employee, Director or Consultant. 
However, unless so determined by the Administrator, or otherwise
provided in this Plan, “Termination” shall not include a change in status from
an Employee, Consultant or Director to another such status.  An event that causes an Affiliate to cease
being an Affiliate shall be treated as the “Termination” of that Affiliate’s
Employees, Directors, and Consultants.

 

2.2                                 Rules of
Interpretation.  Any reference to a “Section,” without
more, is to a Section of this Plan. 
Captions and titles are used for convenience in this Plan and shall not,
by themselves, determine the meaning of this Plan.  Except when otherwise indicated by the context, the singular
includes the plural and vice versa.  Any
reference to a statute is also a reference to the applicable rules and
regulations adopted under that statute. 
Any reference to a statute, rule or regulation, or to a section of
a statute, rule or regulation, is a reference to that statute, rule,
regulation, or section as amended from time to time, both before and after
the effective date of this Plan and including any successor provisions.

 

3.                                       Shares Subject to this Plan; Term of this
Plan

 

3.1                                 Number of Award
Shares.  The Shares
issuable under this Plan shall be authorized but unissued or reacquired Shares,
including but not limited to Shares repurchased by the Company on the open
market.  Subject to adjustment under
Section 10, the maximum number of Shares that may be issued under this Plan
is 3,500,000.  When an Award is granted,
the maximum number of Shares that may be issued under this Plan shall be
reduced by the number of Shares covered by that Award.  However, if an Award later terminates or
expires without having been exercised in full, the maximum number of shares
that may be issued under this Plan shall be increased by the number of Shares
that were covered by, but not purchased under, that Award.  By contrast, the repurchase of Shares by the
Company shall not increase the maximum number of Shares that may be issued
under this Plan.

 

3.2                                 Term of this Plan.

 

(a)                                  This
Plan shall be effective on, and Awards may be granted under this Plan after,
the date it has been both adopted by the Board and approved by the Company’s
shareholders (the “Effective
Date”).

 

(b)                                 Subject
to the provisions of Section 14, Awards may be granted under this Plan for
a period of ten years from the earlier of the date on which the Board approves
this Plan and the date the Company’s shareholders approve this Plan.  Accordingly, Awards may not be granted under
this Plan after ten years from the earlier of those dates.

 

4.                                       Administration

 

4.1                                 General.

 

(a)                                  The
Board shall have ultimate responsibility for administering this Plan.  The Board may delegate certain of its
responsibilities to a Committee, which shall consist of at least two members of
the Board.  The Board or the Committee
may further delegate its

 

5

 

responsibilities to any
Employee of the Company or any Affiliate. 
Where this Plan specifies that an action is to be taken or a
determination made by the Board, only the Board may take that action or make
that determination.  Where this Plan
specifies that an action is to be taken or a determination made by the Committee,
only the Committee may take that action or make that determination.  Where this Plan references the
“Administrator,” the action may be taken or determination made by the Board,
the Committee, or other Administrator. 
However, only the Board or the Committee may approve grants of Awards to
Executives and such other participants as may be specifically designated by the
Board, and an Administrator other than the Board or the Committee may grant
Awards only within guidelines established by the Board or Committee.  Moreover, all actions and determinations by
any Administrator are subject to the provisions of this Plan.

 

(b)                                 So
long as the Company has registered and outstanding a class of equity securities
under Section 12 of the Exchange Act, the Committee shall consist of
Company Directors who are “Non-Employee Directors” as defined in
Rule 16b-3 and, after the expiration of any transition period permitted by
Treasury Regulations Section 1.162-27(h)(3), who are “outside directors”
as defined in Section 162(m) of the Code.

 

4.2                                 Authority of
the Administrator. 
Subject to the other provisions of this Plan, the Administrator shall
have the authority to:

 

(a)                                  grant
Awards, including Substitute Awards;

 

(b)                                 determine
the Fair Market Value of Shares;

 

(c)                                  determine
the Option Price and the Purchase Price of Awards;

 

(d)                                 select
the Awardees;

 

(e)                                  determine
the times Awards are granted;

 

(f)                                    determine
the number of Shares subject to each Award;

 

(g)                                 determine
the methods of payment that may be used to purchase Award Shares;

 

(h)                                 determine
the methods of payment that may be used to satisfy withholding tax obligations;

 

(i)                                     determine
the other terms of each Award, including but not limited to the time or times
at which Awards may be exercised, whether and under what conditions an Award is
assignable, and whether an Option is a Nonstatutory Option or an Incentive
Stock Option;

 

(j)                                     modify
or amend any Award;

 

(k)                                  authorize
any person to sign any Award Agreement or other document related to this Plan
on behalf of the Company;

 

6

 

(l)                                     determine
the form of any Award Agreement or other document related to this Plan, and
whether that document, including signatures, may be in electronic form;

 

(m)                               interpret
this Plan and any Award Agreement or document related to this Plan;

 

(n)                                 correct
any defect, remedy any omission, or reconcile any inconsistency in this Plan,
any Award Agreement or any other document related to this Plan;

 

(o)                                 adopt,
amend, and revoke rules and regulations under this Plan, including rules and
regulations relating to sub-plans and Plan addenda;

 

(p)                                 adopt,
amend, and revoke special rules and procedures which may be inconsistent with
the terms of this Plan, set forth (if the Administrator so chooses) in sub-plans
regarding (for example) the operation and administration of this Plan and the
terms of Awards, if and to the extent necessary or useful to accommodate
non-U.S. Applicable Laws and practices as they apply to Awards and Award Shares
held by, or granted or issued to, persons working or resident outside of the
United States or employed by Affiliates incorporated outside the United States;

 

(q)                                 in
the case of the Board, determine whether a transaction or event should be
treated as a Change in Control, a Divestiture or neither;

 

(r)                                    determine
the effect of a Fundamental Transaction and, if the Board determines that a
transaction or event should be treated as a Change in Control or a Divestiture,
then the effect of that Change in Control or Divestiture; and

 

(s)                                  make
all other determinations the Administrator deems necessary or advisable for the
administration of this Plan.

 

4.3                                 Scope of Discretion.  Subject to the last sentence of this
Section 4.3, on all matters for which this Plan confers the authority, right
or power on the Board, the Committee, or other Administrator to make decisions,
that body may make those decisions. 
Those decisions will be final, binding and conclusive.  Moreover, but again subject to the last
sentence of this Section 4.3, in making those decisions, the Board,
Committee or other Administrator need not treat all persons eligible to receive
Awards, all Awardees, all Awards or all Award Shares the same way.  However, except as provided in Section 14.3,
the discretion of the Board, Committee or other Administrator is subject to the
specific provisions and specific limitations of this Plan, as well as all
rights conferred on specific Awardees by Award Agreements and other agreements.

 

5.                                       Participants Eligible to Receive Awards

 

5.1                                 Eligible
Participants.  Awards
(including Substitute Awards) may be granted to, and only to, Employees,
Directors and Consultants, including to prospective Employees, Directors and
Consultants conditioned on the beginning of their service for the Company or an
Affiliate.  However, Incentive Stock
Options may only be granted to Employees, as provided in Section 7(g).

 

7

 

5.2                                 Section 162(m)
Limitation.

 

(a)                                  Options.  So long as the Company is a “publicly held corporation” within the
meaning of Section 162(m) of the Code: (i) no Employee may be granted
one or more Options within any fiscal year of the Company under this Plan to
purchase more than 500,000 Shares under Options, subject to adjustment pursuant
to Section 10, (ii) Options may be granted to an Executive only by
the Committee (and, notwithstanding Section 4.1(a), not by the
Board).  If an Option is cancelled
without being exercised or if the Option Price of an Option is reduced, that
cancelled or repriced Option shall continue to be counted against the limit on
Awards that may be granted to any participant under this Section 5.2.  Notwithstanding anything herein to the
contrary, in connection with his or her initial employment with the Company or
an Affiliate, a new Employee or prospective Employee shall be eligible to
receive up to a maximum of 750,000 Shares under Options (subject to adjustment
pursuant to Section 10), which Shares shall not be counted toward the
500,000 limitation set forth in this Section 5.2(a).

 

(b)                                 Stock Awards.  Any Stock Award intended as “qualified
performance-based compensation” within the meaning of Section 162(m) of
the Code must vest or become exercisable contingent on the achievement of one
or more Objectively Determinable Performance Conditions.  The Committee shall have the discretion to
determine the time and manner of compliance with Section 162(m) of the
Code.

 

6.                                       Terms and Conditions of Options

 

The following rules apply
to all Options:

 

6.1           Price.  No Option intended as “qualified
incentive-based compensation” within the meaning of Section 162(m) of the
Code may have an Option Price less than 100% of the Fair Market Value of the
Shares on the Grant Date.  In no event
will the Option Price of any Option be less than the par value of the Shares
issuable under the Option if that is required by Applicable Law.  The Option Price of an Incentive Stock
Option shall be subject to Section 7(f).

 

6.2           Term.  No Option shall be exercisable after its
Expiration Date.  No Option may have an
Expiration Date that is more than ten years after its Grant Date.  Additional provisions regarding the term of
Incentive Stock Options are provided in Sections 7(a) and 7(e).

 

6.3                                 Vesting.  Options
shall be exercisable: (a) on the Grant Date, or (b) in accordance
with a schedule related to the Grant Date, the date the Awardee’s
directorship, employment or consultancy begins, or a different date specified
in the Award Agreement.  If so provided
in the Award Agreement, an Option may be exercisable subject to the application
of Reverse Vesting to the Option Shares. 
Additional provisions regarding the vesting of Incentive Stock Options
are provided in Section 7(c).  No
Option granted to an individual who is subject to the overtime pay provisions
of the Fair Labor Standards Act may be exercised before the expiration of six
months after the Grant Date.

 

8

 

6.4                                 Form and
Method of Payment.

 

(a)                                  The
Administrator shall determine the acceptable form and method of payment for
exercising an Option.

 

(b)                                 Acceptable
forms of payment for all Option Shares are cash, check or wire transfer,
denominated in U.S. dollars except as specified by the Administrator for
non-U.S. Employees or non-U.S. sub-plans.

 

(c)                                  In
addition, the Administrator may permit payment to be made by any of the
following methods:

 

(i)                                     other
Shares, or the designation of other Shares, which (A) are “mature” shares
for purposes of avoiding variable accounting treatment under generally accepted
accounting principles (generally mature shares are those that have been owned
by the Awardee for more than six months on the date of surrender), and (B) have
a Fair Market Value on the date of surrender equal to the Option Price of the
Shares as to which the Option is being exercised;

 

(ii)                                  provided
that a public market exists for the Shares, consideration received by the
Company under a procedure under which a licensed broker-dealer advances funds
on behalf of an Awardee or sells Option Shares on behalf of an Awardee (a “Cashless Exercise Procedure”),
provided that if the Company extends or arranges for the extension of credit to
an Awardee under any Cashless Exercise Procedure, no Officer or Director may
participate in that Cashless Exercise Procedure;

 

(iii)                               subject to Section 6.4(e), one or more
promissory notes meeting the requirements of Section 6.4(e) provided,
however, that promissory notes may not be used for any portion of an Award
which is not vested at the time of exercise;

 

(iv)                              cancellation
of any debt owed by the Company or any Affiliate to the Awardee including
without limitation waiver of compensation due or accrued for services
previously rendered to the Company or an Affiliate; and

 

(v)                                 any
combination of the methods of payment permitted by any paragraph of this
Section 6.4.

 

(d)                                 The
Administrator may also permit any other form or method of payment for Option
Shares permitted by Applicable Law.

 

(e)                                  The
promissory notes referred to in Section 6.4(c)(iii) shall be full
recourse.  Unless the Administrator
specifies otherwise after taking into account any relevant accounting issues,
the promissory notes shall bear interest at a fair market value rate when the
Option is exercised.  Interest on the
promissory notes shall also be at least sufficient to avoid imputation of
interest under Sections 483, 1274, and 7872 of the Code.  The promissory notes and their
administration shall at all times comply with any applicable margin rules of
the Federal Reserve.  The promissory
notes may also include such other terms as the Administrator specifies.  Payment may not be made by promissory note
by Officers or Directors if Shares are registered under Section 12 of the
Exchange Act.

 

9

 

6.5                                 Assignability of
Options.  Except as determined
by the Administrator, no Option shall be assignable or otherwise transferable
by the Awardee except by will or by the laws of descent and distribution.  However, Options may be transferred and
exercised in accordance with a Domestic Relations Order and may be exercised by
a guardian or conservator appointed to act for the Awardee.  Incentive Stock Options may only be assigned
in compliance with Section 7(h).

 

6.6                                 Substitute Options.  The
Board may cause the Company to grant Substitute Options in connection with the
acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger, tender offer, or other similar transaction) or of all or
a portion of the assets of any entity. 
Any such substitution shall be effective on the effective date of the
acquisition.  Substitute Options may be
Nonstatutory Options or Incentive Stock Options.  Unless and to the extent specified otherwise by the Board, Substitute
Options shall have the same terms and conditions as the options they replace,
except that (subject to the provisions of Section 10) Substitute Options
shall be Options to purchase Shares rather than equity securities of the
granting entity and shall have an Option Price determined by the Board.

 

7.                                       Incentive
Stock Options

 

The following rules apply
only to Incentive Stock Options and only to the extent these rules are more
restrictive than the rules that would otherwise apply under this Plan.  With the consent of the Awardee, or where this
Plan provides that an action may be taken notwithstanding any other provision
of this Plan, the Administrator may deviate from the requirements of this
Section, notwithstanding that any Incentive Stock Option modified by the
Administrator will thereafter be treated as a Nonstatutory Option.

 

(a)                                  The
Expiration Date of an Incentive Stock Option shall not be later than ten years
from its Grant Date, with the result that no Incentive Stock Option may be
exercised after the expiration of ten years from its Grant Date.

 

(b)                                 No
Incentive Stock Option may be granted more than ten years from the date this
Plan was approved by the Board.

 

(c)                                  Options
intended to be incentive stock options under Section 422 of the Code that
are granted to any single Awardee under all incentive stock option plans of the
Company and its Affiliates, including incentive stock options granted under
this Plan, may not vest at a rate of more than $100,000 (or such other amount
that may be hereafter specified in the applicable section of the Code) in
Fair Market Value of stock (measured on the grant dates of the options) during
any calendar year.  For this purpose, an
option vests with respect to a given share of stock the first time its holder
may purchase that share, notwithstanding any right of the Company to repurchase
that share.  Unless the administrator of
that option plan specifies otherwise in the related agreement governing the
option, this vesting limitation shall be applied by, to the extent necessary to
satisfy this $100,000 (or other amount) rule, by treating certain stock options
that were intended to be incentive stock options under Section 422 of the
Code as Nonstatutory Options.  The stock
options or portions of stock options to be reclassified as Nonstatutory Options
are those with the highest option prices, whether granted under this Plan or
any other equity compensation plan of the Company or any Affiliate that permits
that treatment.

 

10

 

This Section 7(c)
shall not cause an Incentive Stock Option to vest before its original vesting
date or cause an Incentive Stock Option that has already vested to cease to be
vested.

 

(d)                                 In
order for an Incentive Stock Option to be exercised for any form of payment
other than those described in Section 6.4(b), that form of payment must be
stated at the time of grant in the Award Agreement relating to that Incentive
Stock Option.

 

(e)                                  Any
Incentive Stock Option granted to a Ten Percent Shareholder, must have an
Expiration Date that is not later than five years from its Grant Date, with the
result that no such Option may be exercised after the expiration of five years
from the Grant Date.

 

(f)                                    The
Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. 
The Option Price for the Shares covered by an Incentive Stock Option
granted to a Ten Percent Shareholder shall never be less than 110% of the Fair
Market Value of the Shares at the Grant Date.

 

(g)                                 Incentive
Stock Options may be granted only to Employees.  If an Awardee changes status from an Employee to a Consultant,
that Awardee’s Incentive Stock Options become Nonstatutory Options if not
exercised within the time period described in Section 7(i) (determined by
treating that change in status as a Termination solely for purposes of this
Section 7(g)).

 

(h)                                 No
rights under an Incentive Stock Option may be transferred by the Awardee, other
than by will or the laws of descent and distribution.  During the life of the Awardee, an Incentive Stock Option may be
exercised only by the Awardee.  The
Company’s compliance with a Domestic Relations Order, or the exercise of an
Incentive Stock Option by a guardian or conservator appointed to act for the
Awardee, shall not violate this Section 7(h).

 

(i)                                     An
Incentive Stock Option shall be treated as a Nonstatutory Option if it remains
exercisable after, and is not exercised within, the three-month period
beginning with the Awardee’s Termination for any reason other than the
Awardee’s death or disability (as defined in Section 22(e) of the
Code).  In the case of Termination due
to death, an Incentive Stock Option shall continue to be treated as an
Incentive Stock Option if it remains exercisable after, and is not exercised
within, the three-month period after the Awardee’s Termination provided it is
exercised before the Expiration Date. 
In the case of Termination due to disability, an Incentive Stock Option
shall be treated as a Nonstatutory Option if it remains exercisable after, and
is not exercised within, one year after the Awardee’s Termination.

 

(j)                                     An
Incentive Stock Option may only be modified by the Board or the Committee.

 

8.                                       Stock Awards

 

8.1                                 General.  The
specific terms and conditions of a Stock Award applicable to the Awardee shall
be provided for in the Award Agreement. The Award Agreement shall state the
number of Shares that the Awardee shall be entitled to receive or purchase, the
terms and conditions on which the Shares shall vest, the price to be paid and,
if applicable, the time within

 

11

 

which the Awardee must
accept such offer. The offer shall be accepted by execution of the Award
Agreement.  The Administrator may
require that all Shares subject to a right of repurchase or risk of forfeiture
be held in escrow until such repurchase right or risk of forfeiture
lapses.  The grant or vesting of a Stock
Award may be made contingent on the achievement of Objectively Determinable
Performance Conditions.

 

8.2                                 Right of Repurchase.  If so provided in the Award Agreement, Award
Shares acquired pursuant to a Stock Award may be subject to repurchase by the
Company or an Affiliate if not vested in accordance with the Award Agreement.

 

8.3                                 Form of Payment for Stock Awards.  The Administrator shall determine the
acceptable form and method of payment for exercising a Stock Award.  Acceptable forms of payment for all Award
Shares are cash, check or wire transfer, denominated in U.S. dollars except as
specified by the Administrator for non-U.S. Employees or non-U.S.
sub-plans.  In addition, the
Administrator may permit payment to be made by any of the methods permitted
with respect to the exercise of Options pursuant to Section 6.4.

 

8.4                                 Nonassignability of Stock Awards.  Except as determined by the Administrator,
no Stock Award shall be assignable or otherwise transferable by the Awardee
except by will or by the laws of descent and distribution (including without
limitation Section 17). 
Notwithstanding anything to the contrary herein, Stock Awards may be
transferred and exercised in accordance with a Domestic Relations Order.

 

8.5                                 Substitute Stock Award.  The Board may cause the Company to grant
Substitute Stock Awards in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger, tender
offer, or other similar transaction) or of all or a portion of the assets of
any entity.  Any such substitution shall
be effective on the effective date of the acquisition.  Unless and to the extent specified otherwise
by the Board, Substitute Stock Awards shall have the same terms and conditions
as the stock awards they replace, except that (subject to the provisions of
Section 10) Substitute Stock Awards shall be Stock Awards to purchase
Shares rather than equity securities of the granting entity and shall have a
Purchase Price that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution.

 

8.6                                 Maximum
Number of Stock Awards. 
The maximum aggregate number of Shares that may be issued pursuant to
Stock Awards under this Plan shall not exceed ten percent (10%) of the number
of Shares that may be issued pursuant to this Plan under Section 3.1.

 

9.                                       Exercise of Awards

 

9.1                                 In General. 
An Award shall be exercisable in accordance with this Plan and the Award
Agreement under which it is granted.

 

9.2                                 Time of Exercise.  Options and Stock Awards shall be
considered exercised when the Company receives: (a) written notice of
exercise from the person entitled to exercise the Option or Stock Award, (b)
full payment, or provision for payment, in a form and method approved by the
Administrator, for the Shares for which the Option or Stock Award is being

 

12

 

exercised, and (c) with
respect to Nonstatutory Options, payment, or provision for payment, in a form
approved by the Administrator, of all applicable withholding taxes due upon
exercise.  An Award may not be exercised
for a fraction of a Share.

 

9.3                                 Issuance of Award Shares.  The
Company shall issue Award Shares in the name of the person properly exercising
the Award.  If the Awardee is that
person and so requests, the Award Shares shall be issued in the name of the
Awardee and the Awardee’s spouse.  The
Company shall endeavor to issue Award Shares promptly after an Award is
exercised.  Until Award Shares are
actually issued, as evidenced by the appropriate entry on the stock register of
the Company or its transfer agent, the Awardee will not have the rights of a
shareholder with respect to those Award Shares, even though the Awardee has
completed all the steps necessary to exercise the Award.  No adjustment shall be made for any
dividend, distribution, or other right for which the record date precedes the
date the Award Shares are issued, except as provided in Section 10.

 

9.4                                 Termination.

 

(a)                                  In General.  Except
as provided in an Award Agreement or in writing by the Administrator, and as
otherwise provided in Sections 9.4(b), (c), (d) and (e) after an Awardee’s
Termination, the Awardee’s Awards shall be exercisable to the extent (but only
to the extent) they are vested on the date of that Termination and only during
the three months after the Termination, but in no event after the Expiration
Date.  To the extent the Awardee does
not exercise an Award within the time specified for exercise, the Award shall
automatically terminate.

 

(b)                                 Leaves of Absence. 
Unless otherwise provided in the Award Agreement or in writing by the
Administrator, no Award may be exercised more than three months after the
beginning of a leave of absence, other than a personal or medical leave
approved by an authorized representative of the Company with employment
guaranteed upon return.  Awards shall
not continue to vest during a leave of absence, unless otherwise determined in
writing by the Administrator with respect to an approved personal or medical
leave with employment guaranteed upon return.

 

(c)                                  Death or Disability.  Unless otherwise provided in the Award
Agreement or in writing by the Administrator, if an Awardee’s Termination is
due to death or disability (as determined by the Administrator with respect to
all Awards other than Incentive Stock Options and as defined by
Section 22(e) of the Code with respect to Incentive Stock Options), all
Awards of that Awardee to the extent exercisable at the date of that
Termination may be exercised for one year after that Termination, but in no
event after the Expiration Date.  In the
case of Termination due to death, an Award may be exercised as provided in
Section 17.  In the case of
Termination due to disability, if a guardian or conservator has been appointed
to act for the Awardee and been granted this authority as part of that
appointment, that guardian or conservator may exercise the Award on behalf of
the Awardee.  Death or disability
occurring after an Awardee’s Termination shall not cause the Termination to be
treated as having occurred due to death or disability.  To the extent an Award is not so exercised
within the time specified for its exercise, the Award shall automatically
terminate.

 

13

 

(d)                                 Divestiture.  If an
Awardee’s Termination is due to a Divestiture, the Board may take any one or
more of the actions described in Section 10.3 or 10.4 with respect to the
Awardee’s Awards.

 

(e)                                  Termination for Cause. 
In the discretion of the Administrator, which may be exercised on the
date of grant, or at a date later in time, if an Awardee’s Termination is due
to Cause, all of the Awardee’s Awards shall automatically terminate and cease
to be exercisable at the time of Termination. 
“Cause”
means employment-related dishonesty, fraud, misconduct or disclosure or misuse
of confidential information, or other employment-related conduct that is likely
to cause significant injury to the Company, an Affiliate, or any of their
respective employees, officers or directors (including, without limitation,
commission of a felony or similar offense whether or not employment-related),
in each case as determined by the Administrator.  “Cause” shall not require that a civil judgment or criminal
conviction have been entered against or guilty plea shall have been made by the
Awardee regarding any of the matters referred to in the previous sentence.  Accordingly, the Administrator shall be entitled
to determine “Cause” based on the Administrator’s good faith belief.  If the Awardee is criminally charged with a
felony or similar offense, that shall be a sufficient, but not a necessary,
basis for such a belief.

 

(f)                                    Administrator Discretion.  Notwithstanding the provisions of Section 9.4
(a)-(e), the Administrator shall have complete discretion, exercisable either
at the time an Award is granted or at any time while the Award remains
outstanding, to:

 

(i)                                     Extend
the period of time for which the Award is to remain exercisable, following the
Awardee’s Termination, from the limited exercise period otherwise in effect for
that Award to such greater period of time as the Administrator shall deem
appropriate, but in no event beyond the Expiration Date; and/or

 

(ii)                                  Permit
the Award to be exercised, during the applicable post-Termination exercise
period, not only with respect to the number of vested Shares for which such
Award may be exercisable at the time of the Awardee’s Termination but also with
respect to one or more additional installments in which the Awardee would have
vested had the Awardee not been subject to Termination.

 

(g)                                 Consulting or Employment Relationship. Nothing in this Plan
or in any Award Agreement, and no Award or the fact that Award Shares remain
subject to repurchase rights, shall: 
(A) interfere with or limit the right of the Company or any
Affiliate to terminate the employment or consultancy of any Awardee at any
time, whether with or without cause or reason, and with or without the payment
of severance or any other compensation or payment, (B) interfere with the
application of any provision in any of the Company’s or any Affiliate’s charter
documents or Applicable Law relating to the election, appointment, term of
office, or removal of a Director or (C) interfere with the Company’s right to
terminate any consultancy.

 

10.                                 Certain Transactions and Events

 

10.1                           In General.  Except as provided in this Section 10, no change in the
capital structure of the Company, merger, sale or other disposition of assets
or a subsidiary, change in

 

14

 

control, issuance by the
Company of shares of any class of securities or securities convertible into
shares of any class of securities, exchange or conversion of securities, or
other transaction or event shall require or be the occasion for any adjustments
of the type described in this Section 10. 
Additional provisions with respect to the foregoing transactions are set
forth in Section 14.3.

 

10.2                           Changes in Capital Structure.  In the event of any stock split, reverse
stock split, recapitalization, combination or reclassification of stock, stock
dividend, spin-off, or similar change to the capital structure of the Company
(not including a Fundamental Transaction or Change in Control), the Board shall
make whatever adjustments it concludes are appropriate to: (a) the number
and type of Awards that may be granted under this Plan, (b) the number and
type of Options that may be granted to any participant under this Plan,
(c) the Purchase Price and number and class of securities issuable under
each outstanding Stock Award, (d) the Option Price and number and class of
securities issuable under each outstanding Option, and (e) the repurchase price
of any securities substituted for Award Shares that are subject to repurchase
rights.  The specific adjustments shall
be determined by the Board.  Unless the
Board specifies otherwise, any securities issuable as a result of any such
adjustment shall be rounded down to the next lower whole security.  The Board need not adopt the same rules for
each Award or each Awardee.

 

10.3                           Fundamental Transactions.  Except for grants to Non-Employee Directors
pursuant to Section 11, in the event of (a) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption shall be binding on all
participants under this Plan), (b) a merger in which the Company is the
surviving corporation but after which the shareholders of the Company
immediately prior to such merger (other than any shareholder that merges, or
which owns or controls another corporation that merges, with the Company in
such merger) cease to own their shares or other equity interest in the Company,
(c) the sale of all or substantially all of the assets of the Company, or (d)
the acquisition, sale, or transfer of more than 50% of the outstanding shares
of the Company by tender offer or similar transaction (each, a “Fundamental Transaction”),
any or all outstanding Awards may be assumed, converted or replaced by the
successor corporation (if any), which assumption, conversion or replacement
shall be binding on all participants under this Plan.  In the alternative, the successor corporation may substitute
equivalent Awards or provide substantially similar consideration to
participants as was provided to the Company’s shareholders (after taking into
account the existing provisions of the Awards).  The successor corporation may also issue, in place of outstanding
Shares held by participants, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the participants. In
the event such successor corporation (if any) does not assume or substitute
Awards, as provided above, pursuant to a transaction described in this
Section 10.3, the vesting with respect to such Awards shall fully and
immediately accelerate or the repurchase rights of the Company shall fully and
immediately terminate, as the case may be, so that the Awards may be exercised
or the repurchase rights shall terminate before, or otherwise in connection
with the closing or completion of the Fundamental Transaction or event, but
then terminate.  Notwithstanding
anything in this Plan to the contrary, the Board may, in its sole discretion,

 

15

 

provide that the vesting
of any or all Award Shares subject to vesting or a right of repurchase shall
accelerate or lapse, as the case may be, upon a transaction described in this
Section 10.3. If the Board exercises such discretion with respect to
Options, such Options shall become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Board
determines, and if such Options are not exercised prior to the consummation of
the Fundamental Transaction, they shall terminate at such time as determined by
the Board.  The Board need not adopt the
same rules for each Award or each Awardee. 
Subject to any greater rights granted to participants under the
foregoing provisions of this Section 10.3, in the event of the occurrence
of any Fundamental Transaction, any outstanding Awards shall be treated as
provided in the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, or sale of assets.

 

10.4                           Changes in Control.  The Board may also, but need not, specify
that other transactions or events constitute a “Change in Control”.  The Board may do that either before or after
the transaction or event occurs. 
Examples of transactions or events that the Board may treat as Changes
in Control are: (a) any person or entity, including a “group” as
contemplated by Section 13(d)(3) of the Exchange Act, acquires securities
holding 50% or more of the total combined voting power or value of the Company,
or (b) as a result of or in connection with a contested election of
Company Directors, the persons who were Company Directors immediately before
the election cease to constitute a majority of the Board.  In connection with a Change in Control,
notwithstanding any other provision of this Plan, the Board may, but need not,
take any one or more of the actions described in Section 10.3.  In addition, the Board may extend the date
for the exercise of Awards (but not beyond their original Expiration
Date).  The Board need not adopt the
same rules for each Award or each Awardee.

 

10.5                           Divestiture.  If the Company or an Affiliate sells or otherwise transfers
equity securities of an Affiliate to a person or entity other than the Company
or an Affiliate, or leases, exchanges or transfers all or any portion of its
assets to such a person or entity, then the Board may specify that such
transaction or event constitutes a “Divestiture”.  In
connection with a Divestiture, notwithstanding any other provision of this
Plan, the Board may, but need not,  take one or more of the actions described
in Section 10.3 or 10.4 with respect to Awards or Award Shares held by,
for example, Employees, Directors or Consultants for whom that transaction or
event results in a Termination.  The
Board need not adopt the same rules for each Award or each Awardee.

 

10.6                           Dissolution.  If
the Company adopts a plan of dissolution, the Board may cause Awards to be
fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the
Company’s repurchase rights on Award Shares to lapse upon completion of the
dissolution.  The Board need not adopt
the same rules for each Award or each Awardee. 
However, to the extent not exercised before the earlier of the
completion of the dissolution, Awards shall terminate immediately prior to the
dissolution.

 

16

 

11.                                 Automatic Option Grants to Non-Employee Directors

 

11.1                           Automatic
Option Grants to Non-Employee
Directors.

 

(a)                                  Annual Grant.  On the date of the last regular meeting of directors during each
calendar year each individual who is serving as a Non-Employee Director shall
automatically be granted a Nonstatutory Option to purchase 10,000 Shares (the “Annual Grant”),
provided, however, that such individual has served as a Non-Employee Director
for at least six months.

 

(b)                                 Initial Grant.  Upon the first appointment or election of an individual as a
Non-Employee Director, such individual shall automatically be granted a
Nonstatutory Option to purchase 15,000 Shares (the “Initial Grant”).

 

(c)                                  Exercise Price.

 

(i)                                     The
Option Price shall be equal to one hundred percent (100%) of the Fair Market Value
of the Shares on the Option grant date.

 

(ii)                                  The
Option Price shall be payable in one or more of the alternative forms
authorized pursuant to Section 6.4. 
Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the Option Price must be made on the date of
exercise.

 

(d)                                 Option Term.  Each Option shall have a term of ten (10) years measured from the
Option grant date.

 

(e)                                  Exercise and Vesting of Options.  The Shares underlying each Option issued
pursuant to each Initial Grant shall vest and be exercisable in a series of
forty-eight (48) successive equal monthly installments at the end of each full
month from the date of grant, for so long as the Non-Employee Director
continuously remains a Director. The Shares underlying each Option issued
pursuant to each Annual Grant shall vest and be exercisable in a series of
twelve (12) successive equal monthly installments at the end of each full month
from the date of grant, for so long as the Non-Employee Director continuously
remains a Director.

 

(f)                                    Termination of Board Service.  The following provisions shall govern the
exercise of any Options held by the Awardee at the time the Awardee ceases to
serve as a Non-Employee Director:

 

(i)                                     In General.  Except as otherwise provided in
Section 11.3, after cessation of service as a Director (the “Cessation Date”), the
Awardee’s Options shall be exercisable to the extent (but only to the extent)
they are vested on the Cessation Date and only during the three months after
such Cessation Date, but in no event after the Expiration Date.  To the extent the Awardee does not exercise
an Option within the time specified for exercise, the Option shall
automatically terminate.

 

(ii)                                  Death or Disability.  If an Awardee’s cessation of service on the
Board is due to death or disability (as determined by the Board), all
Non-Employee Director Options of that Awardee, whether or not exercisable upon
such Cessation Date, may be exercised at any time on or prior to the Expiration
Date.  In the case of a cessation of
service due to death, an Option may be exercised as provided in
Section 17.  In the case of a
cessation of service due

 

17

 

to disability, if a
guardian or conservator has been appointed to act for the Awardee and been
granted this authority as part of that appointment, that guardian or
conservator may exercise the Option on behalf of the Awardee.  Death or disability occurring after an
Awardee’s cessation of service shall not cause the cessation of service to be
treated as having occurred due to death or disability.  To the extent an Option is not so exercised
within the time specified for its exercise, the Option shall automatically
terminate.

 

11.2                           Certain
Transactions and Events.

 

(a)                                  In
the event of a Fundamental Transaction while the Awardee remains a Non-Employee
Director, the Shares at the time subject to each outstanding Option held by
such Awardee pursuant to Section 11, but not otherwise vested, shall
automatically vest in full so that each such Option shall, immediately prior to
the effective date of the Fundamental Transaction, become exercisable for all
the Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Immediately following the consummation of the Fundamental
Transaction, each Option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or Affiliate thereof).

 

(b)                                 In
the event of a Change in Control while the Awardee remains a Non-Employee
Director, the Shares at the time subject to each outstanding Option held by
such Awardee pursuant to Section 11, 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 exercisable for all the
Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Each such Option shall remain exercisable for such fully vested
Shares until the expiration or sooner termination of the Option term in
connection with a Change in Control.

 

(c)                                  Each
Option which is assumed in connection with a Fundamental Transaction shall be
appropriately adjusted, immediately after such Fundamental Transaction, to
apply to the number and class of securities which would have been issuable to
the Awardee in consummation of such Fundamental Transaction had the Option been
exercised immediately prior to such Fundamental Transaction. Appropriate
adjustments shall also be made to the Option Price payable per share under each
outstanding Option, provided the aggregate Option Price payable for such
securities shall remain the same.

 

(d)                                 The
grant of Options pursuant to Section 11 shall in no way affect the right
of the Company 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.

 

(e)                                  The
remaining terms of each Option granted pursuant to Section 11 shall, as
applicable, be the same as terms in effect for Awards granted under this
Plan.  Notwithstanding the foregoing,
the provisions of Section 9.4 and Section 10 shall not apply to
Options granted pursuant to Section 11.

 

11.3                           Limited Transferability of Options.  Each Option granted pursuant to
Section 11 may be assigned in whole or in part during the Awardee’s
lifetime to one or more members of the Awardee’s family or to a trust
established exclusively for one or more such family members

 

18

 

or to an entity in which
the Awardee is majority owner or to the Awardee’s former spouse, to the extent
such assignment is in connection with the Awardee’s estate or financial plan or
pursuant to a Domestic Relations Order. 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 Administrator may deem appropriate. The Awardee may also designate one or
more persons as the beneficiary or beneficiaries of his or her outstanding
Options under Section 11, and those Options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Awardee’s death while holding those Options. Such beneficiary or
beneficiaries shall take the transferred Options subject to all the terms and
conditions of the applicable Award Agreement evidencing each such transferred
Option, including without limitation, the limited time period during which the
Option may be exercised following the Awardee’s death.

 

12.                                 Withholding and Tax Reporting

 

12.1                           Tax Withholding
Alternatives.

 

(a)                                  General.  Whenever
Award Shares are issued or become free of restrictions, the Company may require
the Awardee to remit to the Company an amount sufficient to satisfy any
applicable tax withholding requirement, whether the related tax is imposed on
the Awardee or the Company.  The Company
shall have no obligation to deliver Award Shares or release Award Shares from
an escrow or permit a transfer of Award Shares until the Awardee has satisfied
those tax withholding obligations.

 

(b)                                 Method of Payment. 
The Awardee shall pay any required withholding using the forms of
consideration described in Section 6.4(b), except that, in the discretion
of the Administrator, the Company may also permit the Awardee to use any of the
forms of payment described in Section 6.4(c).  The Administrator, in its sole discretion, may also permit Award
Shares to be withheld to pay required withholding.  If the Administrator permits Award Shares to be withheld, the
Fair Market Value of the Award Shares withheld, as determined as of the date of
withholding, shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

12.2                           Reporting of Dispositions.  Any holder of Option
Shares acquired under an Incentive Stock Option shall promptly notify the
Administrator, following such procedures as the Administrator may require, of
the sale or other disposition of any of those Option Shares if the disposition
occurs during:  (a) the longer of
two years after the Grant Date of the Incentive Stock Option and one year after
the date the Incentive Stock Option was exercised, or (b) such other
period as the Administrator has established.

 

13.                                 Compliance with Law

 

The grant of Awards and
the issuance and subsequent transfer of Award Shares shall be subject to
compliance with all Applicable Law, including all applicable securities
laws.  Awards may not be exercised, and
Award Shares may not be transferred, in violation of Applicable Law.

 

19

 

Thus, for example, Awards
may not be exercised unless:  (a) a
registration statement under the Securities Act is then in effect with respect
to the related Award Shares, or (b) in the opinion of legal counsel to the
Company, those Award Shares may be issued in accordance with an applicable
exemption from the registration requirements of the Securities Act and any
other applicable securities laws.  The
failure or inability of the Company to obtain from any regulatory body the
authority considered by the Company’s legal counsel to be necessary or useful
for the lawful issuance of any Award Shares or their subsequent transfer shall
relieve the Company of any liability for failing to issue those Award Shares or
permitting their transfer.  As a
condition to the exercise of any Award or the transfer of any Award Shares, the
Company may require the Awardee to satisfy any requirements or qualifications
that may be necessary or appropriate to comply with or evidence compliance with
any Applicable Law.

 

14.                                 Amendment or Termination of this Plan or Outstanding Awards

 

14.1                           Amendment and Termination.  Subject to Section 14.2 and 14.3, the
Board may at any time amend, suspend, or terminate this Plan.

 

14.2                           Shareholder Approval.  The Company shall obtain the approval of the Company’s
shareholders for any amendment to this Plan if shareholder approval is
necessary or desirable to comply with any Applicable Law or with the
requirements applicable to the grant of Awards intended to be Incentive Stock
Options.  The Board may also, but need
not, require that the Company’s shareholders approve any other amendments to
this Plan.

 

14.3                           Effect.  No
amendment, suspension, or termination of this Plan, and no modification of any
Award even in the absence of an amendment, suspension, or termination of this
Plan, shall impair any existing contractual rights of any Awardee unless the
affected Awardee consents to the amendment, suspension, termination, or
modification.  However, no such consent
shall be required if the Board determines, in its sole and absolute discretion,
that the amendment, suspension, termination, or modification:  (a) is required or advisable in order for
the Company, this Plan or the Award to satisfy Applicable Law, to meet the
requirements of any accounting standard or to avoid any adverse accounting
treatment, or (b) in connection with any transaction or event described in
Section 10, is in the best interests of the Company or its
shareholders.  The Board may, but need
not, take the tax or accounting consequences to affected Awardees into
consideration in acting under the preceding sentence.  Those decisions shall be final, binding and conclusive.  Termination of this Plan shall not affect
the Administrator’s ability to exercise the powers granted to it under this
Plan with respect to (i) Awards granted before the termination of this Plan or
(ii) Award Shares issued under such Awards even if those Award Shares are
issued after the termination of this Plan.

 

15.                                 Reserved Rights

 

15.1                           Nonexclusivity of this Plan.  This
Plan shall not limit the power of the Company or any Affiliate to adopt other
incentive arrangements including, for example, the grant or issuance of stock
options, stock, or other equity-based rights under other plans.

 

15.2                           Unfunded Plan.  This Plan shall be unfunded.  Although bookkeeping accounts may be
established with respect to Awardees, any such accounts will be used merely as
a

 

20

 

convenience.  The Company shall not be required to segregate
any assets on account of this Plan, the grant of Awards, or the issuance of
Award Shares.  The Company and the
Administrator shall not be deemed to be a trustee of stock or cash to be
awarded under this Plan.  Any
obligations of the Company to any Awardee shall be based solely upon contracts
entered into under this Plan, such as Award Agreements.  No such obligations shall be deemed to be
secured by any pledge or other encumbrance on any assets of the Company.  Neither the Company nor the Administrator
shall be required to give any security or bond for the performance of any such
obligations.

 

16.                                 Special Arrangements Regarding Award Shares

 

16.1                           Escrow of Stock Certificates.  To enforce any restrictions on Award Shares,
the Administrator may require their holder to deposit the certificates
representing Award Shares, with stock powers or other transfer instruments
approved by the Administrator endorsed in blank, with the Company or an agent
of the Company to hold in escrow until the restrictions have lapsed or
terminated.  The Administrator may also
cause a legend or legends referencing the restrictions to be placed on the
certificates.  Any Awardee who delivers
a promissory note as partial or full consideration for the purchase of Award
Shares will be required to pledge and deposit with the Company some or all of
the Award Shares as collateral to secure the payment of the note.  However, the Administrator may require or
accept other or additional forms of collateral to secure the note and, in any
event, the Company will have full recourse against the maker of the note,
notwithstanding any pledge or other collateral.

 

16.2                           Repurchase Rights.

 

(a)                                  General.  If
an Option is subject to Reverse Vesting or a Stock Award is subject to vesting
conditions, the Company shall have the right, during the seven months after the
Awardee’s Termination, to repurchase any or all of the Award Shares that were
unvested as of the date of that Termination. 
If the Award Shares were purchased with a promissory note, the repurchase
price shall be the lower of:  (a) the
Purchase Price for the Award Shares (minus the amount of any cash dividends
paid or payable with respect to the Award Shares for which the record date
precedes the repurchase) and (b) the Fair Market Value at the date of
Termination.  In all other cases, the
repurchase price shall be determined by the Administrator in accordance with
this Section 16.2 which shall be either (i) the Purchase Price for
the Award Shares (minus the amount of any cash dividends paid or payable with
respect to the Award Shares for which the record date precedes the repurchase)
or (ii) the lower of (A) the Option Price or Purchase Price for the
Award Shares or (B) the Fair Market Value of those Award Shares as of the
date of the Termination.  The repurchase
price shall be paid in cash or if the Award Shares were purchased in whole or
in part with a promissory note, cancellation in whole or in part of
indebtedness under that note, or a combination of those means.  The Company may assign this right of
repurchase.

 

(b)                                 Procedure.  The
Company or its assignee may choose to give the Awardee a written notice of
exercise of its repurchase rights under this Section 16.2.  However, the Company’s failure to give such
a notice shall not affect its rights to repurchase Award Shares.  The Company must, however, tender the
repurchase price during the period specified in this Section 16.2 for
exercising its repurchase rights in order to exercise such rights.

 

21

 

16.3                           Market Standoff.  If requested by the Company or a
representative of its underwriters in connection with a registration of any
securities of the Company under the Securities Act, Awardees or certain
Awardees shall be prohibited from selling some or all of their Award Shares
during a period not to exceed 180 days after the effective date of the
Company’s registration statement.  This
restriction shall not apply to any registration statement on Form S-8, Form S-4
or an equivalent registration statement.

 

17.                                 Beneficiaries

 

An Awardee may file a
written designation of one or more beneficiaries who are to receive the
Awardee’s rights under the Awardee’s Awards after the Awardee’s death.  Such designation shall be accompanied by a
signed acknowledgment from the Awardee’s spouse, if any, consenting to such
designation.  An Awardee may change such
a designation at any time by written notice. 
If an Awardee designates a beneficiary, the beneficiary may exercise the
Awardee’s Awards after the Awardee’s death. 
If an Awardee dies when the Awardee has no living beneficiary designated
under this Plan, the Company shall allow the executor or administrator of the
Awardee’s estate to exercise the Award or, if there is none, the person
entitled to exercise the Option under the Awardee’s will or the laws of descent
and distribution.  In any case, no Award
may be exercised after its Expiration Date.

 

18.                                 Miscellaneous

 

18.1                           Governing Law.  This Plan, the Award Agreements and
all other agreements entered into under this Plan, and all actions taken under
this Plan or in connection with Awards or Award Shares, shall be governed by
the laws of the State of California.

 

18.2                           Determination of Value.  Fair Market Value shall be determined as
follows:

 

(a)                                  Listed Stock.  If the
Shares are traded on any established stock exchange or quoted on a national
market system, Fair Market Value shall be the closing sales price for the
Shares as quoted on that stock exchange or system for the date the value is to
be determined (the “Value Date”)
as reported by such stock exchange or national market system, or, if not
reported by such stock exchange or national market system, as reported in The
Wall
Street Journal or a similar publication.  If no sales are reported as having occurred on the Value Date,
Fair Market Value shall be that closing sales price for the last preceding
trading day on which sales of Shares are reported as having occurred.  If no sales are reported as having occurred
during the five trading days before the Value Date, Fair Market Value shall be
the closing bid for Shares on the Value Date. 
If Shares are listed on multiple exchanges or systems, Fair Market Value
shall be based on sales or bid prices on the primary exchange or system on
which Shares are traded or quoted.

 

(b)                                 Stock Quoted by Securities Dealer.  If Shares are regularly quoted by a recognized securities dealer
but selling prices are not reported on any established stock exchange or quoted
on a national market system, Fair Market Value shall be the mean between the
high bid and low asked prices on the Value Date.  If no prices are quoted for the Value Date, Fair Market Value
shall be the mean between the high bid and low asked prices on the last
preceding trading day on which any bid and asked prices were quoted.

 

22

 

(c)                                  No Established Market. 
If Shares are not traded on any established stock exchange or quoted on
a national market system and are not quoted by a recognized securities dealer,
the Board or Committee will determine Fair Market Value in good faith.  The Board or Committee will consider the
following factors, and any others it considers significant, in determining Fair
Market Value: (i) the price at which other securities of the Company have
been issued to purchasers other than Employees, Directors, or Consultants,
(ii) the Company’s shareholder’s equity, prospective earning power,
dividend-paying capacity, and non-operating assets, if any, and (iii) any
other relevant factors, including the economic outlook for the Company and the
Company’s industry, the Company’s position in that industry, the Company’s
goodwill and other intellectual property, and the values of securities of other
businesses in the same industry.

 

18.3                           Reservation of Shares.  During the term of this
Plan, the Company shall at all times reserve and keep available such number of
Shares as are still issuable under this Plan.

 

18.4                           Electronic Communications.  Any Award Agreement,
notice of exercise of an Award, or other document required or permitted by this
Plan may be delivered in writing or, to the extent determined by the
Administrator, electronically. 
Signatures may also be electronic if permitted by the Administrator.

 

18.5                           Notices.  Unless the Administrator
specifies otherwise, any notice to the Company under any Award Agreement or
with respect to any Awards or Award Shares shall be in writing (or, if so
authorized by Section 18.4, communicated electronically), shall be
addressed to the Company, and shall only be effective when received by the
Company.

 

Adopted by the Board
on:  March 19, 2004

 

Approved by the
shareholders on:  May 27, 2004

 

Effective date of this
Plan:  May 27, 2004

 

23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}]]