Document:

Form Supplemental Plan

 

  EXHIBIT 4.1

 

	
WARNING

Granting options to directors and officers under this plan may violate

NASD or stock exchange rules if the plan does not meet the broad based

plan exemption from shareholder approval

CELL GENESYS, INC.

2001 NONSTATUTORY STOCK OPTION PLAN

 

	Purposes of the Plan.  The purposes of this
Nonstatutory Stock Option Plan are:

	to attract and retain the best available personnel for positions of
substantial responsibility, 
	to provide additional incentive to Employees, and
	to promote the success of the Company's business.

Options granted under the Plan will be Nonstatutory Stock Options.

	Definitions.  As used herein, the following definitions shall
apply:

	"Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
	"Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
	"Board" means the Board of Directors of the Company.
	"Code" means the Internal Revenue Code of 1986, as
amended.
	"Committee"  means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
	"Common Stock" means the Common Stock of the Company.
	"Company" means Cell Genesys, Inc., a Delaware
corporation.
	"Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
	"Director" means a member of the Board.
	"Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
	"Employee" means any person, including Officers, employed
by the Company or any Parent or Subsidiary of the Company.  A Service Provider
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company
or between the Company, its Parent, any Subsidiary, or any successor.  Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
	"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
	"Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

	If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
	If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
	In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.

	"Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant.  The
Notice of Grant is part of the Option Agreement.
	"Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
	"Option" means a nonstatutory stock option granted pursuant
to the Plan, that is not intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
	"Option Agreement" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant.  The Option Agreement is subject to the terms and conditions of the
Plan.
	"Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
	"Optioned Stock" means the Common Stock subject to an
Option.
	"Optionee" means the holder of an outstanding Option
granted under the Plan.
	"Parent" means a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the Code.
	"Plan" means this 2001 Nonstatutory Stock Option Plan.
	"Service Provider" means an Employee including an Officer,
Consultant or Director.
	"Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
	"Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the
Code.

	Stock Subject to the Plan.  Subject to the
provisions of Section 12 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is two million (2,000,000) Shares.
The Shares may be authorized, but unissued, or reacquired Common Stock.  

If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

	Administration of the Plan.

	Administration.  The Plan shall be administered by (i) the Board
or (ii) a Committee, which committee shall be constituted to satisfy
Applicable Laws. 

	Powers of the Administrator.  Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator shall have
the authority, in its discretion:

	to determine the Fair Market Value of the Common Stock;
	to select the Service Providers to whom Options may be granted
hereunder;
	to determine whether and to what extent Options are granted hereunder;
	to determine the number of shares of Common Stock to be covered by each
Option granted hereunder;
	to approve forms of agreement for use under the Plan;
	to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder.  Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option  or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
shall determine;
	to construe and interpret the terms of the Plan and awards granted pursuant
to the Plan;
	to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws;
	to modify or amend each Option (subject to Section 14(b) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;
	to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Option previously granted by the
Administrator;
	to determine the terms and restrictions applicable to Options;
	to allow Optionees to satisfy withholding tax obligations by electing to
have the Company withhold from the Shares to be issued upon exercise of an
Option that number of Shares having a Fair Market Value equal to the amount
required to be withheld.  The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined.  All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
	to make all other determinations deemed necessary or advisable for
administering the Plan.

	Effect of Administrator's Decision.  The
Administrator's decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options.

	Eligibility.  Options may be granted to Service Providers; provided,
however, that notwithstanding anything to the contrary contained in the Plan,
Options may not be granted to Officers and Directors.

	Limitation.  Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

	Term of Plan.  The Plan shall become effective upon its
adoption by the Board.  It shall continue in effect for ten (10) years, unless
sooner terminated under Section 14 of the Plan. 

	Term of Option.  The term of each Option shall be stated in the
Option Agreement. 

	Option Exercise Price and Consideration.

	Exercise Price.  The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, but in no case shall the per share exercise price be less than
the Fair Market Value.

	Waiting Period and Exercise Dates.  At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.

	Form of Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  Such consideration may consist entirely of:

	cash;
	check;
	other Shares which (A) in the case of Shares acquired upon exercise of
an option, have been owned by the Optionee 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 aggregate exercise price of the Shares as to which said Option
shall be exercised;
	consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;
	a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any
Company-sponsored deferred compensation program or arrangement;
	such other consideration and method of payment for the issuance of Shares to
the extent permitted by Applicable Laws; or
	any combination of the foregoing methods of payment.

	Exercise of Option.

	Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.  An Option may not be exercised for a fraction of
a Share.

An Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised.  Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse.  Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised.  No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

	Termination of Relationship as a Service Provider.  If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan.  If, after termination, the Optionee does not exercise his
or her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

	Disability of Optionee.  If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement).  In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination.  If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan.  If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

	Death of Optionee.  If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death.  In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination.  If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan.  The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution.  If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

	Buyout Provisions.  The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

	Non-Transferability of Options.  Unless determined
otherwise by the Administrator, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee.  If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

	Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale. 

	Changes in Capitalization.  Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration."  Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive.  Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.

	Dissolution or Liquidation.  In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable.  In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

	Merger or Asset Sale.  In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.  In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable.  If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period.  For
the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock, immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

	Date of Grant.  The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

	Amendment and Termination of the Plan.

	Amendment and Termination.  The Board may at any time amend, alter,
suspend or terminate the Plan.  

	Effect of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company.  Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to options granted under the Plan prior to the date of such
termination.

	Conditions Upon Issuance of Shares.

	Legal Compliance.  Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

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

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

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

 

CELL GENESYS, INC.

2001 NONSTATUTORY STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

	NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

Grant Number

Date of Grant

Vesting Commencement Date

Exercise Price per Share$

Total Number of Shares Granted

Total Exercise Price$

Type of Option:Nonstatutory Stock Option

Term/Expiration Date:

Vesting Schedule:

Subject to the Optionee continuing to be a Service Provider on such dates,
this Option shall vest and become exercisable in accordance with the following
schedule:

[25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48th of the Shares subject to the Option
shall vest upon the last day of each month thereafter.]

Termination Period:

This Option may be exercised for 3 months after Optionee ceases to be a
Service Provider.  Upon the death or Disability of the Optionee, this Option may
be exercised for such longer period as provided in the Plan.  In no event shall
this Option be exercised later than the Term/Expiration Date as provided
above.

	AGREEMENT

	Grant of Option.  The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to
purchase the number of Shares, as set forth in the Notice of Grant, at the
exercise price per share set forth in the Notice of Grant (the "Exercise
Price"), subject to the terms and conditions of the Plan, which is
incorporated herein by reference.  Subject to Section 14(b) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and the terms
and conditions of this Option Agreement, the terms and conditions of the Plan
shall prevail.

	Exercise of Option.

	Right to Exercise.  This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

	Method of Exercise.  This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required
by the Company pursuant to the provisions of the Plan.  The Exercise Notice
shall be completed by the Optionee and delivered to the Company.  The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares.  This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws.  Assuming such compliance,
for income tax purposes the Exercised Shares shall be considered transferred to
the Optionee on the date the Option is exercised with respect to such Exercised
Shares.

	Method of Payment.  Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

	cash;
	check;
	consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan; or 
	surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

	Non-Transferability of Option.  This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee.  The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

	Term of Option.  This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

	Tax Consequences.  Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below.  THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE.  THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.

	Exercising the Option.  The Optionee may incur regular federal income
tax liability upon exercise of an NSO.  The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price.  If the Optionee is an Employee or
a former Employee, the Company will be required to withhold from his or her
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.

	Disposition of Shares.  If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

	Vesting Acceleration Upon Certain Terminations of Employment or
Consulting Relationship Following a Change of Control.

	Vesting Acceleration for Optionees With One Year or More of Service.
If Optionee has served as an Employee of the Company for one (1) year or more as
of the date of a "Change of Control" and following such "Change
of Control" Optionee's Continuous Status as an Employee terminates as a
result of "Involuntary Termination" other than for "Cause"
at any time within twenty-four (24) months following such "Change of
Control", then one hundred percent (100%) of this Option shall
automatically be accelerated in full so as to become completely vested and fully
exercisable (all quoted terms as defined below).

	Change of Control.  "Change of Control" means the
occurrence of any of the following events:

	Any "person" (as such term is used in Sections 13 (d) and 14(d) of
the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule l3d-3 under said Act), directly
or indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company's then outstanding voting
securities; or
	A change in the composition of the Board occurring within a two-year period,
as a result of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
	The stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the total voting power represented by the voting securities of the Company of
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all substantially all the Company's assets.

	Involuntary Termination. "Involuntary Termination" shall
mean (i) the elimination of Optionee's job position or a material reduction of
the Optionee's job position or a material reduction of the Optionee's duties,
authority or responsibilities, relative to the Optionee's job position or
duties, authority or responsibilities as in effect immediately prior to such
reduction; a reduction by the Company in the base salary of the Optionee as in
effect immediately prior to such reduction; (iii) a material reduction by the
Company in the kind of level of employee benefits, including bonuses, to which
the Optionee was entitled immediately prior to such reduction with the result
that the Optionee's overall benefits package is materially reduced; or (iv) the
relocation of the Optionee to a facility or a location more than (30) miles from
the Optionee's then present location; or (v) any other involuntary termination
of the Optionee's employment without cause except in the event of
disability.

	Cause.  "Cause" shall mean (i) any act of personal
dishonesty, fraud or misrepresentation taken by the Optionee in connection with
his responsibilities as an employee and intended to result in substantial gain
or personal enrichment of the Optionee at the expense of Company, (ii) the
Optionee's conviction of a felony, (iii) improper disclosure of the Company's
confidential or proprietary information by the Optionee; or (iv) the Optionee's
continued failure to substantially perform his principal duties in a reasonable
period of time after receipt of written notice from the Company.

	Voluntary Resignation; Termination For Cause; Non-Termination.  If,
following a Change of Control, the Optionee's Continuous Status as an Employee
terminates by reason of the Optionee's voluntary resignation (and is not an
Involuntary Termination), or if the Optionee's Continuous Status as an Employee
does not terminate, then the Optionee shall not be entitled to receive
accelerated Option vesting under Section 7(a) hereof.

	Entire Agreement; Governing Law.  The Plan is incorporated herein by
reference.  The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.  This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.

	NO GUARANTEE OF CONTINUED SERVICE.  OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.  Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

	

OPTIONEE

Signature

Print Name

Residence Address

	

CELL GENESYS, INC.

By

Title

EXHIBIT A

CELL GENESYS, INC. 

2001 NONSTATUTORY STOCK OPTION PLAN

EXERCISE NOTICE

 

Cell Genesys, Inc.

342 Lakeside Drive

Foster City, CA 94404

Attention:  Corporate Secretary

	Exercise of Option.  Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Cell Genesys, Inc.
(the "Company") under and pursuant to the 2001 Nonstatutory Stock
Option Plan (the "Plan") and the Stock Option Agreement dated,
_________, ___ (the "Option Agreement").  The purchase price for the
Shares shall be $_______, as required by the Option Agreement.

	Delivery of Payment.  Purchaser herewith delivers to the Company the
full purchase price for the Shares.

	Representations of Purchaser.  Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.

	Rights as Shareholder.  Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option.  The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of
the Plan.

	Tax Consultation.  Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares.  Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

	Entire Agreement; Governing Law.  The Plan and Option Agreement are
incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser.  This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

	

Submitted by:

PURCHASER

Signature

Print Name

Address:

	

Accepted by:

CELL GENESYS, INC.

By

Title

Date Received

Address:342 Lakeside Drive

       Foster City, CA   94404<PAGE>   1
                                                                    EXHIBIT 10.1

                   RESTATED LIBERTY BAY FINANCIAL CORPORATION
                         INCENTIVE STOCK OPTION PLAN II

                                      PLAN

        1. Purpose of the Plan. The purpose of this Plan is to provide
additional incentives to Employees of Liberty Bay Financial Corporation and
future subsidiaries, thereby helping to attract and retain the best available
personnel for positions of responsibility with the Corporation and otherwise
promoting the success of the business activities of the Corporation. It is
intended that Options issued pursuant to this Plan shall constitute either
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code or nonqualified stock options.

        2. Definitions. As used herein, the following definitions shall apply:

               (a) "Board" shall mean the Board of Directors of the Corporation.

               (b) "Committee" shall mean the Board or the Committee appointed
        by the Board in accordance with subsection 4(a) of the Plan.

               (c) "Common Stock" shall mean the Corporation's common stock.

               (d) "Continuous Status as an Employee" shall mean the absence of
        any interruption or termination of service as an Employee. Continuous
        Status as an Employee shall not be considered interrupted in the case of
        sick leave, military leave, or any other approved leave of absence.

               (e) "Corporation" shall mean Liberty Bay Financial Corporation, a
        Washington banking corporation.

               (f) "Employee" shall mean any person employed by the Corporation
        or any Parent or Subsidiary of the Corporation which now exists or is
        hereafter organized or is acquired by the Corporation, who is deemed to
        be a "key employee" by the Committee.

               (g) "Nonqualified Stock Option" shall mean an Option other than
        an Incentive Stock Option.

               (h) "Option" shall mean a stock option granted pursuant to the
        Plan. Options shall include both Incentive Stock Options under Section
        422 of the Internal Revenue Code and Nonqualified Stock Options, as the
        context requires.

               (i) "Optioned Stock" shall mean the Common Stock subject to an
        Option.

               (j) "Optionee" shall mean an Employee who receives an Option.

               (k) "Parent" shall mean any corporation having a relationship
        with the Corporation as described in Section 424(e) of the Internal
        Revenue Code.

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 1
<PAGE>   2

               (l) "Plan" shall mean the Liberty Bay Financial Corporation
        Incentive Stock Option Plan II, as restated.

               (m) "Shareholder-Employee" shall mean an Employee who owns stock
        representing more than 10 percent of the total combined voting power of
        all classes of stock of the Corporation or of any Parent or Subsidiary.
        For this purpose, the attribution of stock ownership rules provided in
        Section 424(d) of the Internal Revenue Code shall apply.

               (n) "Subsidiary" shall mean any corporation having a relationship
        with the Corporation as described in Section 424(f) of the Internal
        Revenue Code.

        3. Stock Subject to Options.

               (a) Number of Shares Reserved. The maximum number of shares
        available pursuant to the Plan is 35,000 shares of the Common Stock of
        the Corporation (subject to adjustment as provided in subsection 6(h) of
        the Plan). During the term of this Plan, the Corporation will at all
        times reserve and keep available a sufficient number of shares of its
        Common Stock to satisfy the requirements of the Plan.

               (b) Expired Options. If any outstanding Option expires or becomes
        unexercisable for any reason without having been exercised in full, the
        shares of Common Stock allocable to the unexercised portion of such
        Option shall again become available for other Options.

        4. Administration of the Plan.

               (a) The Committee. The Plan shall be administered by the Board
        directly, acting as a Committee of the whole, or if the Board elects, by
        a separate Committee appointed by the Board for that purpose and
        consisting of at least three Board members. All references in the Plan
        to the "Committee" shall refer to such separate committee, if any is
        established, or if none is then in existence, shall refer to the Board
        as a whole. Once appointed, any such Committee shall continue to serve
        until otherwise directed by the Board. From time to time the Board may
        increase the size of the Committee and appoint additional members
        thereof, remove members (with or without cause), appoint new members in
        substitution therefor, and fill vacancies however caused.

                      (1) The Committee shall select one of its members as
        chairman, and shall hold meetings at such times and places as the
        chairman or a majority of the Committee may determine.

                      (2) At least annually, the Committee shall present a
        written report to the Board indicating the persons to whom Options have
        been granted since the date of the last such report, and in each case
        the date or dates of Options granted, the number of shares optioned, and
        the Option price per share.

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 2
<PAGE>   3

                      (3) At all times, the Board shall have the power to remove
        all members of the Committee and thereafter to directly administer the
        Plan as a Committee of the whole.

               (b)  Powers of the Committee. Except for the terms and conditions
        explicitly set forth in the Plan, the Committee shall have the authority
        and discretion:

                      (1) To determine the persons to whom Options are to be
        granted, the times of grant and the number of shares to be represented
        by each Option;

                      (2) To determine the Option price for the shares of Common
        Stock to be issued pursuant to each Option, subject to the provisions of
        subsection 6(b) of the Plan;

                      (3) To determine all other terms and conditions of each
        Option granted under the Plan, which need not be identical;

                      (4) To modify or amend the terms of any Option previously
        granted, or to grant substitute Options, subject to the provisions of
        subsections 6(k) and 6(l) of the Plan;

                      (5) To interpret the Plan;

                      (6) To authorize any person or persons to execute and
        deliver Option agreements or to take any other actions deemed by the
        Committee to be necessary or appropriate to effectuate the grant of
        Options;

                      (7) To make all other determinations and take all other
        actions which the Committee deems necessary or appropriate to administer
        the Plan in accordance with its terms and conditions.

               All actions of the Committee shall be either by (i) a majority
        vote of the members of the full Committee at a meeting of the Committee,
        or (ii) by unanimous written consent of all members of the full
        Committee without a meeting thereof.

               All decisions, determinations and interpretations of the
        Committee shall be final and binding upon all persons, including all
        Optionees and any other holders or persons interested in any Options,
        unless otherwise expressly determined by a vote of the majority of the
        entire Board. No member of the Committee or of the Board shall be liable
        for any action or determination made in good faith with respect to the
        Plan or any Option.

        5. Eligibility. Options may be granted only to Employees who the
Committee, in its discretion, from time to time select.

        Granting of Options pursuant to the Plan shall be entirely discretionary
with the Committee, and the adoption of this Plan shall not confer upon any
person any right to receive any Option or Options pursuant to the Plan unless
and until said Options are granted by the Committee, in its sole discretion.
Neither the adoption of the Plan nor the granting of any Options pursuant to the
Plan shall confer upon any Employee any right with respect to

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 3
<PAGE>   4

continuation of employment, nor shall the same interfere in any way with the
Employee's right or with the right of the Corporation or any Subsidiary to
terminate the employment relationship at any time.

        6. Terms and Conditions of Options. All Options granted pursuant to the
Plan must be authorized by the Committee, and must be documented in written
agreements in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to all of the following terms and
conditions, unless waived or modified by the Committee.

               (a) Number of Shares; Annual Limitation. Each Option agreement
        shall state whether the Option is an Incentive Stock Option or a
        Nonqualified Stock Option and the number of shares subject to Option.
        Any number of Options may be granted to a single eligible person at any
        time and from time to time, except that in the case of Incentive Stock
        Options, the aggregate fair market value (determined as of the time each
        Option is granted) of all shares of Common Stock with respect to which
        Incentive Stock Options become exercisable for the first time by an
        Employee in any one calendar year (under all incentive stock option
        plans of the Corporation, its Parent and all of its Subsidiaries taken
        together) shall not exceed $100,000.

               (b) Option Price and Consideration. The Option price for the
        shares of Common Stock to be issued pursuant to the Option shall be such
        price as is determined by the Committee, but shall in no event be less
        than the fair market value of the Common Stock on the date of grant of
        the Option. In the case of an Incentive Stock Option granted to an
        Employee who, immediately before the grant of such Incentive Stock
        Option, is a Shareholder-Employee, the Incentive Stock Option price
        shall be at least 110 percent of the fair market value of the Common
        Stock on the date of grant of the Incentive Stock Option. The fair
        market value shall be determined by the Committee in its discretion;
        provided, however, that in the event there is a public market for the
        Common Stock, the fair market value shall be the mean of the bid and
        asked prices of the Common Stock as of the date of grant as reported on
        the National Association of Securities Dealers Automatic Quotation
        System (NASDAQ), or, in the event the Common Stock is listed on a stock
        exchange, the fair market value shall be the closing price on the
        exchange as of the date of grant of the Option.

               The Option price shall be payable either (i) in United States
        dollars upon exercise of the Option, or (ii) such other consideration of
        comparable value deemed to be acceptable by the Committee, including
        without limitation Common Stock of the Corporation, services or other
        property.

               (c) Term of Option. No Incentive Stock Option granted pursuant to
        the Plan shall be exercisable after the expiration of five (5) years
        from the date such Option is granted, and no Option granted shall be
        exercisable prior to the date on which the Employee completes one (1)
        year of continuous employment with the Corporation following the date of
        the grant, subject to the rights under subsection 6(k) hereof. Subject
        to the foregoing and other applicable provisions of the Plan including
        but not limited to subsection 6(e) herein, the term of each Option shall
        be determined by the Committee in its discretion.

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 4
<PAGE>   5

               (d) Manner of Exercise. An Option shall be deemed to be exercised
        when written notice of exercise has been given to the Corporation in
        accordance with the terms of the Option by the person entitled to
        exercise the Option, together with full payment for the shares of Common
        Stock subject to said notice.

               (e) Death or Disability of Optionee. In the event of the death or
        disability of an Optionee who at the time of his death or disability was
        an Employee and who had been in Continuous Status as an Employee since
        the date of grant of the Option, the Option shall terminate on the
        earlier of (i) 90 days after the date of death or disability of the
        Optionee or such later date as may be set in the discretion of the
        Committee; or (ii) the expiration date otherwise provided in the Option
        Agreement, except that if the expiration date of an Option should occur
        during the 90-day period immediately following the Optionee's death or
        disability, such Option shall terminate at the end of such 90-day
        period. The Option shall be exercisable at any time prior to such
        termination by the Optionee's estate, or by such person or persons who
        have acquired the right to exercise the Option by bequest or by
        inheritance or by reason of the death or disability of the Optionee.

               (f) Termination of Status as an Employee. If an Optionee's status
        as an Employee is terminated at any time after the grant of his Option
        for any reason other than death or disability, as provided in
        subparagraph (e), above, and not by reason of personal dishonesty,
        incompetence, willful misconduct, fraud, breach of fiduciary duty
        involving personal profit, intentional failure to perform stated duties,
        or willful violation of any law, rule or regulation, as provided below:

                      (1) His Incentive Stock Option shall terminate on the
        earlier of (i) the same day of the third month after the date of
        termination of his status as an Employee, or (ii) the expiration date
        otherwise provided in his Option Agreement.

                      (2) If an Optionee's status as an Employee is terminated
        at any time after the grant of his Option by reason of personal
        dishonesty, incompetence, willful misconduct, fraud, breach of fiduciary
        duty involving personal profit, intentional failure to perform stated
        duties, or willful violation of any law, rule or regulation, then his
        Option shall terminate on the date of termination of his status as an
        Employee.

               (g) Non-Transferability of Options. No Option granted pursuant to
        the Plan may be sold, pledged, assigned, hypothecated, transferred, or
        disposed of in any manner other than by will or by the laws of descent
        or distribution and may be exercised during the lifetime of the
        Optionee, only by the Optionee.

               (h) Adjustments Upon Changes in Capitalization. Subject to any
        required action by the shareholders of the Corporation, the number of
        shares of Common Stock covered by each outstanding Option, the number of
        shares of Common Stock available for grant of additional Options, and
        the price per share of Common Stock specified in each outstanding
        Option, shall be proportionately adjusted for any increase or decrease
        in the number of issued shares of Common Stock resulting from any stock
        split or other subdivision or consolidation of shares, the payment of
        any stock dividend (but only on the Common Stock) or any other increase
        or decrease in the number of such shares of

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 5
<PAGE>   6

        Common Stock effected without receipt of consideration by the
        Corporation; provided, however, that conversion of any convertible
        securities of the Corporation shall not be deemed to have been "effected
        without receipt of consideration." Such adjustment shall be made by the
        Committee, whose determination in that respect shall be final, binding
        and conclusive.

               No Incentive Stock Option shall be adjusted by the Committee
        pursuant to this subparagraph 6(i) in a manner which causes the
        Incentive Stock Option to fail to continue to qualify as an incentive
        stock option within the meaning of Section 422 of the Internal Revenue
        Code.

               Except as otherwise expressly provided in this subsection 6(h),
        no Optionee shall have any rights by reason of any stock split or the
        payment of any stock dividend or any other increase or decrease in the
        number of shares of Common Stock. Except as otherwise expressly provided
        in this subsection 6(h), any issue by the Corporation of shares of stock
        of any class, or securities convertible into shares of stock of any
        class, shall not affect the number of shares or price of Common Stock
        subject to any Options, and no adjustments in Options shall be made by
        reason thereof. The grant of an Option pursuant to the Plan shall not
        affect in any way the right or power of the Corporation to make
        adjustments, reclassifications, reorganizations or changes of its
        capital or business structure.

               (i) Date of Grant of Option. The date of grant of an Option
        shall, for all purposes, be the date on which the Committee makes the
        determination granting such Option. Said date of grant shall be
        specified in the Option Agreement.

               (j) Conditions Upon Issuance of Shares. Shares of Common Stock
        shall not be issued with respect to an Option granted under the Plan
        unless the exercise of such Option and the issuance and delivery of such
        shares pursuant thereto shall comply with all relevant provisions of
        law, including applicable federal and state securities laws.

               As a condition to the exercise of an Option, the Corporation may
        require the person exercising such Option to represent and warrant at
        the time of exercise that the shares of Common Stock are being purchased
        only for investment and without any present intention to sell or
        distribute such Common Stock if, in the opinion of counsel for the
        Corporation, such a representation is required by any of the
        aforementioned relevant provisions of law.

               (k) Merger, Sale of Assets, Etc. In the event of the merger or
        other reorganization of the Corporation with or into any other
        corporation, or in the event of a proposed sale of substantially all of
        the assets of the Corporation, or in the event of a proposed dissolution
        or liquidation of the Corporation, (i) all outstanding and unexercised
        Options shall become immediately exercisable, and (ii) such Options
        shall either be assumed by the successor corporation, or parent thereof,
        in the reorganization transaction described above or be replaced with a
        comparable award for the purchase of shares of the capital stock of the
        successor corporation, except that if such Options are not so assumed or
        replaced, then (iii) the Committee may, in the exercise of its sole
        discretion, terminate

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 6
<PAGE>   7

        all outstanding Options as of a date fixed by the Committee which may be
        sooner than the originally stated option term. The Committee shall
        notify each Optionee of such action in writing not less than 60 days
        prior to the termination date fixed by the Committee, and each Optionee
        shall have the right to exercise his Option to and including said
        termination date.

               (l) Substitute Stock Options. In connection with the acquisition
        or proposed acquisition by the Corporation or any Subsidiary, whether by
        merger, acquisition of stock or assets, or other reorganization
        transaction, of a business, any employees of which have been granted
        Incentive Stock Options, the Committee is authorized to issue, in
        substitution of any such unexercised stock option, a new Option under
        this Plan which confers upon the Optionee substantially the same
        benefits as the old option; provided, however, that the issuance of any
        new Option for an old Incentive Stock Option shall satisfy the
        requirements of Section 424(a) of the Internal Revenue Code.

               (m) Tax Compliance. The Corporation, in its sole discretion, may
        take any actions reasonable believed by it to be required to comply with
        any local, state or federal tax laws relating to the reporting or
        withholding of taxes attributable to the grant or exercise of any Option
        or the disposition of any shares of Common Stock issued upon exercise of
        an Option, including, but not limited to, (i) withholding from any
        person exercising an Option a number of shares of Common Stock having a
        fair market value equal to the amount required to be withhold by the
        Corporation under applicable tax laws, and (ii) withholding from any
        form of compensation or other amount due an Optionee or holder of shares
        of Common Stock issued upon exercise of an Option any amount required to
        be withheld by the Corporation under applicable tax laws. Withholding or
        reporting shall be considered required for purposes of this subparagraph
        if any tax deduction or other favorable tax treatment available to the
        Corporation is conditioned upon such reporting or withholding.

               (n) Other Provisions. Option Agreements exercised pursuant to the
        Plan may contain such other provisions as the Committee shall deem
        advisable, provided in the case of Incentive Stock Options the
        provisions are not inconsistent with the provisions of Section 422(b) of
        the Internal Revenue Code or with any of the other terms and conditions
        of this Plan.

        7. Term of the Plan. The Plan shall become effective on the earlier of
(a) the date of adoption of the Plan by the Board; or (b) the date of
shareholder approval of the Plan as provided in section 9 of the Plan. Unless
sooner terminated as provided in subsection 8(a) of the Plan, the Plan shall
terminate on the tenth anniversary of its effective date. Options may be granted
at any time after the effective date and prior to the date of termination of the
Plan.

        8. Amendment or Early Termination of the Plan.

               (a) Amendment or Early Termination. The Board may terminate the
        Plan at any time. The Board may amend the Plan at any time and from time
        to time in such respects as the Board may deem advisable, except that,
        without approval of the holders of a

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 7
<PAGE>   8

        majority of the outstanding shares of the Common Stock, no such revision
        or amendment shall:

                      (1) Increase the number of shares of Common Stock subject
        to the Plan other than in connection with an adjustment under subsection
        6(h) of the Plan; or

                      (2) Change the designation of the class of persons
        eligible to be granted Options, as provided in section 5 of the Plan; or

                      (3) Make any amendments to the Plan which would require
        shareholder approval under any applicable law or regulation.

               (b) Effect of Amendment or Termination. No amendment or
        termination of the Plan shall affect Options granted prior to such
        amendment or termination, and all such Options shall remain in full
        force and effect notwithstanding such amendment or termination.

        9. Shareholder Approval. The Plan shall be subject to approval by a
majority of the outstanding shares of Common Stock of the Corporation present
and entitled to vote at a duly convened meeting of the shareholders of the
Corporation.

                                        /s/ Michael J. Clementz
                                        ----------------------------------------
                                        Michael J. Clementz
                                        President and Chief Executive Officer

Restated Liberty Bay Financial Corporation
Incentive Stock Option Plan II - Page 8

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