Exhibit 10.17

 

GOOGLE INC.

 

2004 STOCK PLAN

 

1. Purposes of the Plan. The purposes of this Plan are:

 

  •   to attract and retain the best available personnel for positions of
substantial responsibility,

 

  •   to provide additional incentive to Employees, Directors and Consultants,
and

 

  •   to promote the success of the Company’s business.

 

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock
Options, Restricted Stock, Stock Appreciation Rights, Restricted Stock Units,
Performance Units, Performance Shares and Other Stock Based Awards.

 

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

 

(a) “Administrator” means the Board or any of its Committees as will be
administering the Plan, in accordance with Section 4 of the Plan.

 

(b) “Annual Revenue” means the Company’s or a business unit’s net sales for the
Fiscal Year, determined in accordance with generally accepted accounting
principles; provided, however, that prior to the Fiscal Year, the Committee
shall determine whether any significant item(s) shall be excluded or included
from the calculation of Annual Revenue with respect to one or more Participants.

 

(c) “Applicable Laws” means the requirements relating to the administration of
equity-based awards or equity compensation plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will
be, granted under the Plan.

 

(d) “Award” means, individually or collectively, a grant under the Plan of
Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares or Other Stock Based Awards.

 

(e) “Award Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.

 

(f) “Award Transfer Program” means any program instituted by the Administrator
which would permit Participants the opportunity to transfer any outstanding
Awards to a financial institution or other person or entity selected by the
Administrator.

--------------------------------------------------------------------------------

(g) “Awarded Stock” means the Common Stock subject to an Award.

 

(h) “Board” means the Board of Directors of the Company.

 

(i) “Cash Position” means the Company’s level of cash and cash equivalents.

 

(j) “Change in Control” means 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 and within three (3) years from the
date of such acquisition, a merger or consolidation of the Company with or into
the person (or affiliate thereof) holding such beneficial ownership of
securities of the Company is consummated; or

 

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

 

(iii) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

 

(iv) 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.

 

For purposes of this Section, “affiliate” will mean, with respect to any
specified person, any other person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, such specified person (“control,” “controlled by” and “under common
control with” will mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through ownership of voting securities, by contact or credit
arrangement, as trustee or executor, or otherwise).

 

(k) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.

 

(l) “Committee” means a committee of Directors or other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 of the Plan.

 

-2-

--------------------------------------------------------------------------------

(m) “Common Stock” means the Class A Common Stock of the Company, or in the case
of Performance Units and certain Other Stock Based Awards, the cash equivalent
thereof.

 

(n) “Company” means Google Inc., a Delaware corporation, or any successor
thereto.

 

(o) “Consultant” means any person, including an advisor, engaged by the Company
or a Parent or Subsidiary to render services to such entity.

 

(p) “Controllable Profits” means as to any Plan Year, a business unit’s Annual
Revenue minus (a) cost of sales, (b) research, development, and engineering
expense, (c) marketing and sales expense, (d) general and administrative
expense, (e) extended receivables expense, and (f) shipping requirement
deviation expense.

 

(q) “Customer Satisfaction MBOs” means as to any Participant for any Plan Year,
the objective and measurable individual goals set by a “management by
objectives” process and approved by the Committee, which goals relate to the
satisfaction of external or internal customer requirements.

 

(r) “Director” means a member of the Board.

 

(s) “Disability” means total and permanent disability as defined in Section
22(e)(3) of the Code, provided that in the case of Awards other than Incentive
Stock Options, the Administrator in its discretion may determine whether a
permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.

 

(t) “Dividend Equivalent” means a credit, made at the discretion of the
Administrator, to the account of a Participant in an amount equal to the cash
dividends paid on one Share for each Share represented by an Award held by such
Participant.

 

(u) “Earnings Per Share” means as to any Fiscal Year, the Company’s or a
business unit’s Net Income, divided by a weighted average number of common
shares outstanding and dilutive common equivalent shares deemed outstanding,
determined in accordance with generally accepted accounting principles.

 

(w) “Employee” means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

 

(x) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(y) “Exchange Program” means a program under which (i) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have
lower exercise prices and different terms), Awards of a different type, and/or
cash, and/or (ii) the exercise price of an outstanding Award is reduced. The
terms and conditions of any Exchange Program will be determined by the
Administrator in its sole discretion.

 

-3-

--------------------------------------------------------------------------------

(z) “Fair Market Value” means, as of any date and unless the Administrator
determines otherwise, 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
will 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 day 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 will be the mean between the high bid and low asked prices for the Common
Stock for the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable; or

 

(iii) In the absence of an established market for the Common Stock, the Fair
Market Value will be determined in good faith by the Administrator.

 

(iv) Notwithstanding the preceding, for federal, state, and local income tax
reporting purposes and for such other purposes as the Administrator deems
appropriate, the Fair Market Value shall be determined by the Administrator in
accordance with uniform and nondiscriminatory standards adopted by it from time
to time.

 

(aa) “Fiscal Year” means the fiscal year of the Company.

 

(bb) “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

 

(cc) “Individual Objectives” means as to a Participant, the objective and
measurable goals set by a “management by objectives” process and approved by the
Committee (in its discretion).

 

(dd) “Net Income” means as to any Fiscal Year, the income after taxes of the
Company for the Fiscal Year determined in accordance with generally accepted
accounting principles, provided that prior to the Fiscal Year, the Committee
shall determine whether any significant item(s) shall be included or excluded
from the calculation of Net Income with respect to one or more Participants.

 

(ee) “New Orders” means as to any Plan Year, the firm orders for a system,
product, part, or service that are being recorded for the first time as defined
in the Company’s Order Recognition Policy.

 

(ff) “Nonstatutory Stock Option” means an Option that by its terms does not
qualify or is not intended to qualify as an Incentive Stock Option.

 

-4-

--------------------------------------------------------------------------------

(gg) “Officer” means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

 

(hh) “Operating Cash Flow” means the Company’s or a business unit’s sum of Net
Income plus depreciation and amortization less capital expenditures plus changes
in working capital comprised of accounts receivable, inventories, other current
assets, trade accounts payable, accrued expenses, product warranty, advance
payments from customers and long-term accrued expenses, determined in accordance
with generally acceptable accounting principles.

 

(ii) “Operating Income” means the Company’s or a business unit’s income from
operations but excluding any unusual items, determined in accordance with
generally accepted accounting principles.

 

(jj) “Option” means a stock option granted pursuant to the Plan.

 

(kk) “Other Stock Based Awards” means any other awards not specifically
described in the Plan that are valued in whole or in part by reference to, or
are otherwise based on, Shares and are created by the Administrator pursuant to
Section 12.

 

(ll) “Outside Director” means a Director who is not an Employee.

 

(mm) “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

 

(nn) “Participant” means the holder of an outstanding Award granted under the
Plan.

 

(oo) “Performance Goals” means the goal(s) (or combined goal(s)) determined by
the Committee (in its discretion) to be applicable to a Participant with respect
to an Award. As determined by the Committee, the Performance Goals applicable to
an Award may provide for a targeted level or levels of achievement using one or
more of the following measures: (a) Annual Revenue, (b) Cash Position, (c)
Controllable Profits, (d) Customer Satisfaction MBOs, (e) Earnings Per Share,
(f) Individual Objectives, (g) Net Income, (h) New Orders (i) Operating Cash
Flow, (j) Operating Income, (k) Return on Assets, (l) Return on Equity, (m)
Return on Sales, and (n) Total Shareholder Return. The Performance Goals may
differ from Participant to Participant and from Award to Award. Any criteria
used may be measured, as applicable, in absolute or relative terms (including
passage of time and/or against another company or companies), on a per share
basis, against the performance of the Company as a whole or any segment of the
Company, and on a pre-tax or after-tax basis.

 

(pp) “Performance Share” means an Award granted to a Service Provider pursuant
to Section 10 of the Plan.

 

(qq) “Performance Unit” means an Award granted to a Service Provider pursuant to
Section 10 of the Plan.

 

(rr) “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore, the Shares
are subject to a substantial risk of forfeiture. Such restrictions may be based
on the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.

 

-5-

--------------------------------------------------------------------------------

(ss) “Plan” means this 2004 Stock Plan.

 

(tt) “Restricted Stock” means shares of Common Stock issued pursuant to a
Restricted Stock award under Section 8, Section 11 or Section 12 of the Plan or
issued pursuant to the early exercise of an Option.

 

(uu) “Restricted Stock Unit” means an Award that the Administrator permits to be
paid in installments or on a deferred basis pursuant to Section 11 of the Plan.

 

(vv) “Return on Assets” means the percentage equal to the Company’s or a
business unit’s Operating Income before incentive compensation, divided by
average net Company or business unit, as applicable, assets, determined in
accordance with generally accepted accounting principles.

 

(ww) “Return on Equity” means the percentage equal to the Company’s Net Income
divided by average stockholder’s equity, determined in accordance with generally
accepted accounting principles.

 

(ww) “Return on Sales” means the percentage equal to the Company’s or a business
unit’s Operating Income before incentive compensation, divided by the Company’s
or the business unit’s, as applicable, revenue, determined in accordance with
generally accepted accounting principles.

 

(xx) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.

 

(yy) “Section 16(b) “ means Section 16(b) of the Exchange Act.

 

(zz) “Service Provider” means an Employee, Director or Consultant.

 

(aaa) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 15 of the Plan.

 

(bbb) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with an Option, that pursuant to Section 9 of the Plan is designated
as a SAR.

 

(ccc) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 

(ddd) “Total Shareholder Return” means the total return (change in share price
plus reinvestment of any dividends) of a Share.

 

(eee) “Unvested Awards” means Options or Restricted Stock that (i) were granted
to an individual in connection with such individual’s position as a Service
Provider and (ii) are still subject to vesting or lapsing of Company repurchase
rights or similar restrictions.

 

-6-

--------------------------------------------------------------------------------

3. Stock Subject to the Plan.

 

(a) Stock Subject to the Plan. Subject to the provisions of Section 15 of the
Plan, the maximum aggregate number of Shares that may be issued under the Plan
is 13,431,660. The Shares may be authorized, but unissued, or reacquired Common
Stock. Shares shall not be deemed to have been issued pursuant to the Plan (i)
with respect to any portion of an Award that is settled in cash, or (ii) to the
extent such Shares are withheld in satisfaction of tax withholding obligations.
Upon payment in Shares pursuant to the exercise of an Award, the number of
Shares available for issuance under the Plan shall be reduced only by the number
of Shares actually issued in such payment. If a Participant pays the exercise
price (or purchase price, if applicable) of an Award through the tender of
Shares, the number of Shares so tendered shall again be available for issuance
pursuant to future Awards under the Plan. Notwithstanding anything in the Plan,
or any Award Agreement to the contrary, Shares attributable to Awards
transferred under any Award Transfer Program shall not be again available for
grant under the Plan.

 

(b) Lapsed Awards. If any outstanding Award expires or is terminated or canceled
without having been exercised or settled in full, or if Shares acquired pursuant
to an Award subject to forfeiture or repurchase are forfeited or repurchased by
the Company, the Shares allocable to the terminated portion of such Award or
such forfeited or repurchased Shares shall again be available for grant under
the Plan.

 

4. Administration of the Plan.

 

(a) Procedure.

 

(i) Multiple Administrative Bodies. Different Committees with respect to
different groups of Service Providers may administer the Plan.

 

(ii) Section 162(m). To the extent that the Administrator determines it to be
desirable and necessary to qualify Awards granted hereunder as
“performance-based compensation” within the meaning of Section 162(m) of the
Code, the Plan will be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code.

 

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder will be
structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be
constituted to satisfy Applicable Laws.

 

(v) Delegation of Authority for Day-to-Day Administration. Except to the extent
prohibited by Applicable Law, the Administrator may delegate to one or more
individuals the day-to-day administration of the Plan and any of the functions
assigned to it in this Plan. Such delegation may be revoked at any time.

 

-7-

--------------------------------------------------------------------------------

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

 

(i) to determine the Fair Market Value;

 

(ii) to select the Service Providers to whom Awards may be granted hereunder;

 

(iii) to determine the number of Shares to be covered by each Award granted
hereunder;

 

(iv) to approve forms of agreement for use under the Plan;

 

(v) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any Award granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Awards may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture or repurchase restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, will
determine;

 

(vi) to reduce the exercise price of any Award to the then current Fair Market
Value if the Fair Market Value of the Common Stock covered by such Award shall
have declined since the date the Award was granted;

 

(vii) to institute an Exchange Program;

 

(viii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan;

 

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws and/or qualifying for preferred
tax treatment under applicable foreign tax laws;

 

(x) to modify or amend each Award (subject to Section 18(c) of the Plan),
including the discretionary authority to extend the post-termination
exercisability period of Awards longer than is otherwise provided for in the
Plan;

 

(xi) to allow Participants to satisfy withholding tax obligations by electing to
have the Company withhold from the Shares or cash to be issued upon exercise or
vesting of an Award that number of Shares or cash having a Fair Market Value
equal to the minimum amount required to be withheld. The Fair Market Value of
any Shares to be withheld will be determined on the date that the amount of tax
to be withheld is to be determined. All elections by a Participant to have
Shares or cash withheld for this purpose will be made in such form and under
such conditions as the Administrator may deem necessary or advisable;

 

-8-

--------------------------------------------------------------------------------

(xii) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;

 

(xiii) to allow a Participant to defer the receipt of the payment of cash or the
delivery of Shares that would otherwise be due to such Participant under an
Award;

 

(xiv) to implement an Award Transfer Program;

 

(xv) to determine whether Awards will be settled in Shares, cash or in any
combination thereof;

 

(xvi) to determine whether Awards will be adjusted for Dividend Equivalents;

 

(xvii) to create Other Stock Based Awards for issuance under the Plan;

 

(xviii) to establish a program whereby Service Providers designated by the
Administrator can reduce compensation otherwise payable in cash in exchange for
Awards under the Plan;

 

(xix) to impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or other
subsequent transfers by the Participant of any Shares issued as a result of or
under an Award, including without limitation, (A) restrictions under an insider
trading policy, and (B) restrictions as to the use of a specified brokerage firm
for such resales or other transfers; and

 

(xx) to make all other determinations deemed necessary or advisable for
administering the Plan.

 

(c) Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations will be final and binding on all Participants
and any other holders of Awards.

 

5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock Appreciation
Rights, Performance Units, Performance Shares, Restricted Stock Units and Other
Stock Based Awards may be granted to Service Providers. Incentive Stock Options
may be granted only to Employees.

 

6. Limitations.

 

(a) ISO $100,000 Rule. Each Option will be designated in the Award Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options will be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options will be taken into account in the order in
which they were granted. The Fair Market Value of the Shares will be determined
as of the time the Option with respect to such Shares is granted.

 

-9-

--------------------------------------------------------------------------------

(b) No Rights as a Service Provider. Neither the Plan nor any Award shall confer
upon a Participant any right with respect to continuing his or her relationship
as a Service Provider, nor shall they interfere in any way with the right of the
Participant or the right of the Company or its Parent or Subsidiaries to
terminate such relationship at any time, with or without cause.

 

(c) 162(m) Limitation. The following limitations shall apply to Awards under the
Plan:

 

(i) Option and SAR Share Annual Limit. No Service Provider will be granted, in
any Fiscal Year, Options and/or SARs to purchase more than 1,000,000 Shares.

 

(ii) Restricted Stock, Restricted Stock Units, Performance Units and Performance
Shares Annual Limit. No Service Provider will be granted, in any Fiscal Year,
Restricted Stock, Restricted Stock Units, Performance Units and/or Performance
Shares to purchase more than 500,000 Shares.

 

(iii) Section 162(m) Performance Restrictions. For purposes of qualifying grants
of Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the
achievement of Performance Goals. The Performance Goals shall be set by the
Administrator on or before the latest date permissible to enable the Restricted
Stock Units, Restricted Stock, Performance Shares or Performance Units to
qualify as “performance-based compensation” under Section 162(m) of the Code. In
granting Restricted Stock Units, Restricted Stock, Performance Shares or
Performance Units which are intended to qualify under Section 162(m) of the
Code, the Administrator shall follow any procedures determined by it from time
to time to be necessary or appropriate to ensure qualification of the Award
under Section 162(m) of the Code (e.g., in determining the Performance Goals).

 

(iv) The foregoing limitations will be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 15 of
the Plan.

 

(v) If an Award is cancelled in the same Fiscal Year in which it was granted
(other than in connection with a transaction described in Section 15 of the
Plan), the cancelled Award will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

 

7. Stock Options.

 

(a) Term of Option. The term of each Option will be stated in the Award
Agreement. In the case of an Incentive Stock Option, the term will be ten (10)
years from the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.

 

-10-

--------------------------------------------------------------------------------

(b) Option Exercise Price and Consideration.

 

(i) Exercise Price. The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option will be determined by the Administrator,
subject to the following:

 

(1) In the case of an Incentive Stock Option

 

(A) granted to an Employee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price will be no less than 110% of the Fair Market Value per
Share on the date of grant.

 

(B) granted to any Employee other than an Employee described in paragraph (A)
immediately above, the per Share exercise price will be no less than 100% of the
Fair Market Value per Share on the date of grant.

 

(2) In the case of a Nonstatutory Stock Option, the per Share exercise price
will be determined by the Administrator. In the case of a Nonstatutory Stock
Option intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the per Share exercise price will be no
less than 100% of the Fair Market Value per Share on the date of grant.

 

(3) Notwithstanding the foregoing, Incentive Stock Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.

 

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

 

(c) Form of Consideration. The Administrator will determine the acceptable form
of consideration for exercising an Option, including the method of payment. In
the case of an Incentive Stock Option, the Administrator will determine the
acceptable form of consideration at the time of grant. Such consideration to the
extent permitted by Applicable Laws may consist entirely of:

 

(i) cash;

 

(ii) check;

 

(iii) promissory note;

 

(iv) other Shares which meet the conditions established by the Administrator to
avoid adverse accounting consequences (as determined by the Administrator);

 

(v) consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;

 

-11-

--------------------------------------------------------------------------------

(vi) a reduction in the amount of any Company liability to the Participant,
including any liability attributable to the Participant’s participation in any
Company-sponsored deferred compensation program or arrangement;

 

(vii) any combination of the foregoing methods of payment; or

 

(viii) such other consideration and method of payment for the issuance of Shares
to the extent permitted by Applicable Laws.

 

(d) Exercise of Option.

 

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

 

An Option will be deemed exercised when the Company receives: (x) written or
electronic notice of exercise (in accordance with the Award Agreement) from the
person entitled to exercise the Option, and (y) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise of an
Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder will exist with
respect to the Awarded Stock, notwithstanding the exercise of the Option. The
Company will issue (or cause to be issued) such Shares promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 15 of the Plan or the applicable Award Agreement.

 

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

 

(ii) Termination of Relationship as a Service Provider. If a Participant ceases
to be a Service Provider, other than upon the Participant’s death or Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement). In the absence of a specified
time in the Award Agreement, the Option will remain exercisable for three (3)
months following the Participant’s termination. Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan on the date one (1) month following the
Participant’s termination. If after termination the Participant does not
exercise his or her Option within the time specified by the Administrator, the
Option will terminate, and the Shares covered by such Option will revert to the
Plan.

 

-12-

--------------------------------------------------------------------------------

(iii) Disability of Participant. If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following
the Participant’s termination. Unless otherwise provided by the Administrator,
if on the date of termination the Participant is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will
revert to the Plan on the date one (1) month following the Participant’s
termination. If after termination the Participant does not exercise his or her
Option within the time specified herein, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.

 

(iv) Death of Participant. If a Participant dies while a Service Provider, the
Option may be exercised following the Participant’s death within such period of
time as is specified in the Award Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Award
Agreement), by the Participant’s designated beneficiary, provided such
beneficiary has been designated prior to Participant’s death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the person(s) to whom the
Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death. Unless otherwise provided by the Administrator,
if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will
immediately revert to the Plan on the date one (1) month following the
Participant’s death. If the Option is not so exercised within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

 

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

 

8. Restricted Stock.

 

(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine. Subject to Section 6(c)(ii) hereof, the
Administrator shall have complete discretion to determine (i) the number of
Shares subject to a Restricted Stock award granted to any Participant, and (ii)
the conditions that must be satisfied, which typically will be based principally
or solely on continued provision of services but may include a performance-based
component, upon which is conditioned the grant, vesting or issuance of
Restricted Stock.

 

(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced
by an Award Agreement that will specify the Period of Restriction, the number of
Shares granted, and such other terms and conditions as the Administrator, in its
sole discretion, will determine. Unless the Administrator determines otherwise,
Shares of Restricted Stock will be held by the Company as escrow agent until the
restrictions on such Shares have lapsed.

 

-13-

--------------------------------------------------------------------------------

(c) Transferability. Except as provided in this Section 8, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction.

 

(d) Other Restrictions. The Administrator, in its sole discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate.

 

(e) Removal of Restrictions. Except as otherwise provided in this Section 8,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan will be released from escrow as soon as practicable after the last day of
the Period of Restriction. The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed.

 

(f) Voting Rights. During the Period of Restriction, Service Providers holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the Administrator determines otherwise.

 

(g) Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

 

(h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will
revert to the Company and again will become available for grant under the Plan.

 

9. Stock Appreciation Rights.

 

(a) Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be
granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion.

 

(b) Number of Shares. Subject to Section 6(c)(i) of the Plan, the Administrator
will have complete discretion to determine the number of SARs granted to any
Service Provider.

 

(c) Exercise Price and Other Terms. The Administrator, subject to the provisions
of the Plan, will have complete discretion to determine the terms and conditions
of SARs granted under the Plan.

 

(d) Exercise of SARs. SARs will be exercisable on such terms and conditions as
the Administrator, in its sole discretion, will determine.

 

-14-

--------------------------------------------------------------------------------

(e) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.

 

(f) Expiration of SARs. An SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of Sections 7(d)(ii),
7(d)(iii) and 7(d)(iv) also will apply to SARs.

 

(g) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

 

(ii) The number of Shares with respect to which the SAR is exercised.

 

At the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

 

(h) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares a Stock Appreciation Right previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Participant at the time that such offer is made.

 

10. Performance Units and Performance Shares.

 

(a) Grant of Performance Units/Shares. Subject to the terms and conditions of
the Plan, Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. Subject to Section 6(c)(ii), the
Administrator will have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant.

 

(b) Value of Performance Units/Shares. Each Performance Unit will have an
initial value that is established by the Administrator on or before the date of
grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

 

(c) Performance Objectives and Other Terms. The Administrator will set
performance objectives in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Units/Shares
that will be paid out to the Service Providers. The time period during which the
performance objectives must be met will be called the “Performance Period.” Each
Award of Performance Units/Shares will be evidenced by an Award Agreement that
will specify the Performance Period, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. The Administrator may set
performance objectives based upon the achievement of Company-wide, divisional,
or individual goals, applicable federal or state securities laws, or any other
basis determined by the Administrator in its discretion.

 

-15-

--------------------------------------------------------------------------------

(d) Earning of Performance Units/Shares. After the applicable Performance Period
has ended, the holder of Performance Units/Shares will be entitled to receive a
payout of the number of Performance Units/Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives have been achieved. After the grant of
a Performance Unit/Share, the Administrator, in its sole discretion, may reduce
or waive any performance objectives for such Performance Unit/Share.

 

(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made as soon after the expiration of the
applicable Performance Period at the time determined by the Administrator. The
Administrator, in its sole discretion, may pay earned Performance Units/Shares
in the form of cash, in Shares (which have an aggregate Fair Market Value equal
to the value of the earned Performance Units/Shares at the close of the
applicable Performance Period) or in a combination thereof.

 

(f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited
to the Company, and again will be available for grant under the Plan.

 

11. Restricted Stock Units. Restricted Stock Units shall consist of a Restricted
Stock, Performance Share or Performance Unit Award that the Administrator, in
its sole discretion permits to be paid out in installments or on a deferred
basis, in accordance with rules and procedures established by the Administrator.

 

12. Other Stock Based Awards. Other Stock Based Awards may be granted either
alone, in addition to, or in tandem with, other Awards granted under the Plan
and/or cash awards made outside of the Plan. The Administrator shall have
authority to determine the Service Providers to whom and the time or times at
which Other Stock Based Awards shall be made, the amount of such Other Stock
Based Awards, and all other conditions of the Other Stock Based Awards including
any dividend and/or voting rights.

 

13. Leaves of Absence. Unless the Administrator provides otherwise, vesting of
Awards granted hereunder will be suspended during any unpaid leave of absence
and will resume on the date the Participant returns to work on a regular
schedule as determined by the Company; provided, however, that no vesting credit
will be awarded for the time vesting has been suspended during such leave of
absence. A Service Provider will not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, or any Subsidiary. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three months following the 91st day of such
leave any Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.

 

14. Non-Transferability of Awards. Unless determined otherwise by the
Administrator, an Award 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
Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as
the Administrator deems appropriate.

 

-16-

--------------------------------------------------------------------------------

15. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

 

(a) Adjustments. In the event that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs such that an adjustment is
determined by the Administrator (in its sole discretion) to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Administrator shall, in
such manner as it may deem equitable, adjust the number and class of Shares
which may be delivered under the Plan, the 162(m) annual share issuance limits
under Section 6(c) of the Plan, and the number, class, and price of Shares
subject to outstanding Awards. Notwithstanding the preceding, the number of
Shares subject to any Award always shall be a whole number.

 

(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for a Participant to have the
right to exercise his or her Award, to the extent applicable, until ten (10)
days prior to such transaction as to all of the Awarded Stock covered thereby,
including Shares as to which the Award would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option or
forfeiture rights applicable to any Award shall lapse 100%, and that any Award
vesting shall accelerate 100%, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised or vested, an Award will terminate immediately prior
to the consummation of such proposed action.

 

(c) Merger or Change in Control.

 

(i) Stock Options and SARS. In the event of a merger or Change in Control, each
outstanding Option and SAR shall be assumed or an equivalent option or SAR
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. With respect to Options and SARs granted to an Outside
Director that are assumed or substituted for, if immediately prior to or after
the merger or Change in Control the Participant’s status as a Director or a
director of the successor corporation, as applicable, is terminated other than
upon a voluntary resignation by the Participant, then the Participant shall
fully vest in and have the right to exercise such Options and SARs as to all of
the Awarded Stock, including Shares as to which it would not otherwise be vested
or exercisable. Unless determined otherwise by the Administrator, in the event
that the successor corporation refuses to assume or substitute for the Option or
SAR, the Participant shall fully vest in and have the right to exercise the
Option or SAR as to all of the Awarded Stock, including Shares as to which it
would not otherwise be vested or exercisable. If an Option or SAR is not assumed
or substituted in the event of a merger or Change in Control, the Administrator
shall notify the Participant in writing or electronically that the

 

-17-

--------------------------------------------------------------------------------

Option or SAR shall be exercisable, to the extent vested, for a period of up to
fifteen (15) days from the date of such notice, and the Option or SAR shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or SAR shall be considered assumed if, following the
merger or Change in Control, the option or stock appreciation right confers the
right to purchase or receive, for each Share of Awarded Stock subject to the
Option or SAR immediately prior to the merger or Change in Control, the
consideration (whether stock, cash, or other securities or property) received in
the merger or Change in Control by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger or Change in Control 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 or SAR, for each Share of Awarded Stock subject to the
Option or SAR, 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 Change in Control. Notwithstanding
anything herein to the contrary, an Award that vests, is earned or paid-out upon
the satisfaction of one or more performance goals will not be considered assumed
if the Company or its successor modifies any of such performance goals without
the Participant’s consent; provided, however, a modification to such performance
goals only to reflect the successor corporation’s post-merger or post-Change in
Control corporate structure will not be deemed to invalidate an otherwise valid
Award assumption.

 

(ii) Restricted Stock, Performance Shares, Performance Units, Restricted Stock
Units and Other Stock Based Awards. In the event of a merger or Change in
Control, each outstanding Restricted Stock, Performance Share, Performance Unit,
Other Stock Based Award and Restricted Stock Unit awards shall be assumed or an
equivalent Restricted Stock, Performance Share, Performance Unit, Other Stock
Based Award and Restricted Stock Unit award substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. With respect
to Awards granted to an Outside Director that are assumed or substituted for, if
immediately prior to or after the merger or Change in Control the Participant’s
status as a Director or a director of the successor corporation, as applicable,
is terminated other than upon a voluntary resignation by the Participant, then
the Participant shall fully vest in such Awards, including Shares as to which it
would not otherwise be vested. Unless determined otherwise by the Administrator,
in the event that the successor corporation refuses to assume or substitute for
the Restricted Stock, Performance Share, Performance Unit, Other Stock Based
Award or Restricted Stock Unit award, the Participant shall fully vest in the
Restricted Stock, Performance Share, Performance Unit, Other Stock Based Award
or Restricted Stock Unit including as to Shares which would not otherwise be
vested. For the purposes of this paragraph, a Restricted Stock, Performance
Share, Performance Unit, Other Stock Based Award and Restricted Stock Unit award
shall be considered assumed if, following the merger or Change in Control, the
award confers the right to purchase or receive, for each Share subject to the
Award immediately prior to the merger or Change in Control, the consideration
(whether stock, cash, or other securities or property) received in the merger or
Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or Change in Control 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, for each
Share and each unit/right to acquire a Share subject to the Award, 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 Change in Control. Notwithstanding

 

-18-

--------------------------------------------------------------------------------

anything herein to the contrary, an Award that vests, is earned or paid-out upon
the satisfaction of one or more performance goals will not be considered assumed
if the Company or its successor modifies any of such performance goals without
the Participant’s consent; provided, however, a modification to such performance
goals only to reflect the successor corporation’s post-merger or post-Change in
Control corporate structure will not be deemed to invalidate an otherwise valid
Award assumption.

 

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

 

17. Term of Plan. Subject to Section 22 of the Plan, the Plan will become
effective upon its adoption by the Board. It will continue in effect for a term
of ten (10) years unless terminated earlier under Section 18 of the Plan.

 

18. Amendment and Termination of the Plan.

 

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

 

(b) Stockholder Approval. The Company will obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

 

(c) Effect of Amendment or Termination. Subject to Section 20 of the Plan, no
amendment, alteration, suspension or termination of the Plan will impair the
rights of any Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in writing and signed
by the Participant and the Company. Termination of the Plan will not affect the
Administrator’s ability to exercise the powers granted to it hereunder with
respect to Awards granted under the Plan prior to the date of such termination.

 

19. Conditions Upon Issuance of Shares.

 

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

 

(b) Investment Representations. As a condition to the exercise or receipt of an
Award, the Company may require the person exercising or receiving such Award to
represent and warrant at the time of any such exercise or receipt 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.

 

20. Severability. Notwithstanding any contrary provision of the Plan or an Award
to the contrary, if any one or more of the provisions (or any part thereof) of
this Plan or the Awards shall be held invalid, illegal or unenforceable in any
respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan or Award, as applicable, shall not
in any way be affected or impaired thereby.

 

-19-

--------------------------------------------------------------------------------

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

 

22. Stockholder Approval. The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval will be obtained in the manner and to the
degree required under Applicable Laws.

 

-20-