Exhibit 10.1

 

FAVRILLE, INC.

 

2005 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

 

ADOPTED BY BOARD OF DIRECTORS DECEMBER 31, 2004
APPROVED BY STOCKHOLDERS DECEMBER 31, 2004
EFFECTIVE DATE: FEBRUARY 7, 2005

 

 

1.             PURPOSES.

 

(a)           Eligible Option Recipients.  The persons eligible to receive
Options are the Non-Employee Directors of the Company.

 

(b)           Available Options.  The purpose of the Plan is to provide a means
by which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

 

(c)           General Purpose.  The Company, by means of the Plan, seeks to
retain the services of its current Non-Employee Directors, to secure and retain
the services of new Non-Employee Directors 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)           “Annual Grant” means an Option granted annually to all
Non-Employee Directors who meet the specified criteria pursuant to Section 6(b).

 

(c)           “Annual Meeting” means the annual meeting of the stockholders of
the Company.

 

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

 

(e)           “Capitalization Adjustment” has the meaning ascribed to that term
in Section 11(a).

 

(f)            “Change in Control” means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following
events:

 

(i)            any Exchange Act Person becomes the Owner, directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities
other than by virtue of a merger, consolidation or similar transaction. 
Notwithstanding the foregoing, a Change in Control shall

 

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not be deemed to occur (A) on account of the acquisition of securities of the
Company by an investor, any affiliate thereof or any other Exchange Act Person
from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of
equity securities or (B) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”) exceeds the designated percentage
threshold of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by the Company reducing the number of
shares outstanding, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of voting
securities by the Company, and after such share acquisition, the Subject Person
becomes the Owner of any additional voting securities that, assuming the
repurchase or other acquisition had not occurred, increases the percentage of
the then outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control shall be deemed to
occur;

 

(ii)           there is consummated a merger, consolidation or similar
transaction involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar transaction, the
stockholders of the Company immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the surviving
Entity in such merger, consolidation or similar transaction or (B) more than
fifty percent (50%) of the combined outstanding voting power of the parent of
the surviving Entity in such merger, consolidation or similar transaction, in
each case in substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to such
transaction;

 

(iii)         the stockholders of the Company approve or the Board approves a
plan of complete dissolution or liquidation of the Company, or a complete
dissolution or liquidation of the Company shall otherwise occur;

 

(iv)          there is consummated a sale, lease, license or other disposition
of all or substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries
to an Entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or
other disposition; or

 

(v)            individuals who, on the date this Plan is adopted by the Board,
are members of the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the members of the Board; provided, however,
that if the appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the members of
the Incumbent Board then still in office, such new member shall, for purposes of
this Plan, be considered as a member of the Incumbent Board.

 

Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant shall
supersede the foregoing definition with respect to Stock

 

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Awards subject to such agreement (it being understood, however, that if no
definition of Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall apply).

 

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

 

(h)           “Committee” means a committee of one (1) or more members of the
Board appointed by the Board in accordance with Section 3(c).

 

(i)            “Common Stock” means the common stock of the Company.

 

(j)            “Company” means Favrille, Inc., a Delaware corporation.

 

(k)           “Consultant” means any person, including an advisor, who (i) is
engaged by the Company or an Affiliate to render consulting or advisory services
and is compensated for such services or (ii) is serving as a member of the Board
of Directors of an Affiliate and is compensated for such services.  However,
service solely as a Director, or payment of a fee for such services, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.

 

(l)            “Continuous Service” means that the Optionholder’s service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated.    A change in the capacity in which the
Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder’s service with the Company or an Affiliate, shall not terminate
a Participant’s Continuous Service.  For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service.  The Board or the chief executive officer of the Company, in that
party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.  
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in an Option only to such extent as may be
provided in the Company’s leave of absence policy or in the written terms of the
Optionholder’s leave of absence.

 

(m)          “Corporate Transaction” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

 

(i)            a sale or other disposition of all or substantially all, as
determined by the Board in its discretion, of the consolidated assets of the
Company and its Subsidiaries;

 

(ii)           a sale or other disposition of at least ninety percent (90%) of
the outstanding securities of the Company;

 

(iii)         a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or

 

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(iv)          a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger, consolidation or similar transaction are
converted or exchanged by virtue of the merger, consolidation or similar
transaction into other property, whether in the form of securities, cash or
otherwise.

 

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

 

(o)           “Disability” means the inability of a person, in the opinion of a
qualified physician acceptable to the Company, to perform the major duties of
that person’s position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.

 

(p)           “Employee” means any person employed by the Company or an
Affiliate.  However, service solely as a Director, or payment of a fee for such
services, shall not cause a Director to be considered an “Employee” for purposes
of the Plan.

 

(q)           “Entity” means a corporation, partnership or other entity.

 

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

 

(s)           “Exchange Act Person” means any natural person, Entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that
“Exchange Act Person” shall not include (A) the Company or any Subsidiary of the
Company, (B) any employee benefit plan of the Company or any Subsidiary of the
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(D) an Entity Owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their Ownership of stock of the
Company.

 

(t)            “Fair Market Value” means, as of any date, the value of the
Common Stock determined as follows:

 

(i)            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.

 

(ii)           In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined by the Board in good faith.

 

(u)           “Initial Grant” means an Option granted to a Non-Employee Director
who meets the specified criteria pursuant to Section 6(a).

 

(v)            “IPO Date” means the effective date of the initial public
offering of the Common Stock.

 

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(w)           “Non-Employee Director” means a Director who is not an Employee.

 

(x)           “Nonstatutory Stock Option” means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

 

(y)           “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.

 

(z)           “Option” means a Nonstatutory Stock Option granted pursuant to the
Plan.

 

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

 

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

 

(cc)         “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be
deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

 

(dd)         “Plan” means this Favrille, Inc. 2005 Non-Employee Directors’ Stock
Option Plan.

 

(ee)         “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

 

(ff)           “Securities Act” means the Securities Act of 1933, as amended.

 

(gg)         “Subsidiary” means, with respect to the Company, (i) any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, Owned by the Company, and (ii) any partnership in which the Company
has a direct or indirect interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%).

 

3.             ADMINISTRATION.

 

(a)           Administration by Board.  The Board shall administer the Plan
unless and until the Board delegates administration of the Plan to a Committee,
as provided in Section 3(c).

 

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

 

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(i)            To determine the provisions of each Option to the extent not
specified in the Plan.

 

(ii)           To construe and interpret the Plan and Options 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 Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

 

(iii)         To effect, at any time and from time to time, with the consent of
any adversely affected Optionholder, (1) the reduction of the exercise price of
any outstanding Option under the Plan, (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (A) a new Option
under the Plan or another equity plan of the Company covering the same or a
different number of shares of Common Stock, (B) cash and/or (C) other valuable
consideration (as determined by the Board, in its sole discretion), or (3) any
other action that is treated as a repricing under generally accepted accounting
principles.

 

(iv)          To amend the Plan or an Option as provided in Section 12.

 

(v)            To terminate or suspend the Plan as provided in Section 13.

 

(vi)          Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and that are not in conflict with the provisions of the Plan.

 

(c)           Delegation to Committee.  The Board may delegate some or all of
the administration of the Plan to a Committee or Committees of one (1) or more
members of the Board, and the term “Committee” shall apply to any person or
persons to whom such authority has been delegated.  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 that
have been delegated to the Committee, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or 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 retain the authority to concurrently
administer the Plan with the Committee and may, at any time, revest in the Board
some or all of the powers previously delegated.

 

(d)           Effect of Board’s Decision.  All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.

 

4.             SHARES SUBJECT TO THE PLAN.

 

(a)           Share Reserve.  Subject to the provisions of Section 11(a)
relating to Capitalization Adjustments, the shares of Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate four hundred twenty
thousand (420,000) shares of Common Stock plus an annual increase to be added on
the first day of each Company fiscal year,

 

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beginning in 2006 and ending in (and including) 2014, equal to the lesser of the
following amounts: (i) ninety thousand (90,000) shares of Common Stock, or (ii)
an amount determined by the Board.

 

(b)           Reversion of Shares to the Share Reserve.  If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan. 
If any shares subject to an Option are not delivered to an Optionholder because
such shares are withheld for the payment of taxes or the Option is exercised
through a reduction of shares subject to the Option (i.e., “net exercised”), the
number of shares that are not delivered to the Optionholder as a result thereof
shall remain available for issuance under the Plan.  If the exercise price of an
Option is satisfied by tendering shares of Common Stock held by the Optionholder
(either by actual delivery or attestation), then the number of shares so
tendered shall remain available for issuance under the Plan.

 

(c)           Source of Shares.  The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

 

5.             ELIGIBILITY.

 

The Options, as set forth in Section 6, automatically shall be granted under the
Plan to all Non-Employee Directors who meet the criteria specified in Section 6.

 

6.             NON-DISCRETIONARY GRANTS.

 

(a)           Initial Grants.  Without any further action of the Board, each
person who after the IPO Date is elected or appointed for the first time to be a
Non-Employee Director automatically shall, upon the date of his or her initial
election or appointment to be a Non-Employee Director, be granted an Initial
Grant to purchase thirty-five thousand (35,000) shares of Common Stock on the
terms and conditions set forth herein.

 

(b)           Annual Grants. Without any further action of the Board, on the
date of each Annual Meeting, commencing with the Annual Meeting in 2006, each
person who is then a Non-Employee Director automatically shall be granted an
Annual Grant to purchase eight thousand (8,000) shares of Common Stock on the
terms and conditions set forth herein; provided, however, that if the person has
not been serving as a Non-Employee Director for the entire period since the
preceding Annual Meeting, then the number of shares subject to such Annual Grant
shall be reduced pro rata for each full quarter prior to the date of grant
during such period for which such person did not serve as a Non- Employee
Director.

 

7.             OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as
required by the Plan.  Each Option shall contain such additional terms and
conditions, not inconsistent with the Plan, as the Board shall deem
appropriate.  Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

 

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

 

(b)           Exercise Price.  The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option on the date the Option is granted.

 

(c)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable law,
either (i) in cash at the time the Option is exercised or (ii) at the discretion
of the Board either at the time of the grant of the Option or subsequent thereto
(1) by delivery to the Company of other Common Stock at the time the Option is
exercised, (2) by a “net exercise” of the Option (as further described below),
(3) pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, 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 or (4) in any other form of legal consideration that may be
acceptable to the Board.  Unless otherwise specifically provided in the Option,
the purchase price of Common Stock acquired pursuant to an Option that is paid
by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes).

 

In the case of a “net exercise” of an Option, the Company will not require a
payment of the exercise price of the Option from the Participant but will reduce
the number of shares of Common Stock issued upon the exercise by the largest
number of whole shares that has a Fair Market Value that does not exceed the
aggregate exercise price.  With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the
Participant.  Shares of Common Stock will no longer be outstanding under an
Option (and will therefore not thereafter be exercisable) following the exercise
of such Option to the extent of (i) shares used to pay the exercise price of an
Option under a “net exercise”, (ii) shares actually delivered to the Participant
as a result of such exercise and (iii) shares withheld for purposes of tax
withholding.

 

(d)           Transferability.  An Option is transferable by will or by the laws
of descent and distribution.  An Option also may be transferable upon written
consent of the Company if, at the time of transfer, a Form S-8 registration
statement under the Securities Act is available for the exercise of the Option
and the subsequent resale of the underlying securities.  In addition, an
Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise satisfactory to the Company, designate a third party
who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.

 

(e)           Vesting.  Options shall vest as follows:

 

(i)            Initial Grants:  1/36th of the shares of Common Stock subject to
an Initial Grant shall vest monthly over three (3) years.

 

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(ii)           Annual Grants:  1/12th of the shares of Common Stock subject to
an Annual Grant shall vest monthly over one (1) year.

 

(f)            Termination of Continuous Service.  In the event that an
Optionholder’s Continuous Service terminates for any reason, the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination of Continuous Service) but
only within such period of time ending on the expiration of the term of the
Option as set forth in the Option Agreement.  If, after termination of
Continuous Service, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

 

8.             SECURITIES LAW COMPLIANCE.

 

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
Options and to issue and sell shares of Common Stock upon exercise of the
Options; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Option or any Common Stock
issued or issuable pursuant to any such Option.  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 Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
such Options unless and until such authority is obtained.

 

9.             USE OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of Common Stock pursuant to Options shall constitute
general funds of the Company.

 

10.          MISCELLANEOUS.

 

(a)           Acceleration of Exercisability and Vesting.  The Board shall have
the power to accelerate the time at which an Option may first be exercised or
the time during which an Option or any part thereof will vest in accordance with
the Plan, notwithstanding the provisions in the Plan or the Option stating the
time at which it may first be exercised or the time during which it will vest.

 

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

 

(c)           No Service Rights.  Nothing in the Plan, any Option Agreement or
other instrument executed thereunder or any Option granted pursuant thereto
shall confer upon any Optionholder any right to continue to serve the Company as
a Non-Employee Director or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of

 

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the corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

 

(d)           Investment Assurances.  The Company may require an Optionholder,
as a condition of exercising or acquiring Common Stock under any Option, (i) to
give written assurances satisfactory to the Company as to the Optionholder’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 Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the Common Stock subject to the Option for the Optionholder’s own
account and not with any present intention of selling or otherwise distributing
the Common Stock.  The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Option
has been registered under a then currently effective registration statement
under the Securities Act or (2) 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, 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 Common Stock.

 

(e)           Withholding Obligations.  To the extent provided by the terms of
an Option Agreement, the Company may in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to an Option by any
of the following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means:  (i) causing the Optionholder to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise
issuable to the Optionholder in connection with the Option; or (iii) via such
other method as may be set forth in the Option Agreement.

 

11.          ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

 

(a)           Capitalization Adjustments.  If any change is made in, or other
event occurs with respect to, the Common Stock subject to the Plan, or subject
to any Option, 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 (each a “Capitalization Adjustment”)), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to Section 4 and to the nondiscretionary Options specified in
Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Options.  The Board shall make such adjustments, and its
determination shall be final, binding and conclusive.  (Notwithstanding the
foregoing, the

 

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conversion of any convertible securities of the Company shall not be treated as
a transaction “without receipt of consideration” by the Company.)

 

(b)           Dissolution or Liquidation.  In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to the completion of such dissolution or liquidation.

 

(c)           Corporate Transaction.  In the event of a Corporate Transaction,
any surviving corporation or acquiring corporation may assume or continue any or
all Options outstanding under the Plan or may substitute similar stock options
for Options outstanding under the Plan (including options to acquire the same
consideration paid to the stockholders of the Company, as the case may be,
pursuant to the Corporate Transaction).  In the event that any surviving
corporation or acquiring corporation does not assume or continue all such
outstanding Options or substitute similar stock options for all such outstanding
Options, then with respect to Options that have been not assumed, continued or
substituted and that are held by Optionholders whose Continuous Service has not
terminated prior to the effective time of the Corporate Transaction, the vesting
of such Options (and, if applicable, the time at which such Options may be
exercised) shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Options shall terminate
on the effective time of the Corporate Transaction if not exercised (if
applicable) at or prior to such effective time.  With respect to any other
Options outstanding under the Plan that have not been assumed, continued or
substituted, the vesting of such Options (and, if applicable, the time at which
such Options may be exercised) shall not be accelerated, unless otherwise
provided in a written agreement between the Company or any Affiliate and the
Optionholder, and such Options shall terminate if not exercised (if applicable)
prior to the effective time of the Corporate Transaction.

 

(d)           Change in Control.  An Option may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Option Agreement for such Option or as may be provided in
any other written agreement between the Company or any Affiliate and the
Optionholder, but in the absence of such provision, no such acceleration shall
occur.

 

12.          AMENDMENT OF THE PLAN AND OPTIONS.

 

(a)           Amendment of Plan.  Subject to the limitations, if any, of
applicable law, the Board, at any time and from time to time, may amend the
Plan.  However, except as provided in Section 11(a) relating to Capitalization
Adjustments, no amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary to satisfy
applicable law.

 

(b)           Stockholder Approval.  The Board, in its sole discretion, may
submit any other amendment to the Plan for stockholder approval.

 

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(c)           No Impairment of Rights.  Rights under any Option 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 Optionholder and (ii) the
Optionholder consents in writing.

 

(d)           Amendment of Options.  The Board, at any time, and from time to
time, may amend the terms of any one or more Options, including, but not limited
to, amendments to provide terms more favorable than previously provided in the
agreement evidencing an Option, subject to any specified limits in the Plan that
are not subject to Board discretion; provided, however, that the rights under
any Option shall not be impaired by any such amendment unless (i) the Company
requests the consent of the Optionholder and (ii) the Optionholder consents in
writing.

 

13.          TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)           Plan Term.  The Board may suspend or terminate the Plan at any
time. No Options may be granted under the Plan while the Plan is suspended or
after it is terminated.

 

(b)           No Impairment of Rights.  Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.

 

14.          EFFECTIVE DATE OF PLAN.

 

                The Plan shall become effective on the IPO Date, but no Option
shall be exercised 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.

 

The law of the state of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

 

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