Exhibit 10.14

 

HORIZON ORGANIC HOLDING CORPORATION

 

1998 EQUITY INCENTIVE PLAN

 

ADOPTED OCTOBER 25, 1995

AMENDED AND RESTATED APRIL 14, 1998

APPROVED BY STOCKHOLDERS APRIL 30, 1998

AMENDED AND RESTATED MARCH 31, 2000

APPROVED BY STOCKHOLDERS MAY 16, 2000

AMENDED AND RESTATED JANUARY 31, 2002

APPROVED BY STOCKHOLDERS MAY 14, 2002

AMENDED AND RESTATED JULY 31, 2002

PLAN TERMINATION DATE: APRIL 13, 2008

 

1.                                       PURPOSES.

 

(a)                     The purpose of the Plan is to provide a means by which
selected Employees and Directors of and Consultants to the Company and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire
restricted stock.

 

(b)                    The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or Consultants to the
Company or its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

 

2.                                       DEFINITIONS.

 

(a)                     “AFFILIATE” means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f) respectively, of the Code.

 

(b)                    “BOARD” means the Board of Directors of the Company.

 

(c)                     “CODE” means the Internal Revenue Code of 1986, as
amended.

 

(d)                    “COMMITTEE” means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.

 

(e)                     “COMMON STOCK” means the common stock of the Company:

 

(f)                       “COMPANY” means Horizon Organic Holding Corporation, a
Delaware corporation.

 

(g)                    “CONSULTANT” means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term “Consultant” shall not include Directors who
are paid only a director’s fee by the Company or who are not compensated by the
Company for their services as Directors.

(h)                    “CONTINUOUS SERVICE” means the Stock Award holder’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party’s sole discretion, whether
Continuous Service shall be considered interrupted in the case of: (i) any leave
of absence approved by the Board or the chief executive officer of the Company,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.

 

(i)                        “COVERED EMPLOYEE” means the chief executive officer
and the four (4) other highest compensated officers of the Company for whom
total compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.

 

(j)                        “DIRECTOR” means a member of the Board of Directors
of the Company.

 

(k)                     “DISABILITY” means the inability of a person to perform
the normal duties of the person’s position with the Company or an Affiliate of
the Company, provided that such inability to perform must be certified in
writing (a “Physician’s Certificate”) by a medical doctor, reasonably acceptable
to the Company.

 

(l)                        “EMPLOYEE” means any person employed by the Company
or any Affiliate. Neither service as a Director nor payment of a director’s fee
by the Company or an Affiliate shall be sufficient to constitute “employment” by
the Company or an Affiliate.

 

(m)                  “EXCHANGE ACT” means the Securities Exchange Act of 1934,
as amended.

 

(n)                    “FAIR MARKET VALUE” means, as of any date, the value of
the Common Stock of the Company determined as follows:

 

(1)                         If the Common Stock is listed on any established
stock exchange or traded on The Nasdaq National Market or The Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or

 

(2)                         In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.

 

(o)                    “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.

 

(p)                    “LISTING DATE” means the first date upon which any
security of the Company is listed (or approved for listing) upon notice of
issuance on any securities exchange, or designated (or approved for designation)
upon notice of issuance as a national market security on an interdealer
quotation system.

(q)                    “NON-EMPLOYEE DIRECTOR” means a Director who either (i)
is not a current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a “non- employee director” for purposes of Rule 16b-3.

 

(r)                       “NONSTATUTORY STOCK OPTION” means an Option not
intended to qualify as an Incentive Stock Option.

 

(s)                     “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.

 

(t)                       “OPTION” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.

 

(u)                    “OPTION AGREEMENT” means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

 

(v)                    “OPTIONEE” means a person to whom an Option is granted
pursuant to the Plan, or if applicable, such other person who holds an
outstanding Option.

 

(w)                  “OUTSIDE DIRECTOR” means a Director who either (i) is not a
current employee of the Company or an “affiliated corporation” (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an “affiliated corporation”
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time, and is not currently receiving direct or indirect
remuneration from the Company or an “affiliated corporation” for services in any
capacity other than as a Director, or (ii) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.

 

(y)                    “PLAN” means this 1998 Equity Incentive Plan.

 

(z)                      “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.

 

(aa)               “SECURITIES ACT” means the Securities Act of 1933, as
amended.

 

(bb)             “STOCK AWARD” means any right granted under the Plan, including
any Option, a stock bonus and any right to acquire restricted stock.

 

(cc)               “STOCK AWARD AGREEMENT” means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

3.                                       ADMINISTRATION.

 

(a)                     The Plan shall be administered by the Board unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).

 

(b)                    The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

 

(1)                         To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.

 

(2)                         To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration.The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

 

(3)                         To amend the Plan or a Stock Award as provided in
Section 12.

 

(c)                     The Board may delegate administration of the Plan to a
committee composed of two (2) or more members (the “Committee”), all of the
members of which Committee may be Non-Employee Directors and/or Outside
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board including the power to delegate to a subcommittee of two
or more Directors (who may or may not be Outside Directors or Non-Employee
Directors) any of the administrative powers to the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter mean the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. Notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Stock
Awards to eligible persons who (x) are not then subject to Section 16 of the
Exchange Act and/or (y) are either (i) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Option, or (ii) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code.

 

(d)                    All actions taken and all interpretations and
determinations made by the Board or Committee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Optionees, the Company and all other interested persons. No member of the Board
or Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan, and all members of
the Board and Committee shall, in addition to their right as directors, be fully
protected by the Company with respect to any such action, determination or
interpretation.

4.                                       SHARES SUBJECT TO THE PLAN.

 

(a)                     Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate Two Million Two-Hundred Fifty
Thousand (2,250,000) shares of the Common Stock.If any Stock Award shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. If any shares of Common
Stock acquired pursuant to the exercise of an Option shall for any reason be
repurchased by the Company under a repurchase option provided under the Plan,
the stock repurchased by the Company under such repurchase option shall revert
to and again become available for issuance under the Plan.

 

(b)                    The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

 

5.                                       ELIGIBILITY.

 

(a)                     Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted only
to Employees, Directors or Consultants.

 

(b)                    No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Incentive Stock
Option is at least one hundred ten percent (110%) of the Fair Market Value of
such stock at the date of grant and the Incentive Stock Option is not
exercisable after the expiration of five (5) years from the date of grant.

 

(c)                     Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options covering more than two hundred fifty thousand (250,000) shares of Common
Stock in any calendar year.This subsection 5(c) shall not apply prior to the
Listing Date and, following the Listing Date, shall not apply until (i) the
earliest of:(A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of stockholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

 

6.                                       OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and
a separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

(a)                     TERM.No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.

 

(b)                    PRICE.The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Incentive Stock Option on the date the Incentive Stock
Option is granted or such greater amount as required by Section 5(b).The
exercise price of each Nonstatutory Stock Option shall be determined by the
Board. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

 

(c)                     CONSIDERATION.The purchase price of stock acquired
pursuant to an Option shall be paid at the time the Option is exercised, to the
extent permitted by applicable statutes and regulations, either (i) in cash or
by check or (ii) at the discretion of the Board, at the time of the grant of the
Option, under one of the following alternatives:

 

(1)                         Provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds;

 

(2)                         Provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street Journal, by
delivery of already-owned shares of Common Stock, held for the period required
to avoid a charge to the Company’s reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interests, which Common Stock
shall be valued at its fair market value on the date of exercise;

 

(3)                         Pursuant to a deferred payment alternative as
described in the Option Agreement, provided that, at any time that the Company
is incorporated in Delaware, payment of the Common Stock’s “par value” (as
defined in the Delaware General Corporation Law) shall not be made by deferred
payment;

 

(4)                         In any other form of legal consideration that may be
acceptable to the Board; or

 

(5)                         By any combination of the above methods.

(d)                    TRANSFERABILITY.An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person.A Nonstatutory Stock Option may be transferable to
the extent expressly provided in the Option Agreement; provided, however, that
if the Option Agreement does not specifically provide for transferability, then
such Nonstatutory Stock Option shall not be transferable except by will or by
the laws of descent and distribution or pursuant to a domestic relations order,
and shall be exercisable during the lifetime of the person to whom the
Nonstatutory Stock Option is granted only by such person or any transferee
pursuant to a domestic relations order. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.

 

(e)                     VESTING. The total number of shares of stock subject to
an Option shall vest and become exercisable as provided in the Option Agreement.

 

(f)                       TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionee’s Continuous Service terminates (other than upon the Optionee’s death
or Disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it at the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee’s Continuous Service (or such
longer or shorter period specified in the Option Agreement) or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

 

An Optionee’s Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee’s Continuous Service (other
than upon the Optionee’s death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act or any material regulatory requirements of
any foreign jurisdiction, then the Option shall terminate on the earlier of (i)
the expiration of the term of the Option as set forth in the Option Agreement,
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee’s Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

 

(g)                    DISABILITY OF OPTIONEE.In the event an Optionee’s
Continuous Service terminates as a result of the Optionee’s Disability, the
Optionee may exercise his or her Option, but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement.If, at the date of termination, the Optionee is not entitled to
exercise the entire Option, the shares covered by the unexercisable portion of
the Option shall revert to and again become available for issuance under the
Plan no later than thirty (30) days following the date of termination.If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

(h)                    DEATH OF OPTIONEE. In the event of the death of an
Optionee during, or within the three (3) month or twelve (12) month periods
referred to above after the termination of, the Optionee’s Continuous Service,
the Option may be exercised by the Optionee’s estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee’s death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date twelve (12) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise the entire Option, the shares covered by
the unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan no later than thirty (30) days following
the date of termination. If, after death, the Option is not exercised within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

 

(i)                        QUALIFIED RETIREMENT OF OPTIONEE. In the event an
Optionee’s Continuous Service terminates as a result of the Optionee’s Qualified
Retirement (as determined by the Board of Directors or the Committee), the
Optionee may exercise his or her Option, but only within such period of time
ending on the expiration of the term of the Option as set forth in the Option
Agreement (or such shorter period specified in the Option Agreement). If, at the
date of such termination, the Optionee is not entitled to exercise the entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan no later than
thirty (30) days following the date of termination. If, after such termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.

 

(j)                        EARLY EXERCISE.The Option may, but need not, include
a provision whereby the Optionee may elect at any time before the Optionee’s
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.Any
unvested shares so purchased shall be subject to a repurchase right in favor of
the Company or any other restriction the Board determines appropriate.

 

7.                                       TERMS OF STOCK BONUSES AND PURCHASES OF
RESTRICTED STOCK.

 

(a)                     Each stock bonus or restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:

 

(1)                         PURCHASE PRICE.The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock’s Fair Market Value on
the date such award is made.Notwithstanding the foregoing, the Board may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company for its benefit.

(2)        TRANSFERABILITY.A stock bonus or restricted stock purchase agreement
may be transferable to the extent expressly provided in the Stock Award
Agreement; provided, however, that if the Stock Award Agreement does not
specifically provide for transferability, then such stock bonus or restricted
stock purchase award shall not be transferable except by will or the laws of
descent and distribution or pursuant to a domestic relations order, and shall be
exercisable during the lifetime of the person to whom the stock bonus or
restricted stock purchase award is granted only by such person or any transferee
pursuant to a domestic relations order, so long as stock awarded under such
agreement remains subject to any restrictions pursuant to the agreement.

 

(3)        CONSIDERATION.The purchase price of stock acquired pursuant to a
restricted stock purchase agreement shall be paid either:(i) in cash at the time
of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the person to whom the stock is sold; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion.Notwithstanding the foregoing, the Board may award stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.

 

(4)                         VESTING.Shares of stock sold or awarded under the
Plan may, but need not, be subject to a repurchase option or reacquisition right
in favor of the Company in accordance with a vesting schedule to be determined
by the Board.

 

(5)                         TERMINATION OF CONTINUOUS SERVICE.In the event a
Participant’s Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of stock held by that person which
have not vested as of the date of termination under the terms of the stock bonus
or restricted stock purchase agreement between the Company and such person,
subject to the provisions of Section 11.

 

8.                                       COVENANTS OF THE COMPANY.

 

(a)                     During the terms of the Stock Awards, the Company shall
keep available at all times the number of shares of stock required to satisfy
such Stock Awards.

 

(b)                    The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to grant Stock Awards and to issue and sell shares of Common Stock upon
exercise of the Stock Awards; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Stock
Award or any stock issued or issuable pursuant to any such Stock Award.If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.

 

9.                                       USE OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.

10.                                 MISCELLANEOUS.

 

(a)                     The Board shall have the power to accelerate the time at
which a Stock Award may first be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions in the Stock
Award stating the time at which it may first be exercised or the time during
which it will vest.

 

(b)                    No Optionee shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.

 

(c)                     Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any Optionee any right to
continue in the employ of the Company or any Affiliate (or to continue acting as
a Director or Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment of any Employee with or without cause, the
right of the Company’s Board of Directors and/or the Company’s stockholders to
remove any Director pursuant to the terms of the Company’s Bylaws and the
provisions of applicable laws, or the right to terminate the relationship of any
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or Affiliate to which such Consultant is providing services.

 

(d)                    To the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

 

(e)                     The Company may require any person to whom a Stock Award
is granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(a)(2), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person’s own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws.The Company may require the Stock Award holder
to provide such other representations, written assurances or information which
the Company shall determine is necessary, desirable or appropriate to comply
with applicable securities and other laws as a condition of granting a Stock
Award to such Stock Award holder or permitting the Stock Award holder to
exercise such Stock Award. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

(f)                       To the extent provided by the terms of a Stock Award
Agreement, the Stock Award holder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means or by a combination of such means (in
addition to the Company’s right to withhold from any compensation paid to the
Stock Award holder by the Company):(1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionee as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.

 

11.                                 ADJUSTMENTS UPON CHANGES IN STOCK.

 

(a)                     If any change is made in the stock subject to the Plan,
or subject to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards.Such adjustments shall be made
by the Board, the determination of which shall be final, binding and
conclusive.(The conversion of any convertible securities of the Company shall
not be treated as a “transaction not involving the receipt of consideration by
the Company”.)

 

(b)                    In the event of a Change in Control (as defined herein),
then:(i) with respect to Stock Awards held by persons whose Continuous Service
has not terminated prior to such Change in Control, the vesting (and, if
applicable, the exercisability) of Stock Awards held by such persons shall be
accelerated immediately prior to such event, and the Stock Awards terminated if
not exercised at or prior to the later of the date of such event or thirty (30)
days after delivery to such person of notice of such event or the prospect of
such event, and (ii) any Company repurchase option or reacquisition right with
respect to shares acquired by such persons under a Stock Award shall lapse
immediately prior to such event and the shares held by such persons shall be
fully vested.In its discretion, the Board may require any surviving corporation
or acquiring corporation to assume any Stock Awards outstanding under the Plan
or to substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(b)) for those outstanding under the Plan.In the event any
surviving or acquiring corporation does not assume such Stock Awards or
substitute similar stock awards for those outstanding under the Plan, such Stock
Awards which are vested without regard to such event shall terminate if not
exercised prior to such event and such Stock Awards which become vested by
virtue of acceleration due to such event shall terminate if not exercised within
the period set forth above in this subsection 11(b).

 

(c)                     In the event of a dissolution or liquidation of the
Company, any Stock Awards outstanding under the Plan shall terminate if not
exercised prior to such event.

 

12.                                 AMENDMENT OF THE PLAN AND STOCK AWARDS.

(a)                     The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 11 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or
any Nasdaq or securities exchange listing requirements.

 

(b)                    The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m) of
the Code and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

 

(c)                     It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide
Optionees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.

 

(d)                    Rights and obligations under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

(e)                     The Board at any time, and from time to time, may amend
the terms of any one or more Stock Awards; provided, however, that the rights
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.

 

13.                                 TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)       The Board may suspend or terminate the Plan at any time.Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier.No Stock Awards may be granted
under the Plan while the Plan is suspended or after it is terminated.

 

(b)       Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.

 

14.                                 EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective as of the Listing Date, but no Stock Awards
granted under the Plan shall be exercised (or, in the case of a stock bonus,
shall be granted) unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.

 

15.                                 CHOICE OF LAW.

 

All questions concerning the construction, validity and interpretation of this
Plan shall be governed by the law of the State of Delaware, without regard to
such state’s conflict of laws rules.