Exhibit 10.20

 

2004 AMENDED AND RESTATED EQUITY INCENTIVE PLAN

OF

THRESHOLD PHARMACEUTICALS, INC.

 

1. Purpose of this Plan

 

The purpose of this 2004 Amended and Restated Equity Incentive Plan is to
enhance the long-term stockholder value of Threshold Pharmaceuticals, Inc. by
offering opportunities to eligible individuals to participate in the growth in
value of the equity of Threshold Pharmaceuticals, Inc.

 

2. Definitions and Rules of Interpretation

 

2.1 Definitions.

 

This Plan uses the following defined terms:

 

(a) “Administrator” means the Board or the Committee, or any officer or employee
of the Company to whom the Board or the Committee delegates authority to
administer this Plan.

 

(b) “Affiliate” means a “parent” or “subsidiary” (as each is defined in Section
424 of the Code) of the Company and any other entity that the Board or Committee
designates as an “Affiliate” for purposes of this Plan.

 

(c) “Applicable Law” means any and all laws of whatever jurisdiction, within or
without the United States, and the rules of any stock exchange or quotation
system on which Shares are listed or quoted, applicable to the taking or
refraining from taking of any action under this Plan, including the
administration of this Plan and the issuance or transfer of Awards or Award
Shares.

 

(d) “Award” means a Stock Award, SAR, Cash Award, or Option granted in
accordance with the terms of this Plan.

 

(e) “Award Agreement” means the document evidencing the grant of an Award.

 

(f) “Award Shares” means Shares covered by an outstanding Award or purchased
under an Award.

 

(g) “Awardee” means: (i) a person to whom an Award has been granted, including a
holder of a Substitute Award, (ii) a person to whom an Award has been
transferred in accordance with all applicable requirements of Sections 6.5,
7(h), and 16.

 

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

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(i) “Cash Award” means the right to receive cash as described in Section 8.3.

 

(j) “Cause” means employment related dishonesty, fraud, misconduct or disclosure
or misuse of confidential information, or other employment related conduct that
is likely to cause significant injury to the Company, an Affiliate, or any of
their respective employees, officers or directors (including, without
limitation, commission of a felony or similar offense), in each case as
determined by the Administrator. “Cause” shall not require that a civil judgment
or criminal conviction have been entered against or guilty plea shall have been
made by the Awardee regarding any of the matters referred to in the previous
sentence. Accordingly, the Administrator shall be entitled to determine “Cause”
based on the Administrator’s good faith belief. If the Awardee is criminally
charged with a felony or similar offense that shall be a sufficient, but not a
necessary, basis for such belief.

 

(k) “Change in Control” means any transaction or event that the Board specifies
as a Change in Control under Section 10.4.

 

(l) “Code” means the Internal Revenue Code of 1986.

 

(m) “Committee” means a committee composed of Company Directors appointed in
accordance with the Company’s charter documents and Section 4.

 

(n) “Company” means Threshold Pharmaceuticals, Inc., a Delaware corporation.

 

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

 

(p) “Consultant” means an individual who, or an employee of any entity that,
provides bona fide services to the Company or an Affiliate not in connection
with the offer or sale of securities in a capital-raising transaction, but who
is not an Employee.

 

(q) “Director” means a member of the Board of Directors of the Company or an
Affiliate.

 

(r) “Divestiture” means any transaction or event that the Board specifies as a
Divestiture under Section 10.5.

 

(s) “Domestic Relations Order” means a “domestic relations order” as defined in,
and otherwise meeting the requirements of, Section 414(p) of the Code, except
that reference to a “plan” in that definition shall be to this Plan.

 

(t) “Effective Date” means the first date of the sale by the Company of shares
of its capital stock in an initial public offering pursuant to a registration
statement on Form S-1 filed with the SEC.

 

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(u) “Employee” means a regular employee of the Company or an Affiliate,
including an officer or Director, who is treated as an employee in the personnel
records of the Company or an Affiliate, but not individuals who are classified
by the Company or an Affiliate as: (i) leased from or otherwise employed by a
third party, (ii) independent contractors, or (iii) intermittent or temporary
workers. The Company’s or an Affiliate’s classification of an individual as an
“Employee” (or as not an “Employee”) for purposes of this Plan shall not be
altered retroactively even if that classification is changed retroactively for
another purpose as a result of an audit, litigation or otherwise. An Awardee
shall not cease to be an Employee due to transfers between locations of the
Company, or between the Company and an Affiliate, or to any successor to the
Company or an Affiliate that assumes the Awardee’s Options under Section 10.
Neither service as a Director nor receipt of a director’s fee shall be
sufficient to make a Director an “Employee.”

 

(v) “Exchange Act” means the Securities Exchange Act of 1934.

 

(w) “Executive” means, if the Company has any class of any equity security
registered under Section 12 of the Exchange Act, an individual who is subject to
Section 16 of the Exchange Act or who is a “covered employee” under Section
162(m) of the Code, in either case because of the individual’s relationship with
the Company or an Affiliate. If the Company does not have any class of any
equity security registered under Section 12 of the Exchange Act, “Executive”
means any (i) Director, (ii) officer elected or appointed by the Board, or (iii)
beneficial owner of more than 10% of any class of the Company’s equity
securities.

 

(x) “Expiration Date” means, with respect to an Award, the date stated in the
Award Agreement as the expiration date of the Award or, if no such date is
stated in the Award Agreement, then the last day of the maximum exercise period
for the Award, disregarding the effect of an Awardee’s Termination or any other
event that would shorten that period.

 

(y) “Fair Market Value” means the value of Shares as determined under Section
17.2.

 

(z) “Fundamental Transaction” means any transaction or event described in
Section 10.3.

 

(aa) “Good Reason” means (i) a material diminution in responsibility or
compensation, or (ii) requiring Awardee to work in a location (other than normal
business travel) which is more than 50 miles from Awardee’s principal place of
business before the change.

 

(bb) “Grant Date” means the date the Administrator approves the grant of an
Award. However, if the Administrator specifies that an Award’s Grant Date is a
future date or the date on which a condition is satisfied, the Grant Date for
such Award is that future date or the date that the condition is satisfied.

 

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(cc) “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option under Section 422 of the Code and designated as an
Incentive Stock Option in the Award Agreement for that Option.

 

(dd) “Involuntary Termination” means termination by the Company without Cause or
termination by the Awardee for Good Reason.

 

(ee) “Nonstatutory Option” means any Option other than an Incentive Stock
Option.

 

(ff) “Objectively Determinable Performance Condition” shall mean a performance
condition (i) that is established (A) at the time an Award is granted or (B) no
later than the earlier of (1) 90 days after the beginning of the period of
service to which it relates, or (2) before the elapse of 25% of the period of
service to which it relates, (ii) that is uncertain of achievement at the time
it is established, and (iii) the achievement of which is determinable by a third
party with knowledge of the relevant facts. Examples of measures that may be
used in Objectively Determinable Performance Conditions include net order
dollars, net profit dollars, net profit growth, net revenue dollars, revenue
growth, individual performance, earnings per share, return on assets, return on
equity, and other financial objectives, objective customer satisfaction
indicators and efficiency measures, each with respect to the Company and/or an
Affiliate or individual business unit.

 

(gg) “Officer” means an officer of the Company as defined in Rule 16a-1 adopted
under the Exchange Act.

 

(hh) “Option” means a right to purchase Shares of the Company granted under this
Plan.

 

(ii) “Option Price” means the price payable under an Option for Shares, not
including any amount payable in respect of withholding or other taxes.

 

(jj) “Option Shares” means Shares covered by an outstanding Option or purchased
under an Option.

 

(kk) “Plan” means this 2004 Amended and Restated Equity Incentive Plan of
Threshold Pharmaceuticals, Inc.

 

(ll) “Prior Plan” means the Company’s 2001 Equity Incentive Plan.

 

(mm) “Purchase Price” means the price payable under a Stock Award for Shares,
not including any amount payable in respect of withholding or other taxes.

 

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(nn) “Rule 16b-3” means Rule 16b-3 adopted under Section 16(b) of the Exchange
Act.

 

(oo) “SAR” or “Stock Appreciation Right” means a right to receive cash and/or
Shares based on a change in the Fair Market Value of a specific number of Shares
pursuant to an Award Agreement, as described in Section 8.1.

 

(pp) “Securities Act” means the Securities Act of 1933.

 

(qq) “Share” means a share of the common stock of the Company or other
securities substituted for the common stock under Section 10.

 

(rr) “Stock Award” means an offer by the Company to sell shares subject to
certain restrictions pursuant to the Award Agreement as described in Section 8.2
or, as determined by the Committee, a notional account representing the right to
be paid an amount based on Shares.

 

(ss) “Substitute Award” means a Substitute Option, Substitute SAR or Substitute
Stock Award granted in accordance with the terms of this Plan.

 

(tt) “Substitute Option” means an Option granted in substitution for, or upon
the conversion of, an option granted by another entity to purchase equity
securities in the granting entity.

 

(uu) “Substitute SAR” means a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with respect
to equity securities in the granting entity.

 

(vv) “Substitute Stock Award” means a Stock Award granted in substitution for,
or upon the conversion of, a stock award granted by another entity to purchase
equity securities in the granting entity.

 

(ww) “Termination” means that the Awardee has ceased to be, with or without any
cause or reason, an Employee, Director or Consultant. However, unless so
determined by the Administrator, or otherwise provided in this Plan,
“Termination” shall not include a change in status from an Employee, Consultant
or Director to another such status. An event that causes an Affiliate to cease
being an Affiliate shall be treated as the “Termination” of that Affiliate’s
Employees, Directors, and Consultants.

 

2.2 Rules of Interpretation. Any reference to a “Section,” without more, is to a
Section of this Plan. Captions and titles are used for convenience in this Plan
and shall not, by themselves, determine the meaning of this Plan. Except when
otherwise indicated by the context, the singular includes the plural and vice
versa. Any reference to a statute

 

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is also a reference to the applicable rules and regulations adopted under that
statute. Any reference to a statute, rule or regulation, or to a section of a
statute, rule or regulation, is a reference to that statute, rule, regulation,
or section as amended from time to time, both before and after the Effective
Date and including any successor provisions.

 

3. Shares Subject to this Plan; Term of this Plan

 

3.1 Number of Award Shares. The Shares issuable under this Plan shall be
authorized but unissued or reacquired Shares, including Shares repurchased by
the Company on the open market. The number of Shares initially reserved for
issuance over the term of this Plan shall be 2,428,8051. Except as required by
Applicable Law, Shares shall not reduce the number of Shares reserved for
issuance under this Plan until the earlier of the date such Shares are vested
pursuant to the terms of the applicable Award or the actual date of delivery of
the Shares to the Awardee. Notwithstanding the foregoing, the maximum number of
Shares shall be increased by (i) the number of shares available for issuance, as
of the Effective Date, under the Prior Plan as last approved by the Company’s
stockholders, including the Shares subject to outstanding awards under the Prior
Plan, plus (ii) those Shares issued under the Plan or Prior Plan that are
forfeited or repurchased by the Company at the original purchase price or less
or that are issuable upon exercise of awards granted under the Plan or Prior
Plan that expire or become unexercisable for any reason after the Effective
Date, plus (iii) those Shares that are Restored pursuant to the decision of the
Board or Committee pursuant to Section 6.4(a) to deliver only such Shares as are
necessary to award the net Share appreciation. The repurchase of Shares by the
Company shall not increase the maximum number of Shares that may be issued under
this Plan to the extent the Company repurchases Shares that were originally
exercised or purchased with other previously owned Shares. The maximum number of
Shares shall be cumulatively increased on the first January 1 after the
Effective Date and each January 1 thereafter for 9 more years, by a number of
Shares equal to the lesser of (a) 5% of the number of Shares issued and
outstanding on the immediately preceding December 31, (b) 1,214,4022 Shares, and
(c) a number of Shares set by the Board.

 

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1 Reflects stock split effective January 26, 2005.

2 Reflects stock split effective January 26, 2005.

 

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3.2 Source of Shares. Award Shares may be: (a) Shares that have never been
issued, (b) Shares that have been issued but are no longer outstanding, or (c)
Shares that are outstanding and are acquired to discharge the Company’s
obligation to deliver Award Shares.

 

3.3 Term of this Plan

 

(a) This Plan shall be effective on, and Awards may be granted under this Plan
on and after, the earliest the date on which the Plan has been both adopted by
the Board and approved by the Company’s stockholders.

 

(b) Subject to the provisions of Section 13, Awards may be granted under this
Plan for a period of ten years from the earlier of the date on which the Board
approves this Plan and the date the Company’s stockholders approve this Plan.
Accordingly, Awards may not be granted under this Plan after the earlier of
those dates.

 

4. Administration

 

4.1 General

 

(a) The Board shall have ultimate responsibility for administering this Plan.
The Board may delegate certain of its responsibilities to a Committee, which
shall consist of at least two members of the Board. The Board or the Committee
may further delegate its responsibilities to any Employee of the Company or any
Affiliate. Where this Plan specifies that an action is to be taken or a
determination made by the Board, only the Board may take that action or make
that determination. Where this Plan specifies that an action is to be taken or a
determination made by the Committee, only the Committee may take that action or
make that determination. Where this Plan references the “Administrator,” the
action may be taken or determination made by the Board, the Committee, or other
Administrator. However, only the Board or the Committee may approve grants of
Awards to Executives, and an Administrator other than the Board or the Committee
may grant Awards only within the guidelines established by the Board or
Committee. Moreover, all actions and determinations by any Administrator are
subject to the provisions of this Plan.

 

(b) So long as the Company has registered a class of equity securities under
Section 12 of the Exchange Act, the Committee shall consist of Company Directors
who are “Non-Employee Directors” as defined in Rule 16b-3 and, after the
expiration of any transition period permitted by Treasury Regulations Section
1.162-27(h)(3), who are “outside directors” as defined in Section 162(m) of the
Code.

 

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4.2 Authority of the Board or the Committee. Subject to the other provisions of
this Plan, the Board or the Committee shall have the authority to:

 

(a) grant Awards, including Substitute Awards;

 

(b) determine the Fair Market Value of Shares;

 

(c) determine the Option Price and the Purchase Price of Awards;

 

(d) select the Awardees;

 

(e) determine the times Awards are granted;

 

(f) determine the number of Shares subject to each Award;

 

(g) determine the methods of payment that may be used to purchase Award Shares;

 

(h) determine the methods of payment that may be used to satisfy withholding tax
obligations;

 

(i) determine the other terms of each Award, including but not limited to the
time or times at which Awards may be exercised, whether and under what
conditions an Award is assignable, and whether an Option is a Nonstatutory
Option or an Incentive Stock Option;

 

(j) modify or amend any Award;

 

(k) authorize any person to sign any Award Agreement or other document related
to this Plan on behalf of the Company;

 

(l) determine the form of any Award Agreement or other document related to this
Plan, and whether that document, including signatures, may be in electronic
form;

 

(m) interpret this Plan and any Award Agreement or document related to this
Plan;

 

(n) correct any defect, remedy any omission, or reconcile any inconsistency in
this Plan, any Award Agreement or any other document related to this Plan;

 

(o) adopt, amend, and revoke rules and regulations under this Plan, including
rules and regulations relating to sub-plans and Plan addenda;

 

(p) adopt, amend, and revoke special rules and procedures which may be
inconsistent with the terms of this Plan, set forth (if the Administrator so
chooses) in sub-plans regarding (for example) the operation and administration
of this Plan and the terms

 

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of Awards, if and to the extent necessary or useful to accommodate non-U.S.
Applicable Laws and practices as they apply to Awards and Award Shares held by,
or granted or issued to, persons working or resident outside of the United
States or employed by Affiliates incorporated outside the United States;

 

(q) determine whether a transaction or event should be treated as a Change in
Control, a Divestiture or neither;

 

(r) determine the effect of a Fundamental Transaction and, if the Board
determines that a transaction or event should be treated as a Change in Control
or a Divestiture, then the effect of that Change in Control or Divestiture; and

 

(s) make all other determinations the Administrator deems necessary or advisable
for the administration of this Plan.

 

4.3 Scope of Discretion. Subject to the provisions of this Section 4.3, on all
matters for which this Plan confers the authority, right or power on the Board,
the Committee, or other Administrator to make decisions, that body may make
those decisions in its sole and absolute discretion. Those decisions will be
final, binding and conclusive. In making its decisions, the Board, Committee or
other Administrator need not treat all persons eligible to receive Awards, all
Awardees, all Awards or all Award Shares the same way. Notwithstanding anything
herein to the contrary, and except as provided in Section 13.3, the discretion
of the Board, Committee or other Administrator is subject to the specific
provisions and specific limitations of this Plan, as well as all rights
conferred on specific Awardees by Award Agreements and other agreements.

 

5. Persons Eligible to Receive Awards

 

5.1 Eligible Individuals. Awards (including Substitute Awards) may be granted
to, and only to, Employees, Directors and Consultants, including to prospective
Employees, Directors and Consultants conditioned on the beginning of their
service for the Company or an Affiliate. However, Incentive Stock Options may
only be granted to Employees, as provided in Section 7(g).

 

5.2 Section 162(m) Limitation.

 

(a) Options and SARs. Subject to the provisions of this Section 5.2, for so long
as the Company is a “publicly held corporation” within the meaning of Section
162(m) of the Code: (i) no Employee may be granted one or more SARs and Options
within any fiscal year of the Company under this Plan to purchase more than
1,214,4023 Shares under Options or to receive compensation calculated with
reference to

 

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3 Reflects stock split effective January 26, 2005.

 

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more than that number of Shares under SARs, subject to adjustment pursuant to
Section 10, (ii) Options and SARs may be granted to an Executive only by the
Committee (and, notwithstanding anything to the contrary in Section 4.1(a), not
by the Board). If an Option or SAR is cancelled without being exercised or if
the Option Price of an Option is reduced, that cancelled or repriced Option or
SAR shall continue to be counted against the limit on Awards that my be granted
to any individual under this Section 5.2. Notwithstanding anything herein to the
contrary, a new Employee of the Company or an Affiliate shall be eligible to
receive up to a maximum of 1,821,6044 Shares under Options in the calendar year
which they commence employment, or such compensation calculated with reference
to such number of Shares under SARs, subject to adjustment pursuant to Section
10.

 

(b) Cash Awards and Stock Awards. Any Cash Award or Stock Award intended as
“qualified performance-based compensation” within the meaning of Section 162(m)
of the Code must vest or become exercisable contingent on the achievement of one
or more Objectively Determinable Performance Conditions. The Committee shall
have the discretion to determine the time and manner of compliance with Section
162(m) of the Code.

 

6. Terms and Conditions of Options

 

The following rules apply to all Options:

 

6.1 Price. Except as specifically provided herein, no Nonstatutory Option may
have an Option Price less than 85% of the Fair Market Value of the Shares on the
Grant Date. No Option intended as “qualified incentive-based compensation”
within the meaning of Section 162(m) of the Code may have an Option Price less
than 100% of the Fair Market Value of the Shares on the Grant Date. In no event
will the Option Price of any Option be less than the par value of the Shares
issuable under the Option if that is required by Applicable Law. The Option
Price of an Incentive Stock Option shall be subject to Section 7(f).

 

6.2 Term. No Option shall be exercisable after its Expiration Date. No Option
may have an Expiration Date that is more than ten years after its Grant Date.
Additional provisions regarding the term of Incentive Stock Options are provided
in Sections 7(a) and 7(e).

 

6.3 Vesting. Options shall be exercisable: (a) on the Grant Date, or (b) in
accordance with a schedule related to the Grant Date, the date the Optionee’s
directorship, employment or consultancy begins, or a different date specified in
the Option Agreement. Additional provisions regarding the vesting of Incentive
Stock

 

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4 Reflects stock split effective January 26, 2005.

 

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Options are provided in Section 7(c). No Option granted to an individual who is
subject to the overtime pay provisions of the Fair Labor Standards Act may be
exercised before the expiration of six months after the Grant Date.

 

6.4 Form and Method of Payment.

 

(a) The Board or Committee shall determine the acceptable form and method of
payment for exercising an Option. So long as variable accounting pursuant to
“APB 25” does not apply and the Board or Committee otherwise determines there is
no material adverse accounting consequence at the time of exercise, the Board or
Committee may require the delivery in Shares for the value of the net
appreciation of the Shares at the time of exercise over the exercise price. The
difference between full number of Shares covered by the exercised portion of the
Award and the number of Shares actually delivered shall be restored to the
amount of Shares reserved for issuance under Section 3.1.

 

(b) Acceptable forms of payment for all Option Shares are cash, check or wire
transfer, denominated in U.S. dollars except as specified by the Administrator
for non-U.S. Employees or non-U.S. sub-plans.

 

(c) In addition, the Administrator may permit payment to be made by any of the
following methods:

 

(i) other Shares, or the designation of other Shares, which (A) are “mature”
shares for purposes of avoiding variable accounting treatment under generally
accepted accounting principles (generally mature shares are those that have been
owned by the Optionee for more than six months on the date of surrender), and
(B) have a Fair Market Value on the date of surrender equal to the Option Price
of the Shares as to which the Option is being exercised;

 

(ii) provided that a public market exists for the Shares, consideration received
by the Company under a procedure under which a licensed broker-dealer advances
funds on behalf of an Optionee or sells Option Shares on behalf of an Optionee
(a “Cashless Exercise Procedure”), provided that if the Company extends or
arranges for the extension of credit to an Optionee under any Cashless Exercise
Procedure, no Officer or Director may participate in that Cashless Exercise
Procedure;

 

(iii) cancellation of any debt owed by the Company or any Affiliate to the
Optionee by the Company including without limitation waiver of compensation due
or accrued for services previously rendered to the Company; and

 

(iv) any combination of the methods of payment permitted by any paragraph of
this Section 6.4.

 

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(d) The Administrator may also permit any other form or method of payment for
Option Shares permitted by Applicable Law.

 

6.5 Nonassignability of Options. Except as determined by the Administrator, no
Option shall be assignable or otherwise transferable by the Optionee except by
will or by the laws of descent and distribution. However, Options may be
transferred and exercised in accordance with a Domestic Relations Order and may
be exercised by a guardian or conservator appointed to act for the Optionee.
Incentive Stock Options may only be assigned in compliance with Section 7(h).

 

6.6 Substitute Options. The Board may cause the Company to grant Substitute
Options in connection with the acquisition by the Company or an Affiliate of
equity securities of any entity (including by merger, tender offer, or other
similar transaction) or of all or a portion of the assets of any entity. Any
such substitution shall be effective on the effective date of the acquisition.
Substitute Options may be Nonstatutory Options or Incentive Stock Options.
Unless and to the extent specified otherwise by the Board, Substitute Options
shall have the same terms and conditions as the options they replace, except
that (subject to the provisions of Section 10) Substitute Options shall be
Options to purchase Shares rather than equity securities of the granting entity
and shall have an Option Price determined by the Board.

 

6.7 Repricings. Options may be repriced, replaced or regranted through
cancellation or modification.

 

7. Incentive Stock Options.

 

The following rules apply only to Incentive Stock Options and only to the extent
these rules are more restrictive than the rules that would otherwise apply under
this Plan. With the consent of the Optionee, or where this Plan provides that an
action may be taken notwithstanding any other provision of this Plan, the
Administrator may deviate from the requirements of this Section, notwithstanding
that any Incentive Stock Option modified by the Administrator will thereafter be
treated as a Nonstatutory Option.

 

(a) The Expiration Date of an Incentive Stock Option shall not be later than ten
years from its Grant Date, with the result that no Incentive Stock Option may be
exercised after the expiration of ten years from its Grant Date.

 

(b) No Incentive Stock Option may be granted more than ten years from the date
this Plan was approved by the Board.

 

(c) Options intended to be incentive stock options under Section 422 of the Code
that are granted to any single Optionee under all incentive stock option plans
of the Company and its Affiliates, including incentive stock options granted
under this Plan, may not vest at a rate of more than $100,000 in Fair Market
Value of stock (measured on

 

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the grant dates of the options) during any calendar year. For this purpose, an
option vests with respect to a given share of stock the first time its holder
may purchase that share, notwithstanding any right of the Company to repurchase
that share. Unless the administrator of that option plan specifies otherwise in
the related agreement governing the option, this vesting limitation shall be
applied by, to the extent necessary to satisfy this $ 100,000 rule, treating
certain stock options that were intended to be incentive stock options under
Section 422 of the Code as Nonstatutory Options. The stock options or portions
of stock options to be reclassified as Nonstatutory Options are those with the
highest option prices, whether granted under this Plan or any other equity
compensation plan of the Company or any Affiliate that permits that treatment.
This Section 7(c) shall not cause an Incentive Stock Option to vest before its
original vesting date or cause an Incentive Stock Option that has already vested
to cease to be vested.

 

(d) In order for an Incentive Stock Option to be exercised for any form of
payment other than those described in Section 6.4(b), that right must be stated
at the time of grant in the Option Agreement relating to that Incentive Stock
Option.

 

(e) Any Incentive Stock Option granted to a Ten Percent Stockholder, must have
an Expiration Date that is not later than five years from its Grant Date, with
the result that no such Option may be exercised after the expiration of five
years from the Grant Date. A “Ten Percent Stockholder” is any person who,
directly or by attribution under Section 424(d) of the Code, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate on the Grant Date.

 

(f) The Option Price of an Incentive Stock Option shall never be less than the
Fair Market Value of the Shares at the Grant Date. The Option Price for the
Shares covered by an Incentive Stock Option granted to a Ten Percent Stockholder
shall never be less than 110% of the Fair Market Value of the Shares at the
Grant Date.

 

(g) Incentive Stock Options may be granted only to Employees. If an Optionee
changes status from an Employee to a Consultant, that Optionee’s Incentive Stock
Options become Nonstatutory Options if not exercised within the time period
described in Section 7(i) (determined by treating that change in status as a
Termination solely for purposes of this Section 7(g)).

 

(h) No rights under an Incentive Stock Option may be transferred by the
Optionee, other than by will or the laws of descent and distribution. During the
life of the Optionee, an Incentive Stock Option may be exercised only by the
Optionee. The Company’s compliance with a Domestic Relations Order, or the
exercise of an Incentive Stock Option by a guardian or conservator appointed to
act for the Optionee, shall not violate this Section 7(h).

 

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(i) An Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, and is not exercised within, the three-month period
beginning with the Optionee’s Termination for any reason other than the
Optionee’s death or disability (as defined in Section 22(e) of the Code). In the
case of Termination due to death, an Incentive Stock Option shall continue to be
treated as an Incentive Stock Option if it remains exercisable after, and is not
exercised within, the three month period after the Optionee’s Termination
provided it is exercised before the Expiration Date. In the case of Termination
due to disability, an Incentive Stock Option shall be treated as a Nonstatutory
Option if it remains exercisable after, and is not exercised within, one year
after the Optionee’s Termination.

 

(j) An Incentive Stock Option may only be modified by the Board.

 

8. Stock Appreciation Rights, Stock Awards and Cash Awards

 

8.1 Stock Appreciation Rights. The following rules apply to SARs:

 

(a) General. SARs may be granted either alone, in addition to, or in tandem with
other Awards granted under this Plan. The Administrator may grant SARs to
eligible participants subject to terms and conditions not inconsistent with this
Plan and determined by the Administrator. The specific terms and conditions
applicable to the Awardee shall be provided for in the Award Agreement. SARs
shall be exercisable, in whole or in part, at such times as the Administrator
shall specify in the Award Agreement. The grant or vesting of a SAR may be made
contingent on the achievement of Objectively Determinable Performance
Conditions.

 

(b) Exercise of SARs. Upon the exercise of an SAR, in whole or in part, an
Awardee shall be entitled to a payment in an amount equal to the excess of the
Fair Market Value of a fixed number of Shares covered by the exercised portion
of the SAR on the date of exercise, over the Fair Market Value of the Shares
covered by the exercised portion of the SAR on the Grant Date. The amount due to
the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a
combination thereof, over the period or periods specified in the Award
Agreement. An Award Agreement may place limits on the amount that may be paid
over any specified period or periods upon the exercise of a SAR, on an aggregate
basis or as to any Awardee. A SAR shall be considered exercised when the Company
receives written notice of exercise in accordance with the terms of the Award
Agreement from the person entitled to exercise the SAR. If a SAR has been
granted in tandem with an Option, upon the exercise of the SAR, the number of
shares that may be purchased pursuant to the Option shall be reduced by the
number of shares with respect to which the SAR is exercised.

 

(c) Nonassignability of SARs. Except as determined by the Administrator, no SAR
shall be assignable or otherwise transferable by the Awardee except by will or
by the laws of descent and distribution. Notwithstanding anything herein to the
contrary, SARs may be transferred and exercised in accordance with a Domestic
Relations Order.

 

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(d) Substitute SARs. The Board may cause the Company to grant Substitute SARs in
connection with the acquisition by the Company or an Affiliate of equity
securities of any entity (including by merger) or all or a portion of the assets
of any entity. Any such substitution shall be effective on the effective date of
the acquisition. Unless and to the extent specified otherwise by the Board,
Substitute SARs shall have the same terms and conditions as the options they
replace, except that (subject to the provisions of Section 9) Substitute SARs
shall be exercisable with respect to the Fair Market Value of Shares rather than
equity securities of the granting entity and shall be on terms that, as
determined by the Board in its sole and absolute discretion, properly reflects
the substitution.

 

(e) Repricings. A SAR may be repriced, replaced or regranted, through
cancellation or modification.

 

8.2 Stock Awards. The following rules apply to all Stock Awards:

 

(a) General. The specific terms and conditions of a Stock Award applicable to
the Awardee shall be provided for in the Award Agreement. The Award Agreement
shall state the number of Shares that the Awardee shall be entitled to receive
or purchase, the terms and conditions on which the Shares shall vest, the price
to be paid, whether Shares are to be delivered at the time of grant or at some
deferred date specified in the Award Agreement, whether the Award is payable
solely in Shares, cash or either and, if applicable, the time within which the
Awardee must accept such offer. The offer shall be accepted by execution of the
Award Agreement. The Administrator may require that all Shares subject to a
right of repurchase or risk of forfeiture be held in escrow until such
repurchase right or risk of forfeiture lapses. The grant or vesting of a Stock
Award may be made contingent on the achievement of Objectively Determinable
Performance Conditions.

 

(b) Right of Repurchase. If so provided in the Award Agreement, Award Shares
acquired pursuant to a Stock Award may be subject to repurchase by the Company
or an Affiliate if not vested in accordance with the Award Agreement.

 

(c) Form of Payment. The Administrator shall determine the acceptable form and
method of payment for exercising a Stock Award. Acceptable forms of payment for
all Award Shares are cash, check or wire transfer, denominated in U.S. dollars
except as specified by the Administrator for non-U.S. sub-plans. In addition,
the Administrator may permit payment to be made by any of the methods permitted
with respect to the exercise of Options pursuant to Section 6.4.

 

15

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(d) Nonassignability of Stock Awards. Except as determined by the Administrator,
no Stock Award shall be assignable or otherwise transferable by the Awardee
except by will or by the laws of descent and distribution. Notwithstanding
anything to the contrary herein, Stock Awards may be transferred and exercised
in accordance with a Domestic Relations Order.

 

(e) Substitute Stock Award. The Board may cause the Company to grant Substitute
Stock Awards in connection with the acquisition by the Company or an Affiliate
of equity securities of any entity (including by merger) or all or a portion of
the assets of any entity. Unless and to the extent specified otherwise by the
Board, Substitute Stock Awards shall have the same terms and conditions as the
stock awards they replace, except that (subject to the provisions of Section 10)
Substitute Stock Awards shall be Stock Awards to purchase Shares rather than
equity securities of the granting entity and shall have a Purchase Price that,
as determined by the Board in its sole and absolute discretion, properly
reflects the substitution. Any such Substituted Stock Award shall be effective
on the effective date of the acquisition.

 

8.3 Cash Awards. The following rules apply to all Cash Awards:

 

Cash Awards may be granted either alone, in addition to, or in tandem with other
Awards granted under this Plan. After the Administrator determines that it will
offer a Cash Award, it shall advise the Awardee, by means of an Award Agreement,
of the terms, conditions and restrictions related to the Cash Award.

 

9. Exercise of Awards

 

9.1 In General. An Award shall be exercisable in accordance with this Plan and
the Award Agreement under which it is granted.

 

9.2 Time of Exercise. Options and Stock Awards shall be considered exercised
when the Company receives: (a) written notice of exercise from the person
entitled to exercise the Option or Stock Award, (b) full payment, or provision
for payment, in a form and method approved by the Administrator, for the Shares
for which the Option or Stock Award is being exercised, and (c) with respect to
Nonstatutory Options, payment, or provision for payment, in a form approved by
the Administrator, of all applicable withholding taxes due upon exercise. An
Award may not be exercised for a fraction of a Share. SARs shall be considered
exercised when the Company receives written notice of the exercise from the
person entitled to exercise the SAR.

 

9.3 Issuance of Award Shares. The Company shall issue Award Shares in the name
of the person properly exercising the Award. If the Awardee is that person and
so requests, the Award Shares shall be issued in the name of the Awardee and the
Awardee’s spouse. The Company shall endeavor to issue Award Shares promptly
after an Award is exercised or after the Grant Date of a Stock Award, as
applicable. Until

 

16

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Award Shares are actually issued, as evidenced by the appropriate entry on the
stock register of the Company or its transfer agent, the Awardee will not have
the rights of a stockholder with respect to those Award Shares, even though the
Awardee has completed all the steps necessary to exercise the Award. No
adjustment shall be made for any dividend, distribution, or other right for
which the record date precedes the date the Award Shares are issued, except as
provided in Section 10.

 

9.4 Termination

 

(a) In General. Except as provided in an Award Agreement or in writing by the
Administrator, including in an Award Agreement, and as otherwise provided in
Sections 9.4(b), (c), (d) and (e) after an Awardee’s Termination for other than
Cause, the Awardee’s Awards shall be exercisable to the extent (but only to the
extent) they are vested on the date of that Termination and only during the
ninety (90) days after the Termination, but in no event after the Expiration
Date. Unless otherwise provided in the Award Agreement, in the event of
termination for Cause the Award may not be exercised after the date of
Termination. To the extent the Awardee does not exercise an Award within the
time specified for exercise, the Award shall automatically terminate.

 

(b) Leaves of Absence. Unless otherwise provided in the Award Agreement, no
Award may be exercised more than three months after the beginning of a leave of
absence, other than a personal or medical leave approved by an authorized
representative of the Company with employment guaranteed upon return. Awards
shall not continue to vest during a leave of absence, unless otherwise
determined by the Administrator with respect to an approved personal or medical
leave with employment guaranteed upon return.

 

(c) Death or Disability. Unless otherwise provided by the Administrator, if an
Awardee’s Termination is due to death or disability (as determined by the
Administrator with respect to all Awards other than Incentive Stock Options and
as defined by Section 22(e) of the Code with respect to Incentive Stock
Options), all Awards of that Awardee to the extent exercisable at the date of
that Termination may be exercised for one year after that Termination, but in no
event after the Expiration Date. In the case of Termination due to death, an
Award may be exercised as provided in Section 16. In the case of Termination due
to disability, if a guardian or conservator has been appointed to act for the
Awardee and been granted this authority as part of that appointment, that
guardian or conservator may exercise the Award on behalf of the Awardee. Death
or disability occurring after an Awardee’s Termination shall not cause the
Termination to be treated as having occurred due to death or disability. To the
extent an Award is not so exercised within the time specified for its exercise,
the Award shall automatically terminate.

 

17

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(d) Divestiture. If an Awardee’s Termination is due to a Divestiture, the Board
may take any one or more of the actions described in Section 10.3 or 10.4 with
respect to the Awardee’s Awards.

 

(e) Administrator Discretion. Notwithstanding the provisions of Section 9.4
(a)-(e), the Plan Administrator shall have complete discretion, exercisable
either at the time an Award is granted or at any time while the Award remains
outstanding, to:

 

(i) Extend the period of time for which the Award is to remain exercisable,
following the Awardee’s Termination, from the limited exercise period otherwise
in effect for that Award to such greater period of time as the Administrator
shall deem appropriate, but in no event beyond the Expiration Date; and/or

 

(ii) Permit the Award to be exercised, during the applicable post-Termination
exercise period, not only with respect to the number of vested Shares for which
such Award may be exercisable at the time of the Awardee’s Termination but also
with respect to one or more additional installments in which the Awardee would
have vested had the Awardee not been subject to Termination.

 

(f) Consulting or Employment Relationship. Nothing in this Plan or in any Award
Agreement, and no Award or the fact that Award Shares remain subject to
repurchase rights, shall: (A) interfere with or limit the right of the Company
or any Affiliate to terminate the employment or consultancy of any Awardee at
any time, whether with or without cause or reason, and with or without the
payment of severance or any other compensation or payment, or (B) interfere with
the application of any provision in any of the Company’s or any Affiliate’s
charter documents or Applicable Law relating to the election, appointment, term
of office, or removal of a Director.

 

10. Certain Transactions and Events

 

10.1 In General. Except as provided in this Section 10, no change in the capital
structure of the Company, merger, sale or other disposition of assets or a
subsidiary, change in control, issuance by the Company of shares of any class of
securities or securities convertible into shares of any class of securities,
exchange or conversion of securities, or other transaction or event shall
require or be the occasion for any adjustments of the type described in this
Section 10. Additional provisions with respect to the foregoing transactions are
set forth in Section 13.3.

 

10.2 Changes in Capital Structure. In the event of any stock split, reverse
stock split, recapitalization, combination or reclassification of stock, stock
dividend, spin-off, or similar change to the capital structure of the Company
(not including a Fundamental Transaction or Change in Control), the Board shall
make whatever adjustments it concludes are appropriate to: (a) the number and
type of Awards that may be granted under this Plan, (b) the number and type of
Options that may be granted to any

 

18

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individual under this Plan, (c) the terms of any SAR, (d) the Purchase Price of
any Stock Award, (e) the Option Price and number and class of securities
issuable under each outstanding Option, and (f) the repurchase price of any
securities substituted for Award Shares that are subject to repurchase rights.
The specific adjustments shall be determined by the Board. Unless the Board
specifies otherwise, any securities issuable as a result of any such adjustment
shall be rounded down to the next lower whole security. The Board need not adopt
the same rules for each Award or each Awardee.

 

10.3 Fundamental Transactions. In the event of (a) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption shall be binding on all
Participants), (b) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (c) the sale of all or
substantially all of the assets of the Company, or (d) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction (each, a “Fundamental Transaction”), any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement shall be
binding on all participants under this Plan. In the alternative, the successor
corporation may substitute equivalent Awards or provide substantially similar
consideration to participants as was provided to stockholders (after taking into
account the existing provisions of the Awards). The successor corporation may
also issue, in place of outstanding Shares held by the participants,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the participant. In the event such successor
corporation (if any) does not assume or substitute Awards, as provided above,
pursuant to a transaction described in this Subsection 10.3, the vesting with
respect to such Awards shall fully and immediately accelerate or the repurchase
rights of the Company shall fully and immediately terminate, as the case may be,
so that the Awards may be exercised or the repurchase rights shall terminate
before, or otherwise in connection with the closing or completion of the
Fundamental Transaction or event, but then terminate. Notwithstanding anything
in this Plan to the contrary, the Committee may, in its sole discretion, provide
that the vesting of any or all Award Shares subject to vesting or right of
repurchase shall accelerate or lapse, as the case may be, upon a transaction
described in this Section 10.3. If the Committee exercises such discretion with
respect to Options, such Options shall become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Committee
determines, and if such Options are not exercised prior to the consummation of
the Fundamental Transaction, they shall terminate at such time as determined by
the

 

19

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Committee. Subject to any greater rights granted to participants under the
foregoing provisions of this Section 10.3, in the event of the occurrence of any
Fundamental Transaction, any outstanding Awards shall be treated as provided in
the applicable agreement or plan of merger, consolidation, dissolution,
liquidation, or sale of assets.

 

10.4 Changes of Control. The Board may also, but need not, specify that other
transactions or events constitute a “Change in Control”. The Board may do that
either before or after the transaction or event occurs. Examples of transactions
or events that the Board may treat as Changes of Control are: (a) any person or
entity, including a “group” as contemplated by Section 13(d)(3) of the Exchange
Act, acquires securities holding 30% or more of the total combined voting power
or value of the Company, or (b) as a result of or in connection with a contested
election of Company Directors, the persons who were Company Directors
immediately before the election cease to constitute a majority of the Board. In
connection with a Change in Control, notwithstanding any other provision of this
Plan, the Board may, but need not, take any one or more of the actions described
in Section 10.3. In addition, the Board may extend the date for the exercise of
Awards (but not beyond their original Expiration Date). The Board need not adopt
the same rules for each Award or each Awardee. Notwithstanding anything in this
Plan to the contrary, in the event of an Involuntary Termination of services for
any reason other than death, disability or Cause, within 18 months following the
consummation of a Fundamental Transaction or Change in Control, any Awards,
assumed or substituted in a Fundamental Transaction or Change in Control, which
are subject to vesting conditions and/or the right of repurchase in favor of the
Company or a successor entity, shall accelerate for 12 months of vesting so that
such Award Shares are immediately exercisable upon Termination or, if subject to
the right of repurchase in favor of the Company, such repurchase rights shall
lapse as of the date of Termination. Such Awards shall be exercisable for a
period of three (3) months following termination.

 

10.5 Divestiture. If the Company or an Affiliate sells or otherwise transfers
equity securities of an Affiliate to a person or entity other than the Company
or an Affiliate, or leases, exchanges or transfers all or any portion of its
assets to such a person or entity, then the Board may specify that such
transaction or event constitutes a “Divestiture”. In connection with a
Divestiture, notwithstanding any other provision of this Plan, the Board may,
but need not, take one or more of the actions described in Section 10.3 or 10.4
with respect to Awards of Award Shares held by, for example, Employees,
Directors or Consultants for whom that transaction or event results in a
Termination. The Board need not adopt the same rules for each Award or Awardee.

 

10.6 Dissolution. If the Company adopts a plan of dissolution, the Board may
cause Awards to be fully vested and exercisable (but not after their Expiration
Date) before the dissolution is completed but contingent on its completion and
may cause the Company’s repurchase rights on Award Shares to lapse upon
completion of the dissolution. The Board need not adopt the same rules for each
Award or each Awardee.

 

20

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Notwithstanding anything herein to the contrary, in the event of a dissolution
of the Company, to the extent not exercised before the earlier of the completion
of the dissolution or their Expiration Date, Awards shall terminate immediately
prior to the dissolution.

 

10.7 Cut-Back to Preserve Benefits. If the Administrator determines that the net
after-tax amount to be realized by any Awardee, taking into account any
accelerated vesting, termination of repurchase rights, or cash payments to that
Awardee in connection with any transaction or event set forth in this Section 10
would be greater if one or more of those steps were not taken or payments were
not made with respect to that Awardee’s Awards or Award Shares, then, at the
election of the Awardee, to such extent, one or more of those steps shall not be
taken and payments shall not be made.

 

11. Automatic Option Grants to Non-Employee Directors and Non-Employee Director
Fee Option Grants

 

11.1 Automatic Option Grants to Non-Employee Directors.

 

(a) Grant Dates. Option grants to Non-Employee Directors shall be made on the
dates specified below:

 

(i) Each Non-Employee Director who is first elected or appointed to the Board at
any time after the effective date of this Plan shall automatically be granted,
on the date of such initial election or appointment, an Option to purchase
30,0005 Shares (the “Initial Grant”).

 

(ii) Commencing in 2005, on the date of each annual stockholders meeting, each
individual who is to continue to serve as a Non-Employee Director shall
automatically be granted an Option to purchase 15,0006 Shares (the “Annual
Grant”), provided, however, that such individual has served as a Non-Employee
Director for at least six (6) months.

 

(b) Exercise Price.

 

(i) The Option Price shall be equal to one hundred percent (100%) of the Fair
Market Value of the Shares on the Option grant date.

 

(ii) The Option Price shall be payable in one or more of the alternative forms
authorized pursuant to Section 6.4. Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the Option Price must be
made on the date of exercise.

 

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

5 Reflects amendment by the Board effective May 19, 2005.

6 Reflects amendment by the Board effective May 19, 2005.

 

21

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(c) Option Term. Each Option shall have a term of ten (10) years measured from
the Option grant date.

 

(d) Exercise and Vesting of Options. Except as otherwise determined by the whole
Board, the Shares underlying each Option granted pursuant to Section 11.1 shall
vest and be exercisable as set forth below.

 

(i) Initial Grant. The Shares underlying each Option issued pursuant to the
Initial Grant shall vest and be exercisable as to 2.7777% of the Shares on each
monthly anniversary of the date of grant, rounded down to the nearest whole
Share, for so long as the Non-Employee Director continuously remains a Director
of, or a Consultant to, the Company.

 

(ii) Annual Grant. The Shares underlying each Option issued pursuant to the
Annual Grant shall vest and be exercisable as to 8.3333% of the Shares on each
monthly anniversary of the date of grant for the first 11 months following the
date of grant and as to the remaining Shares on the date of the annual
stockholders meeting for the year following the year of grant for such Option,
rounded down to the nearest whole Share, for so long as the Non-Employee
Director continuously remains a Director of, or a Consultant to, the Company.

 

(e) Termination of Service. The following provisions shall govern the exercise
of any Options held by the Awardee at the time the Awardee ceases to serve as a
Non-Employee Director, Employee or Consultant:

 

(i) In General. Except as otherwise provided in Section 10.3, after cessation of
service (the “Cessation Date”), the Awardee’s Options shall be exercisable to
the extent (but only to the extent) they are vested on the Cessation Date and
only during the three months after such Cessation Date, but in no event after
the Expiration Date. To the extent the Awardee does not exercise an Option
within the time specified for exercise, the Option shall automatically
terminate.

 

(ii) Death or Disability. If an Awardee’s cessation of service is due to death
or disability (as determined by the Board), all Options of that Awardee, to the
extent exercisable upon such Cessation Date, may be exercised for one year after
the Cessation Date, but in no event after the Expiration Date. In the case of a
cessation of service due to death, an Option may be exercised as provided in
Section 16. In the case of a cessation of service due to disability, if a
guardian or conservator has been appointed to act for the Awardee and been
granted this authority as part of that appointment, that guardian or conservator
may exercise the Option on behalf of the Awardee. Death or disability occurring
after an Awardee’s cessation of service shall not cause the cessation of service
to be treated as having occurred due to death or disability. To the extent an
Option is not so exercised within the time specified for its exercise, the
Option shall automatically terminate.

 

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(f) Board Discretion. The Awards under this Section 11.1 are not intended as the
exclusive Awards that may be made to Non-Employee Directors under this Plan. The
Board may, in its discretion, amend the Plan with respect to the terms of the
Awards herein, may add or substitute other types of Awards or may temporarily or
permanently suspend Awards hereunder, all without approval of the Company’s
stockholders.

 

11.2 Director Fee Option Grants

 

(a) Option Grants. The Board shall have the sole and exclusive authority to
determine the calendar year or years for which the Director fee option grant
program (the “Director Fee Option Program”) is to be in effect. For each such
calendar year the program is in effect, each Non-Employee Director may elect to
apply all or any portion of the annual retainer fee otherwise payable in cash,
for his or her service on the Board for that year, to the acquisition of a
special Option grant under this Director Fee Option Program. Such election must
be filed with the Company’s Chief Financial Officer prior to first day of the
calendar year for which the annual retainer fee which is the subject of that
election is otherwise payable. Each Non-Employee Director who files such a
timely election shall automatically be granted an Option under this Director Fee
Option Program on the first trading day in January in the calendar year for
which the annual retainer fee which is the subject of that election would
otherwise be payable in cash.

 

(b) Option Terms. Each Option shall be a Nonstatutory Option governed by the
terms and conditions specified below.

 

(i) Exercise Price.

 

A. The Purchase Price shall be thirty-three and one-third percent (33 1/3%) of
the Fair Market Value per Share on the Option grant date.

 

B. The Purchase Price shall become immediately due upon exercise of the Option
and shall be payable in one or more of the alternative forms authorized pursuant
to Section 6.4 of this Plan. Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the Purchase Price must
be made on the date that the Option is exercised.

 

(ii) Number of Option Shares. The number of Shares subject to the Option shall
be determined pursuant to the following formula (rounded down to the nearest
whole number):

 

X = A ÷ (B x 66 2/3%), where

 

X is the number of Option Shares,

 

A is the portion of the annual retainer fee subject to the Non-Employee
Director’s election, and

 

B is the Fair Market Value of a Share on the option grant date.

 

23

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(iii) Exercise and Term of Options. The Option shall become exercisable in a
series of twelve (12) equal monthly installments upon the Awardee’s completion
of each month of Board service over the twelve (12)-month period measured from
the grant date. Each Option shall have a maximum term of ten (10) years measured
from the Option grant date.

 

(iv) Termination of Board Service. Should the Awardee cease Board service for
any reason (other than death or permanent disability) while holding one or more
Options under this Director Fee Option Program, then each such Option shall
remain exercisable, for any or all of the Shares for which the Option is
exercisable at the time of such cessation of Board service, until the earlier of
(x) the expiration of the ten (10)-year Option term or (y) the expiration of the
three (3)-year period measured from the date of such cessation of Board service.
However, each Option held by the Awardee under this Director Fee Option Program
at the time of his or her cessation of Board service shall immediately terminate
and cease to remain outstanding with respect to any and all Shares for which the
Option is not otherwise at that time exercisable.

 

(v) Death or Permanent Disability. Should the Awardee’s service as a Board
member cease by reason of death or permanent disability, then each Option held
by such Awardee under this Director Fee Option Program shall immediately become
exercisable for all the Shares at the time subject to that Option, and the
Option may be exercised for any or all of those Shares as fully-vested Shares
until the earlier of (x) the expiration of the ten (10)-year option term or (y)
the expiration of the three (3)-year period measured from the date of such
cessation of Board service.

 

Should the Awardee die after cessation of his or her Board service but while
holding one or more Options under this Director Fee Option Program, then each
such Option may be exercised, for any or all of the shares for which the Option
is exercisable at the time of the Awardee’s cessation of Board service (less any
Shares subsequently purchased by the Awardee prior to death), by the personal
representative of the Awardee’s estate or by the person or persons to whom the
Option is transferred pursuant to the Awardee’s will or in accordance with the
laws of descent and distribution or by the designated beneficiary or
beneficiaries of such option. Such right of exercise shall lapse, and the Option
shall terminate, upon the earlier of (xx) the expiration of the ten (10)-year
Option term or (yy) the three (3)-year period measured from the date of the
Awardee’s cessation of Board service.

 

24

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11.3 Certain Transactions and Events

 

(a) In the event of a Fundamental Transaction while the Awardee remains a
Non-Employee Director, the Shares at the time subject to each outstanding Option
held by such Awardee pursuant to Section 11, but not otherwise vested, shall
automatically vest in full so that each such Option shall, immediately prior to
the effective date of the Fundamental Transaction, become exercisable for all
the Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Immediately following the consummation of the Fundamental
Transaction, each Option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or Affiliate thereof).

 

(b) In the event of a Change in Control while the Awardee remains a Non-Employee
Director, the Shares at the time subject to each outstanding Option held by such
Awardee pursuant to Section 11, but not otherwise vested, shall automatically
vest in full so that each such Option shall, immediately prior to the effective
date of the Change in Control, become exercisable for all the Shares as fully
vested Shares and may be exercised for any or all of those vested Shares. Each
such Option shall remain exercisable for such fully vested Shares until the
expiration or sooner termination of the Option term in connection with a Change
in Control.

 

(c) Each Option which is assumed in connection with a Fundamental Transaction
shall be appropriately adjusted, immediately after such Fundamental Transaction,
to apply to the number and class of securities which would have been issuable to
the Awardee in consummation of such Fundamental Transaction had the Option been
exercised immediately prior to such Fundamental Transaction. Appropriate
adjustments shall also be made to the Option Price payable per share under each
outstanding Option, provided the aggregate Option Price payable for such
securities shall remain the same. To the extent the actual holders of the
Company’s outstanding Common Stock receive cash consideration for their Common
Stock in consummation of the Fundamental Transaction, the successor corporation
may, in connection with the assumption of the outstanding Options granted
pursuant to Section 11, substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Fundamental Transaction.

 

(d) The grant of Options pursuant to Section 11 shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

 

(e) The remaining terms of each Option granted pursuant to Section 11 shall, as
applicable, be the same as terms in effect for Awards granted under this Plan.
Notwithstanding the foregoing, the provisions of Section 9.4 and Section 10
shall not apply to Options granted pursuant to Section 11.

 

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11.4 Limited Transferability of Options. Each Option granted pursuant to Section
11 may be assigned in whole or in part during the Awardee’s lifetime to one or
more members of the Awardee’s family or to a trust established exclusively for
one or more such family members or to an entity in which the Awardee is majority
owner or to the Awardee ‘s former spouse, to the extent such assignment is in
connection with the Awardee ‘s estate or financial plan or pursuant to a
Domestic Relations Order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the Option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the Option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Administrator may
deem appropriate. The Awardee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding Options under Section 11,
and those Options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Awardee ‘s death while
holding those Options. Such beneficiary or beneficiaries shall take the
transferred Options subject to all the terms and conditions of the applicable
Award Agreement evidencing each such transferred Option, including (without
limitation) the limited time period during which the Option may be exercised
following the Awardee ‘s death.

 

12. Withholding and Tax Reporting

 

12.1 Tax Withholding Alternatives

 

(a) General. Whenever Award Shares are issued or become free of restrictions,
the Company may require the Awardee to remit to the Company an amount sufficient
to satisfy any applicable tax withholding requirement, whether the related tax
is imposed on the Awardee or the Company. The Company shall have no obligation
to deliver Award Shares or release Award Shares from an escrow or permit a
transfer of Award Shares until the Awardee has satisfied those tax withholding
obligations. Whenever payment in satisfaction of Awards is made in cash, the
payment will be reduced by an amount sufficient to satisfy all tax withholding
requirements.

 

(b) Method of Payment. The Awardee shall pay any required withholding using the
forms of consideration described in Section 6.4(b), except that, in the
discretion of the Administrator, the Company may also permit the Awardee to use
any of the forms of payment described in Section 6.4(c). The Administrator, in
its sole discretion, may also permit Award Shares to be withheld to pay required
withholding. If the Administrator permits Award Shares to be withheld, the Fair
Market Value of the Award Shares withheld, as determined as of the date of
withholding, shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

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12.2 Reporting of Dispositions. Any holder of Option Shares acquired under an
Incentive Stock Option shall promptly notify the Administrator, following such
procedures as the Administrator may require, of the sale or other disposition of
any of those Option Shares if the disposition occurs during: (a) the longer of
two years after the Grant Date of the Incentive Stock Option and one year after
the date the Incentive Stock Option was exercised, or (b) such other period as
the Administrator has established.

 

13. Compliance with Law

 

The grant of Awards and the issuance and subsequent transfer of Award Shares
shall be subject to compliance with all Applicable Law, including all applicable
securities laws. Awards may not be exercised, and Award Shares may not be
transferred, in violation of Applicable Law. Thus, for example, Awards may not
be exercised unless: (a) a registration statement under the Securities Act is
then in effect with respect to the related Award Shares, or (b) in the opinion
of legal counsel to the Company, those Award Shares may be issued in accordance
with an applicable exemption from the registration requirements of the
Securities Act and any other applicable securities laws. The failure or
inability of the Company to obtain from any regulatory body the authority
considered by the Company’s legal counsel to be necessary or useful for the
lawful issuance of any Award Shares or their subsequent transfer shall relieve
the Company of any liability for failing to issue those Award Shares or
permitting their transfer. As a condition to the exercise of any Award or the
transfer of any Award Shares, the Company may require the Awardee to satisfy any
requirements or qualifications that may be necessary or appropriate to comply
with or evidence compliance with any Applicable Law.

 

14. Amendment or Termination of this Plan or Outstanding Awards

 

14.1 Amendment and Termination. The Board may at any time amend, suspend, or
terminate this Plan.

 

14.2 Stockholder Approval. The Company shall obtain the approval of the
Company’s stockholders for any amendment to this Plan if stockholder approval is
necessary or desirable to comply with any Applicable Law or with the
requirements applicable to the grant of Awards intended to be Incentive Stock
Options. The Board may also, but need not, require that the Company’s
stockholders approve any other amendments to this Plan.

 

14.3 Effect. No amendment, suspension, or termination of this Plan, and no
modification of any Award even in the absence of an amendment, suspension, or
termination of this Plan, shall impair any existing contractual rights of any
Awardee unless the affected Awardee consents to the amendment, suspension,
termination, or modification. Notwithstanding anything herein to the contrary,
no such consent shall be required if the Board determines, in its sole and
absolute discretion, that the amendment, suspension, termination, or
modification: (a) is required or advisable in order for the

 

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Company, this Plan or the Award to satisfy Applicable Law, to meet the
requirements of any accounting standard or to avoid any adverse accounting
treatment, or (b) in connection with any transaction or event described in
Section 10, is in the best interests of the Company or its stockholders. The
Board may, but need not, take the tax or accounting consequences to affected
Awardees into consideration in acting under the preceding sentence. Those
decisions shall be final, binding and conclusive. Termination of this Plan shall
not affect the Administrator’s ability to exercise the powers granted to it
under this Plan with respect to Awards granted before the termination of Award
Shares issued under such Awards even if those Award Shares are issued after the
termination.

 

15. Reserved Rights

 

15.1 Nonexclusivity of this Plan. This Plan shall not limit the power of the
Company or any Affiliate to adopt other incentive arrangements including, for
example, the grant or issuance of stock options, stock, or other equity-based
rights under other plans.

 

15.2 Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Awardees, any such accounts will be used
merely as a convenience. The Company shall not be required to segregate any
assets on account of this Plan, the grant of Awards, or the issuance of Award
Shares. The Company and the Administrator shall not be deemed to be a trustee of
stock or cash to be awarded under this Plan. Any obligations of the Company to
any Awardee shall be based solely upon contracts entered into under this Plan,
such as Award Agreements. No such obligations shall be deemed to be secured by
any pledge or other encumbrance on any assets of the Company. Neither the
Company nor the Administrator shall be required to give any security or bond for
the performance of any such obligations.

 

16. Special Arrangements Regarding Award Shares

 

16.1 Escrow of Stock Certificates. To enforce any restrictions on Award Shares,
the Administrator may require their holder to deposit the certificates
representing Award Shares, with stock powers or other transfer instruments
approved by the Administrator endorsed in blank, with the Company or an agent of
the Company to hold in escrow until the restrictions have lapsed or terminated.
The Administrator may also cause a legend or legends referencing the
restrictions to be placed on the certificates.

 

16.2 Repurchase Rights

 

(a) General. If a Stock Award is subject to vesting conditions, the Company
shall have the right, during the seven months after the Awardee’s Termination,
to repurchase any or all of the Award Shares that were unvested as of the date
of that Termination. The repurchase price shall be determined by the
Administrator in accordance with this Section 16.2 which shall be either (i) the
Purchase Price for the

 

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Award Shares (minus the amount of any cash dividends paid or payable with
respect to the Award Shares for which the record date precedes the repurchase)
or (ii) the lower of (A) the Purchase Price for the Shares or (B) the Fair
Market Value of those Award Shares as of the date of the Termination. The
repurchase price shall be paid in cash. The Company may assign this right of
repurchase.

 

(b) Procedure. The Company or its assignee may choose to give the Awardee a
written notice of exercise of its repurchase rights under this Section 16.2.
However, the Company’s failure to give such a notice shall not affect its rights
to repurchase Award Shares. The Company must, however, tender the repurchase
price during the period specified in this Section 16.2 for exercising its
repurchase rights in order to exercise such rights.

 

17. Beneficiaries

 

An Awardee may file a written designation of one or more beneficiaries who are
to receive the Awardee’s rights under the Awardee’s Awards after the Awardee’s
death. An Awardee may change such a designation at any time by written notice.
If an Awardee designates a beneficiary, the beneficiary may exercise the
Awardee’s Awards after the Awardee’s death. If an Awardee dies when the Awardee
has no living beneficiary designated under this Plan, the Company shall allow
the executor or administrator of the Awardee’s estate to exercise the Award or,
if there is none, the person entitled to exercise the Option under the Awardee’s
will or the laws of descent and distribution. In any case, no Award may be
exercised after its Expiration Date.

 

18. Miscellaneous

 

18.1 Governing Law. This Plan, the Award Agreements and all other agreements
entered into under this Plan, and all actions taken under this Plan or in
connection with Awards or Award Shares, shall be governed by the laws of the
State of Delaware.

 

18.2 Determination of Value. Fair Market Value shall be determined as follows:

 

(a) Listed Stock. If the Shares are traded on any established stock exchange or
quoted on a national market system, Fair Market Value shall be the closing sales
price for the Shares as quoted on that stock exchange or system for the date the
value is to be determined (the “Value Date”) as reported in The Wall Street
Journal or a similar publication. If no sales are reported as having occurred on
the Value Date, Fair Market Value shall be that closing sales price for the last
preceding trading day on which sales of Shares are reported as having occurred.
If no sales are reported as having occurred during the five trading days before
the Value Date, Fair Market Value shall be the closing bid for Shares on the
Value Date. If Shares are listed on multiple exchanges or systems, Fair Market
Value shall be based on sales or bid prices on the primary exchange or system on
which Shares are traded or quoted.

 

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(b) Stock Quoted by Securities Dealer. If Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported on any
established stock exchange or quoted on a national market system, Fair Market
Value shall be the mean between the high bid and low asked prices on the Value
Date. If no prices are quoted for the Value Date, Fair Market Value shall be the
mean between the high bid and low asked prices on the last preceding trading day
on which any bid and asked prices were quoted.

 

(c) No Established Market. If Shares are not traded on any established stock
exchange or quoted on a national market system and are not quoted by a
recognized securities dealer, the Administrator (following guidelines
established by the Board or Committee) will determine Fair Market Value in good
faith. The Administrator will consider the following factors, and any others it
considers significant, in determining Fair Market Value: (i) the price at which
other securities of the Company have been issued to purchasers other than
Employees, Directors, or Consultants, (ii) the Company’s stockholder’s equity,
prospective earning power, dividend-paying capacity, and non-operating assets,
if any, and (iii) any other relevant factors, including the economic outlook for
the Company and the Company’s industry, the Company’s position in that industry,
the Company’s goodwill and other intellectual property, and the values of
securities of other businesses in the same industry.

 

18.3 Reservation of Shares. During the term of this Plan, the Company shall at
all times reserve and keep available such number of Shares as are still issuable
under this Plan.

 

18.4 Electronic Communications. Any Award Agreement, notice of exercise of an
Award, or other document required or permitted by this Plan may be delivered in
writing or, to the extent determined by the Administrator, electronically.
Signatures may also be electronic if permitted by the Administrator.

 

18.5 Notices. Unless the Administrator specifies otherwise, any notice to the
Company under any Option Agreement or with respect to any Awards or Award Shares
shall be in writing (or, if so authorized by Section 17.4, communicated
electronically), shall be addressed to the Secretary of the Company, and shall
only be effective when received by the Secretary of the Company.

 

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