Document:

Form of Warrant

     

    Exhibit
      10.3

     

    ACACIA
      RESEARCH CORPORATION 

     

    WARRANT
      TO PURCHASE COMMON STOCK

     

    December
      ___, 2006

     

    Void
      After December ___, 2011

     

    THIS
      CERTIFIES THAT,
      for
      value received, [             ],
      or
      permitted registered assigns (the “Holder”),
      is
      entitled to subscribe for and purchase at the Exercise Price (defined below)
      from Acacia
      Research Corporation,
      a
      Delaware corporation (the
      “Company”),
      up to
[       ]
      shares
      of
      the Company’s Acacia Research-CombiMatrix common stock, par value $0.001 per
      share (the “Common
      Stock”).

     

    1.    DEFINITIONS.
      As
      used
      herein, the following terms shall have the following respective
      meanings:

     

    (a)    “Exercise
      Period” shall mean the period commencing on the date hereof and ending five (5)
      years from the date hereof, unless sooner terminated as provided
      below.

     

    (b)    “Exercise
      Price” shall mean $________ per share, subject to adjustment pursuant to
      Section 5 below.

     

    (c)    “Exercise
      Shares” shall mean the shares of Common Stock issuable upon exercise of this
      Warrant.

     

    (d)    “Trading
      Day” shall mean
      (a)
      any day on which the Common Stock is listed or quoted and traded on its primary
      Trading Market, (b) if the Common Stock is not then listed or quoted and traded
      on any Eligible Market, then a day on which trading occurs on the OTC
      Bulletin Board
      (or any
      successor thereto), or (c) if trading does not occur on the OTC Bulletin Board
      (or any successor thereto), any Business Day.

    

    2.    EXERCISE
      OF WARRANT.  The
      rights represented by this Warrant may be exercised in whole or in part at
      any
      time during the Exercise Period, by delivery of the following to the Company
      at
      its address set forth on the signature page hereto (or at such other address
      as
      it may designate by notice in writing to the Holder):

     

    (a)    An
      executed Notice of Exercise in the form attached hereto;

    

    (b)    Payment
      of the Exercise Price either (i) in cash or by check, (ii) by cancellation
      of
      indebtedness, or (iii) pursuant to Section 2.1 below; and

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    (c)    This
      Warrant.

     

    The
      Holder shall not be required to deliver the original Warrant in order to effect
      the exercise hereunder. Execution and delivery of the Notice of Exercise shall
      have the same effect as cancellation of the original Warrant and issuance of
      a
      new Warrant evidencing the right to purchase the remaining number of Exercise
      Shares.

    

    Certificates
      for shares purchased hereunder shall be transmitted by the transfer agent of
      the
      Company to the Holder by crediting the account of the Holder’s prime broker with
      the  Depository Trust Company through its Deposit Withdrawal Agent
      Commission system if the Company is a participant in such system, and otherwise
      by physical delivery to the address specified by the Holder in the Notice of
      Exercise within three business days from the delivery to the Company of the
      Notice of Exercise, surrender of this Warrant and payment of the aggregate
      Exercise Price as set forth above.  This Warrant shall be deemed to have
      been exercised on the date the Exercise Price is received by the Company. 
The Exercise Shares shall be deemed to have been issued, and 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 the Warrant has been
      exercised by payment to the Company of the Exercise Price.

     

    In
      addition to any other rights available to the Holder, if the Company fails
      to
      deliver to the Holder a certificate representing Exercise Shares by the third
      Trading Day after the date on which delivery of such certificate is required
      by
      this Warrant, and if after such third Trading Day the Holder purchases (in
      an
      open market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by the Holder of the Warrant Shares that the Holder
      anticipated receiving from the Company (a “Buy-In”),
      then
      in the Holder’s sole discretion, the Company shall within three Trading Days
      after the Holder’s request, either (i) pay cash to the Holder in an amount equal
      to the Holder’s total purchase price (including brokerage commissions, if any)
      for the shares of Common Stock so purchased less the Exercise Price (the
“Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Price on the date of the event giving rise to the
      Company’s obligation to deliver such certificate.

     

    The
      person in whose name any certificate or certificates for Exercise Shares are
      to
      be issued upon exercise of this Warrant shall be deemed to have become the
      holder of record of such shares on the date on which this Warrant was
      surrendered and payment of the Exercise Price was made, irrespective of the
      date
      of delivery of such certificate or certificates, except that, if the date of
      such surrender and payment is a date when the stock transfer books of the
      Company are closed, such person shall be deemed to have become the holder of
      such shares at the close of business on the next succeeding date on which the
      stock transfer books are open.

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    To
      the
      extent permitted by law, the Company’s obligations to issue and deliver Exercise
      Shares in accordance with the terms hereof are absolute and unconditional,
      irrespective of any action or inaction by the Holder to enforce the same, any
      waiver or consent with respect to any provision hereof, the recovery of any
      judgment against any person or entity or any action to enforce the same, or
      any
      setoff, counterclaim, recoupment, limitation or termination, or any breach
      or
      alleged breach by the Holder or any other person or entity of any obligation
      to
      the Company or any violation or alleged violation of law by the Holder or any
      other person or entity, and irrespective of any other circumstance which might
      otherwise limit such obligation of the Company to the Holder in connection
      with
      the issuance of Exercise Shares. Nothing herein shall limit a Holder’s right to
      pursue any other remedies available to it hereunder, at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief with respect to the Company’s failure to timely deliver
      certificates representing shares of Common Stock upon exercise of the Warrant
      as
      required pursuant to the terms hereof. 

    

    This
      Warrant shall be non-callable.

    

    2.1.    Net
      Exercise. 
If
      during the Exercise Period, the fair market value of one share of the Common
      Stock is greater than the Exercise Price (at the date of calculation as set
      forth below), in lieu of exercising this Warrant by payment of cash or by check,
      or by cancellation of indebtedness, the Holder may elect to receive shares
      equal
      to the value (as determined below) of this Warrant (or the portion thereof
      being
      canceled) by surrender of this Warrant at the principal office of the Company
      together with the properly endorsed Notice of Exercise in which event the
      Company shall issue to the Holder a number of shares of Common Stock computed
      using the following formula:

     

    X
      =
Y
      (A-B)

    A

     

    Where
      X =
      the number of shares of Common Stock to be issued to the Holder

     

    
      	Y =	
              the number of shares of Common
                Stock
                purchasable under the Warrant or, if only a portion of the Warrant
                is
                being exercised, the portion of the Warrant being canceled (at the
                date of
                such calculation)

            

      	 	 

      	
              A
                =

            	
              the
                fair market value of one share of the Company’s Common Stock (at the date
                of such calculation)

            

      	 	 

      	B =	
              Exercise
                Price (as adjusted to the date of such
                calculation)

            

    

     

    For
      purposes of the above calculation, the “fair market value” of one share of
      Common Stock shall mean (i) the average of the closing sales prices for the
      shares of Common Stock on the Nasdaq Global Market or other trading market
      where
      such security is listed or traded as reported by Bloomberg Financial Markets
      (or
      a comparable reporting service of national reputation selected by the Company
      and reasonably acceptable to the Holder if Bloomberg Financial Markets is not
      then reporting sales prices of such security) (collectively, “Bloomberg”) for
      the 10 consecutive trading days immediately preceding such date, or (ii) if
      the
      Nasdaq Global Market is not the principal trading market for the shares of
      Common Stock, the average of the reported sales prices reported by Bloomberg
      on
      the principal trading market for the Common Stock during the same period, or,
      if
      there is no sales price for such period, the last sales price reported by
      Bloomberg for such period, or (iii) if neither of the foregoing applies, the
      last sales price of such security in the over-the-counter market on the pink
      sheets or bulletin board for such security as reported by Bloomberg, or if
      no
      sales price is so reported for such security, the last bid price of such
      security as reported by Bloomberg or (iv) if fair market value cannot be
      calculated as of such date on any of the foregoing bases, the fair market value
      shall be as determined by the Board of Directors of the Company in the exercise
      of its good faith judgment. 

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    2.2.    Issuance
      of New Warrants. 
      Upon any partial exercise of this Warrant, the Company, at its expense, will
      forthwith and, in any event within five business days, issue and deliver to
      the
      Holder a new warrant or warrants of like tenor, registered in the name of the
      Holder, exercisable, in the aggregate, for the balance of the number of shares
      of Common Stock remaining available for purchase under the Warrant.

     

    2.3.    Payment
      of Taxes and Expenses. 
      The Company shall pay any recording, filing, stamp or similar tax which may
      be
      payable in respect of any transfer involved in the issuance of, and the
      preparation and delivery of certificates (if applicable) representing, (i)
      any
      Exercise Shares purchased upon exercise of this Warrant and/or (ii) new or
      replacement warrants in the Holder’s name or the name of any transferee of all
      or any portion of this Warrant.

     

    3.      
      COVENANTS OF THE COMPANY.

     

    3.1.    Covenants
      as to Exercise Shares. 
      The Company covenants and agrees that all Exercise Shares that may be issued
      upon the exercise of the rights represented by this Warrant will, upon issuance
      in accordance with the terms hereof, be validly issued and outstanding, fully
      paid and nonassessable, and free from all taxes, liens and charges with respect
      to the issuance thereof.  The Company further covenants and agrees that the
      Company will at all times during the Exercise Period, have authorized and
      reserved, free from preemptive rights, a sufficient number of shares of Common
      Stock to provide for the exercise of the rights represented by this
      Warrant.  If at any time during the Exercise Period the number of
      authorized but unissued shares of Common Stock shall not be sufficient to permit
      exercise of this Warrant, the Company will take such corporate action as may,
      in
      the opinion of its counsel, be necessary to increase its authorized but unissued
      shares of Common Stock to such number of shares as shall be sufficient for
      such
      purposes.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    3.2.    No
      Impairment. 
      Except and to the extent as waived or consented to by the Holder, the Company
      will not, by amendment of its Certificate 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 to be observed or performed
      hereunder by the Company, but will at all times in good faith assist in the
      carrying out of all the provisions of this Warrant and in the taking of all
      such
      action as may be necessary or appropriate in order to protect the exercise
      rights of the Holder against impairment.

     

    3.3.    Notices
      of Record Date and Certain Other Events. 
In
      the event of any taking by the Company of a record of the holders of any class
      of securities for the purpose of determining the holders thereof who are
      entitled to receive any dividend (other than a cash dividend which is the same
      as cash dividends paid in previous quarters) or other distribution, the Company
      shall mail to the Holder, at least 20 days prior to the date on which any such
      record is to be taken for the purpose of such dividend or distribution, a notice
      specifying such date.  In the event of any voluntary dissolution,
      liquidation or winding up of the Company, the Company shall mail to the Holder,
      at least 20 days prior to the date of the occurrence of any such event, a notice
      specifying such date. In the event the Company authorizes or approves, enters
      into any agreement contemplating, or solicits stockholder approval for any
      Fundamental Transaction, as defined in Section 7 herein, the Company shall
      mail
      to the Holder, at least twenty days prior to the date of the occurrence of
      such
      event, a notice specifying such date.

     

    4.     [INTENTIONALLY
      OMITTED]

     

    5.     ADJUSTMENT
      OF EXERCISE PRICE AND SHARES.

     

    (a)    In
      the
      event of changes in the outstanding Common Stock of the Company by reason of
      stock dividends, split-ups, recapitalizations, reclassifications, combinations
      or exchanges of shares, separations, reorganizations, liquidations,
      consolidation, acquisition of the Company (whether through merger or acquisition
      of substantially all the assets or stock of the Company), or the like, the
      number, class and type of shares available under the Warrant in the aggregate
      and the Exercise Price shall be correspondingly adjusted to give the Holder
      of
      the Warrant, on exercise for the same aggregate Exercise Price, the total
      number, class, and type of shares or other property as the Holder would have
      owned had the Warrant been exercised prior to the event and had the Holder
      continued to hold such shares until the event requiring adjustment.  The
      form of this Warrant need not be changed because of any adjustment in the number
      of Exercise Shares subject to this Warrant.

     

    (b)    If
      at any
      time or from time to time the holders of Common Stock of the Company (or any
      shares of stock or other securities at the time receivable upon the exercise
      of
      this Warrant) shall have received or become entitled to receive, without payment
      therefor,  

     

    (i)    Common
      Stock or any shares of stock or other securities which are at any time directly
      or indirectly convertible into or exchangeable for Common Stock, or any rights
      or options to subscribe for, purchase or otherwise acquire any of the foregoing
      by way of dividend or other distribution (other than a dividend or distribution
      covered in Section 5(a) above),

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (ii)   any
      cash
      paid or payable otherwise than as a cash dividend or

     

    (iii)   Common
      Stock or additional stock or other securities or property (including cash)
      by
      way of spinoff, split-up, reclassification, combination of shares or similar
      corporate rearrangement (other than shares of Common Stock pursuant to
      Section 5(a) above), then and in each such case, the Holder hereof will,
      upon the exercise of this Warrant, be entitled to receive, in addition to the
      number of shares of Common Stock receivable thereupon, and without payment
      of
      any additional consideration therefor, the amount of stock and other securities
      and property (including cash in the cases referred to in clauses (ii) and (iii)
      above) which such Holder would hold on the date of such exercise had such Holder
      been the holder of record of such Common Stock as of the date on which holders
      of Common Stock received or became entitled to receive such shares or all other
      additional stock and other securities and property.

     

    (c)    Upon
      the
      occurrence of each adjustment pursuant to this Section 5, the Company at its
      expense will, at the written request of the Holder, promptly compute such
      adjustment in accordance with the terms of this Warrant and prepare a
      certificate setting forth such adjustment, including a statement of the adjusted
      Exercise Price and adjusted number or type of Exercise Shares or other
      securities issuable upon exercise of this Warrant (as applicable), describing
      the transactions giving rise to such adjustments and showing in detail the
      facts
      upon which such adjustment is based. Upon written request, the Company will
      promptly deliver a copy of each such certificate to the Holder and to the
      Company’s transfer agent.

     

    6.    FRACTIONAL
      SHARES.  No
      fractional shares shall be issued upon the exercise of this Warrant as a
      consequence of any adjustment pursuant hereto.  All Exercise Shares
      (including fractions) issuable upon exercise of this Warrant may be aggregated
      for purposes of determining whether the exercise would result in the issuance
      of
      any fractional share.  If, after aggregation, the exercise would result in
      the issuance of a fractional share, the Company shall, in lieu of issuance
      of
      any fractional share, pay the Holder otherwise entitled to such fraction a
      sum
      in cash equal to the product resulting from multiplying the then current fair
      market value of an Exercise Share by such fraction.

     

    7.    FUNDAMENTAL
      TRANSACTIONS. 
      If, at any time while this Warrant is outstanding, (i) the Company effects
      any
      merger of the Company with or into another entity, (ii) the Company effects
      any
      sale of all or substantially all of its assets in one or a series of related
      transactions, (iii) any tender offer or exchange offer (whether by the Company
      or another individual or entity) is completed pursuant to which holders of
      Common Stock are permitted to tender or exchange their shares for other
      securities, cash or property or (iv) the Company effects any reclassification
      of
      the Common Stock or any compulsory share exchange pursuant to which the Common
      Stock is effectively converted into or exchanged for

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

       

       

      other
        securities, cash or property (other than as a result of a subdivision or
        combination of shares of Common Stock covered by Section 5 above) (in any
        such
        case, a “Fundamental
        Transaction”),
        then,
        upon any subsequent exercise of this Warrant, the Holder shall have the right
        to
        receive, for each Warrant Share that would have been issuable upon such exercise
        immediately prior to the occurrence of such Fundamental Transaction, at the
        option of the Holder, (a) upon exercise of this 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 any additional consideration (the
“Alternate
        Consideration”)
        receivable upon or as a result of such reorganization, reclassification,
        merger,
        consolidation or disposition of assets by a Holder of the number of shares
        of
        Common Stock for which this Warrant is exercisable immediately prior to such
        event.  
        For
        purposes of any such exercise, the determination of the Exercise Price shall
        be
        appropriately adjusted to apply to such Alternate Consideration based on
        the
        amount of Alternate Consideration issuable in respect of one share of Common
        Stock in such Fundamental Transaction, and the Company shall apportion the
        Exercise Price among the Alternate Consideration in a reasonable manner
        reflecting the relative value of any different components of the Alternate
        Consideration.  If holders of Common Stock are given any choice as to the
        securities, cash or property to be received in a Fundamental Transaction,
        then
        the Holder shall be given the same choice as to the Alternate Consideration
        it
        receives upon any exercise of this Warrant following such Fundamental
        Transaction.  To the extent necessary to effectuate the foregoing
        provisions, any successor to the Company or surviving entity in such Fundamental
        Transaction shall issue to the Holder a new warrant consistent with the
        foregoing provisions and evidencing the Holder’s right to exercise such warrant
        into Alternate Consideration. The terms of any agreement pursuant to which
        a
        Fundamental Transaction is effected shall include terms requiring any such
        successor or surviving entity to comply with the provisions of this Section
        7
        and insuring that this Warrant (or any such replacement security) will be
        similarly adjusted upon any subsequent transaction analogous to a Fundamental
        Transaction.

    

     

    8.    NO
      STOCKHOLDER RIGHTS.  This
      Warrant in and of itself shall not entitle the Holder to any voting rights
      or
      other rights as a stockholder of the Company.

     

    9.    TRANSFER
      OF WARRANT.  Subject
      to applicable laws, this Warrant and all rights hereunder are transferable,
      by
      the Holder in person or by duly authorized attorney, upon delivery of this
      Warrant and the form of assignment attached hereto to any transferee designated
      by Holder.

     

    10.   LOST,
      STOLEN, MUTILATED OR DESTROYED WARRANT.  If
      this
      Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
      as to indemnity or otherwise as it may reasonably impose (which shall, in the
      case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
      of like denomination and tenor as the Warrant so lost, stolen, mutilated or
      destroyed.  Any such new Warrant shall constitute an original contractual
      obligation of the Company, whether or not the allegedly lost, stolen, mutilated
      or destroyed Warrant shall be at any time enforceable by anyone.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    11.    NOTICES,
      ETC.  All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given: (a) upon personal delivery to the party to be notified,
      (b) when sent by confirmed telex or facsimile if sent during normal
      business hours of the recipient, if not, then on the next business day,
      (c) five days after having been sent by registered or certified mail,
      return receipt requested, postage prepaid, or (d) one day after deposit
      with a nationally recognized overnight courier, specifying next day delivery,
      with written verification of receipt.  All communications shall be sent to
      the Company at the address listed on the signature page hereto and to Holder
      at
      the applicable address set forth on the applicable signature page to the
      Subscription Agreement or at such other address as the Company or Holder may
      designate by 10 days advance written notice to the other parties
      hereto.

     

    12.    ACCEPTANCE. 
      Receipt
      of this Warrant by the Holder shall constitute acceptance of and agreement
      to
      all of the terms and conditions contained herein.

     

    13.    GOVERNING
      LAW.  This
      Warrant and all rights, obligations and liabilities hereunder shall be governed
      by the laws of the State of New York.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

     

    
      
        
        

      

      
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      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to be executed by its duly authorized officer
        as
        of December ___, 2006.

    

     

    
      	 	
              ACACIA RESEARCH
                CORPORATION

               

               

              By:__________________________________

              Name:

              Title:

            

    

     

     

     

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    NOTICE
      OF EXERCISE

     

    TO: 
      ACACIA
      RESEARCH CORPORATION 

     

    (1)    o  The
      undersigned hereby elects to purchase
           shares of the
      Acacia Research-CombiMatrix Common Stock (the “Common
      Stock”)
      of
ACACIA
      RESEARCH CORPORATION  (the
      “Company”)
      pursuant to the terms of the attached Warrant, and tenders herewith payment
      of
      the exercise price in full, together with all applicable transfer taxes, if
      any.

     

     o  The
      undersigned hereby elects to purchase
           shares of Common
      Stock of the Company pursuant to the terms of the net exercise provisions set
      forth in Section 2.1 of the attached Warrant, and shall tender payment of
      all applicable transfer taxes, if any.

     

    (2)    Please
      issue a certificate or certificates representing said shares of Common Stock
      of
      the Company in the name of the undersigned or in such other name as is specified
      below:

     

     

    
      	 	
              (Name)

               

               
(Address)

    

     

    
 

    
      	
               

              (Date)

            	 	
              _____________________________

              (Signature)

               

               

               

              
                _____________________________

                (Signature)

              

            

    

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    ASSIGNMENT
      FORM

     

    (To
      assign the foregoing Warrant, execute this form and supply required
      information.  Do not use this form to purchase shares.)

     

    FOR
      VALUE RECEIVED,
      the
      foregoing Warrant and all rights evidenced thereby are hereby assigned
      to

     

     

    
      	
              Name:

               

               

              Address:

               

               

              Dated:        ,
                20___

            	
              _____________________________

              (Please Print)

               

               

               

              
                _____________________________

                (Please
                  Print)

              

            

    

     

           
Holder’s
      Signature: 

     

    Holder’s
      Address:

     

    
 

     

     

    NOTE: 
      The signature to this Assignment Form must correspond with the name as it
      appears on the face of the Warrant, without alteration or enlargement or any
      change whatever.  Officers of corporations and those acting in a fiduciary
      or other representative capacity should file proper evidence of authority to
      assign the foregoing Warrant.

     

    -11-Exhibit 10.1

 

ONCOGENEX TECHNOLOGIES
INC.

 

AMENDED AND
RESTATED STOCK OPTION PLAN

 

1.                                      PURPOSE
OF THE PLAN

 

OncoGenex Technologies Inc. (the “Company”)
hereby establishes a stock option plan for directors, officers, employees and
Service Providers (as defined below) of the Company and its subsidiaries, to be
known as the “OncoGenex Technologies Inc. Stock
Option Plan” (the “Plan”).

 

2.                                      DEFINITIONS

 

In
this Plan, the following terms shall have the following meanings:

 

2.1                                 “Board”
means the Board of Directors of the Company.

 

2.2                                 “Change
of Control” means the acquisition after the Series B2 Issue Date by any
person or by any person and a Joint Actor, whether directly or indirectly, of
voting securities (as defined in the Securities Act) of the Company, which, when
added to all other voting securities of the Company at the time held by such
person or by such person and a Joint Actor, totals for the first time not less
than fifty percent (50%) of the outstanding voting securities of the Company or
the votes attached to those securities are sufficient, if exercised, to elect a
majority of the Board of Directors of the Company.

 

2.3                                 “Common
Shares” means the common shares of the Company.

 

2.4                                 “Company”
means OncoGenex Technologies Inc.

 

2.5                                 “Corporate
Reorganization” has the meaning ascribed to it in Subsection 5.3.

 

2.6                                 “Disability”
means:

 

(a)                                  any period of 365 consecutive days during which the Optionee is
prevented, notwithstanding reasonable efforts to accommodate the disability,
from performing his/her essential duties for the Company for more than 182 days
in the aggregate by reason of illness or mental or physical disability; or

 

(b)                                 the Optionee being found of unsound
mind or incapable of managing his/her own affairs by the final judgement or
order of a court of competent jurisdiction.

 

2.7                                 “Equity
Securities” means:

 

 

(i)                                     shares
or any other security of the Company that carries the residual right to
participate in the earnings of the Company and, on liquidation, dissolution or
winding-up, in the assets of the Company, whether or not the security carries
voting rights;

 

(ii)                                  any
warrants, options or rights entitling the holders thereof to purchase or
acquire any such securities; or

 

(iii)                               any
securities issued by the Company which are convertible or exchangeable into
such securities.

 

2.8                                 “Expiry
Date” means the date set by the Board under Section 3.1 of the Plan, as
the last date on which an Option may be exercised.

 

2.9                                 “Founder”
means Dr. Martin Gleave and Gleave HoldCo.

 

2.10                           “Fully
Converted Basis” at any time means that all shares convertible into Common
Shares outstanding at that time shall be deemed to have been fully converted,
in accordance with the rights, privileges, restrictions and conditions attached
thereto, into Common Shares and Common Shares issuable as a result thereof
shall be deemed to have been issued and to form part of the holdings of the
Person(s) entitled to receive such Common Shares.

 

2.11                           “Fully
Diluted Basis” at any time means that all options, warrants or other rights of
any kind to acquire Common Shares and all securities convertible or
exchangeable into Common Shares outstanding at that time shall be deemed to
have been fully exercised, converted or exchanged, as the case may be, and the
Common Shares issuable as a result thereof shall be deemed to have been fully
issued and to form part of the holdings of the Person(s) entitled to receive
such Common Shares.

 

2.12                           “Gleave
HoldCo” means 603356 B.C. Ltd.

 

2.13                           “Grant
Date” means the date specified in an Option Agreement as the date on which an
Option is granted.

 

2.14                           “Investment
Agreement” means the investment agreement dated as of the Series B2 Issue
Date among the Company, the Major Investors and WHI Morula Fund, LLC;

 

2.15                           “Joint
Actor” means a person acting “jointly or in concert with” another person as
that phrase is interpreted in Section 96 of the Securities Act, provided
however, if more than one Major Investor concurrently acquires Shares pursuant
to the Shareholders’ Agreement, the Investment Agreement or the rights attaching
to their Shares, those Major Investors shall not be considered Joint Actors of
each other solely by reason of such acquisition.

 

2

 

2.16                           “Major
Investors” means Ventures West 7 Limited Partnership (“Ventures West Canada”),
Ventures West 7 U.S. Limited Partnership (“Ventures West U.S.”), H.I.G. Horizon
Corp. (“H.I.G. Horizon”), Working Opportunity Fund (EVCC) Ltd. (“WOF”) and
Business Development Bank of Canada (“BDC”) (or their respective successors or
permitted assigns) and “Major Investor” means any one of them, provided that if
any of Ventures West Canada, Ventures West U.S., H.I.G. Horizon, WOF and BDC
ceases to be a shareholder of the Company without successor or assignee then “Major
Investors” or “Major Investor” means the remaining parties or party alone.

 

2.17                           “Offer”
has the meaning ascribed to it in Subsection 4.5.

 

2.18                           “Option”
means an option to purchase Shares granted pursuant to this Plan.

 

2.19                           “Option
Agreement” means an agreement, in the form attached hereto as Schedule “A”,
whereby the Company grants to an Optionee an Option.

 

2.20                           “Optionee”
means each of the directors, officers, employees and Service Providers granted
an Option pursuant to this Plan and their heirs, executors and administrators
and an Optionee may also be a corporation or family trust controlled by an
individual eligible for an Option grant pursuant to this Plan.

 

2.21                           “Option
Price” means the price per Share specified in an Option Agreement, adjusted
from time to time in accordance with the provisions of Section 5.

 

2.22                           “Option
Shares” means the aggregate number of Shares, which an Optionee may purchase
under an Option.

 

2.23                           “Person”
means any individual, partnership, joint venture, syndicate, sole
proprietorship, company or corporation with or without share capital, trust,
trustee, executor, administrator, or other legal personal representatives,
regulatory body or agency, government or governmental agency, authority or
entity howsoever designated or constituted.

 

2.24                           “Plan”
has the meaning ascribed to it in Section 1.

 

2.25                           “Purchaser”
has the meaning ascribed to it in Subsection 6.1(a).

 

2.26                           “Securities
Act” means the Securities Act, R.S.B.C. 1996, c.418, as amended, as at the date
hereof.

 

2.27                           “Selling
Shareholders” has the meaning ascribed to it in Subsection 6.1(a).

 

2.28                           “Series B2
Issue Date” means the first date upon which shares of the second series of Class B
preferred shares of the Company are issued.

 

2.29                           “Service
Provider” means:

 

3

 

(a)                                  any
person or company engaged to provide management, consulting or advisory
services for the Company or for any entity controlled by the Company, provided
such person is not an employee of the Company; and

 

(b)                                 any
person who is providing management, consulting or advisory services to the
Company or to any entity controlled by the Company indirectly through a company
that is a Service Provider under Subsection 2.29(a), provided such person
is not an employee of the Company.

 

2.30                           “Shareholders’
Agreement” means the shareholders’ agreement dated for reference as of the Series B2
Issue Date and made among the Company, the Major Investors and certain others,
as amended and restated from time to time.

 

2.31                           “Share
Reorganization” has the meaning ascribed to it in Subsection 5.1.

 

2.32                           “Shares”
means the common shares in the capital of the Company as constituted on the
date of this agreement provided that, in the event of any adjustment pursuant
to Section 5, “Shares” shall thereafter mean the shares or other property
resulting from the events giving rise to the adjustment.

 

2.33                           “Substantial
Sale” has the meaning ascribed to it in Subsection 6.1(a).

 

2.34                           “Transfer”
includes any sale, exchange, assignment, gift, bequest, disposition, mortgage,
charge, pledge, encumbrance, grant of a security interest or other arrangement
by which possession, legal title or beneficial ownership passes from one Person
to another, or to the same Person in a different capacity, whether or not
voluntarily and whether or not for value, and any agreement to effect any of
the foregoing; and the words “Transferred”, “Transferring” and similar words
have corresponding meanings.

 

2.35                           “Unissued
Option Shares” means the number of Shares, at a particular time, which have
been allotted for issuance upon the exercise of an Option but which have not
been issued, as adjusted from time to time in accordance with the provisions of
Section 5, such adjustments to be cumulative.

 

2.36                           “Vested”
means that an Option has become exercisable in respect of a number of Option
Shares by the Optionee pursuant to the terms of the Option Agreement.

 

3.                                      GRANT
OF OPTIONS

 

3.1                                 Option
Terms

 

The
Board may from time to time authorize the issue of Options to directors,
officers, employees and Service Providers of the Company and its subsidiaries. The
Option Price under each Option shall be determined by the Board at the time of
issue of the Option and shall be subject to adjustment as provided in Section 5.

 

4

 

The Expiry Date for each Option shall be set by the
Board at the time of issue of the Option and shall not be more than seven years
after the Grant Date. Options shall not be assignable (or transferable), except
to a corporation or family trust controlled by an individual eligible for an
Option grant pursuant to this Plan or as otherwise provided herein.

 

3.2                                 Limits
on Shares Issuable on Exercise of Options

 

The
maximum number of Shares which may be issuable pursuant to options granted
under the Plan shall be equal to a maximum of 15% of the number of Shares
outstanding from time to time on a Fully Diluted Basis or such additional
amount as may be approved from time to time by the Board, but in any event not
to exceed 1,905,557 Shares.

 

3.3                                 Option
Agreements

 

Each
Option shall be confirmed by the execution of an Option Agreement. Each
Optionee shall have the option to purchase from the Company the Option Shares
at the time and in the manner set out in the Plan and in the Option Agreement
applicable to that Optionee. The execution of an Option Agreement shall
constitute conclusive evidence that it has been completed in compliance with
this Plan.

 

4.                                      EXERCISE
OF OPTION

 

4.1                                 When
Options May be Exercised

 

Subject
to Sections 4.3 and 4.4, an Option may be exercised to purchase any number of
Shares up to the number of Vested Unissued Option Shares at any time after the
Grant Date up to 4:30 p.m. local time on the Expiry Date and shall not be
exercisable thereafter.

 

4.2                                 Manner
of Exercise

 

The
Option shall be exercisable by delivering to the Company a notice specifying
the number of Shares in respect of which the Option is exercised together with
payment in full of the Option Price for each such Share.

 

Upon
notice and payment there will be a binding contract for the issue of the Shares
in respect of which the Option is exercised, upon and subject to the provisions
of the Plan. Delivery of the Optionee’s cheque payable to the Company in the
amount of the Option Price shall constitute payment of the Option Price unless
the cheque is not honoured upon presentation in which case the Option shall not
have been validly exercised.

 

5

 

4.3                                 Vesting
of Option Shares

 

Subject
to Section 4.4, each Option shall become Vested in accordance with the
Option Agreement or as may be determined by the Board on the Grant Date or as
otherwise provided herein.

 

4.4                                 Termination
Of Employment

 

If an
Optionee ceases to be a director, officer, employee or Service Provider of the
Company or one of the Company’s subsidiaries, his or her Option shall be
exercisable as follows:

 

(a)                                  Death
or Disability

 

If the
Optionee ceases to be a director, officer, employee or Service Provider of the
Company or a subsidiary of the Company, due to his or her death or Disability
or, in the case of an Optionee that is a company, the death or Disability of
the person who provides management or consulting services to the Company or to
any entity controlled by the Company, the Option then held by the Optionee
shall be exercisable to acquire Vested Unissued Option Shares up to the Expiry
Date or the date that is six (6) months after the Optionee ceases to be a
director, officer, employee or Service Provider, which ever is sooner, after
which the Option held by such Optionee shall be cancelled.

 

(b)                                 Termination
For Cause

 

If the
Optionee, or in the case of an Option granted to an Optionee who falls under
the definition of Service Provider set out in Subsection 2.29(b), the
Optionee’s employer, ceases to be a director, officer, employee or Service
Provider of the Company or a subsidiary of the Company as a result of
termination for cause, as that term is interpreted by the courts of the
jurisdiction in which the Optionee, or, in the case of the Optionee who satisfies
the definition of Service Provider set out in Subsection 2.29(b), the
Optionee’s employer, is employed or engaged, any outstanding Option held by
such Optionee on the date of such termination, whether in respect of Option
Shares that are Vested or not, shall be cancelled as of that date.

 

(c)                                  Early
Retirement, Voluntary Resignation or Termination Other than For Cause

 

If the
Optionee or, in the case of an Option granted to an Optionee who falls under
the definition of Service Provider set out in Subsection 2.29(b), the
Optionee’s employer, ceases to be a director, officer, employee or Service
Provider, as the case may be, of the Company or a subsidiary of the Company due
to his or her retirement at the request of his or her employer earlier than the
normal retirement date under the Company’s

 

6

 

retirement
policy then in force, or due to his or her termination by the Company other
than for cause, or due to his or her voluntary resignation, the Option then held
by the Optionee shall be exercisable to acquire Vested Unissued Option Shares
as follows:

 

(i)                                     subject
to Subsection 4.4(c)(ii), in the case of an employee of the Company or of
a subsidiary of the Company, until the Expiry Date or the date which is sixty
(60) days after the Optionee ceases to be an employee of the Company or a
subsidiary of the Company, which ever is sooner, after which the Option held by
such Optionee shall be cancelled;

 

(ii)                                  in
the case of a director and/or officer who is also an employee of the Company or
of a subsidiary of the Company, until the Expiry Date or the date which is one (1) year
after the Optionee ceases to be an employee of the Company or a subsidiary of
the Company, which ever is sooner, after which the Option held by such Optionee
shall be cancelled;

 

(iii)                               in the case of a
director and/or officer who is not also an employee of the Company or a
subsidiary of the Company, or in the case of a Service Provider, until the
Expiry Date of the Option.

 

For
greater certainty, an Option that had not become Vested in respect of certain
Unissued Option Shares at the time that the relevant event referred to in this Section 4.4
occurred, shall not be or become exercisable in respect of such Unissued Option
Shares and shall be cancelled.

 

Notwithstanding
that an Option may have been transferred to a family trust, the Option will
terminate after the transferor of the Option ceases to be a director, officer,
employee or Service Provider of the Company or a subsidiary of the Company, on the
date specified in and in accordance with Subsection 4.4(a), (b) or
(c), as the case may be.

 

4.5                                 Effect
of a Take-over Bid

 

If a bona  fide offer (an “Offer”)
for Shares is made to the Optionee or to shareholders of the Company generally
or to a class of shareholders which includes the Optionee, which Offer, if
accepted in whole or in part, would result in a Change of Control , the Company
shall, immediately upon receipt of notice of the Offer, notify each Optionee
who is an officer or director of the Company of full particulars of the Offer,
whereupon all Option Shares subject to such Option will become Vested and the
Option may be exercised in whole or in part by the Optionee so as to permit the
Optionee to tender the Option Shares received upon exercise, pursuant to the
Offer. However, if:

 

(a)                                  the
Offer is not completed within the time specified therein; or

 

7

 

(b)                                 all
of the Option Shares tendered by the Optionee pursuant to the Offer are not
taken up or paid for by the offeror in respect thereof,

 

then the Option Shares
received upon such exercise, or in the case of clause (b) above, the
Option Shares that are not taken up and paid for, may be returned by the
Optionee to the Company and reinstated as authorized but unissued Shares and
with respect to such returned Option Shares, the Option shall be reinstated as
if it had not been exercised and the terms upon which such Option Shares were
to become Vested pursuant to Section 4.3 shall be reinstated. If any
Option Shares are returned to the Company under this Section 4.5, the
Company shall immediately refund the exercise price to the Optionee for such
Option Shares.

 

4.6                                 Acceleration
of Expiry Date

 

If at
any time when an Option granted under the Plan remains unexercised with respect
to any Unissued Option Shares, an Offer is made by an offeror, the Board may,
upon notifying each Optionee of full particulars of the Offer, declare all
Option Shares issuable upon the exercise of Options granted under the Plan,
Vested, and declare that the Expiry Date for the exercise of all unexercised
Options granted under the Plan is accelerated so that all Options will either
be exercised or will expire prior to the date upon which Shares must be
tendered pursuant to the Offer. After a declaration by the Board under this Section 4.6,
the provisions of Section 4.5 will continue to apply to the Option.

 

4.7                                 Effect
of a Change of Control

 

If a
Change of Control occurs, 50% (or such larger percentage as may be determined
by the Board) of all Option Shares subject to each outstanding Option which
have not yet Vested will become Vested, whereupon such Option may be exercised
in whole or in part by the Optionee to the extent that the Option is Vested as
a result of this Section 4.7.

 

4.8                                 Exclusion
From Severance Allowance, Retirement Allowance or Termination Settlement

 

If the Optionee, or, in the case of an Option granted
to an Optionee who falls under the definition of Service Provider set out in
Subsection 2.29(b), the Optionee’s employer, retires, resigns or is
terminated from employment or engagement with the Company or any subsidiary of
the Company, the loss or limitation, if any, pursuant to the Option Agreement
with respect to the right to purchase Option Shares which were not Vested at
that time or which, if Vested, were cancelled, shall not give rise to any right
to damages and shall not be included in the calculation of nor form any part of
any severance allowance, retiring allowance or termination settlement of any
kind whatsoever in respect of such Optionee.

 

8

 

4.9                                 Shares
Not Acquired

 

Any
Unissued Option Shares not acquired by an Optionee under an Option which has
expired may be made the subject of a further Option pursuant to the provisions
of the Plan.

 

5.                                      ADJUSTMENT
OF OPTION PRICE AND NUMBER OF OPTION SHARES

 

5.1                                 Share
Reorganization

 

Whenever
the Company issues Shares to all or substantially all holders of Shares by way
of a stock dividend or other distribution, or subdivides all outstanding Shares
into a greater number of Shares, or combines or consolidates all outstanding
Shares into a lesser number of Shares (each of such events being herein called
a “Share Reorganization”) then effective immediately after the record date for
such dividend or other distribution or the effective date of such subdivision,
combination or consolidation, for each Option:

 

(a)                                  the
Option Price will be adjusted to a price per Share which is the product of:

 

(i)                                     the
Option Price in effect immediately before that effective date or record date;
and

 

(ii)                                  a
fraction, the numerator of which is the total number of Shares outstanding on
that effective date or record date before giving effect to the Share
Reorganization, and the denominator of which is the total number of Shares that
are or would be outstanding immediately after such effective date or record
date after giving effect to the Share Reorganizations; and

 

(b)                                 the
number of Unissued Option Shares will be adjusted by multiplying (i) the
number of Unissued Option Shares immediately before such effective date or
record date by (ii) a fraction which is the reciprocal of the fraction
described in clause (a)(ii) above.

 

5.2                                 Special
Distribution

 

Whenever
the Company issues by way of a dividend or otherwise distributes to all or
substantially all holders of Shares;

 

(a)                                  shares
of the Company, other than the Shares;

 

(b)                                 evidences
of indebtedness;

 

9

 

(c)                                  any
cash or other assets, excluding cash dividends (other than cash dividends which
the Board has determined to be outside the normal course); or

 

(d)                                 rights,
options or warrants;

 

then
to the extent that such dividend or distribution does not constitute a Share
Reorganization (any of such non-excluded events being herein called a “Special
Distribution”), and effective immediately after the record date at which
holders of Shares are determined for purposes of the Special Distribution, for
each Option the Option Price will be reduced, and the number of Unissued Option
Shares will be correspondingly increased,
by such amount, if any, as is determined by the Board in its sole and
unfettered discretion to be appropriate in order to properly reflect any
diminution in value of the Option Shares as a result of such Special
Distribution.

 

5.3                                 Corporate Organization

 

Whenever there is:

 

(a)                                  a reclassification of outstanding Shares, a
change of Shares into other shares or securities, or any other capital
reorganization of the Company, other than as described in Sections 5.1 or 5.2;

 

(b)                                 a consolidation, merger or amalgamation of the
Company with or into another corporation resulting in a reclassification of
outstanding Shares into other shares or securities or a change of Shares into
other shares or securities; or

 

(c)                                  a transaction whereby all or substantially all of
the Company’s undertaking and assets become the property of another
corporation;

 

(any such event being herein
called a “Corporate Reorganization”) the Optionee will have an option to
purchase (at the times, for the consideration, and subject to the terms and
conditions set out in the Plan) and will accept on the exercise of such option,
in lieu of the Unissued Option Shares which he would otherwise have been
entitled to purchase, the kind and amount of shares or other securities or
property that he would have been entitled to receive as a result of the
Corporate Reorganization if, on the effective date thereof, he had been the
holder of all Unissued Option Shares or if appropriate, as otherwise determined
by the Directors.

 

5.4                                 Determination of Option Price and Number of
Unissued Option Shares

 

If any questions arise at any time with respect to the
Option Price or number of Unissued Option Shares deliverable upon exercise of
an Option following a Share Reorganization, Special Distribution or Corporate
Reorganization, such questions

 

10

 

shall be conclusively determined by the Company’s
auditor, or, if they decline to so act, any other firm of Chartered Accountants
in Vancouver, British Columbia, that the Board may designate and who will have
access to all appropriate records and such determination will be binding upon
the Company and all Optionees.

 

6.                                      SUBSTANTIAL SALE

 

6.1                                 Substantial
Sale

 

For so
long as the Shareholders’ Agreement is in effect, if

 

(a)                                  securityholders
of the Company, including at least two securityholders who are not Major
Investors (the “Selling Shareholders”), holding not less than 73.5% of the
outstanding shares in the capital of the Company calculated on a Fully
Converted Basis have agreed to Transfer their Equity Securities (a “Substantial
Sale”) to a Person, or Persons acting in concert, (a “Purchaser”); and

 

(b)                                 the
Purchaser offers to purchase the Options of an Optionee, the Optionee must sell
the Options to the Purchaser at a price equal to

 

	
  The number of
  Shares then exercisable under the Option

  	
   

  	
  X

  	
   

  	
  The price per
  Share paid by the Purchaser to the Selling Shareholders minus the exercise
  price per Share under the Option

  

 

on
equivalent terms
and conditions, mutatis mutandis, as those
agreed to by the Selling Shareholders in respect of the Substantial Sale, but
in any event subject to the rights, privileges, restrictions and conditions,
including all liquidation preferences, attaching to the securities as set out
in the Company’s constating documents.

 

If the
Purchaser offers to buy the Options of an Optionee and the Optionee does not
sell the Optionee’s Options to the Purchaser as contemplated above, then the
Optionee’s Option will expire, terminate and be cancelled on completion of the
Substantial Sale.

 

7.                                      CALIFORNIA RESIDENTS

 

Notwithstanding any other provision of this Plan to the
contrary, if the Company grants an Option to a resident of the State of
California and such Option grant is not exempt from qualification under the
California securities laws other than pursuant to Section 25102(o) of the
California Corporations Code, or any successor thereto, the following
provisions shall apply to such Option as long as required by California law:

 

11

 

7.1                                 Minimum Exercise Price

 

The Option Price shall not be less than eighty-five
percent (85%) of the Fair Market Value of one (1) Share on the Grant Date;
provided, however, that if the Optionee owns securities possessing more than
10% of the total combined voting power of all classes of securities of the
Company or of any parent or subsidiary of the Company on the Grant Date, the
Option Price shall not be less than one hundred ten percent (110%) of the Fair
Market Value of one (1) Share on the Grant Date. The term “Fair Market
Value” as used in this paragraph means the fair market value of one (1) Share
as determined by the Board; provided, however, that if the Shares are publicly
traded, the fair market value shall be determined by the Board with reference
to the recent market price of the Shares.

 

7.2                                 Minimum Vesting

 

The Option shall become exercisable at a rate of at
least 20% of the Option Shares per year, with the first 20% of the Option
Shares becoming exercisable no later than one (1) year after the Grant
Date.

 

7.3                                 Transfer Restrictions

 

The Option may not be transferred except by will, by the
laws of descent and distribution, or as permitted by Rule 701 under the
United States Securities Act of 1933, as amended.

 

7.4                                 Financial Statements

 

Annually, the Company will deliver or cause to be
delivered to the Optionee, no later than such information is delivered to the
Company’s security holders, annual financial statements of the Company;
provided, however, that this paragraph does not apply to key employees whose
duties in connection with the Company assure them access to equivalent
information.

 

7.5                                 Shareholder Approval Requirement

 

If the
Plan has not been approved by a majority of the outstanding securities of the
Company entitled to vote (voting on an as if converted basis) by the date that
is 12 months after the date that the Board approved the addition to the Plan of
this Section 7 relating to California residents, then any Option granted
under the Plan to a California resident subject to this Section 7 shall
immediately terminate. No Option granted under the Plan to a California
resident subject to this Section 7 shall be exercisable until such
approval shall have been obtained.

 

12

 

8.                                      MISCELLANEOUS

 

8.1                                 Right to Employment

 

Neither this Plan nor any of the provisions hereof shall
confer upon any Optionee any right with respect to employment or continued
employment with the Company or any subsidiary of the Company or interfere in
any way with the right of the Company or any subsidiary of the Company to
terminate such employment.

 

8.2                                 Necessary Approvals

 

The obligation of the Company to sell and deliver Shares
in accordance with the Plan is subject to the approval of any governmental
authority having jurisdiction. If any Shares cannot be issued to any Optionee
for any reason, including, without limitation, the failure to obtain such
approval, then the obligation of the Company to issue such Shares shall
terminate and any Option Price paid by an Optionee to the Company shall be
immediately refunded to the Optionee by the Company.

 

8.3                                 Administration of the Plan

 

The Board shall, without limitation, have full and final
authority in its discretion, but subject to the express provisions of the Plan,
to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to make all other determinations deemed
necessary or advisable in respect of the Plan. Except as set forth in Section 5.4,
the interpretation and construction of any provision of the Plan by the Board
shall be final and conclusive. Administration of the Plan shall be the
responsibility of the appropriate officers of the Company and all costs in
respect thereof shall be paid by the Company.

 

8.4                                 Income Taxes

 

As a condition of and prior to participation in the Plan
any Optionee shall on request authorize the Company in writing to withhold from
any remuneration otherwise payable to him or her any amounts required by any
taxing authority to be withheld for taxes of any kind as a consequence of his
or her participation in the Plan.

 

8.5                                 Amendments to the Plan

 

The Board may from time to time, subject to applicable
law and to the prior approval, if required, of any regulatory body having
authority over the Company or the Plan, suspend, terminate or discontinue the
Plan at any time, or amend or revise the terms of the Plan or of any Option
granted under the Plan and the Option Agreement relating thereto, provided that
no such amendment, revision, suspension, termination or discontinuance shall in
any manner adversely affect any Option previously granted to an Optionee under
the Plan without the consent of that Optionee. For further certainty, nothing
in the Plan shall limit the Board’s ability to grant Options under the Plan on
terms that may be different or more favorable to an Optionee than those
specified herein.

 

13

 

8.6                                 Form of Notice

 

A notice given to the Company shall be in writing,
signed by the Optionee and delivered to the Secretary of the Company.

 

8.7                                 No Representation or Warranty

 

The Company makes no representation or warranty as to
the future market value of any Shares issued in accordance with the provisions
of the Plan.

 

8.8                                 Compliance with Applicable Law

 

If any provision of the Plan or
any Option Agreement contravenes any law or any order, policy, by-law or
regulation of any regulatory body having authority over the Company or the
Plan, then such provision shall be deemed to be amended to the extent required
to bring such provision into compliance therewith.

 

8.9                                 No Assignment

 

No Optionee may assign any of his or her rights under
the Plan without the consent from the Board or a majority of the Major Investors.

 

8.10                           Rights
of Optionees

 

An
Optionee shall have no rights whatsoever as a shareholder of the Company in
respect of any of the Unissued Option Shares (including, without limitation,
voting rights or any right to receive dividends, warrants or rights under any
rights offering).

 

8.11                           Conflict

 

In the event of any conflict between the provisions of
this Plan and an Option Agreement, the provisions of the Plan shall govern.

 

8.12                           Governing Law

 

The Plan and each Option Agreement issued pursuant to
the Plan shall be governed by the laws of the province of British Columbia.

 

8.13                           Time of Essence

 

Time is of the essence of this Plan and of each Option
Agreement. No extension of time will be deemed to be or to operate as a waiver
of the essentiality of time.

 

14

 

8.14                           Entire Agreement

 

This Plan and the Option Agreement sets out the entire
agreement between the Company and the Optionees relative to the subject matter
hereof and supersedes all prior agreements, undertakings and understandings,
whether oral or written.

 

8.15                           Term of Plan

 

No Options shall be granted under this Plan after September 16,
2013.

 

This Amended and Restated Stock Option Plan was approved by the Board
of Directors on September 16, 2003, was restated after giving effect to
the consolidation of the Company’s share capital on a one for five basis on September 23,
2003 and was further amended and restated by the Board of Directors on December 20,
2004 and June 15, 2005.

 

15

 

SCHEDULE “A”

 

ONCOGENEX
TECHNOLOGIES INC.

 

STOCK OPTION
PLAN

OPTION AGREEMENT

 

This
Option Agreement is entered into between OncoGenex Technologies Inc. (“the
Company”) and the Optionee named below pursuant to the Company Stock Option
Plan as amended (the “Plan”), a copy of which is attached hereto, and confirms
that:

 

1.                                       on •, 20• (the “Grant Date”);

 

2.                                       • (the “Optionee”);

 

3.                                       was granted the option (the “Option”) to purchase
•
common shares (the “Option Shares”) of the Company;

 

4.                                       for the price (the “Option Price”) of $• per share;

 

5.                                       which shall be exercisable (“Vested”) in whole or
in part in the following amounts on or after the following dates:

 

i)                 as to • shares, as at the Grant Date.

 

ii)              as to • shares, upon each anniversary of the Grant Date,
beginning on the first anniversary.

 

6.                                       terminating on the •, 20•  (the “Expiry
Date”);

 

all
on the terms and subject to the conditions set out in the Plan. For greater
certainty, once Option Shares have become Vested, they continue to be
exercisable until the termination or cancellation thereof as provided in this
Option Agreement and the Plan.

 

By
signing this Option Agreement, the Optionee acknowledges that the Optionee has
read and understands the Plan and agrees to the terms and conditions of the
Plan and this Option Agreement.

 

In
order to exercise this Option, the Optionee must deliver to the Company a
notice of exercise in the form attached hereto as Exhibit No. 1, duly
completed and executed together with a certified cheque for payment for all
Option Shares in respect of which the Option is exercised.

 

 

IN WITNESS WHEREOF
the parties hereto have executed this Option Agreement as of the •  day of • , 20•.

 

 

	
  SIGNED, SEALED
  AND DELIVERED

  	
  )

  	
   

  	
   

  
	
  in the presence
  of

  	
  )

  	
   

  	
   

  
	
   

  	
  )

  	
   

  	
   

  
	
   

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  	
   

  
	
  Witness

  	
  )

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ONCOGENEX
  TECHNOLOGIES INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

17

 

EXHIBIT NO. 1 TO OPTION
AGREEMENT

 

EXERCISE
FORM

 

	
  TO:

  	
   

  	
  OncoGenex Technologies Inc.

  	
   

  	
   

  
	
   

  	
   

  	
  400 – 1001 West Broadway

  	
   

  	
   

  
	
   

  	
   

  	
  Vancouver, British Columbia V6H 4B1

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
  604-736-3678

  
	
   

  	
   

  	
  Facsimile:

  	
   

  	
  604-736-3687

  
	
   

  	
   

  	
  Attention:

  	
   

  	
  Scott Cormack

  
							

 

I,
the undersigned holder of the attached Option Agreement with OncoGenex
Technologies Inc. (the “Company”), hereby exercise my Option and agree to
acquire                     
common shares of the Company (the “Acquired Shares”) and enclose a certified
cheque in the amount of $                     
representing the exercise price (Option Price multiplied by number of shares being
acquired) for the Acquired Shares.

 

I
hereby request that the Company issue the Acquired Shares to me under the
OncoGenex Technologies Inc. Stock Option Plan and irrevocably direct that the
Acquired Shares be issued registered in the following name and address and
delivered as follows:

 

	
  Name in Full

  	
   

  	
  Registered
  Address

  	
   

  	
  Delivery
  Address

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

(PLEASE
PRINT IN FULL THE NAME IN WHICH CERTIFICATES ARE TO BE ISSUED.)

 

DATED
this             day of                           
,           .

 

	
   

  	
   

  
	
   

  	
  Signature of Optionee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Optionee

  

 

18

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