Document:

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                                                                    Exhibit 10.4

                               ALTUS MEDICAL, INC.

                            2002 DIRECTOR OPTION PLAN

        1.  Purposes of the Plan. The purposes of this 2002 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.

            All options granted hereunder shall be nonstatutory stock options.

        2.  Definitions.  As used herein, the following definitions shall apply:
            -----------
            (a)     "Board" means the Board of Directors of the Company.
                     -----
            (b)     "Code" means the Internal Revenue Code of 1986, as amended.
                     ----
            (c)     "Common Stock" means the common stock of the Company.
                     ------------
            (d)     "Company" means Altus Medical, Inc., a Delaware corporation.
                     -------
            (e)     "Director" means a member of the Board.
                     --------
            (f)     "Disability" means total and permanent disability as defined
                     ----------
in section 22(e)(3) of the Code.

            (g)     "Employee" means any person, including officers and
                     --------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

            (h)     "Exchange Act" means the Securities Exchange Act of 1934,
                     ------------
as amended.
            (i)     "Fair Market Value" means, as of any date, the value of
                     -----------------
Common Stock determined as follows:

                    (i)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

                    (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market

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trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable; or

                    (iii) 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.

            (j)    "Inside Director" means a Director who is an Employee.
                    ---------------
            (k)    "Option" means a stock option granted pursuant to the Plan.
                    ------
            (l)    "Optioned Stock" means the Common Stock subject to an Option.
                    --------------
            (m)    "Optionee" means a Director who holds an Option.
                    --------
            (n)    "Outside Director" means a Director who is not an Employee.
                    ----------------
            (o)    "Parent" means a "parent corporation," whether now or
                    ------
hereafter existing, as defined in Section 424(e) of the Code.
            (p)    "Plan" means this 2002 Director Option Plan.
                    ----
            (q)    "Share" means a share of the Common Stock, as adjusted in
                    -----
accordance with Section 10 of the Plan.
            (r)    "Subsidiary"  means a  "subsidiary  corporation,"  whether
                    ----------
now or  hereafter  existing,  as defined in  Section 424(f)  of the Internal
Revenue Code of 1986.

        3.  Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 150,000 Shares plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 2003, equal to the lesser of
(i) the number of Shares issued pursuant to Options under the Plan in the prior
fiscal year or (ii) an amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.

            If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

        4.  Administration and Grants of Options under the Plan.
            ---------------------------------------------------
            (a)   Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:

                  (i)  No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.

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                    (ii)  Each Outside Director shall be automatically granted
an Option to purchase 30,000 Shares (the "First Option") on the date on which
such person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.

                    (iii) Each Outside Director shall be automatically granted
an Option to purchase 10,000 Shares (a "Subsequent Option") on the date of the
Company's annual stockholders meeting each year provided he or she is then an
Outside Director.

                    (iv) The terms of a First Option granted hereunder shall be
as follows:

                         (A)  the term of the Election Option shall be ten (10)
years.

                         (B)  the First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

                         (C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.

                         (D) subject to Section 10 hereof, the First Option
shall become exercisable as to 1/3rd of the Shares subject to the First Option
on each anniversary following its date of grant, provided that the Optionee
continues to serve as a Director on such dates.

                    (v)  The terms of a Subsequent Option granted hereunder
shall be as follows:

                         (A) the term of the Subsequent Option shall be ten (10)
years.

                         (B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.

                         (C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.

                         (D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to 100% of the Shares subject to the
Subsequent Option three (3) years following its date of grant, provided that the
Optionee continues to serve as a Director on such date.

                    (vi) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the total number of
Shares reserved for issuance under the Plan, then the remaining Shares available
for Option grant shall be granted under Options to the Outside Directors on a
pro rata basis. No further grants shall be made until such time, if any, as
additional Shares become available for grant under the Plan through the
provisions of the Plan, by action of the Board,

                                      -3-

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by the stockholders  approving an increase in the number of Shares which may be
issued under the Plan or through  cancellation or expiration of Options
previously granted hereunder.

         5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.

            The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.

        6.  Term of Plan.  The Plan shall  become  effective  upon the later to
occur of its  adoption by the Board or its approval by the stockholders  of the
Company.  It shall  continue in effect for a term of ten (10) years unless
sooner  terminated  under Section 11 of the Plan.

        7.  Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other Shares, which, in the case of
Shares acquired from the Company, (x) have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (iv) consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.

        8.  Exercise of Option.
            ------------------

            (a)  Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof and may not be exercised for a fraction of a Share. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment may
consist of any consideration and method of payment allowable under Section 7 of
the Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan.

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

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            (b)   Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not vested as to
his or her entire Option on the date of such termination, the Shares covered by
the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

            (c)  Disability of Optionee. In the event Optionee's status
as a Director terminates as a result of Disability, the Optionee may exercise
his or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not vested as to
his or her entire Option on the date of termination, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

            (d)  Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
vested as to his or her entire an Option on the date of death, the Shares
covered by the unvested portion of the Option shall revert to the Plan. To the
extent that the Optionee's estate or a person who acquired the right to exercise
such Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

        9.  Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

        10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
         ---------------------------------------------------------------------
Asset Sale.
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            (a)  Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed

                                      -5-

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to have been "effected without receipt of consideration." 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 an Option.

            (b)  Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

            (c)  Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.

                 If the  Successor  Corporation  does not assume an  outstanding
Option or  substitute  for it an equivalent option, the Option shall become
fully vested and exercisable, including as to Shares for which it would not
otherwise be exercisable. In such event the Board shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.

                 For the purposes of this Section 10(c),  an Option shall be
considered  assumed if,  following the merger or sale of assets, the Option
confers the right to purchase or receive, for each Share subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.

        11. Amendment and Termination of the Plan.
            --------------------------------------

            (a)  Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable

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law, regulation or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.

            (b)  Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

        12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.

        13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

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

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

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

        15. Option Agreement.  Options shall be evidenced by written option
agreements in such form as the Board shall approve.

                                      -7-<PAGE>

                                                                    Exhibit 10.5

                               ALTUS MEDICAL, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

         The following constitute the provisions of the Employee Stock Purchase
Plan of Altus Medical, Inc.

     1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a uniform and
nondiscriminatory basis consistent with the requirements of Section 423.

     2. Definitions.

          (a) "Administrator" shall mean the Board or any Committee designated
     by the Board to administer the plan pursuant to Section 14.

          (b) "Board" shall mean the Board of Directors of the Company.

          (c) "Change of Control" shall mean the occurrence of any of the
     following events:

               (i) Any "person" (as such term is used in Sections 13(d) and
          14(d) of the Exchange Act) becomes the "beneficial owner" (as defined
          in Rule 13d-3 of the Exchange Act), directly or indirectly, of
          securities of the Company representing fifty percent (50%) or more of
          the total voting power represented by the Company's then outstanding
          voting securities; or

               (ii) The consummation of the sale or disposition by the Company
          of all or substantially all of the Company's assets; or

               (iii) The consummation of a merger or consolidation of the
          Company, with any other corporation, other than a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior thereto continuing to represent
          (either by remaining outstanding or by being converted into voting
          securities of the surviving entity or its parent) at least fifty
          percent (50%) of the total voting power represented by the voting
          securities of the Company, or such surviving entity or its parent
          outstanding immediately after such merger or consolidation.

               (iv) A change in the composition of the Board, as a result of
          which fewer than a majority of the Directors are Incumbent Directors.
          "Incumbent Directors" shall mean Directors who either (A) are
          Directors of the Company, as applicable, as of the date hereof, or (B)
          are elected, or nominated for election, to the Board with the
          affirmative votes of at least a majority of those Directors whose
          election or nomination was not in connection with any transaction
          described

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in subsections (i), (ii) or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company.

     (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (e) "Committee" means a committee of the Board appointed by the Board in
accordance with Section 14 hereof.

     (f) "Common Stock" shall mean the common stock of the Company.

     (g) "Company" shall mean Altus Medical, Inc., a Delaware corporation.

     (h) "Compensation" shall mean all base straight time gross earnings,
commissions overtime and shift premium, but exclusive of payments for incentive
compensation, bonuses and other compensation.

     (i) "Designated Subsidiary" shall mean any Subsidiary selected by the
Administrator as eligible to participate in the Plan.

     (j) "Eligible Employee" shall mean any individual who is a common law
employee of the Company or any Designated Subsidiary and whose customary
employment with the Company or Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.

     (k) "Exercise Date" shall mean the first Trading Day on or after May 1 and
November 1 of each year. The first Exercise Date under the Plan shall be the
first Trading Day on or after November 1, 2002.

     (l) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or
     a national market system, including without limitation the Nasdaq National
     Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
     Market Value shall be the closing sales price for such stock (or the
     closing bid, if no sales were reported) as quoted on such exchange or
     system on the date of determination, as reported in The Wall Street Journal
     or such other source as the Board deems reliable;

          (ii) If the Common Stock is regularly quoted by a recognized
     securities dealer but selling prices are not reported, its Fair Market
     Value shall be the mean of the closing bid and asked prices for the Common
     Stock on the date of determination, as reported in The Wall Street Journal
     or such other source as the Board deems reliable;

<PAGE>

               (iii) 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; or

               (iv) For purposes of the Offering Date of the first Offering
          Period under the Plan, the Fair Market Value shall be the initial
          price to the public as set forth in the final prospectus included
          within the registration statement in Form S-1 filed with the
          Securities and Exchange Commission for the initial public offering of
          the Company's Common Stock (the "Registration Statement").

          (m) "Offering Date" shall mean the first Trading Day of each Offering
     Period.

          (n) "Offering Periods" shall mean the periods of approximately twelve
     (12) months during which an option granted pursuant to the Plan may be
     exercised, commencing on the first Trading Day on or after May 1 and
     November 1 of each year and terminating on the first Trading Day on or
     after the May 1 and November 1 Offering Period commencement date
     approximately twelve months later; provided, however, that the first
     Offering Period under the Plan shall commence with the first Trading Day on
     or after the date on which the Company's Registration Statement on Form S-1
     is declared effective by the Securities and Exchange Commission and ending
     on the first Trading Day on or after the earlier of (i) May 1, 2003 or (ii)
     twenty-seven (27) months from the beginning of the first Offering Period.
     The duration and timing of Offering Periods may be changed pursuant to
     Section 4 of this Plan.

          (o) "Plan" shall mean this Employee Stock Purchase Plan.

          (p) "Purchase Period" shall mean the approximately six (6) month
     period commencing on one Exercise Date and ending with the next Exercise
     Date, except that the first Purchase Period of any Offering Period shall
     commence on the Offering Date and end with the next Exercise Date.

          (q) "Purchase Price" shall mean 85% of the Fair Market Value of a
     share of Common Stock on the Offering Date or on the Exercise Date,
     whichever is lower; provided however, that the Purchase Price may be
     adjusted by the Administrator pursuant to Section 20.

          (r) "Subsidiary" shall mean a "subsidiary corporation," whether now or
     hereafter existing, as defined in Section 424(f) of the Code.

          (s) "Trading Day" shall mean a day on which national stock exchanges
     and the Nasdaq System are open for trading.

     3. Eligibility.

          (a) First Offering Period. Any individual who is an Eligible Employee
     immediately prior to the first Offering Period shall be automatically
     enrolled in the first Offering Period.

          (b) Subsequent Offering Periods. Any Eligible Employee on a given
     Offering Date shall be eligible to participate in the Plan.

<PAGE>

          (c) Limitations. Any provisions of the Plan to the contrary
     notwithstanding, no Eligible Employee shall be granted an option under the
     Plan (i) to the extent that, immediately after the grant, such Eligible
     Employee (or any other person whose stock would be attributed to such
     Eligible Employee pursuant to Section 424(d) of the Code) would own capital
     stock of the Company and/or hold outstanding options to purchase such stock
     possessing five percent (5%) or more of the total combined voting power or
     value of all classes of the capital stock of the Company or of any
     Subsidiary, or (ii) to the extent that his or her rights to purchase stock
     under all employee stock purchase plans of the Company and its subsidiaries
     accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000)
     worth of stock (determined at the fair market value of the shares at the
     time such option is granted) for each calendar year in which such option is
     outstanding at any time.

     4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Company's Registration Statement on form S-1 is declared
effective by the Securities and Exchange Commission and ending on the first
Trading Day on or after May 1, 2003. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced prior to the scheduled beginning of the first Offering Period to be
affected thereafter.

     5. Participation.

          (a) First Offering Period. An Eligible Employee shall be entitled to
     participate in the first Offering Period only if such individual submits a
     subscription agreement authorizing payroll deductions in the form of
     Exhibit A to this Plan (i) no earlier than the effective date of the Form
     S-8 registration statement with respect to the issuance of Common Stock
     under this Plan and (ii) no later than five (5) business days from the
     effective date of such S-8 registration statement (the "Enrollment
     Window"). An Eligible Employee's failure to submit the subscription
     agreement during the Enrollment Window shall result in the automatic
     termination of such individual's participation in the Offering Period.

          (b) Subsequent Offering Periods. An Eligible Employee may become a
     participant in the Plan by completing a subscription agreement authorizing
     payroll deductions in the form of Exhibit A to this Plan and filing it with
     the Company's payroll office prior to the applicable Offering Date.

     6. Payroll Deductions.

          (a) At the time a participant files his or her subscription agreement,
     he or she shall elect to have payroll deductions made on each pay day
     during the Offering Period in an amount not exceeding 15% of the
     Compensation which he or she receives on each pay day during the Offering
     Period; provided, however, that should a pay day occur on an Exercise Date,
     a participant shall have the payroll deductions made on such day applied to
     his or her account under the new Offering Period or Purchase Period, as the
     case may be. A participant's subscription agreement shall remain in effect
     for successive Offering Periods unless terminated as provided in Section 10
     hereof.

<PAGE>

          (b) Payroll deductions for a participant shall commence on the first
     payday following the Offering Date and shall end on the last payday in the
     Offering Period to which such authorization is applicable, unless sooner
     terminated by the participant as provided in Section 10 hereof; provided,
     however, that for the first Offering Period, payroll deductions shall
     commence on the first payday on or following the end of the Enrollment
     Window.

          (c) All payroll deductions made for a participant shall be credited to
     his or her account under the Plan and shall be withheld in whole
     percentages only. A participant may not make any additional payments into
     such account.

          (d) A participant may discontinue his or her participation in
     the Plan as provided in Section 10 hereof, or may increase or decrease the
     rate of his or her payroll deductions during the Offering Period by
     completing or filing with the Company a new subscription agreement
     authorizing a change in payroll deduction rate. The Administrator may, in
     its discretion, limit the nature and/or number of participation rate
     changes during any Offering Period. The change in rate shall be effective
     with the first full payroll period following five (5) business days after
     the Company's receipt of the new subscription agreement unless the Company
     elects to process a given change in participation more quickly.

          (e) Notwithstanding the foregoing, to the extent necessary to comply
     with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
     payroll deductions may be decreased to zero percent (0%) at any time during
     a Purchase Period. Payroll deductions shall recommence at the rate provided
     in such participant's subscription agreement at the beginning of the first
     Purchase Period which is scheduled to end in the following calendar year,
     unless terminated by the participant as provided in Section 10 hereof.

          (f) At the time the option is exercised, in whole or in part, or at
     the time some or all of the Company's Common Stock issued under the Plan is
     disposed of, the participant must make adequate provision for the Company's
     federal, state, or other tax withholding obligations, if any, which arise
     upon the exercise of the option or the disposition of the Common Stock. At
     any time, the Company may, but shall not be obligated to, withhold from the
     participant's compensation the amount necessary for the Company to meet
     applicable withholding obligations, including any withholding required to
     make available to the Company any tax deductions or benefits attributable
     to sale or early disposition of Common Stock by the Eligible Employee.

     7. Grant of Option. On the Offering Date of each Offering Period, each
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Eligible Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Eligible Employee be permitted to purchase during each
Purchase Period more than 2,500 shares of the Company's Common Stock (subject to
any adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
The Eligible Employee may accept the grant of such option by turning in a
completed Subscription Agreement (attached hereto as Exhibit A) to the Company
on or prior to an Offering Date, or with respect to the first Offering Period,
prior to the last day of the Enrollment Window. The

<PAGE>

Administrator may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Eligible Employee may purchase during each Purchase Period of such Offering
Period. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.

     8. Exercise of Option.

          (a) Unless a participant withdraws from the Plan as provided in
     Section 10 hereof, his or her option for the purchase of shares shall be
     exercised automatically on the Exercise Date, and the maximum number of
     full shares subject to option shall be purchased for such participant at
     the applicable Purchase Price with the accumulated payroll deductions in
     his or her account. No fractional shares shall be purchased; any payroll
     deductions accumulated in a participant's account which are not sufficient
     to purchase a full share shall be retained in the participant's account for
     the subsequent Purchase Period or Offering Period, subject to earlier
     withdrawal by the participant as provided in Section 10 hereof. Any other
     funds left over in a participant's account after the Exercise Date shall be
     returned to the participant. During a participant's lifetime, a
     participant's option to purchase shares hereunder is exercisable only by
     him or her.

          (b) If the Administrator determines that, on a given Exercise Date,
     the number of shares with respect to which options are to be exercised may
     exceed (i) the number of shares of Common Stock that were available for
     sale under the Plan on the Offering Date of the applicable Offering Period,
     or (ii) the number of shares available for sale under the Plan on such
     Exercise Date, the Administrator may in its sole discretion (x) provide
     that the Company shall make a pro rata allocation of the shares of Common
     Stock available for purchase on such Offering Date or Exercise Date, as
     applicable, in as uniform a manner as shall be practicable and as it shall
     determine in its sole discretion to be equitable among all participants
     exercising options to purchase Common Stock on such Exercise Date, and
     continue all Offering Periods then in effect, or (y) provide that the
     Company shall make a pro rata allocation of the shares available for
     purchase on such Offering Date or Exercise Date, as applicable, in as
     uniform a manner as shall be practicable and as it shall determine in its
     sole discretion to be equitable among all participants exercising options
     to purchase Common Stock on such Exercise Date, and terminate any or all
     Offering Periods then in effect pursuant to Section 20 hereof. The Company
     may make pro rata allocation of the shares available on the Offering Date
     of any applicable Offering Period pursuant to the preceding sentence,
     notwithstanding any authorization of additional shares for issuance under
     the Plan by the Company's shareholders subsequent to such Offering Date.

     9. Delivery. As soon as reasonably practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant the shares purchased upon exercise of his or her option in a
form determined by the Administrator.

     10. Withdrawal.

          (a) A participant may withdraw all but not less than all the payroll
     deductions credited to his or her account and not yet used to exercise his
     or her option under the Plan at any time by giving written notice to the
     Company in the form of Exhibit B to this Plan. All of the

<PAGE>

participant's payroll deductions credited to his or her account shall be paid to
such participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.

          (b) A participant's withdrawal from an Offering Period shall not have
     any effect upon his or her eligibility to participate in any similar plan
     which may hereafter be adopted by the Company or in succeeding Offering
     Periods which commence after the termination of the Offering Period from
     which the participant withdraws.

     11. Termination of Employment. In the event a participant ceases to be an
Eligible Employee of the Company or any Designated Subsidiary, as applicable,
his or her option shall remain exercisable for a period of three (3) months from
the date of such Eligible Employee's termination. Upon the expiration of such
three (3) month period or a date prior to the expiration of such three (3) month
period if requested by the participant, any payroll deductions credited to such
participant's account during the Offering Period but not yet used to purchase
shares under the Plan shall be returned to such participant or, in the case of
his or her death, to the person or persons entitled thereto under Section 15
hereof, and such participant's option shall be automatically terminated.

     12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.

     13. Stock.

          (a) Subject to adjustment upon changes in capitalization of the
     Company as provided in Section 19 hereof, the maximum number of shares of
     the Company's Common Stock which shall be made available for sale under the
     Plan shall be 200,000 shares plus an annual increase to be added on the
     first day of the Company's fiscal year beginning in 2003, equal to the
     lesser of (i) 600,000 shares, (ii) 2% of the outstanding shares on such
     date or (iii) an amount determined by the Administrator.

          (b) Until the shares are issued (as evidenced by the appropriate entry
     on the books of the Company or of a duly authorized transfer agent of the
     Company), a participant shall only have the rights of an unsecured creditor
     with respect to such shares, and no right to vote or receive dividends or
     any other rights as a stockholder shall exist with respect to such shares.

          (c) Shares to be delivered to a participant under the Plan shall be
     registered in the name of the participant or in the name of the participant
     and his or her spouse.

     14. Administration. The Administrator shall administer the Plan and shall
have full and exclusive discretionary authority to construe, interpret and apply
the terms of the Plan, to determine eligibility and to adjudicate all disputed
claims filed under the Plan. Every finding, decision and determination made by
the Administrator shall, to the full extent permitted by law, be final and
binding upon all parties.

<PAGE>

     15. Designation of Beneficiary.

          (a) A participant may file a written designation of a beneficiary who
     is to receive any shares and cash, if any, from the participant's account
     under the Plan in the event of such participant's death subsequent to an
     Exercise Date on which the option is exercised but prior to delivery to
     such participant of such shares and cash. In addition, a participant may
     file a written designation of a beneficiary who is to receive any cash from
     the participant's account under the Plan in the event of such participant's
     death prior to exercise of the option. If a participant is married and the
     designated beneficiary is not the spouse, spousal consent shall be required
     for such designation to be effective.

          (b) Such designation of beneficiary may be changed by the participant
     at any time by written notice. In the event of the death of a participant
     and in the absence of a beneficiary validly designated under the Plan who
     is living at the time of such participant's death, the Company shall
     deliver such shares and/or cash to the executor or administrator of the
     estate of the participant, or if no such executor or administrator has been
     appointed (to the knowledge of the Company), the Company, in its
     discretion, may deliver such shares and/or cash to the spouse or to any one
     or more dependents or relatives of the participant, or if no spouse,
     dependent or relative is known to the Company, then to such other person as
     the Company may designate. (c) All beneficiary designations shall be in
     such form and manner as the Administrator may designate from time to time.

     16. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.

     17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions. Until
shares are issued, participants shall only have the rights of an unsecured
creditor.

     18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Eligible
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

     19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Change of Control.

          (a) Changes in Capitalization. Subject to any required action by the
     shareholders of the Company, the maximum number of shares of the Company's
     Common Stock which shall be made available for sale under the Plan, the
     maximum number of shares each participant may purchase each Purchase Period
     (pursuant to Section 7), the number of shares that may be added annually to
     the shares reserved under the Plan (pursuant to Section 13(a)(i)), as well
     as the price per

<PAGE>

share and the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other change in the number of
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.

          (b) Dissolution or Liquidation. In the event of the proposed
     dissolution or liquidation of the Company, the Offering Period then in
     progress shall be shortened by setting a new Exercise Date (the "New
     Exercise Date"), and shall terminate immediately prior to the consummation
     of such proposed dissolution or liquidation, unless provided otherwise by
     the Administrator. The New Exercise Date shall be before the date of the
     Company's proposed dissolution or liquidation. The Administrator shall
     notify each participant in writing, at least ten (10) business days prior
     to the New Exercise Date, that the Exercise Date for the participant's
     option has been changed to the New Exercise Date and that the participant's
     option shall be exercised automatically on the New Exercise Date, unless
     prior to such date the participant has withdrawn from the Offering Period
     as provided in Section 10 hereof.

          (c) Merger or Change of Control. In the event of a merger or Change of
     Control, each outstanding option shall be assumed or an equivalent option
     substituted by the successor corporation or a Parent or Subsidiary of the
     successor corporation. In the event that the successor corporation refuses
     to assume or substitute for the option, any Purchase Periods then in
     progress shall be shortened by setting a New Exercise Date and any Offering
     Periods then in progress shall end on the New Exercise Date. The New
     Exercise Date shall be before the date of the Company's proposed merger or
     Change of Control. The Administrator shall notify each participant in
     writing, at least ten (10) business days prior to the New Exercise Date,
     that the Exercise Date for the participant's option has been changed to the
     New Exercise Date and that the participant's option shall be exercised
     automatically on the New Exercise Date, unless prior to such date the
     participant has withdrawn from the Offering Period as provided in Section
     10 hereof.

     20. Amendment or Termination.

          (a) The Administrator may at any time and for any reason terminate or
     amend the Plan. Except as otherwise provided in the Plan, no such
     termination can affect options previously granted, provided that an
     Offering Period may be terminated by the Administrator on any Exercise Date
     if the Administrator determines that the termination of the Offering Period
     or the Plan is in the best interests of the Company and its shareholders.
     Except as provided in Section 19 and this Section 20 hereof, no amendment
     may make any change in any option theretofore granted which adversely
     affects the rights of any participant. To the extent necessary to comply
     with Section 423 of the Code (or any successor rule or provision or any
     other applicable law, regulation or stock exchange rule), the Company shall
     obtain shareholder approval in such a manner and to such a degree as
     required.

<PAGE>

          (b) Without shareholder consent and without regard to whether any
     participant rights may be considered to have been "adversely affected," the
     Administrator shall be entitled to change the Offering Periods, limit the
     frequency and/or number of changes in the amount withheld during an
     Offering Period, establish the exchange ratio applicable to amounts
     withheld in a currency other than US dollars, permit payroll withholding
     in excess of the amount designated by a participant in order to adjust for
     delays or mistakes in the Company's processing of properly completed
     withholding elections, establish reasonable waiting and adjustment periods
     and/or accounting and crediting procedures to ensure that amounts applied
     toward the purchase of Common Stock for each participant properly
     correspond with amounts withheld from the participant's Compensation, and
     establish such other limitations or procedures as the Administrator
     determines in its sole discretion advisable which are consistent with the
     Plan.

          (c) In the event the Administrator determines that the ongoing
     operation of the Plan may result in unfavorable financial accounting
     consequences, the Board may, in its discretion and, to the extent necessary
     or desirable, modify or amend the Plan to reduce or eliminate such
     accounting consequence including, but not limited to:

               (i) increasing the Purchase Price for any Offering Period
          including an Offering Period underway at the time of the change in
          Purchase Price;

               (ii) shortening any Offering Period so that Offering Period ends
          on a new Exercise Date, including an Offering Period underway at the
          time of the Board action; and

               (iii) allocating shares.

          Such modifications or amendments shall not require stockholder
     approval or the consent of any Plan participants.

     21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form and manner specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.

     22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

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

<PAGE>

     23. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company. It shall continue in effect until terminated under Section 20
hereof.

     24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Offering Date of
such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period.

<PAGE>

                                    EXHIBIT A

                               ALTUS MEDICAL, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT

_____ Original Application                            Offering Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1. ____________________ hereby elects to participate in the Altus Medical, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note that no
fractional percentages are permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.

4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to shareholder
approval of the Employee Stock Purchase Plan.

5. Shares purchased for me under the Plan should be issued in the name(s) of
(choose one):
              [ ] Eligible Employee [ ] Eligible Employee and Spouse

6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were purchased by
me over the price which I paid for the shares. I hereby agree to notify the
Company in writing within 30 days after the date of any disposition of my shares
and I will make adequate

<PAGE>

provision for Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand that
I will be treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market value
of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital gain.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:

NAME: (Please print)_____________________________________________________
                        (First)             (Middle)           (Last)

         _________________________                  ___________________________
         Relationship

         _________________________                  ___________________________
         Percentage Benefit                          (Address)

NAME: (please print)
_______________________________________________________________________________
                        (First)                    (Middle)         (Last)

         _________________________                  ___________________________
         Relationship

         _________________________                  ___________________________
         Percentage of Benefit                       (Address)

<PAGE>

Employee's Social
Security Number:    ____________________________________

Employee's Address: ____________________________________

                    ____________________________________

                    ____________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________      ________________________________

                                     Signature of Employee

                                     _______________________________
                                     Spouse's Signature
                                     (If beneficiary other than spouse)

<PAGE>

                                    EXHIBIT B

                               ALTUS MEDICAL, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL

     The undersigned participant in the Offering Period of the Altus Medical,
Inc. Employee Stock Purchase Plan which began on ____________, ______ (the
"Offering Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

                                      Name and Address of Participant:

                                      ________________________________

                                      ________________________________

                                      ________________________________

                                      Signature:

                                      _________________________________

                                      Date:____________________________

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