Performance Equity Plan (2002)Full Document 

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                              LIPID SCIENCES, INC.
                             PERFORMANCE EQUITY PLAN
                            (AMENDED AUGUST 5, 2002)

SECTION 1. PURPOSE; DEFINITIONS.

         1.1. Purpose. The purpose of the Lipid Sciences, Inc. 2001 Performance
Equity Plan is to enable the Company to offer to its employees, officers,
directors and consultants whose past, present and/ or potential contributions to
the Company and its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a proprietary interest in the
Company. The various types of long-term incentive awards that may be provided
under the Plan will enable the Company to respond to changes in compensation
practices, tax laws, accounting regulations and the size and diversity of its
businesses.

         1.2. Definitions. For purposes of the Plan, the following terms shall
be defined as set forth below:

         (a) "Agreement" means the agreement between the Company and the Holder,
or such other document as may be determined by the Committee, setting forth the
terms and conditions of an award under the Plan.

         (b) "Board" means the Board of Directors of the Company.

         (c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

         (d) "Committee" means the Stock Option Committee of the Board or any
other committee of the Board that the Board may designate to administer the Plan
or any portion thereof. If no Committee is so designated, then all references in
this Plan to "Committee" shall mean the Board.

         (e) "Common Stock" means the Common Stock of the Company, no par value.

         (f) "Company" means Lipid Sciences, Inc., a corporation organized under
the laws of the State of Delaware.

         (g) "Deferred Stock" means Common Stock to be received under an award
made pursuant to Section 8, below, at the end of a specified deferral period.

         (h) "Disability" means physical or mental impairment as determined
under procedures established by the Committee for purposes of the Plan.

         (i) "Effective Date" means the date set forth in Section 12.1, below.

         (j) "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
given date: (i) if the Common Stock is listed on a national securities exchange
or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale
price of the Common Stock in the principal trading market for the Common Stock
on such date, as reported by the exchange or Nasdaq, as the case may be; (ii) if
the Common Stock is not listed on a national securities exchange or quoted on
the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the
over-the-counter market, the closing bid price for the Common Stock on such
date, as reported by the OTC Bulletin Board or the National Quotation Bureau,
Incorporated or similar publisher of such quotations; and (iii) if the fair
market value of the Common Stock cannot be determined pursuant to clause (i) or
(ii) above, such price as the Committee shall determine, in good faith.

         (k) "Holder" means a person who has received an award under the Plan.

         (l) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

         (m) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         (n) "Other Stock-Based Award" means an award under Section 9, below,
that is valued in whole or in part by reference to, or is otherwise based upon,
Common Stock.

         (o) "Parent" means any present or future "parent corporation" of the
Company, as such term is defined in Section 424(e) of the Code (without regard
to the phrase "at the time of the granting of the option" in such Section).

         (p) "Plan" means the Lipid Sciences, Inc. 2001 Performance Equity Plan,
as hereinafter amended from time to time.

         (q) "Repurchase Value" shall mean the Fair Market Value in the event

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