DURECT CORP (Form: S-8, Received: 05/18/2001 15:39:04)

As filed with the Securities and Exchange Commission on May 18, 2001
Registration No. 333-__________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

DURECT CORPORATION
(Exact name of Registrant as specified in its charter)

       Delaware                                    94-3297098
(State of incorporation)             (I.R.S. Employer Identification No.)

                            10240 Bubb Road
                          Cupertino, CA 95014
               (Address of principal executive offices)
                        _______________________

DURECT Corporation 2000 Employee Stock Purchase Plan

DURECT Corporation 2000 Stock Plan
Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan
Southern BioSystems, Inc. 1993 Stock Option Plan
(Full title of the Plans)
James E. Brown
Chief Executive Officer
DURECT Corporation
10240 Bubb Road
Cupertino, CA 95014
(408)777-1417
(Name, address and telephone number, including area code, of agent for service) Copy to:

Mark B. Weeks
Stephen B. Thau
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(650) 854-4488

(Calculation of Registration Fee on following page)

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                                  CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
                                                                    Proposed        Proposed
                                                 Maximum Amount      Maximum         Maximum           Amount of
                                                     to be          Offering        Aggregate       Registration Fee
  Title of Securities to be Registered           Registered(1)      Price Per     Offering Price
                                                                      Share
--------------------------------------------------------------------------------------------------------------------
 DURECT Corporation 2000 Employee Stock
  Purchase Plan Common Stock, $0.0001
  par value.................................      225,000 Shares    $7.3355 (2)     $ 1,650,488      $  412.62

 DURECT Corporation 2000 Stock Plan
  Common Stock, $0.0001 par value...........    2,250,000 Shares    $8.6300 (3)     $19,417,500      $4,854.38

 Southern BioSystems, Inc. 1993 Stock Option
  Plan (4) Common Stock, $0.01
  par value.................................      462,713 Shares    $8.6300 (3)     $ 3,993,213      $  998.30

 Southern Research Technologies, Inc. 1995
  Nonqualified Stock Option Plan (4)
  Common Stock, $0.01 par value.............      170,207 Shares    $8.6300 (3)     $ 1,468,886      $  367.22


          TOTAL                                 3,107,920 Shares                    $26,530,087      $6,632.52
          -----

(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under any of the Plans being registered pursuant to this Registration Statement by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of Common Stock.

(2) Estimated in accordance with Rule 457(h) under the Securities Act of 1933 (the "Securities Act") solely for the purpose of calculating the registration fee. The computation is based on the average of the high and low sale prices of the Common Stock as reported on The Nasdaq National Market on May 14, 2001, multiplied by 85%, which is the percentage of the trading purchase price applicable to purchases under the referenced Plan.

(3) Estimated in accordance with Rule 457(h) under the Securities Act solely for the purpose of calculating the registration fee. The computation with respect to unissued options is based on the average of the high and low sale prices of the Common Stock as reported on The Nasdaq National Market on May 14, 2001.

(4) Pursuant to an Agreement and Plan of Merger dated as of April 18, 2001, among Registrant, Southern BioSystems, Inc. and Magnolia Acquisition Corporation, Registrant assumed, effective April 30, 2001, all of the outstanding options to purchase Common Stock of Southern BioSystems, Inc. under both its 1993 Stock Option Plan and under Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan assumed by Southern BioSystems, Inc. in 1991. Such options became exercisable to purchase shares of Registrant's

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Common Stock, with appropriate adjustments to the number of shares and exercise price of each assumed option.

PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The Securities and Exchange Commission (the "SEC") requires us to "incorporate by reference" certain of our publicly-filed documents into this prospectus, which means that information included in those documents is considered part of this prospectus. Information that we file with the SEC after the effective date of this prospectus will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), until we terminate the effectiveness of this registration statement.

The following documents filed with the SEC are hereby incorporated by reference:

(a) Our Registration on Form 10-K filed on March 30, 2001 (No. 000-31615), which contains audited financial statements for our latest fiscal year for which such statements have been filed.

(b) Our Registration on Form 10-Q filed on May 11, 2001 (No. 000-31615), which contains condensed financial statements for the three months ended March 31, 2001.

(c) The description of our Common Stock in our Registration Statement on Form 8-A filed with the SEC under Section 12 of the Exchange Act on September 22, 2000 (File No. 000-31615), including any amendments or reports filed for the purpose of updating such description.

We will furnish without charge to you, on written or oral request, a copy of any or all of the documents incorporated by reference, other than exhibits to those documents. You should direct any requests for documents to James E. Brown, c/o DURECT Corporation, 10240 Bubb Road, Cupertino, CA 95014.

Item 4. Description of Securities. Not applicable.

Item 5. Interests of Named Experts and Counsel.

Certain legal matters with respect to the legality of the issuance of the common stock registered hereby will be passed upon for the Registrant by Venture Law Group in Menlo Park, California. As of the date of this Registration Statement, attorneys of Venture Law Group beneficially own an aggregate of 8,643 shares of the Registrant's common stock.

Item 6. Indemnification of Directors and Officers.

Our Certificate of Incorporation reduces the liability of a director to the corporation or its shareholders for monetary damages for breaches of his or her fiduciary duty of care to the fullest extent permissible under Delaware law. Our Bylaws further provide for indemnification of corporate agents to

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the maximum extent permitted by the Delaware General Corporation Law. In addition, we have entered into indemnification agreements with our officers and directors.

Item 7. Exemption from Registration Claimed. Not applicable.

Item 8. Exhibits.

Exhibit
Number
4.1 Southern BioSystems, Inc. 1993 Stock Option Plan
(as amended)

4.2 Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan (as amended)

5.1 Opinion of Venture Law Group, a Professional Corporation

23.1 Consent of Ernst & Young LLP, Independent Auditors

23.2 Consent of Venture Law Group, A Professional Corporation (included in Exhibit 5.1).

24.1 Power of Attorney (see signature page).

Item 9. Undertakings.

The undersigned Registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as the indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that

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a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the question has already been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

[Signature Page Follows]

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant, DURECT Corporation, a corporation organized and existing under the laws of the State of Delaware, certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Menlo Park, State of California, on this 18th day of May, 2001.

DURECT Corporation

By:       /s/ James E. Brown
     ----------------------------------
          James E. Brown
          Chief Executive Officer

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James E. Brown and Thomas A. Schreck, jointly and severally, his or her attorney-in-fact and agent, with the power of substitution and resubstitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any amendments to this Registration Statement on Form S-8, and to file such amendments, together with exhibits and other documents in connection therewith, with the Securities and Exchange Commission, granting to the attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully as he or she might or could do in person, and ratifying and confirming all that the attorney-in-fact and agent, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature                     Title                                 Date
---------                     -----                                 ----

/s/  Felix Theeuwes           Chairman, Chief Scientific Officer    May 18, 2001
----------------------------  and Director
Felix Theeuwes, D.Sc.


/s/ James E. Brown            President, Chief Executive Officer    May 18, 2001
----------------------------  and Director
James E. Brown, D.V.M.


/s/ Thomas A. Schreck         Chief Financial Officer and Director  May 18, 2001
----------------------------
Thomas A. Schreck


/s/ James R. Butler           Director                              May 18, 2001
----------------------------
James R. Butler


/s/ John L. Doyle             Director                              May 18, 2001
----------------------------
John L. Doyle


/s/ Douglas A. Lee            Director                              May 18, 2001
----------------------------
Douglas A. Lee


/s/ Matthew V. McPherron      Director                              May 18, 2001
----------------------------
Matthew V. McPherron


/s/ Armand Nuekermans         Director                              May 18, 2001
----------------------------
Armand Nuekermans


/s/ Albert L. Zesiger         Director                              May 18, 2001
----------------------------
Albert L. Zesiger

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INDEX TO EXHIBITS

Exhibit
Number

4.1 Southern BioSystems, Inc. 1993 Stock Option Plan (as amended)

4.2 Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan (as amended)

5.1 Opinion of Venture Law Group, a Professional Corporation

23.1 Consent of Ernst & Young LLP Independent Auditors

23.2 Consent of Venture Law Group, A Professional Corporation (included in Exhibit 5.1).

24.1 Power of Attorney (see signature page)

EXHIBIT 4.1

1993 STOCK OPTION PLAN
OF SOUTHERN BIOSYSTEMS, INC.,
AS AMENDED ON MAY 2, 2000

Section 1. Establishment, Purpose and Effective Date of Plan

1.1 Establishment. Southern BioSystems, Inc., an Alabama corporation, hereby establishes a stock option plan for key Employees, Consultants and Directors which shall be known as the "1993 STOCK OPTION PLAN" (the "Plan"). It is intended that certain of the Options issued pursuant to the Plan may constitute incentive stock options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan also shall provide for the issuance of options which are not qualified under Section 422 of the Code, the latter of which are referred to herein as non-qualified stock options ("NQSOs").

1.2 Purpose. The purpose of the Plan is to advance the interests of the Corporation, its subsidiaries and its shareholders by encouraging and providing for the acquisition of an equity interest in the Corporation by key Employees, Consultants and Directors of the Corporation through the grant of (a) ISOs to key Employees and (b) NQSOs to key Employees, Consultants and Directors. The Plan will enable the Corporation to attract and retain the services of key Employees, Consultants and Directors upon whose judgment, interest, and special effort the successful conduct of its business operations is largely dependent.

1.3 Effective Date. The Plan shall become effective on the date approved by the shareholders of the Corporation (the "Effective Date").

Section 2. Definitions

2.1 Definitions

(a) "Board" means the Board of Directors of the Corporation.

(b) "Consultant" means any person, whether an individual, corporation, partnership, limited liability company or other entity, rendering services to the Corporation as an independent contractor who is not paid by the Corporation on a salaried or hourly basis.

(c) "Corporation" means Southern BioSystems, Inc., an Alabama corporation, as well as any subsidiary, 50% or more of the outstanding voting stock of which is owned by the Corporation.

(d) "Director" means a member of the Board of Directors of the Corporation.
(e) "Disability" means the permanent and total inability, by reason of physical or mental infirmity, or both, of a Participant to perform the work customarily assigned

to him by the Corporation. The determination of the existence or nonexistence of Disability shall be made by the Board pursuant to a medical examination by a medical doctor selected or approved by the Board.

(f) "Employee" means the Chairman of the Board, any Vice Chairman of the Board, the President, Secretary or Treasurer of the Corporation, any Vice President of the Corporation, any Assistant Secretary or Assistant Treasurer of the Corporation, any other individual employed by the Corporation or a subsidiary thereof whom the Board determines is a key employee.

(g) "Fair Market Value" means (i) in the event the Corporation's common stock is listed or admitted to trading on a national securities exchange or designated on an automated quotation system of a registered securities association on the date an Option is granted hereunder, the current market price per share of the Corporation's common stock, which shall be deemed to be the average of the daily Closing Prices for fifteen (15) consecutive trading days commencing twenty (20) Trading Days before the date such Option is granted. ("Closing Price" shall mean the last reported sale price for the Corporation's common stock as reported in the consolidated transaction or other reporting system for securities listed or traded on the exchange, or designated on such automated quotation system, which is the principal exchange or system on which the Corporation's common stock is so listed, designated or admitted; "Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday, and Friday, or other than any day on which the Corporation's common stock is not traded on the exchange or system which is the principal United States exchange for the common stock of the Corporation), and (ii) in the event the Corporation's common stock is not listed or admitted to trading on a national securities exchange or designated on an automated quotation system of a registered securities association on the date an Option is granted hereunder, the value agreed upon by the Corporation and the Participant or the Participant's authorized representative. In the event that the parties fail to agree upon the Fair Market Value, the Fair Market Value shall be determined by an appraisal firm which shall value the Corporation as of the end of the calendar month preceding the date such Option is granted, but without any discount for lack of control, a minority interest, or lack of marketability. In determining the value of the Corporation, the appraiser shall take into account the benefits received by the Corporation and the benefits received by other members of the affiliated group as a result of the Corporation's being a member of a group filing a consolidated return, including, but not limited to, giving effect to net operating losses and net capital losses incurred by the Corporation and by other members of the affiliated group, and any benefits received by the Corporation or by other members of the consolidated group as a result of the method used in allocating the consolidated group's tax liabilities. Such appraisal shall be conducted by one appraisal firm if agreed to by the Participant, or his authorized representative, and by the Corporation. If the parties are unable to agree to a single appraisal firm, then each shall have the right to appoint their own appraiser. All such appraisal firms shall be experienced in making appraisals of Corporations and notices of such appointments shall be delivered promptly to all parties. If two appraisers are appointed, they shall attempt to agree mutually as to such value, but, if they are unable to do so within ninety (90) days after their appointment, they shall immediately submit in writing to the Corporation and the Participant their respective appraisals of the value per share and, if each such appraisal is within ten percent (10%) of the average of both such appraisals, then that average shall be considered to be the value. If each

such appraisal is not within ten percent (10%) of the average of both such appraisals, then the two appraisers shall within ten (10) days after said ninety
(90) day period mutually select and appoint a third appraiser similarly qualified and give written notice thereof to the Corporation and the Participant. Within sixty (60) days after the appointment of the third appraiser, the third appraiser shall submit his appraisal of such value in writing to the Corporation and the Participant and the value per share of the common stock of the Corporation shall be conclusively determined by taking the average of the two appraisal value figures which are closest together. The value of the Corporation as determined by the above described mechanism shall be final and binding upon the Corporation, the Participant or his authorized representative, and any others affected by this Plan. The cost of obtaining such appraisals shall be paid by the Corporation.

(h) "Option" means the right to purchase Stock at a stated price for a specified period of time. For purposes of the Plan, an Option may be designated as either (i) an ISO or (ii) an NQSO at the time of grant.

(i) "Participant" means an Employee, Consultant or Director designated by the Board to participate in the Plan.

(j) "Retirement" (including "Early Retirement" and "Normal Retirement") means termination of employment under the terms of the Corporation's then current retirement program.

(k) "Stock" means the Common Stock of the Corporation, $.01 par value, or as it may then be constituted.

(l) "Ten Percent Shareholder" means any individual who, immediately prior to the time an Option is granted pursuant to this Plan, directly or indirectly owns Stock possessing more than 10 per cent of the total combined voting power of all classes of stock of the Corporation, or of its parent or subsidiary corporation. For purposes of this Plan, an individual shall be treated as owning indirectly any Stock which is owned by such individual's brothers and sisters (whether by the whole or half blood), spouse, ancestors and lineal descendants, and stock owned directly or indirectly, by or for a corporation, partnership, trust or estate shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. Stock available for purchase pursuant to an outstanding option, however, shall not be treated as owned for purposes of this paragraph (l).

Section 3. Eligibility and Participation

3.1 Eligibility and Participation. Participants in the Plan shall be selected by the Board from among those Employees, Directors and Consultants who, in the opinion of the Board, are in a position to contribute materially to the Corporation's continued growth and development and to its long-term financial success. Participation shall be based on the recommendations of the Corporation's Chief Executive Officer, subject to approval by the Board.

Section 4. Administration

4.1 Administration. The Board shall be responsible for the administration of the Plan. The Board, by majority action thereof, is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Corporation, and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Board pursuant to the provisions of the Plan shall be final and binding and conclusive for all purposes and upon all persons whomsoever.

Section 5. Stock Subject to Plan

5.1 Number. The total number of shares of Stock subject to issuance under the Plan may not exceed 150,000, subject to adjustment as provided by Subsection 5.3. The shares to be delivered under the Plan may consist, in whole or in part, of authorized but unissued Stock or treasury Stock not reserved for any other purpose.

5.2 Unused Stock. In the event any shares of Stock are subject to an Option which, for any reason, expires, terminates or, with the consent of the Participant, is canceled as to such shares, such Stock may again be made subject to an Option pursuant to the Plan.

5.3 Adjustment in Capitalization. In the event of any change in the outstanding shares of Stock that occurs after ratification of the Plan by the shareholders of the Corporation by reason of a Stock dividend, Stock split, recapitalization or other similar corporate change in which the number of shares of Stock outstanding is increased, decreased or then changed without the receipt by the Corporation of additional consideration, the aggregate number of shares of Stock subject to each outstanding Option, and its stated Option Price, and the aggregate number of shares of Stock reserved for issuance under the Plan shall be appropriately adjusted by the Board, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share.

Section 6. Duration of Plan

6.1 Duration of Plan. The Plan shall remain in effect, subject to the Board's right to earlier terminate the Plan pursuant to Subsection 9.1 hereof, until all Stock subject to it shall have been purchased or acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no Option may be granted under the Plan on or after the tenth (10th) anniversary of the Plan's Effective Date.

Section 7. Terms of Options

7.1 Grant of Options. Subject to the provisions of Subsection 3.1, 5.1 and 6.1 Options may be granted to Employees, Consultants and Directors at any time and from time to time as shall be determined by the Board. The Board also shall determine and state at the time of grant whether an Option is to be designated as an ISO or an NQSO. With respect to Options

granted under this Plan, if the Fair Market Value (determined at the date of grant) of Stock with respect to which ISOs may become exercisable for the first time in any calendar year by any Participant is greater than $100,000, then any such Options in excess of such amount, if any, shall constitute NQSOs and shall not be ISOs.

7.2 Option Agreement. As determined by the Board on the date of grant, each Option shall be evidenced by a written Option agreement that shall specify the type of Option granted, the Option price, the duration of the Option, and the number of shares of Stock to which the Option pertains, together with other terms of the Option.

7.3 Option Price. No ISO granted pursuant to the Plan shall have an exercise price that is less than the Fair Market Value of the Stock on the date such Option is granted; furthermore, no ISO which is granted to a Ten Percent Shareholder shall have an exercise price that is less than 110% of the Fair Market Value of the Stock on the date such ISO is granted.

7.4 Duration of Options. Each Option shall expire at such time as the Board shall determine at the time it is granted, provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. Furthermore, no ISO which is granted to a Ten Percent Shareholder shall be exercisable later than the fifth (5th) anniversary date of its grant.

7.5 Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Board shall in each instance approve, which need not be the same for all Participants.

7.6 Restrictions on Stock Transferability. The Board shall impose such restrictions on any shares of Stock acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, the right of first refusal described below, restrictions under applicable federal securities law, under the requirements of any stock exchange or automated quotation system upon which such shares of Stock are then listed or designated and under any blue sky or state securities laws applicable to such shares. If at any time during a Participant's lifetime, following the exercise of all or any portion of an Option granted under this Plan, the Participant shall desire to sell all or any part of the shares acquired by Participant pursuant to such Option (in this Section 7.6, called the "Stock"), the Participant may sell the same only after offering it to the Corporation in the following manner:

(a) The Participant shall serve notice upon the Corporation stating that the Participant has received a bona fide offer for the sale of shares of the Stock and setting forth the following information: (i) the number of shares of the Participant's Stock proposed to be sold; (ii) the name and address of the person offering to purchase such Stock; and (iii) the sale price and terms of payment of such sale. Such notice shall also contain an offer by the Participant to sell such shares of the Stock to the Corporation at the price offered by such bona fide offeror.

(b) For a period of thirty (30) days after receipt of such notice, the Corporation shall have the right to purchase all or a portion of the shares of Stock so offered. If

the Corporation fails to exercise such right with respect to all or a portion of such shares of Stock, the Participant shall be free to sell such remaining shares of Stock to the person named in the aforesaid notice at a price and upon the terms and conditions set forth in such notice; provided, however, that such disposition shall be made within thirty (30) days following the termination of the right of the Corporation to purchase such shares of Stock .

7.7 Payment.

(a) Upon exercise of a NQSO, at the Participant's sole discretion, the Participant shall elect one of the following methods of payment:

(i) The exercise price shall be payable to the Corporation in full in cash or its equivalent (in which event the proceeds from such payment shall be added to the general funds of the Corporation and shall be used for general corporate purposes); or

(ii) The Participant shall be entitled to receive a number of shares of Stock (rounded to the nearest whole number) having an aggregate Fair Market Value (as determined in accordance with Section 2.1(g) hereof) equal to the amount by which the aggregate Fair Market Value, on the date of exercise, of the shares of Stock subject to the NQSO with respect to which the Participant has elected under this Section 7.7(a)(ii) shall exceed the aggregate option price of such NQSO.

(b) Upon exercise of an ISO, the exercise price shall be payable to the Corporation in full in cash or its equivalent (in which the event proceeds from such payment shall be added to the general funds of the Corporation and shall be used for general corporate purposes).

7.8 ISOs; Termination of Employment Due to Death, Disability,
Retirement or Otherwise. In the event the employment of a Participant is terminated by reason of death, Disability, Retirement or otherwise, the rights under any then outstanding ISO granted pursuant to the Plan shall terminate upon the expiration date of the ISO or three months after such date of termination of employment, whichever first occurs.

7.9 NQSOs; Termination of Employment Due to Death, Disability,
Retirement or Otherwise. In the event the employment of the Participant is terminated by reason of death, Disability, Retirement or otherwise, the rights under any then outstanding NQSO granted pursuant to the Plan shall terminate upon the expiration date of the NQSO or three months after such date of termination of employment, whichever occurs first; provided, however, that the Board may, in its sole discretion, extend the termination date beyond the period of three months in the event it determines such extension is appropriate under the circumstances, but in no event shall any such extension extend the termination date of the NQSO beyond its original expiration date.

7.10 Non-transferability of Options.

No Option granted under the Plan may be sold, transferred, pledged, or assigned, or otherwise alienated or hypothecated, except by will or by the laws of descent and distribution. Further, during the Participant's lifetime, Options granted to such Participant under the Plan are exercisable solely by such Participant or such Participant's guardian or authorized representative.

Section 8. Rights of Employees.

8.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Employee's employment at any time, nor confer upon any Employee any right to continue in the employ of the Corporation.

Section 9. Amendment, Modification, and Termination of Plan

9.1 Amendment, Modification, and Termination of Plan. The Board may at any time terminate, and from time to time may amend or modify, the Plan, provided, however, that no such action of the Board, without approval of the shareholders, may:

(i) Increase the total amount of Stock which may be issued under the Plan, except as provided in Subsection 5.3 of the Plan;

(ii) Change the class of Employees, Directors or Consultants eligible to receive Options;

(iii) Change the provisions of the Plan regarding the exercise price except as permitted by Subsection 5.3;

(iv) Materially increase the cost of the Plan;

(v) Extend the period during which Options may be granted; or

(vi) Extend the maximum period after the date of grant during which Options may be exercised.

No amendment, modification, or termination of the Plan shall in any manner adversely affect any Option theretofore granted under the Plan, without the consent of the Participant.

Section 10. Dissolution; Merger

Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation as a result of which the outstanding securities of the class then subject to Options hereunder are changed into or exchanged for cash or property or securities not of the Corporation's issue, or any combination thereof, or upon a sale of substantially all the assets of the Corporation to another person, corporation, partnership,

limited liability company or other entity, the Plan shall terminate, and all Options theretofore granted hereunder shall terminate, unless provision be made in writing in connection with such transaction for the continuance of the Plan and/or for the assumption of Options theretofore granted, or the substitution for such Options of options covering the stock of a successor corporation or entity, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Plan and Options theretofore granted shall continue in the manner and under the terms so provided. If the Plan and unexercised Options shall terminate pursuant to the foregoing sentence, all persons entitled to exercise any unexercised portions of options then outstanding shall have the right, at such time prior to the consummation of the transaction causing such termination as the Corporation shall designate, to exercise the unexercised portions of their Options, including the portions thereof which would, but for this Section 10, not yet be exercisable. Furthermore, in the event that any person, corporation, partnership, limited liability company or other entity becomes the "beneficial owner" (within the meaning of Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing at least 80% of the combined voting power of the Company's then outstanding securities (but absent any of the transactions described in the first sentence of this paragraph), then this Option shall not lapse or terminate, but for a period of thirty (30) days following the occurrence of such event, and subject to the other provisions of this Agreement, the Grantee shall have the right to exercise any unexercised portions of this Option which would, but for this Section 10, not yet be exercisable.

Section 11. Tax Withholding

11.1 Tax Withholding. Whenever shares of Stock are to be issued under the Plan, the Corporation shall have the power to require the recipient of the Stock to remit to the Corporation an amount sufficient to satisfy federal, state, and local withholding tax requirements. The Corporation also shall have the power to withhold an appropriate number of shares of Stock sufficient to satisfy federal, state and local withholding tax requirements upon the exercise of an Option under the Plan.

Section 12. Indemnification

12.1 Indemnification. Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Corporation against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Corporation's approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless.

Section 13. Requirements of Law; Miscellaneous

13.1 Requirements of Law. The granting of Options or Restricted Stock and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

13.2 Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the substantive laws of the State of Alabama, without regard or reference to the choice of law provisions or laws of such State.

13.3 Gender and Number. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

13.4 Expenses. The Corporation shall bear the expenses of

administering the Plan.

Exhibit 4.2

1995 NONQUALIFIED STOCK OPTION PLAN
OF SOUTHERN RESEARCH TECHNOLOGIES, INC.

Section 1. Establishment, Purpose and Effective Date of Plan.

1.1 Establishment. Southern Research Technologies, Inc., an Alabama corporation (the "Corporation"), hereby establishes a nonqualified stock option plan for key Employees, Consultants and Directors of the Corporation which shall be known as the "1995 NONQUALIFIED STOCK OPTION PLAN" (the "Plan"). Options issued pursuant to the Plan will not be eligible for incentive treatment within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

1.2 Purpose. The purpose of the Plan is to advance the interests of the Corporation, its subsidiaries and its shareholder (or shareholders) by encouraging and providing for the acquisition of an equity interest in the subsidiaries of the Corporation by key Employees, Consultants and Directors of the Corporation through the grant of nonqualified stock options to key Employees, Consultants and Directors. The Plan is intended to enable the Corporation to attract and retain the services of key Employees, Consultants and Directors upon whose judgment, interest, and special effort the successful conduct of its business operations is largely dependent.

1.3 Effective Date. The Plan shall become effective on the date it is approved by the Board (the "Effective Date").

Section 2. Definitions.

2.1 Definitions

(a) "Board" means the Board of Directors of the Corporation.

(d) "Director" means a member of the Board of Directors of the Corporation.

(e) "Disability" means the permanent and total inability, by reason of physical or mental infirmity, or both, of a Participant to perform the work customarily assigned to him by the Corporation. The determination of the existence or nonexistence of Disability shall be made by the Board pursuant to a medical examination by a medical doctor selected or approved by the Board.

(g) "Fair Market Value" means, on any given date (i) if shares of the Subject Stock are not listed or admitted to trade on a national securities exchange and if bid and asked prices for such Subject Stock are not furnished through NASDAQ or a similar organization as described below, the value established by the Board, in its sole discretion, for purposes of the Plan; (ii) if such Subject Stock is listed or admitted to trade on a national securities exchange or national market system, the closing price of the Subject Stock, as published in The Wall Street Journal, so listed or admitted to trade on such date or, if there is no trading of the Subject Stock on such date, then the closing price of the Subject Stock on the next preceding date on which there was trading in such shares; or (iii) if the Subject Stock is not listed or admitted to trade on a national securities exchange or national market system, as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information.

(h) "Option" means the right to purchase Subject Stock at a stated price for a specified period of time.

(i) "Participant" means an Employee, Consultant or Director designated by the Board to participate in the Plan.

(j) "Retirement" (including "Early Retirement" and "Normal Retirement") means termination of employment under the terms of the Corporation's then current retirement program.

(k) "SBS" means Southern BioSystems, Inc., an Alabama corporation.

(l) "SRT-EO" means SRT Electro-Optics, Inc., an Alabama corporation.

(m) "Subject Stock" means 100,000 shares of the common stock of SRT-EO owned by the Corporation and subject to issuance under this Plan, and 100,000 shares of the common stock of SBS owned by the Corporation and subject to issuance under this Plan.

Section 3. Eligibility and Participation. Participants in this Plan shall be selected by the Board from among those Employees, Directors and Consultants who, in the opinion of the Board, are in a position to contribute materially to the Corporation's continued growth and development and to its long-term financial success. Participation shall be based on the recommendations of the Corporation's Chief Executive Officer, subject to approval by the Board.

Section 4. Administration. The Board shall be responsible for the administration of the Plan. The Board, by majority action thereof, is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Corporation, and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Board pursuant to the provisions of the Plan shall be final and binding and conclusive for all purposes and upon all persons whomsoever.

Section 5. Stock Subject to Plan.

5.1 Number. The following number of shares of capital stock shall be subject to issuance under this Plan: (a) 100,000 shares of the common stock, par value $.01 per share, of SRT Electro-Optics, Inc., an Alabama corporation, owned by the Corporation; and (b) 100,000 shares of the common stock, par value $.01 per share, of Southern BioSystems, Inc., an Alabama corporation, owned by the Corporation.

5.2 Unused Stock. In the event any shares of Subject Stock are subject to an Option which, for any reason, expires, terminates or, with the consent of the Participant, is canceled as to such shares, such Subject Stock may again be made subject to an Option pursuant to the Plan.

5.3 Adjustment in Capitalization. In the event of any change in the outstanding shares of common stock of SRT-EO or SBS that occurs after the Effective Date by reason of a stock dividend, stock split, recapitalization or other similar corporate change in which the number of shares of the common stock of either SRT-EO or SBS outstanding is increased, decreased or then changed, then the aggregate number of shares of Subject Stock subject to each outstanding Option, and its stated Option Price, and the aggregate number of shares of Subject Stock shall be appropriately adjusted by the Board, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share.

Section 6. Amendment, Modification, Termination and Duration of Plan. The Board may at any time terminate, and from time to time may amend or modify, the Plan; provided, however, that no amendment, modification, or termination of the Plan shall in any manner adversely affect any Option theretofore granted under the Plan, without the consent of the Participant. The Plan shall remain in effect, subject to the Board's right to earlier terminate the Plan, until all Subject Stock shall have been purchased or acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no Option may be granted under the Plan on or after the tenth (10/th/) anniversary of the Effective Date.

Section 7. Terms of Options

7.1 Grant of Options. Subject to the provisions of Sections 3, 5 and 6 hereof, Options may be granted to Employees, Consultants and Directors at any time and from time to time as shall be determined by the Board.

7.2 Option Agreement. As determined by the Board on the date of grant, each Option shall be evidenced by a written Option agreement that shall specify the Option price, the duration of the Option, and the number of shares of Subject Stock to which the Option pertains, together with other terms of the Option.

7.3 Option Price. Options granted pursuant to the Plan shall have an exercise price that is equal to the Fair Market Value of the Subject Stock held for issuance upon the exercise of such Option on the date such Option is granted, or at such exercise price (whether greater or less than Fair Market Value) determined by the Board.

7.4 Duration and Vesting of Options. Each Option shall expire at such time as the Board shall determine at the time it is granted, provided, however, that no Option shall be exercisable later than the tenth (10/th/) anniversary date of its grant. The Board shall also determine the period over which Options shall vest or otherwise become exercisable, and shall have the authority under this Plan to issue fully-vested Options.

7.6 Restrictions on Stock Transferability. The Board shall impose such restrictions on any shares of Subject Stock acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, the right of first refusal described below, restrictions under applicable federal securities law, under the requirements of any stock exchange or automated quotation system upon which such shares of Subject Stock are then listed or designated and under any blue sky or state securities laws applicable to such shares.

7.7 Right of First Refusal. If at any time during a Participant's lifetime, following the exercise of all or any portion of an Option granted under this Plan, the Participant shall desire to sell all or any part of the shares acquired by Participant pursuant to such Option (in this Section 7.7, called the "Acquired Stock"), the Participant may sell the same only after offering it to the Corporation in the following manner:

(a) The Participant shall serve notice upon the Corporation stating that the Participant has received a bona fide offer for the sale of shares of the Acquired Stock and setting forth the following information: (i) the number of shares of the Participant's Acquired Stock proposed to be sold; (ii) the name and address of the person offering to purchase such Acquired Stock; and (iii) the sale price and terms of payment of such sale. Such notice shall also contain an offer by the Participant to sell such shares of the Acquired Stock to the Corporation at the price offered by such bona fide offeror.

(b) For a period of thirty (30) days after receipt of such notice, the Corporation shall have the right to purchase all or a portion of the shares of Acquired Stock so offered. If the Corporation fails to exercise such right with respect to all or a portion of such shares of Acquired Stock, the Participant shall be free to sell such remaining shares of Acquired Stock to the person named in the aforesaid notice at a price and upon the terms and conditions set forth in such notice; provided, however, that such disposition shall be made within thirty (30) days following the termination of the right of the Corporation to purchase such shares of Acquired Stock.

(c) The terms of this Subsection 7.7 shall terminate as to Acquired Stock of a subsidiary of the Corporation upon the successful consummation by such subsidiary of an initial public offering of securities of the class including the Acquired Stock registered under the Securities Act of 1933, as amended, from which such subsidiary receives cash proceeds in excess of $15,000,000.

7.8 Payment. The exercise price due upon the exercise of any Option shall be payable to the Corporation in full in cash or its equivalent; provided, however, that the Participant may elect to instruct the Corporation to, in lieu of requiring cash payment from Participants to exercise Options issued under the Plan, issue a number of shares of Subject Stock equal to the product of (a) the number of shares of Subject Stock purchasable under the Option, or portion thereof being exercised, and (b) the Fair Market Value of one share of Subject Stock minus the exercise price attributed to such share, divided by (c) the Fair Market Value of one share of Subject Stock. The proceeds from any payment shall be added to the general funds of the Corporation and shall be used for general corporate purposes.

7.9 Termination of Employment Due to Death, Disability, or
Retirement. In the event the employment of a Participant is terminated by reason of death, Disability or Retirement, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or ninety (90) days after such date of termination of employment, whichever first occurs.

7.10 Termination of Employment Other Than for Death, Disability, or
Retirement. If the employment of the Participant shall terminate for any reason other than death, Disability, or Retirement, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or thirty (30) days after such date of termination of employment, whichever first occurs.

7.11 Non-transferability of Options. No Option granted under the Plan may be sold, transferred, pledged, or assigned, or otherwise alienated or hypothecated, except by will or by the laws of descent and distribution. Further, during the Participant's lifetime, Options granted to such Participant under the Plan are exercisable solely by such Participant.

Section 8. Rights of Employees. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any person's employment or other relationship with the Corporation at any time, nor confer upon any person any right to continue in the employ of the Corporation.

Section 9. Dissolution; Merger. Upon the dissolution or liquidation of the Corporation, SRT-EO or SBS, or upon a reorganization, merger or consolidation of the Corporation, SRT-EO or SBS as a result of which the outstanding securities of the class then subject to Options hereunder are changed into or exchanged for cash or property or securities not of the issue of the Corporation, SRT-EO or SBS, as applicable, or any combination thereof, or upon a sale of substantially all the assets of the Corporation, SRT-EO or SBS to another person, corporation, partnership, limited liability company or other entity, then if the Corporation is the direct subject of such an event this Plan shall terminate, and all Options theretofore granted hereunder shall terminate, unless provision be made in writing in connection with such transaction for the continuance of the Plan and/or for the assumption of Options theretofore granted, or the substitution for such Options of options covering the stock of a successor corporation or entity, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Plan and Options theretofore granted shall continue in the manner and under the terms so provided; provided, however, that if either SRT-EO or SBS is the direct subject of such a transaction, then this Plan shall terminate only as to Options for the common stock of either SRT-EO or SBS, as applicable, unless provision be made in writing in connection with such transaction for the continuance of the Plan with respect to such Options and/or for the assumption of such Options, or the substitution for such Options of options covering the stock of a successor corporation or entity, or a parent or a subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event this Plan and such Options theretofore granted shall continue in the manner and under the terms so provided. If the Plan (or its applicability to any Subject Shares of SRT-EO or SBS) and unexercised Options shall terminate pursuant to the foregoing sentence, all persons entitled to exercise any unexercised portions of Options then outstanding shall have the right, at such time prior to the consummation of the transaction causing such termination as the Corporation shall designate, to exercise the unexercised portions of their Options, including the portions thereof which would, but for this Section 9, not yet be exercisable.

Section 10. Tax Withholding. Whenever shares of Subject Stock are to be issued under the Plan, the Corporation shall have the power to require the recipient of the Subject Stock to remit to the Corporation an amount sufficient to satisfy federal, state, and local withholding tax requirements. The Corporation also shall have the power to withhold an appropriate number of shares of Subject Stock sufficient to satisfy federal, state and local withholding tax requirements upon the exercise of an Option under the Plan.

Section 11. Indemnification. Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Corporation against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Corporation's approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless.

Section 12. Requirements of Law; Miscellaneous.

12.1 Requirements of Law. The granting of Options for Subject Stock, the issuance of shares of Subject Stock upon the exercise of an Option , and the sale or transfer of such issued Subject Stock shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

12.2 Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the substantive laws of the State of Alabama, without regard or reference to the choice of law provisions or laws of such State.

12.3 Gender and Number. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

12.4 Expenses. The Corporation shall bear the expenses of administering the Plan.

* * * *

AMENDMENT NUMBER ONE
TO THE
SOUTHERN RESEARCH TECHNOLOGIES, INC.
1995 NONQUALIFIED STOCK OPTION PLAN

The following amendment shall be effective as of January 1, 1997:

1. Amend Section 7.9 Termination of Employment Due to Death, Disability, or Retirement by deleting the section and substituting in lieu thereof the following:

7.9 Termination of Employment or Termination of Service as a Consultant or

Director Due to Death, Disability, or Retirement.

In the event a Participant terminates employment with the Corporation or service as a Consultant or Director to the Corporation by reason of death, Disability or Retirement, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or ninety (90) days after such date of termination of service or employment, whichever first occurs.

2. Amend Section 7.10 Termination of Employment Other Than for Death, Disability, or Retirement by deleting the section and substituting in lieu thereof the following:

7.10 Termination of Employment or Termination of Service Other Than for
Death, Disability, or Retirement. If a Participant terminates employment or service as a Consultant or Director for any reason other than death, Disability, or Retirement, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or thirty (30) days after the date of termination of such employment or service, whichever first occurs; provided, however, in the event the Employee terminates employment with the Corporation or a Consultant or Director terminates service with the Corporation for any reason other than death, Disability, or Retirement but continues or within thirty (30), days thereafter begins service as a Consultant or Director or employment as an employee of an affiliate of the Corporation or a company in which the Corporation holds a significant ownership interest, any outstanding Option granted pursuant to the Plan shall continue until the earlier of (A) the expiration date of the Option or (B) thirty (30) days after termination of such service or employment unless termination is by reason of death, Disability or Retirement in which case ninety (90) days shall be applicable. For purposes of this section, "significant ownership interest" shall mean any direct or indirect ownership interest of twenty- five percent (25%) or more of the total combined voting power of all classes of stock entitled to vote or twenty-five percent (25%) or more of the total value of the shares of all classes of stock of the company.

3. All other provisions of the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, Southern Research Technologies, Inc. has caused this Amendment Number One to be executed by its authorized officers this _____ day of ____________, 1997.

ATTEST:                      SOUTHERN RESEARCH TECHNOLOGIES, INC.


_________________            By:_____________________________
Secretary
                             Its:____________________________

AMENDMENT NUMBER TWO
TO THE
SOUTHERN RESEARCH TECHNOLOGIES, INC.
1995 NONQUALIFIED STOCK OPTION PLAN

The following amendment shall be effective as of January 1, 1997:

1. Amend Section 7.9 Termination of Employment of Service as a Consultant or Director Due to Death, Disability, or Retirement by deleting the section and substituting in lieu thereof the following:

7.9 Termination of Employment or Termination of Service as a Consultant or Director Due to Death, Disability, or Retirement.

2. Amend Section 7.10 Termination of Employment of Service as a Consultant or Director Due to Death, Disability or Retirement by deleting the section and substituting in lieu thereof the following:

7.10 Termination of Employment or Termination of Service Other Than for Death, Disability, or Retirement. If a Participant terminates employment or service as a Consultant or Director for any reason other than death, Disability, or Retirement, the rights under any then outstanding Option granted pursuant to the Plan shall terminate upon the expiration date of the Option or thirty (30) days after the date of termination of such employment or service, whichever first occurs, unless the Board shall have authorized an extension of the Option to a period not to exceed the expiration date of the Option; provided, however, in the event the Employee terminates employment with the Corporation or a Consultant or Director terminates service with the Corporation for any reason other than death, Disability, or Retirement but continues or within thirty (30) days thereafter begins service as a Consultant or Director or employment as an employee of an affiliate of the Corporation or a company in which the Corporation holds a significant ownership interest, any outstanding Option granted pursuant to the Plan shall continue until the earlier of (A) the expiration date of the Option or (B) thirty (30) days after termination of such service or employment unless termination is by reason of death, Disability or Retirement in which case ninety (90) days shall be applicable, unless the Board shall have authorized an extension of the Option to a period not to exceed the expiration date of the Option. For purposes of this section, "significant ownership interest" shall mean any direct or indirect ownership interest of twenty-five percent (25%) or more of the total combined voting power of all classes of stock entitled to vote or twenty-five percent (25%) or more of the total value of the shares of all classes of stock of the company.

3. All other provisions of the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, Southern Research Technologies, Inc. has caused this Amendment Number Two to be executed by its authorized officers this _____ day of ____________, 1997.

ATTEST:                      SOUTHERN RESEARCH TECHNOLOGIES, INC.


____________________         By:_______________________________
Secretary
                             Its:______________________________

AMENDMENT NUMBER TWO
to the
1995 NONQUALIFIED STOCK OPTION PLAN OF
SOUTHERN RESEARCH TECHNOLOGIES, INC.

THIS INSTRUMENT, made and entered into this 19 day of May, 1998, by SOUTHERN BIOSYSTEMS, INC., an Alabama corporation (the "Company").

R E C I T A L S

A. Effective as of May 19, 1998, Southern BioSystems, Inc., ("Old SBS") was merged with and into the Company, which was at that time known as Southern Research Technologies, Inc. (the "Merger"). Simultaneously with the Merger, the Company changed its name to Southern BioSystems, Inc.

B. Prior to the Merger, the Company maintained a stock option plan, known as the 1995 Nonqualified Stock Option Plan of Southern Research Technologies, Inc., as amended by Amendment Number One dated January 1, 1997 (the "SRT Plan"). The SRT Plan provided for grants of options by the Company to certain of its employees, directors, and consultants to acquire shares of common stock in SRT Electro-Optics, Inc. ("SRT EO") and Old SBS owned by the Company. SRT EO was liquidated, and all options issued under the SRT Plan to acquire stock in SRT EO were cashed out. In connection with the Merger, the shares of common stock of Old SBS owned by the Company were canceled. The Company desires to continue the SRT Plan and to substitute one share of common stock of the Company for each share of common stock of Old SBS subject to options outstanding under the SRT Plan at the effective time of the Merger and to substitute one share of common stock of the Company for each share of common stock of Old SBS with respect to which options had not been granted at the time of the Merger but which, but for the cancellation of the Old SBS common stock, would have been available for grants of options under the SRT Plan. Under the terms of the Separation Agreement providing for the Merger, options granted under the SRT Plan to the individuals listed in Exhibit I to acquire shares of common stock of Old SBS were canceled as of the effective time of the Merger.

NOW, THEREFORE, pursuant to Section 6 of the SRT Plan and the terms of the Separation Agreement providing for the Merger, the Company does hereby amend the SRT Plan as follows:

1. All references in the SRT Plan to the "Corporation" shall, from and after May 19, 1998, be deemed references to the Company.

2. All references in the SRT Plan to "Stock" shall be deemed to be references to the common stock of the Company, each share of which shall be deemed to be equal to one share of common stock of Old SBS.

3. The options granted prior to May 19, 1998, under the SRT Plan to acquire shares of common stock of Old SBS, other than those granted to the individuals named in the Exhibit I, shall be exercisable in accordance with their terms for shares of common stock of the Company on the same basis as if such shares were shares of common stock of Old SBS.

4. Options granted under the SRT Plan prior to May 19, 1998, to the individuals listed in Exhibit I were canceled in accordance with the terms of the Separation Agreement providing for the Merger and shall not be exercisable after the effective date of the Merger.

5. Options granted under the SRT Plan to acquire shares of common stock of SRT EO were cashed out and no such option shall be exercisable after the date hereof. No option to acquire shares of common stock of SRT EO shall be granted under the SRT Plan after said date.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its officer thereunto duly authorized on this 19 day of May, 1998.

SOUTHERN BIOSYSTEMS, INC.

By:    /s/ W. B. Smith
    -----------------------------------

Its:   President
     ----------------------------------

Exhibit I

Herbert Blatter

-14-

EXHIBIT 5.1

Venture Law Group, A Professional Corporation 2800 Sand Hill Road Menlo Park, CA 94025 Tel: (650) 854-4488 Fax: (650) 233-8386

May 18, 2001

DURECT Corporation
10240 Bubb Road
Cupertino, CA 95014

Registration Statement on Form S-8

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-8 (the "Registration Statement") filed by you with the Securities and Exchange Commission (the "Commission") on May 18, 2001 in connection with the registration under the Securities Act of 1933, as amended, of a total of 3,107,920 shares of your Common Stock (the "Shares") reserved for issuance under your 2000 Employee Stock Purchase Plan and 2000 Stock Plan as well as under the Southern BioSystems, Inc. 1993 Stock Option Plan and the Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan. As your counsel in connection with this transaction, we have examined the proceedings taken and are familiar with the proceedings proposed to be taken by you in connection with the sale and issuance of the Shares.

It is our opinion that upon conclusion of the proceedings being taken or contemplated by us, as your counsel, to be taken prior to the issuance of the Shares, and upon completion of the proceedings being taken in order to permit such transactions to be carried out in accordance with the securities laws of the various states where required, the Shares when issued and sold in the manner described in the Registration Statement will be legally and validly issued, fully paid and non-assessable.

We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever appearing in the Registration Statement, including the Prospectus constituting a part thereof, and in any amendment thereto.

Very truly yours,

VENTURE LAW GROUP
A Professional Corporation

/s/ Venture Law Group

Exhibit 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the DURECT Corporation 2000 Employee Stock Purchase Plan, the DURECT Corporation 2000 Stock Plan, the Southern BioSystems, Inc. 1993 Stock Option Plan and the Southern Research Technologies, Inc. 1995 Nonqualified Stock Option Plan of DURECT Corporation of our report dated February 9, 2001, with respect to the financial statements and schedule of DURECT Corporation included in its Annual Report on Form 10-K (No.000-31615) filed with the Securities and Exchange Commission.

                                         /s/ ERNST & YOUNG LLP

Palo Alto, California
May 11, 2001