Document:

exv10w2

 

Exhibit
10.2

INTELLECT NEUROSCIENCES, INC.

2005 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN

1. DEFINITIONS.

Unless otherwise specified or unless the context otherwise requires, the following terms, as
used in this Intellect Neurosciences, Inc. 2005 Employee, Director and Consultant Stock
Option Plan, have the following meanings:

Administrator means the Board of Directors, unless it has delegated power to
act on its behalf to the Committee, in which case the Administrator means the
Committee.

Affiliate means a corporation which, for purposes of Section 424 of the
Code, is a parent or subsidiary of the Company, direct or indirect.

Board of Directors means the Board of Directors of the Company.

Code means the United States Internal Revenue Code of 1986, as amended.

Committee means the committee of the Board of Directors to which the Board
of Directors has delegated power to act under or pursuant to the provisions of the
Plan.

Common Stock means shares of the Company’s common stock, $0.001 par value
per share.

Company means Intellect Neurosciences, Inc., a Delaware corporation.

Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.

Employee means any employee of the Company or of an Affiliate (including,
without limitation, an employee who is also serving as an officer or director of the
Company or of an Affiliate), designated by the Administrator to be eligible to be
granted one or more Options under the Plan.

Fair Market Value of a Share of Common Stock means:

(1) If the Common Stock is listed on a national securities exchange or traded in the
over-the-counter market and sales prices are regularly reported for the Common
Stock, the closing or last price of the Common Stock on the Composite Tape or other
comparable reporting system for the trading day immediately preceding the applicable
date;

 

 

(2) If the Common Stock is not traded on a national securities exchange but is
traded on the over-the-counter market, if sales prices are not regularly reported
for the Common Stock for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the mean between the bid
and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was traded
immediately preceding the applicable date; and

(3) If the Common Stock is neither listed on a national securities exchange nor
traded in the over-the-counter market, such value as the Administrator, in good
faith, shall determine.

ISO means an option meant to qualify as an incentive stock option under
Section 422 of the Code.

Non-Qualified Option means an option which is not intended to qualify as an
ISO.

Option means an ISO, a Non-Qualified Option and any other options granted in
accordance with the Plan.

Option Agreement means an agreement between the Company and a Participant
delivered pursuant to the Plan, in such form as the Administrator shall approve.

Participant means an Employee, director or consultant of the Company or an
Affiliate to whom one or more Options are granted under the Plan. As used herein,
“Participant” shall include “Participant’s Survivors” where the context requires.

Plan means this Intellect Neurosciences, Inc. 2005 Employee, Director and
Consultant Stock Option Plan, including Appendix A attached hereto as in effect from
time to time.

Shares means shares of the Common Stock as to which Options have been or may
be granted under the Plan or any shares of capital stock into which the Shares are
changed or for which they are exchanged within the provisions of Paragraph 3 of the
Plan. The Shares issued upon exercise of Options granted under the Plan may be
authorized and unissued shares or shares held by the Company in its treasury, or
both.

Survivor means a deceased Participant’s legal representatives and/or any
person or persons who acquired the Participant’s rights to an Option by will or by
the laws of descent and distribution.

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2. PURPOSES OF THE PLAN.

     The Plan is intended to encourage ownership of Shares by Employees and directors of and
certain consultants to the Company and its Affiliates in order to attract such people, to induce
them to work for the benefit of the Company or of an Affiliate and to provide additional incentive
for them to promote the success of the Company or of an Affiliate. The Plan provides for the
granting of ISOs, Non-Qualified Options and certain other options as set forth in Appendix A
hereto.

3. SHARES SUBJECT TO THE PLAN.

     The number of Shares which may be issued from time to time pursuant to this Plan shall be
1,246,500, or the equivalent of such number of Shares after the Administrator, in its sole
discretion, has interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 16 of the Plan.

     If an Option ceases to be “outstanding”, in whole or in part, the Shares which were subject to
such Option shall be available for the granting of other Options under the Plan. Any Option shall
be treated as “outstanding” until such Option is exercised in full, or terminates or expires under
the provisions of the Plan, or by agreement of the parties to the pertinent Option Agreement.

4. ADMINISTRATION OF THE PLAN.

     The Administrator of the Plan will be the Board of Directors, except to the extent the Board
of Directors delegates its authority to the Committee, in which case the Committee shall be the
Administrator. Subject to the provisions of the Plan, the Administrator is authorized to:

	 	a.	 	Interpret the provisions of the Plan or of any Option or Option Agreement and
to make all rules and determinations which it deems necessary or advisable for the
administration of the Plan;
	 
	 	b.	 	Determine which employees of the Company or of an Affiliate shall be designated
as Employees and which of the Employees, directors and consultants shall be granted
Options;
	 
	 	c.	 	Specify the terms and conditions upon which an Option or Options may be
granted; and
	 
	 	d.	 	Adopt any sub-plans (such as Appendix A hereto) applicable to residents of any
specified jurisdiction as it deems necessary or appropriate in order to comply with or
take advantage of any tax or other laws applicable to the Company, an Affiliate or to
Plan Participants or to otherwise facilitate the administration of the Plan, which
sub-plans may include additional restrictions or conditions applicable to Options or
Shares acquired upon exercise of Options.

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provided, however, that all such interpretations, rules, determinations, terms and
conditions shall be made and prescribed in the context of preserving the tax status under Section
422 of the Code of those Options which are designated as ISOs. Subject to the foregoing, the
interpretation and construction by the Administrator of any provisions of the Plan or of any Option
granted under it shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.

5. ELIGIBILITY FOR PARTICIPATION.

     The Administrator will, in its sole discretion, name the Participants in the Plan, provided,
however, that each Participant must be an Employee, director or consultant of the Company or of an
Affiliate at the time an Option is granted. Notwithstanding the foregoing, the Administrator may
authorize the grant of an Option to a person not then an employee, director or consultant of the
Company or of an Affiliate; provided, however, that the actual grant of such Option
shall be conditioned upon such person becoming eligible to become a Participant at or prior to the
time of the execution of the Option Agreement evidencing such Option. ISOs may be granted only to
Employees. Non-Qualified Options may be granted to any Employee, director or consultant of the
Company or an Affiliate. The granting of any Option to any individual shall neither entitle that
individual to, nor disqualify him or her from, participation in any other grant of Options.

6. TERMS AND CONDITIONS OF OPTIONS.

     Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company
and, to the extent required by law or requested by the Company, by the Participant. The
Administrator may provide that Options be granted subject to such terms and conditions, consistent
with the terms and conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the shareholders of the Company
of this Plan or any amendments thereto. The Option Agreements shall be subject to at least the
following terms and conditions:

	 	A.	 	Non-Qualified Options: Each Option intended to be a Non-Qualified
Option shall be subject to the terms and conditions which the Administrator determines
to be appropriate and in the best interest of the Company, subject to the following
minimum standards for any such Non-Qualified Option:

	 	a.	 	Option Price: Each Option Agreement shall state the option
price (per share) of the Shares covered by each Option, which option price
shall be determined by the Administrator but shall not be less than the par
value per share of Common Stock.
	 
	 	b.	 	Each Option Agreement shall state the number of Shares to which
it pertains;

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	 	c.	 	Each Option Agreement shall state the date or dates on which it
first is exercisable and the date after which it may no longer be exercised,
and may provide that the Option rights accrue or become exercisable in
installments over a period of months or years, or upon the occurrence of
certain conditions or the attainment of stated goals or events; and
	 
	 	d.	 	Exercise of any Option may be conditioned upon the
Participant’s execution of a Share purchase agreement in form satisfactory to
the Administrator providing for certain protections for the Company and its
other shareholders, including requirements that:

	 	i.	 	The Participant’s or the Participant’s
Survivors’ right to sell or transfer the Shares may be restricted; and
	 
	 	ii.	 	The Participant or the Participant’s Survivors
may be required to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any applicable
restrictions.

	 	B.	 	ISOs: Each Option intended to be an ISO shall be issued only to an
Employee and be subject to the following terms and conditions, with such additional
restrictions or changes as the Administrator determines are appropriate but not in
conflict with Section 422 of the Code and relevant regulations and rulings of the
Internal Revenue Service:

	 	a.	 	Minimum standards: The ISO shall meet the minimum standards
required of Non-Qualified Options, as described in Paragraph 6(A) above, except
clause (a) thereunder.
	 
	 	b.	 	Option Price: Immediately before the ISO is granted, if the
Participant owns, directly or by reason of the applicable attribution rules in
Section 424(d) of the Code:

	 	i.	 	10% or less of the total combined
voting power of all classes of stock of the Company or an Affiliate,
the Option price per share of the Shares covered by each ISO shall not
be less than 100% of the Fair Market Value per share of the Shares on
the date of the grant of the Option; or
	 
	 	ii.	 	More than 10% of the total combined voting
power of all classes of stock of the Company or an Affiliate, the
Option price per share of the Shares covered by each ISO shall not be
less than 110% of the said Fair Market Value on the date of grant.

	 	c.	 	Term of Option: For Participants who own:

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	 	i.	 	10% or less of the total combined
voting power of all classes of stock of the Company or an Affiliate,
each ISO shall terminate not more than ten years from the date of the
grant or at such earlier time as the Option Agreement may provide; or
	 
	 	ii.	 	More than 10% of the total combined voting
power of all classes of stock of the Company or an Affiliate, each ISO
shall terminate not more than five years from the date of the grant or
at such earlier time as the Option Agreement may provide.

	 	d.	 	Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of ISOs which may become exercisable in any calendar year
(under this or any other ISO plan of the Company or an Affiliate) so that the
aggregate Fair Market Value (determined at the time each ISO is granted) of the
stock with respect to which ISOs are exercisable for the first time by the
Participant in any calendar year does not exceed $100,000.

7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.

     An Option (or any part or installment thereof) shall be exercised by giving written notice to
the Company or its designee, together with provision for payment of the full purchase price in
accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon
compliance with any other condition(s) set forth in the Option Agreement. Such notice shall be
signed by the person exercising the Option, shall state the number of Shares with respect to which
the Option is being exercised and shall contain any representation required by the Plan or the
Option Agreement. Payment of the purchase price for the Shares as to which such Option is being
exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion
of the Administrator, through delivery of shares of Common Stock having a Fair Market Value equal
as of the date of the exercise to the cash exercise price of the Option and held for at least six
months, or (c) at the discretion of the Administrator, by delivery of the grantee’s personal note,
for full, partial or no recourse, bearing interest payable not less than annually at no less than
100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, with or without the
pledge of such Shares as collateral, or (d) at the discretion of the Administrator, in accordance
with a cashless exercise program established with a securities brokerage firm, and approved by the
Administrator, or (e) at the discretion of the Administrator, by any combination of (a), (b), (c)
and (d) above. Notwithstanding the foregoing, the Administrator shall accept only such payment on
exercise of an ISO as is permitted by Section 422 of the Code.

     The Company shall then reasonably promptly deliver the Shares as to which such Option was
exercised to the Participant (or to the Participant’s Survivors, as the case may be). In
determining what constitutes “reasonably promptly,” it is expressly understood that the issuance
and delivery of the Shares may be delayed by the Company in order to comply with any law or
regulation (including, without limitation, state securities or “blue sky” laws) which requires the

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Company to take any action with respect to the Shares prior to their issuance. The Shares shall,
upon delivery, be evidenced by an appropriate certificate or certificates for fully paid,
non-assessable Shares.

     The Administrator shall have the right to accelerate the date of exercise of any installment
of any Option; provided that the Administrator shall not accelerate the exercise date of any
installment of any Option granted to any Employee as an ISO (and not previously converted into a
Non-Qualified Option pursuant to Paragraph 19) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6.B.d.

     The Administrator may, in its discretion, amend any term or condition of an outstanding Option
provided (i) such term or condition as amended is permitted by the Plan, (ii) any such amendment
shall be made only with the consent of the Participant to whom the Option was granted, or in the
event of the death of the Participant, the Participant’s Survivors, if the amendment is adverse to
the Participant, and (iii) any such amendment of any ISO shall be made only after the Administrator
determines whether such amendment would constitute a “modification” of any Option which is an ISO
(as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences
for the holder of such ISO.

8. RIGHTS AS A SHAREHOLDER.

     No Participant to whom an Option has been granted shall have rights as a shareholder with
respect to any Shares covered by such Option, except after due exercise of the Option and tender of
the full purchase price for the Shares being purchased pursuant to such exercise and registration
of the Shares in the Company’s share register in the name of the Participant.

9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.

     By its terms, an Option granted to a Participant shall not be transferable by the Participant
other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the
Administrator in its discretion and set forth in the applicable Option Agreement. Notwithstanding
the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer
qualify as an ISO. The designation of a beneficiary of an Option by a Participant, with the prior
approval of the Administrator and in such form as the Administrator shall prescribe, shall not be
deemed a transfer prohibited by this Paragraph. Except as provided above, an Option shall be
exercisable, during the Participant’s lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or
similar process upon an Option, shall be null and void.

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10. EFFECT OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.

     Except as otherwise provided in a Participant’s Option Agreement, in the event of a
termination of service (whether as an employee, director or consultant) with the Company or an
Affiliate before the Participant has exercised an Option, the following rules apply:

	 	a.	 	A Participant who ceases to be an employee, director or consultant of the
Company or of an Affiliate (for any reason other than termination “for cause”,
Disability, or death for which events there are special rules in Paragraphs 11, 12, and
13, respectively), may exercise any Option granted to him or her to the extent that the
Option is exercisable on the date of such termination of service, but only within such
term as the Administrator has designated in a Participant’s Option Agreement.
	 
	 	b.	 	Except as provided in Subparagraph (c) below, or Paragraph 12 or 13, in no
event may an Option intended to be an ISO, be exercised later than ninety (90) days
after the Participant’s termination of employment.
	 
	 	c.	 	The provisions of this Paragraph, and not the provisions of Paragraph 12 or 13,
shall apply to a Participant who subsequently becomes Disabled or dies after the
termination of employment, director status or consultancy, provided, however, in the
case of a Participant’s Disability or death within ninety (90) days after the
termination of employment, director status or consultancy, the Participant or the
Participant’s Survivors may exercise the Option within one year after the date of the
Participant’s termination of service, but in no event after the date of expiration of
the term of the Option.
	 
	 	d.	 	Notwithstanding anything herein to the contrary, if subsequent to a
Participant’s termination of employment, termination of director status or termination
of consultancy, but prior to the exercise of an Option, the Board of Directors
determines that, either prior or subsequent to the Participant’s termination, the
Participant engaged in conduct which would constitute “cause”, then such Participant
shall forthwith cease to have any right to exercise any Option.
	 
	 	e.	 	A Participant to whom an Option has been granted under the Plan who is absent
from work with the Company or with an Affiliate because of temporary disability (any
disability other than a permanent and total Disability as defined in Paragraph 1
hereof), or who is on leave of absence for any purpose, shall not, during the period of
any such absence, be deemed, by virtue of such absence alone, to have terminated such
Participant’s employment, director status or consultancy with the Company or with an
Affiliate, except as the Administrator may otherwise expressly provide.
	 
	 	f.	 	Except as required by law or as set forth in a Participant’s Option Agreement,
Options granted under the Plan shall not be affected by any change of a

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	 	 	 	Participant’s status within or among the Company and any Affiliates, so long as the
Participant continues to be an employee, director or consultant of the Company or
any Affiliate.

11. EFFECT OF TERMINATION OF SERVICE “FOR CAUSE”.

     Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if
the Participant’s service (whether as an employee, director or consultant) with the Company or an
Affiliate is terminated “for cause” prior to the time that all his or her outstanding Options have
been exercised:

	 	a.	 	All outstanding and unexercised Options as of the time the Participant is
notified his or her service is terminated “for cause” will immediately be forfeited.
	 
	 	b.	 	For purposes of this Plan, “cause” shall include (and is not limited to)
dishonesty with respect to the Company or any Affiliate, insubordination, substantial
malfeasance or non-feasance of duty, unauthorized disclosure of confidential
information, breach by the Participant of any provision of any employment, consulting,
advisory, nondisclosure, non-competition or similar agreement between the Participant
and the Company or any Affiliate, and conduct substantially prejudicial to the business
of the Company or any Affiliate. The determination of the Administrator as to the
existence of “cause” will be conclusive on the Participant and the Company.
	 
	 	c.	 	“Cause” is not limited to events which have occurred prior to a Participant’s
termination of service, nor is it necessary that the Administrator’s finding of “cause”
occur prior to termination. If the Administrator determines, subsequent to a
Participant’s termination of service but prior to the exercise of an Option, that
either prior or subsequent to the Participant’s termination the Participant engaged in
conduct which would constitute “cause,” then the right to exercise any Option is
forfeited.
	 
	 	d.	 	Any definition in an agreement between the Participant and the Company or an
Affiliate, which contains a conflicting definition of “cause” for termination and which
is in effect at the time of such termination, shall supersede the definition in this
Plan with respect to that Participant.

12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.

     Except as otherwise provided in a Participant’s Option Agreement, a Participant who ceases to
be an employee, director or consultant of the Company or of an Affiliate by reason of Disability
may exercise any Option granted to such Participant:

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	 	a.	 	To the extent that the Option has become exercisable but has not been exercised
on the date of Disability; and
	 
	 	b.	 	In the event rights to exercise the Option accrue periodically, to the extent
of a pro rata portion through the date of Disability of any additional vesting rights
that would have accrued on the next vesting date had the Participant not become
Disabled. The proration shall be based upon the number of days accrued in the current
vesting period prior to the date of Disability.

     A Disabled Participant may exercise such rights only within the period ending one year after
the date of the Participant’s termination of employment, directorship or consultancy, as the case
may be, notwithstanding that the Participant might have been able to exercise the Option as to some
or all of the Shares on a later date if the Participant had not become Disabled and had continued
to be an employee, director or consultant or, if earlier, within the originally prescribed term of
the Option.

     The Administrator shall make the determination both of whether Disability has occurred and the
date of its occurrence (unless a procedure for such determination is set forth in another agreement
between the Company and such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for by the Company.

13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

     Except as otherwise provided in a Participant’s Option Agreement, in the event of the death of
a Participant while the Participant is an employee, director or consultant of the Company or of an
Affiliate, such Option may be exercised by the Participant’s Survivors:

	 	a.	 	To the extent that the Option has become exercisable but has not been exercised
on the date of death; and
	 
	 	b.	 	In the event rights to exercise the Option accrue periodically, to the extent
of a pro rata portion through the date of death of any additional vesting rights that
would have accrued on the next vesting date had the Participant not died. The
proration shall be based upon the number of days accrued in the current vesting period
prior to the Participant’s date of death.

     If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps
to exercise the Option within one year after the date of death of such Participant, notwithstanding
that the decedent might have been able to exercise the Option as to some or all of the Shares on a
later date if he or she had not died and had continued to be an employee, director or consultant
or, if earlier, within the originally prescribed term of the Option.

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14. PURCHASE FOR INVESTMENT.

     Unless the offering and sale of the Shares to be issued upon the particular exercise of an
Option shall have been effectively registered under the Securities Act of 1933, as now in force or
hereafter amended (the “1933 Act”), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been fulfilled:

	 	a.	 	The person(s) who exercise(s) such Option shall warrant to the Company, prior
to the receipt of such Shares, that such person(s) are acquiring such Shares for their
own respective accounts, for investment, and not with a view to, or for sale in
connection with, the distribution of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the provisions of the following legend which
shall be endorsed upon the certificate(s) evidencing their Shares issued pursuant to
such exercise or such grant:

“The shares represented by this certificate have been taken for investment
and they may not be sold or otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration Statement
with respect to such shares shall be effective under the Securities Act of 1933, as amended, or
(b) the Company shall have received an opinion of counsel satisfactory to it
that an exemption from registration under such Act is then available, and
(2) there shall have been compliance with all applicable state securities
laws.”

	 	b.	 	At the discretion of the Administrator, the Company shall have received an
opinion of its counsel that the Shares may be issued upon such particular exercise in
compliance with the 1933 Act without registration thereunder and in compliance with
applicable foreign securities laws.

15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.

     Upon the dissolution or liquidation of the Company, all Options granted under this Plan which
as of such date shall not have been exercised will terminate and become null and void; provided,
however, that if the rights of a Participant or a Participant’s Survivors have not otherwise
terminated and expired, the Participant or the Participant’s Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to the extent that the
Option is exercisable as of the date immediately prior to such dissolution or liquidation.

16. ADJUSTMENTS.

     Upon the occurrence of any of the following events, a Participant’s rights with respect to any
Option granted to him or her hereunder which has not previously been exercised in full shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the Participant’s
Option Agreement:

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     A. Stock Dividends and Stock Splits. If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of
Common Stock deliverable upon the exercise of such Option shall be appropriately increased or
decreased proportionately and appropriate adjustments shall be made in the purchase price per share
to reflect such events. If additional shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect to such shares of Common Stock, the
number of shares of Common Stock deliverable upon the exercise of such Option may be appropriately
increased or decreased proportionately and appropriate adjustments may be made in the purchase
price per share to reflect such events. The number of Shares subject to the limitation in Paragraph
3(b) shall also be proportionately adjusted upon the occurrence of such events.

     B. Corporate Transactions. If the Company is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the Company’s assets other than a
transaction to merely change the state of incorporation (a “Corporate Transaction”), the
Administrator or the board of directors of any entity assuming the obligations of the Company
hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate
provision for the continuation of such Options by substituting on an equitable basis for the Shares
then subject to such Options either the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Corporate Transaction or securities of any successor
or acquiring entity; or (ii) upon written notice to the Participants, provide that all Options must
be exercised (either to the extent then exercisable or, at the discretion of the Administrator or,
upon a change of control of the Company, all Options being made fully exercisable for purposes of
this Subparagraph), within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the Fair Market Value of the Shares subject to such Options (either
to the extent then exercisable or, at the discretion of the Administrator, all Options being made
fully exercisable for purposes of this Subparagraph) over the exercise price thereof.

     C. Recapitalization or Reorganization. In the event of a recapitalization or
reorganization of the Company other than a Corporate Transaction pursuant to which securities of
the Company or of another corporation are issued with respect to the outstanding shares of Common
Stock, a Participant upon exercising an Option after the recapitalization or reorganization shall
be entitled to receive for the purchase price paid upon such exercise the number of replacement
securities which would have been received if such Option had been exercised prior to such
recapitalization or reorganization.

     D. Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant
to Subparagraph A, B or C above with respect to ISOs shall be made only after the Administrator
determines whether such adjustments would constitute a “modification” of such ISOs (as that term is
defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holders
of such ISOs. If the Administrator determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs, it may

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refrain from making such adjustments, unless the holder of an ISO specifically requests in writing
that such adjustment be made and such writing indicates that the holder has full knowledge of the
consequences of such “modification” on his or her income tax treatment with respect to the ISO.

17. ISSUANCES OF SECURITIES.

     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 subject to Options.
Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in
property (including without limitation, securities) of the Company.

18. FRACTIONAL SHARES.

     No fractional shares shall be issued under the Plan and the person exercising such right shall
receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value
thereof.

19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

     The Administrator, at the written request of any Participant, may in its discretion take such
actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have
not been exercised on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Participant is an employee of the Company or an
Affiliate at the time of such conversion. At the time of such conversion, the Administrator (with
the consent of the Participant) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Administrator in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and
no such conversion shall occur until and unless the Administrator takes appropriate action. The
Administrator, with the consent of the Participant, may also terminate any portion of any ISO that
has not been exercised at the time of such conversion.

20. WITHHOLDING.

     In the event that any federal, state, or local income taxes, employment taxes, Federal
Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable
law or governmental regulation to be withheld from the Participant’s salary, wages or other
remuneration in connection with the exercise of an Option or a Disqualifying Disposition (as
defined in Paragraph 21), the Company may withhold from the Participant’s compensation, if

13

 

any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the
Company which employs or employed the Participant, the statutory minimum amount of such
withholdings unless a different withholding arrangement, including the use of shares of the
Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by
law). For purposes hereof, the fair market value of the shares withheld for purposes of payroll
withholding shall be determined in the manner provided in Paragraph 1 above, as of the most recent
practicable date prior to the date of exercise. If the fair market value of the shares withheld is
less than the amount of payroll withholdings required, the Participant may be required to advance
the difference in cash to the Company or the Affiliate employer. The Administrator in its
discretion may condition the exercise of an Option for less than the then Fair Market Value on the
Participant’s payment of such additional withholding.

21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

     Each Employee who receives an ISO must agree to notify the Company in writing immediately
after the Employee makes a Disqualifying Disposition of any shares acquired pursuant to the
exercise of an ISO. A Disqualifying Disposition is defined in Section 424(c) of the Code and
includes any disposition (including any sale or gift) of such shares before the later of (a) two
years after the date the Employee was granted the ISO, or (b) one year after the date the Employee
acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code.
If the Employee has died before such stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.

22. TERMINATION OF THE PLAN.

     The Plan will terminate on the date which is ten years from the earlier of the date of
its adoption by the Board of Directors and the date of its approval by the shareholders. The Plan
may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the
Company; provided, however, that any such earlier termination shall not affect any Option
Agreements executed prior to the effective date of such termination.

23. AMENDMENT OF THE PLAN AND AGREEMENTS.

     The Plan may be amended by the shareholders of the Company. The Plan may also be amended by
the Administrator, including, without limitation, to the extent necessary to qualify any or all
outstanding Options granted under the Plan or Options to be granted under the Plan for favorable
federal income tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent necessary to qualify the
shares issuable upon exercise of any outstanding Options granted, or Options to be granted, under
the Plan for listing on any national securities exchange or quotation in any national automated
quotation system of securities dealers. Any amendment approved by the Administrator which the
Administrator determines is of a scope that requires shareholder approval shall be subject to
obtaining such shareholder approval. Any modification or

14

 

amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her
rights under an Option previously granted to him or her. With the consent of the Participant
affected, the Administrator may amend outstanding Option Agreements in a manner which may be
adverse to the Participant but which is not inconsistent with the Plan. In the discretion of the
Administrator, outstanding Option Agreements may be amended by the Administrator in a manner which
is not adverse to the Participant.

24. EMPLOYMENT OR OTHER RELATIONSHIP.

     Nothing in this Plan or any Option Agreement shall be deemed to prevent the Company or an
Affiliate from terminating the employment, consultancy or director status of a Participant, nor to
prevent a Participant from terminating his or her own employment, consultancy or director status or
to give any Participant a right to be retained in employment or other service by the Company or any
Affiliate for any period of time.

25. GOVERNING LAW.

     This Plan shall be construed and enforced in accordance with the law of the State of Delaware.

15

 

INTELLECT NEUROSCIENCES, INC.

APPENDIX A

TO THE 2005 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN

1. GENERAL

     1.1. This appendix (the “Appendix”) shall apply only to Options granted to Employees or
Non-Employees of the Company or an Affiliate who are residents of the State of Israel for Israeli
tax purposes as of the Date of Grant of an Option (“Israeli Eligible Persons”). The provisions
specified hereunder shall form an integral part of the Intellect Neurosciences, Inc. 2005 Employee,
Director and Consultant Stock Option Plan.

     1.2 This Appendix is to be read as a continuation of the Plan and only modifies the Plan to
the extent set forth herein. Any other provision of the Plan notwithstanding, the Plan may also be
administered for tax purposes pursuant to the provisions of Section 102 and/or Section 3(i) of the
Ordinance and the rules promulgated thereunder with respect to Israeli Eligible Persons who are
Israeli residents for Israeli tax purposes as of the Date of Grant of an Option. The Administrator
may grant to Israeli Eligible Persons Trustee 102 Options, Non Trustee 102 Options and 3(i) Options
as set forth in this Appendix.

     1.3 The Plan and this Appendix are complimentary to each other and shall be deemed as one. In
any case of contradiction, whether explicit or implied, between the provisions of this Appendix and
the Plan, the provisions set out in the Appendix shall prevail.

2. DEFINITIONS

As used herein the following capitalized terms shall have the meanings hereinafter set forth,
unless the context clearly indicates to the contrary. Any capitalized terms used herein not
specifically defined in this Appendix shall have the meaning assigned to them in the Plan.

     “Affiliate” means any Affiliate, as defined in the Plan, which in the case of Employees also
qualifies as an “employing company” within the meaning of Section 102(a) of the Ordinance.

     “Trustee 102 Option” means a grant to an Israeli Eligible Person of a Capital Gain Option or
Ordinary Income Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a
Trustee for the benefit of the Israeli Eligible Person.

     “Capital Gain Option” or “CGO” means a grant to an Israeli Eligible Person of an Option which
the Company elects and designates to qualify for capital gain tax treatment in accordance with the
provisions of Section 102(b)(2) of the Ordinance.

     “Consultant” means any person, other than an Employee or a director of the Company or an
Affiliate (solely with respect to rendering services in such person’s capacity as a director) who
is engaged by the Company or an Affiliate to render consulting or advisory services to the Company
or an Affiliate.

 

 

     “Controlling Shareholder” means a controlling shareholder of the Company or of an Affiliate as
defined in Section 32(9) of the Ordinance.

     “Date of Grant” means, the date of grant of an Option, as determined by the Administrator and
set forth in the Israeli Eligible Person’s Option Agreement.

     “Election” means the election by the Company, with respect to grant of Trustee 102 Options, of
either one of the following tax tracks, as provided in Section 102: (a) “Capital Gains Tax Track”,
or (b) “Ordinary Income Tax Track.”

     “Employee” means any person, including an officer or director, who is an “employee” of the
Company or an Affiliate within the meaning of Section 102 of the Ordinance.

     “ITA” means the Israeli Tax Authorities.

     “3(i) Option” means an Option granted to an Israeli Eligible Person in compliance with Section
3(i) of the Ordinance, who is a Non-Employee.

     “Non-Employee” means a Consultant of the Company or of an Affiliate, or an employee or
director of the Company or of an Affiliate who is not deemed an “employee” within the meaning of
Section 102 of the Ordinance.

     “Non Trustee 102 Option” means an Option granted to an Israeli Eligible Person not through a
Trustee in compliance with Section 102(c) of the Ordinance.

     “Ordinary Income Option” or “OIO” means a grant to an Israeli Eligible Person of an Option
which the Company elects and designates to qualify for ordinary income tax treatment in accordance
with the provisions of Section 102(b)(1) of the Ordinance.

     “Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as
hereafter amended from time to time.

     “Section 102” means Section 102 of the Ordinance and any regulations, rules, orders or
procedures promulgated thereunder, all as now in effect or as hereafter amended from time to time.

     “Section 3(i)” means Section 3(i) of the Ordinance and any regulations, rules, orders or
procedures promulgated thereunder, all as now in effect or as hereafter amended from time to time.

     “Trustee” means any individual or entity appointed by the Administrator to serve as a trustee
under the Plan and approved by the ITA, all in accordance with the provisions of Section 102(a) of
the Ordinance.

3. ADMINISTRATION

     Without derogating from the powers and authorities of the Administrator detailed in the Plan, the
Administrator shall have the sole and full discretion and authority, to administer all grants
pursuant to this Appendix and to take all actions related hereto.

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4. TERMS AND CONDITIONS OF OPTIONS

     4.1 Notwithstanding anything to the contrary in the Plan, the Administrator may issue Options
under this Appendix to Israeli Eligible Persons as set forth herein.

     4.2 Trustee 102 Options.

     (i) Under the Plan, the Company may grant both Capital Gain Options and Ordinary Income
Options. However, the Administrator shall elect from time to time, as permitted by applicable law,
to issue either Capital Gain Options or Ordinary Income Options and shall notify all relevant
authorities, including the ITA, of such Election. The Administrator shall be entitled to change
such Election at any time after the date 12 months from the end of the calendar year in which the
first grant was made in accordance with the previous Election, or such other date as may be allowed
by applicable law. For so long as an Election is in effect, all Trustee 102 Options shall be
issued as either Capital Gain Options or as Ordinary Income Options in accordance with the Election
then in effect. Options granted pursuant to this Section shall be subject to the general terms and
conditions specified in the Plan, except for provisions of the Plan relating to United States
taxation of Options.

     (ii) Trustee 102 Options may be granted after the date 30 days after the Company delivers to
the ITA its request for approval of the Plan and the Trustee in accordance with Section 102
provided that no rejection of the Plan or the Trustee has been received by the Company by such
date. Notwithstanding the above, if within 90 days of the Company’s delivery of the Plan to the
ITA for approval, the ITA notifies the Company of its decision not to approve the Plan or the
Trustee, any Options that were granted and intended to be granted as Trustee 102 Options shall be
deemed to be Non Trustee 102 Options, or will be treated as shall be agreed to with the ITA at such
time.

     (iii) All Trustee 102 Options granted under this Plan shall be granted by the Company to a
Trustee designated by the Administrator and shall be registered in the name of the Trustee. The
Trustee shall hold each such Option and any Shares issued upon exercise of such Option, registered
in the name of the Trustee in trust for the benefit of the Israeli Eligible Person in respect of
whom such Option or Share was granted. All certificates representing Shares issued to the Trustee
under the Plan shall be registered in the name of the Trustee and shall be deposited with the
Trustee, and shall be held by the Trustee for the benefit of the Israeli Eligible Person for such
period of time as required by Section 102 or any regulations, rules or orders or procedures
promulgated thereunder (the “Lockup Period”). For so long as such Shares are registered in the
name of the Trustee, the Trustee shall be the sole owner of such shares for all purposes whatsoever
(including without limitation, for the purpose of delivering notices), and except as specifically
designated otherwise in the Plan, the Israeli Eligible Person shall not have any rights by virtue
of such Shares until such Shares shall have been registered in such Israeli Eligible Person’s name.
All bonus shares and stock dividends issued by the Company, if any, with regard to Shares issued
pursuant to the exercise of Trustee 102 Options, while held by the Trustee, shall be registered in
the name of the Trustee; and all provisions applying to such Shares shall apply to the bonus shares
issued by virtue thereof, mutatis mutandis. Such bonus shares and stock dividends shall be subject
to the Lockup Period of the Shares in respect of which they were issued. Any dividends
received by the Trustee in respect of Shares issued pursuant to the
exercise of Trustee 102 Options shall be subject to the applicable taxation of dividends pursuant to the Ordinance and
Section 102.

- 3 -

 

     (iv) Pursuant to Section 102, the Israeli Eligible Person may not sell, transfer, release from
trust or otherwise dispose of the Trustee 102 Options or the Shares received upon exercise of any
such Options during the Lockup Period. Notwithstanding the above, in the event such a sale,
transfer or other disposition of the Options or the Shares occurs before the end of the Lockup
Period, then the provisions of Section 102 relating to non-compliance with the Lockup Period, will
apply and the Israeli Eligible Person shall bear the entire burden thereof.

     (v) Anything to the contrary notwithstanding, the Trustee shall not release any Trustee 102
Options or any Shares issued upon exercise of Options, prior to the full payment of the relevant
exercise price by the Israeli Eligible Person and payment by the Israeli Eligible Person of the
Israeli Eligible Person’s tax liability arising from such Trustee 102 Options or Shares issued upon
exercise thereof or the Israeli Eligible Person’s guarantee of payment of such taxes in a form
reasonably acceptable to the Trustee and Company or any Affiliate and in compliance with the
Ordinance.

     (vi) The Israeli Eligible Person shall provide the Company or an Affiliate and the Trustee
with a written undertaking and confirmation under which the Israeli Eligible Person confirms that
he/she is aware of the provisions of Section 102 and the Elected tax track and agrees to the
provisions of the trust agreement between the Company and the Trustee, and undertakes not to
release, by sale or transfer, the Trustee 102 Options, Shares issued pursuant to the exercise
thereof, and all rights attached thereto (including bonus shares) prior to the lapse of the Lockup
Period.

     (vii) As a condition to any Trustee 102 Options grant, the Israeli Eligible Person shall
execute a written release which releases the Trustee, the Company and any Affiliate from any
liability in respect of any action or decision duly taken with respect to the Plan or such Options
or Shares issued thereunder.

     (viii) Trustee 102 Options may only be granted to Israeli Eligible Persons who are Employees
of the Company or an Affiliate and who are not, as of the Date of Grant, and who will not be, as a
result of such grant, a Controlling Shareholder.

4.3 Non Trustee 102 Options.

     (i) Options granted pursuant to this Section are intended to constitute Non Trustee 102
Options and shall be subject to the general terms and conditions specified in the Plan, except for
provisions of the Plan relating to United States taxation of Options. Non Trustee 102 Options shall
comply with the provisions of Section 102(c) of the Ordinance.

     (ii) The Company may grant Non Trustee 102 Options only to Employees of the Company or an
Affiliate and may not grant such Options to a person who is, or who as a result of such grant would
become a Controlling Shareholder of the Company or an Affiliate.

     (iii) Non Trustee 102 Options which may be granted pursuant to the Plan, in the discretion of
the Administrator, may be issued to a trustee appointed by the Administrator.

     (iv) If an Israeli Eligible Person ceases to be an Employee of the Company or an Affiliate, as
the case may be, for any reason, the Israeli Eligible Person will be obligated to provide the
Company or

- 4 -

 

any Affiliate with a security or guarantee, in form and substance agreeable to the
Company, in its sole and absolute discretion, to cover any tax obligation which may result from the
sale or disposition of such Options or the Shares received upon exercise thereof.

     (v) The Shares issued upon the exercise of the Non Trustee 102 Options, and all rights
attached thereto shall not be transferred to a third party unless and until the Company or any
Affiliate has either (a) withheld payment of all taxes required to be paid upon the sale or
transfer thereof, if any, or (b) received confirmation either that such payment, if any, was
remitted to the relevant tax authorities or that other arrangements regarding such payment were
made, all in form and substance satisfactory to the Company.

     (vi) All bonus shares and stock dividends issued by the Company, if any, with regard to Shares
issued pursuant to the exercise of Non Trustee 102 Options, shall be subject to all of the
provisions of the Plan applicable to such Shares, mutatis mutandis.

4.4 3(i) Options.

     (i) Options granted pursuant to this Section shall constitute 3(i) Options and shall be
subject to the general terms and conditions specified in the Plan, except for provisions of the
Plan relating to United States taxation of Options.

     (ii) 3(i) Options shall comply with the provisions of Section 3(i) of the Ordinance and may
only be granted to Non-Employees of the Company or an Affiliate.

     (iii) 3(i) Options granted pursuant to the Plan may, in the discretion of the Administrator,
be issued to a trustee appointed by the Administrator. In such case, the Company may elect to
enter into an agreement with a trustee concerning the administration of the issuance and exercise
of 3(i) Options, the purchase and sale of Shares issued upon exercise thereof, and the arrangements
for payment or withholding of taxes due in connection with any such exercise, purchase or sale. The
trust agreement may provide that the Company will issue the Shares to such trustee for the benefit
of the Israeli Eligible Person.

     (iv) The Company may require, as a condition to the grant of 3(i) Options, that such Israeli
Eligible Person provide a surety or guarantee to the satisfaction of the Company, to secure payment
of all taxes which may become due upon the future transfer or disposition of such Shares to be
issued upon the exercise of such 3(i) Options.

     (v) The Shares issued upon the exercise of the 3(i) Options, and all rights attached thereto
shall not be transferred unless and until the Company or an Affiliate has either (a) withheld
payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) received
confirmation either that such payment, if any, was remitted to the relevant tax authorities or that
other arrangements regarding such payment were made, all in form and substance satisfactory to the
Company.

5. NON TRANSFERABLE.

     No Options granted hereunder shall be transferable by an Israeli Eligible Person other than by
will or by the laws of descent and distribution.

- 5 -

 

6. TAX COMPLIANCE.

     (i) Any and all tax consequences arising from the grant or exercise of Options under this
Appendix, the payment for, or the transfer of, Shares issued upon the exercise thereof, or from any
other event or act under the Plan (whether of the Company, an Affiliate, the Trustee or the Israeli
Eligible Person), including, without limitation, any non-compliance of the Israeli Eligible Person
with the provisions hereof or of the Ordinance, shall be borne solely by the Israeli Eligible
Person. The Company, any applicable Affiliate, and the Trustee, shall each, to the extent
relevant, withhold taxes according to the requirements of applicable laws, rules and regulations,
including the withholding of taxes at source. Furthermore, each Israeli Eligible Person shall
indemnify each of the Company, the applicable Affiliate and the Trustee, and hold them harmless
from any and all liability for any tax or interest or penalty thereupon, including without
limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax
from any payment made to the Israeli Eligible Person. For the removal of doubt it is hereby
clarified that Israeli Eligible Person shall bear and be liable for all tax and other consequences
in the event that the Israeli Eligible Person’s Trustee 102 Options and/or Shares issued upon
exercise thereof are not held for the entire Lockup Period, all as provided in Section 102. The
tax liability of an Israeli Eligible Person pursuant to Section 102 or Section 3(i) shall be
determined in accordance with the Ordinance and all rule and regulations promulgated thereunder.

     (ii) Without derogating from the Plan, the terms and conditions upon which the Options granted
pursuant to this Appendix shall be issued and exercised, shall be as specified in the Israeli
Option Agreement to be executed pursuant to the Plan and this Appendix. Each Israeli Option
Agreement shall state, inter alia, the number of Shares to which the Option relates, the type of
Option granted thereunder, the vesting dates and the exercise price. In addition to the execution
of the Israeli Option Agreement, all Israeli Eligible Persons shall be required to execute all
other documents required by the Company or any Affiliate, whether before or after the grant of the
Options.

     (iii) Without derogating from the above, each Israeli Eligible Person shall provide the
Company, and any applicable Affiliate, and the Trustee, if any, with all relevant executed
documents, certificates and/or forms that may be required from time to time by the Company or such
Affiliate, including but not limited to, any customary documents and undertakings towards the
Trustee and the ITA, in order to comply with all applicable laws, to determine and/or establish the
Israeli tax liability of such Israeli Eligible Person and as may be necessary or desirable for the
proper administration of the Plan.

     (iv) Any provisions of the Section 102 or Section 3(i) of the Ordinance and/or any of the
rules or regulations promulgated thereunder, and the terms of any ITA permit, which are not
expressly specified in the Plan or in the applicable Option Agreement, shall be deemed incorporated
into the Plan and Option Agreement and shall be binding upon the Company, relevant Affiliate and
the Israeli Eligible Person.

7. CURRENCY.

     Except as otherwise determined by the Administrator, all monetary values with respect to
Options granted pursuant to this Appendix, including without limitation the fair market value and
the exercise price of each Option, shall be stated in United States Dollars. In the event that the
exercise

- 6 -

 

price is in fact to be paid in New Israeli Shekels, then the conversion rate to be applied
shall be the last known representative rate of exchange of the US Dollar to the New Israeli Shekel
on the date of payment as announced by the Bank of Israel. Provided, however, that the amount of
any tax liability shall be determined in accordance with applicable law and regulations.

8. AMENDMENTS.

     Appendix A may be amended from time to time by the Administrator of the Plan as it deems
necessary or appropriate in order to comply with or take advantage of any changes or amendments to
Israeli tax laws applicable to the Company, an Affiliate or to Israeli Eligible Persons or to
otherwise facilitate administration of this Appendix A with respect to Israeli Eligible Persons.

- 7 -exv10w3

 

Exhibit 10.3

INTELLECT NEUROSCIENCES, INC.

2006 EQUITY INCENTIVE PLAN

1. Purpose and Eligibility. The purpose of this 2006 Equity Incentive Plan (the “Plan”) of
Intellect Neurosciences, Inc., a Delaware corporation (the “Company”) is to provide stock options,
stock issuances and other equity interests in the Company (each, an “Award”) to (a) key employees,
officers, directors, consultants and advisors of the Company and its Subsidiaries and (b) any other
Person who is determined by the Board to have made (or is expected to make) contributions to the
Company and or its Subsidiaries, in each case in order to encourage ownership of the capital stock
of the Company to attract such individuals, induce them to work for the benefit of the Company or
its Subsidiaries and to motivate such persons to promote the success of the Company and its
Subsidiaries. Any person to whom an Award has been granted under the Plan is called a
“Participant.” Additional definitions are contained in Section 10.

2. Administration.

     a. Administration by Board of Directors. The Plan will be administered by the Board of
Directors of the Company (the “Board”). The Board, in its sole discretion, shall have the authority
to grant and amend Awards, to adopt, amend and repeal rules relating to the Plan and to interpret
and correct the provisions of the Plan and any Award. The Board shall have authority, subject to
the express limitations of the Plan, (i) to construe and determine the respective Stock Option
Agreement, Awards and the Plan, (ii) to prescribe, amend and rescind rules and regulations relating
to the Plan and any Awards, (iii) to determine the terms and provisions of the respective Stock
Option Agreements and Awards, which need not be identical, (iv) to initiate an Option Exchange
Program, (v) adopt any necessary sub-plan applicable to residents of any specified jurisdiction as
it deems necessary in order to comply with the law applicable to the Company, its subsidiaries or
any Participant or to otherwise facilitate the administration of the Plan, which sub-plans may
include additional restrictions or conditions applicable to stock options or shares of stock, and
(vi) to make all other determinations in the judgment of the Board of Directors necessary or
desirable for the administration and interpretation of the Plan. The Board may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any Stock Option Agreement
or Award in the manner and to the extent it shall deem expedient to carry the Plan, any Stock
Option Agreement or Award into effect and it shall be the sole and final judge of such expediency.
All decisions by the Board shall be final and binding on all interested persons. Neither the
Company nor any member of the Board shall be liable for any action or determination relating to the
Plan.

     b. Appointment of Committee. To the extent permitted by applicable law, the Board
may delegate any or all of its powers under the Plan to the Compensation Committee (the
“Committee”). All references in the Plan to the “Board” shall mean such Committee or the Board.
In the absence of full delegation, the Board may also consult with the Committee, which shall make
recommendations, with respect to Participants eligible to receive Awards and the number of shares
subject to the Award, to the Board for its review and final approval.

1

 

     c. Delegation to Executive Officers. To the extent permitted by applicable law, the
Board may delegate to one or more executive officers of the Company the power to grant Awards and
exercise such other powers under the Plan as the Board may determine, provided that the Board shall
fix the maximum number of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.

     d. Applicability of Section Rule 16b-3. Anything to the contrary in the foregoing
notwithstanding if, or at such time as, the Common Stock is or becomes registered under Section 12
of the Exchange Act of 1934, as amended (the “Exchange Act”), or any successor statute, the Plan
shall be administered in a manner consistent with Rule 16b-3 promulgated thereunder, as it may be
amended from time to time, or any successor rules (“Rule 16b-3”), such that all subsequent grants
of Awards hereunder to Reporting Persons, as hereinafter defined, shall be exempt under such rule.
Those provisions of the Plan which make express reference to Rule 16b-3 or which are required in
order for certain option transactions to qualify for exemption under Rule 16b-3 shall apply only to
such persons as are required to file reports under Section 16 (a) of the Exchange Act (a “Reporting
Person”).

     e. Applicability of Section 162 (m). Any provisions in this Plan to the contrary
notwithstanding, whenever the Board is authorized to exercise its discretion in the administration
or amendment of this Plan or any Award hereunder or otherwise, the Board may not exercise such
discretion in a manner that would cause any outstanding Award that would otherwise qualify as
performance-based compensation under Section 162 (m) of the Code to fail to so qualify under
Section 162 (m).

3. Stock Available for Awards.

     a. Number of Shares. Subject to adjustment under Section 3(c), the aggregate number
of shares of Common Stock of the Company (the “Common Stock”) that may be issued pursuant to the
Plan is 12,000,000. If any Award expires, or is terminated, surrendered or forfeited, in whole or
in part, the unissued Common Stock covered by such Award shall again be available for the grant of
Awards under the Plan. If an Award granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject to such Award shall again be
available for subsequent Awards under the Plan, and if shares of Common Stock issued pursuant to
the Plan are repurchased by, or are surrendered or forfeited to, the Company at no more than the
price paid for such shares, such shares of Common Stock shall again be available for the grant of
Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.

     b. Per-Participant Limit. Subject to adjustment under Section 3(c), no Participant may
be granted Awards during any one fiscal year to purchase more than
8,000,000 shares of Common
Stock.

     c. Adjustment to Common Stock. Subject to Section 7, in the event of any stock split,
reverse stock split stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, sale of
all or substantially all of the Company’s assets (other than a transaction to merely change the
state of incorporation) or other similar change in capitalization or similar

2

 

event, (i) the number and class of securities available for Awards under the Plan and the
per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price per security subject
to repurchase, and (iv) the terms of each other outstanding Award shall be adjusted by the Company
(or substituted Awards may be made if applicable) to the extent the Board shall determine, in good
faith, that such an adjustment (or substitution) is appropriate. Notwithstanding the foregoing, any
adjustments made with respect to Incentive Stock Option (as defined below) shall be made only after
the Board determines whether such adjustment would constitute a “modification” of such Incentive
Stock Option (as such term is defined in Section 424(h) of the Code, as amended, or any successor
statute) or would cause any adverse tax consequences for the holders of such Incentive Stock
Options. If the Board determines that such adjustment would constitute a modification of such
Incentive Stock Option, the Board make refrain form making such adjustment unless the holder of
such Incentive Stock Option specifically requests in writing that the adjustment be made and that
the holder has full knowledge of the consequences of the adjustment on such holder’s income tax
treatment with respect to the Incentive Stock Option.

4. Stock Options.

     a. General. The Board may grant options to purchase Common Stock (each, an “Option”)
and determine the number of shares of Common Stock to be covered by each Option, the exercise price
of each Option and the conditions and limitations applicable to the exercise of each Option and the
shares of Common Stock issued upon the exercise of each Option, including, but not limited to,
vesting provisions, repurchase provisions and restrictions relating to applicable federal or state
securities laws. Each Option will be evidenced by a Stock Option Agreement, consisting of a Notice
of Stock Option Award and a Stock Option Award Agreement (collectively, a “Stock Option
Agreement”).

     b. Incentive Stock Options. An Option that the Board intends to be an incentive stock
option (an “Incentive Stock Option”) as defined in Section 422 of the Code, as amended, or any
successor statute (“Section 422”), shall be granted only to an employee of the Company and shall be
subject to and shall be construed consistently with the requirements of Section 422 and regulations
thereunder. The Board and the Company shall have no liability if an Option or any part thereof
that is intended to be an Incentive Stock Option does not qualify as such. An Option or any part
thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory
Stock Option” or “Nonqualified Stock Option.”

     c. Dollar Limitation. For so long as the Code shall so provide, Options granted to any
employee under the Plan (and any other incentive stock option plans of the Company) which are
intended to qualify as Incentive Stock Options shall not qualify as Incentive Stock Options to the
extent that such Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value (determined as of the
respective date or dates of grant) of more than $100,000. The amount of Incentive Stock Options
which exceed such $100,000 limitation shall be deemed to be Nonqualified Stock Options. For the
purpose of this limitation, unless otherwise required by the Code or regulations of the Internal
Revenue Service or determined by the Board, Options shall be taken into account in the order
granted, and the Board may designate that portion of any Incentive Stock Option that

3

 

shall be treated as Nonqualified Option in the event that the provisions of this paragraph
apply to a portion of any Option. The designation described in the preceding sentence may be made
at such time as the Committee considers appropriate, including after the issuance of the Option or
at the time of its exercise.

     d. Exercise Price. The Board shall establish the exercise price (or determine the
method by which the exercise price shall be determined) at the time each Option is granted and
specify the exercise price in the applicable Stock Option Agreement, provided, however, in no event
may the per share exercise price be less than the then Fair Market Value (as defined below) of the
Common Stock. In the case of an Incentive Stock Option granted to a Participant who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any parent or subsidiary, then the exercise price shall be
no less than 110% of the fair market value of the Common Stock on the date of grant. In the case
of a grant of an Incentive Stock Option to any other Participant, the exercise price shall be no
less than 100% of the fair market value of the Common Stock on the date of grant.

     e. Duration of Options. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Board may specify in the applicable Stock Option Agreement;
provided, that the term of any Incentive Stock Option may not be more than ten (10) years from the
date of grant. In the case of an Incentive Stock Option granted to a Participant who, at the time
of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any parent or subsidiary, the term of the Option shall be no
longer than ten (10) years from the date of grant.

     f. Exercise of Option. Options may be exercised only by delivery to the Company of a
written notice of exercise signed by the proper person together with payment in full as specified
in Section 4(g) and the Stock Option Agreement for the number of shares for which the Option is
exercised.

     g. Payment Upon Exercise. Common Stock purchased upon the exercise of an Option
shall be paid for by one or any combination of the following forms of payment as permitted by the
Board in its sole and absolute discretion:

          i. by check payable to the order of the Company;

          ii. only if the Common Stock is then publicly traded, by delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient
funds to pay the exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price;

          iii. to the extent explicitly provided in the applicable Stock Option Agreement, by delivery
of shares of Common Stock owned by the Participant valued at fair market value (as determined by
the Board or as determined pursuant to the applicable Stock Option Agreement); or

4

 

          iv. payment of such other lawful consideration as the Board may determine.

The Board shall determine in its sole and absolute discretion and subject to securities laws and
its Insider Trading Policy whether to accept consideration other than cash. The fair market value
of any shares of the Company’s Common Stock or other non-cash consideration which may be delivered
upon exercise of an Option shall be determined in such manner as may be prescribed by the Board.

     h. Acceleration, Extension, Etc. The Board may, in its sole discretion, and in all
instances subject to any relevant tax and accounting considerations which may adversely impact or
impair the Company, (i) accelerate the date or dates on which all or any particular Options or
Awards granted under the Plan may be exercised, or (ii) extend the dates during which all or any
particular Options or Awards granted under the Plan may be exercised; provided, however, in no
event may any extension exceed the lesser of the option term permitted under Section 4(e) herein or
the term set forth in the governing Stock Option Agreement.

     i. Determination of Fair Market Value. If, at the time an Option is granted under the
Plan, the Company’s Common Stock is publicly traded under the Exchange Act, “fair market value”
shall mean (i) if the Common Stock is listed on any established stock exchange, its fair market
value shall be the last reported sales price for such stock (on that date) or the closing bid, if
no sales were reported as quoted on such exchange or system as reported in The Wall Street Journal
or such other source as the Board deems reliable; or (ii) the average of the closing bid and asked
prices last quoted (on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on a national market system. In the absence of an
established market for the Common Stock, the fair market value thereof shall be determined in good
faith by the Board after taking into consideration all factors which it deems appropriate.

5. Restricted Stock.

     a. Grants. The Board may grant Awards entitling recipients to acquire shares of
Common Stock, subject to (i) delivery to the Company by the Participant of a check in an amount at
least equal to the par value of the shares purchased, and (ii) the right of the Company to
repurchase all or part of such shares at their issue price or other stated or formula price from
the Participant in the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods established by the Board
for such Award (each, a “Restricted Stock Award”).

     b. Terms and Conditions. The Board shall determine the terms and conditions of any
such Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock Award
shall be registered in the name of the Participant and, unless otherwise determined by the Board,
deposited by the Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the Company (or such
designee) shall deliver the certificates no longer subject to such restrictions to the Participant
or, if the Participant has died, to the beneficiary designated by a Participant, in a manner
determined by the Board, to receive amounts due or exercise rights of the Participant in

5

 

the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

6. Other Stock-Based Awards. The Board shall have the right to grant other Awards based
upon the Common Stock having such terms and conditions as the Board may determine, including,
without limitation, the grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or
stock units.

7. General Provisions Applicable to Awards.

     a. Transferability of Awards. Except as the Board may otherwise determine or provide
in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by
the person to whom they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the Participant, shall be exercisable
only by the Participant; provided, however, except as the Board may otherwise determine or provide
in an Award, that Nonstatutory Options and Restricted Stock Awards may be transferred pursuant to a
qualified domestic relations order (as defined in Employee Retirement Income Security Act of 1974,
as amended) or to a grantor-retained annuity trust or a similar estate-planning vehicle in which
the trust is bound by all provisions of the Stock Option Agreement and Restricted Stock Award,
which are applicable to the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.

     b. Documentation. Each Award under the Plan shall be evidenced by a written
instrument in such form as the Board shall determine or as executed by an officer of the Company
pursuant to authority delegated by the Board. Each Award may contain terms and conditions in
addition to those set forth in the Plan, provided that such terms and conditions do not contravene
the provisions of the Plan or applicable law.

     c. Board Discretion. The terms of each type of Award need not be identical, and the
Board need not treat Participants uniformly.

     d. Additional Award Provisions. The Board may, in its sole discretion, include
additional provisions in any Stock Option Agreement, Restricted Stock Award or other Award granted
under the Plan, including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to transfer other
property to Participants upon exercise of Awards, or transfer other property to Participants upon
exercise of Awards, or such other provisions as shall be determined by the Board; provided that
such additional provisions shall not be inconsistent with any other term or condition of the Plan
or applicable law.

     e. Termination of Status. The Board shall determine the effect on an Award of the
disability (as defined in Code Section 22(e)(3)), death, retirement, authorized leave of absence or
other change in the employment or other status of a Participant and the extent to which, and the
period during which, the Participant, or the Participant’s legal representative, conservator,

6

 

guardian or Designated Beneficiary, may exercise rights under the Award, subject to applicable
law and the provisions of the Code related to Incentive Stock Options.

     f. Change of Control of the Company.

          i. Unless otherwise expressly provided in the applicable Stock Option Agreement or Restricted
Stock Award or other Award, in connection with the occurrence of a Change in Control (as defined
below), the Board shall, in its sole discretion as to any outstanding Award (including any portion
thereof; on the same basis or on different bases, as the Board shall specify), take one or any
combination of the following actions:

               A. make appropriate provision for the continuation of such Award by the Company or the
assumption of such Award by the surviving or acquiring entity and by substituting on an equitable
basis for the shares then subject to such Award either (x) the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Change of Control, (y) shares of
stock of the surviving or acquiring corporation or (z) such other securities as the Board deems
appropriate, the fair market value of which (as determined by the Board in its sole discretion)
shall not materially differ from the fair market value of the shares of Common Stock subject to
such Award immediately preceding the Change of Control;

               B. accelerate the date of exercise or vesting of such Award; or

               C. permit the exchange of such Award for the right to participate in any stock option or other
employee benefit plan of any successor corporation.

               D. For the purpose of this Agreement, a “Change of Control” shall mean:

     (a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of the then outstanding shares of
voting stock of the Company (the “Outstanding Voting Stock”);
provided, however, that any acquisition by the Company or its
subsidiaries, or any employee benefit plan (or related trust) of the
Company or its subsidiaries of 50% or more of Outstanding Voting
Stock shall not constitute a Change in Control; and provided,
further, that any acquisition by a corporation with respect to
which, following such acquisition, more than 50% of the then
outstanding shares of common stock of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners
of the Outstanding Voting Stock immediately prior to such
acquisition in substantially the same

7

 

proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Voting Stock, shall not constitute a
Change in Control; or

     (b) Individuals who, as of the Effective Date, constitute the
Board (the “Incumbent Directors”) cease for any reason to constitute
a majority of the members of this Board; provided that any
individual who becomes a director after the Effective Date whose
election or nomination for election by the Company’s Shareholders
was approved by a majority of the members of the Incumbent Directors
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
“election contest” relating to the election of the Directors of the
Company (as such terms are used in Rule 14a-11 under the Exchange
Act), “tender offer” (as such term is used in Section 14(d) of the
Exchange Act) or a proposed Merger (as defined below) shall be
deemed to be members of the Incumbent Directors; or

     (c) The consummation of (i) a reorganization, merger or
consolidation (any of the foregoing, a “Merger”), in each case, with
respect to which all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Voting
Stock immediately prior to such Merger do not, following such
Merger, beneficially own, directly or indirectly, more than 50% of
the then outstanding shares of common stock of the corporation
resulting from Merger, (ii) a complete liquidation or dissolution of
the Company or (iii) the sale or other disposition of all or
substantially all of the assets of the Company, excluding a sale or
other disposition of assets to a subsidiary of the Company.

     g. Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify each Participant as soon as practicable prior to
the effective date of such proposed transaction. The Board in its sole discretion may provide for
a Participant to have the right to exercise his or her Award until fifteen (15) days prior to such
transaction as to all of the shares of Common Stock covered by the Option or Award, including
shares as to which the Option or Award would not otherwise be exercisable, which exercise may in
the sole discretion of the Board, be made subject to and conditioned upon the consummation of such
proposed transaction. In addition, the Board may provide that any Company repurchase option
applicable to any shares of Common Stock purchased upon exercise of an Option or Award shall lapse
as to all such shares of Common Stock, provided the proposed dissolution and liquidation takes
place at the time and in the manner contemplated. To the extent it has not been previously
exercised, an Award will terminate upon the consummation of such proposed action.

     h. Assumption of Options Upon Certain Events. In connection with a merger or
consolidation of an entity with the Company or the acquisition by the Company of property or

8

 

stock of an entity, the Board may grant Awards under the Plan in substitution for stock and
stock-based awards issued by such entity or an affiliate thereof.

     i. The substitute Awards shall be granted on such terms and conditions as the Board considers
appropriate in the circumstances.

     j. Parachute Payments and Parachute Awards. Notwithstanding the provisions of Section
7(f), if, in connection with a Change of Control described therein, a tax under Section 4999 of the
Code would be imposed on the Participant (after taking into account the exceptions set forth in
Sections 280G(b)(4) and 280G(b)(5) of the Code, if applicable), then the number of Awards which
shall become exercisable, realizable or vested as provided in such Section shall be reduced (or
delayed), to the minimum extent necessary, so that no such tax would be imposed on the Participant
(the Awards not becoming so accelerated, realizable or vested, the “Parachute Awards”); provided,
however, that if the “aggregate present value” of the Parachute Awards would exceed the tax that,
but for this sentence, would be imposed on the Participant under Section 4999 of the Code in
connection with the Change of Control, then the Awards shall become immediately exercisable,
realizable and vested without regard to the provisions of this sentence. For purposes of the
preceding sentence, the “aggregate present value” of an Award shall be calculated on an after-tax
basis (other than taxes imposed by Section 4999 of the Code) and shall be based on economic
principles rather than the principles set forth under Section 280G of the Code and the regulations
promulgated thereunder. All determinations required to be made under this Section 7(j) shall be
made by the Company.

     k. Amendment of Awards. The Board may amend, modify or terminate any outstanding
Award including, but not limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an Incentive Stock Option to a
Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required
unless the Board determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

     l. Conditions on Delivery of Stock. The Company will not be obligated to deliver any
shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously
delivered under the Plan until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market rules and regulations,
and (iii) the Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements of any applicable
laws, rules or regulations.

     m. Acceleration. The Board may at any time provide that any Options shall become
immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some
or all restrictions, or that any other stock-based Awards may become exercisable in full or in part
or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be, despite the fact that the foregoing actions may (i) cause the application of
Sections 280G and 4999 of the Code if a change in control of the Company occurs, or (ii) disqualify
all or part of the Option as an Incentive Stock Option.

9

 

8. Withholding. The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an Award any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon exercise of Options
under the Plan or the purchase of shares subject to the Award. Subject to the prior approval of the
Company, including without limitation, its determination that such withholding complies with
applicable tax and securities laws,, which may be withheld by the Company in its sole discretion,
the optionee or recipient of an Award may elect to satisfy such obligation, in whole or in part,
(a) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the
exercise of an Option or the purchase of shares subject to an Award or (b) by delivering to the
Company shares of Common Stock already owned by the optionee or Award recipient of an Award. The
shares so delivered or withheld shall have a fair market value of the shares used to satisfy such
withholding obligation as shall be determined by the Company as of the date that the amount of tax
to be withheld is to be determined. An optionee or recipient of an Award who has made an election
pursuant to this Section may only satisfy his or her withholding obligation with shares of Common
Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.

9. No Exercise of Option if Engagement or Employment Terminated for Cause. If the
employment or engagement of any Participant is terminated “for Cause,” the Award may terminate,
upon a determination of the Board, on the date of such termination and the Option shall thereupon
not be exercisable to any extent whatsoever and the Company shall have the right to repurchase any
shares of Common Stock subject to a Restricted Stock Award whether or not such shares have vested.
For purposes of this Section 9, “for Cause” shall be defined as follows: (i) if the Participant
has executed an employment agreement, the definition of “cause” contained therein, if any, shall
govern, or (ii) conduct, as determined by the Board of Directors, involving one or more of the
following: (a) gross misconduct; or (b) the commission of an act of embezzlement, fraud or theft,
which results in economic loss, damage or injury to the Company; or (c) the unauthorized disclosure
of any trade secret or confidential information of the Company (or any client, customer, supplier
or other third party who has a business relationship with the Company) or the violation of any
noncompetition or nonsolicitation covenant or assignment of inventions obligation with the Company;
or (d) the commission of an act which constitutes unfair competition with the Company or which
induces any customer or prospective customer of the Company to breach a contract with the Company
or to decline to do business with the Company; or (e) the indictment of the Participant for a
felony or serious misdemeanor offense, either in connection with the performance of his or her
obligations to the Company or which shall adversely affect the Participant’s ability to perform
such obligations; or (f) the commission of an act of fraud or breach of fiduciary duty which
results in loss, damage or injury to the Company; or (g) the failure of the Participant to perform
in a material respect his or her employment, consulting or advisory obligations without proper
cause; or (h) intentional violation of securities laws or the Company’s Insider Trading Policy. In
making such determination, the Board shall act fairly and in utmost good faith. The Board may in
its discretion waive or modify the provisions of this Section at a meeting of the Board with
respect to any individual Participant with regard to the facts and circumstances of any particular
situation involving a determination under this Section.

10

 

10. Miscellaneous.

     a. Definitions.

          i. “Company,” for purposes of eligibility under the Plan, shall include any present or future
subsidiary corporations of Intellect Neurosciences, Inc., as defined in Section 424(f) of the Code
(a “Subsidiary”), and any present or future parent corporation of the Company, as defined in
Section 424(e) of the Code. For purposes of Awards other than Incentive Stock Options, the term
“Company” shall include any other business venture in which the Company has a direct or indirect
significant interest, as determined by the Board in its sole discretion.

          ii. “Code” means the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder.

          iii. “Employee” for purposes of eligibility under the Plan shall include a person to whom an
offer of employment has been extended by the Company.

          iv. “Option Exchange Program” means a program whereby outstanding options are exchanged for
options with a lower exercise price.

     b. No Right To Employment or Other Status. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving a Participant the
right to continued employment or any other relationship with the Company. The Company expressly
reserves the right at any time to dismiss or otherwise terminate its relationship with a
Participant free from any liability or claim under the Plan.

     c. No Rights As Stockholder. Subject to the provisions of the applicable Award, no
Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any
shares of Common Stock to be distributed with respect to an Award until becoming the record holder
thereof.

     d. Effective Date and Term of Plan. The Plan shall become effective on the date on
which it is adopted by the Board (the “Effective Date”. No Awards shall be granted under the Plan
after the completion of ten years from the date on which the Plan was adopted by the Board, but
Awards previously granted may extend beyond that date.

     e. Amendment of Plan. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time.

     f. Settlement of Awards. Any other provision of the Plan to the contrary
notwithstanding, if any provisions of the Plan permits a Participant, at his or her election, to
receive a cash settlement of Options or other Awards under the Plan, or requires the Company to pay
a cash settlement of Options or Awards under the Plan, the Participant shall be entitled to receive
the cash settlement, and the Company shall be obligated to pay the cash settlement, only if the
Company determines, in its sole and absolute discretion, to make such payment.

11

 

     f. Governing Law. The provisions of the Plan and all Awards made hereunder shall be
governed by and interpreted in accordance with the laws of the state of Delaware, without regard to
any applicable conflicts of law.

Approvals

Original Plan:

Adopted by the Board of Directors on:

January 25, 2007

Approved by the stockholders on:

January 25, 2007

12

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