EXHIBIT 10.38

CATENA NETWORKS, INC.

1998 EQUITY INCENTIVE PLAN

Adopted December 16, 1998
Amended November 1, 1999, December 9, 1999, December 5, 2000, December 13, 2001,
January 16, 2003
and July 23, 2003
Approved By Stockholders February 2, 1999, December 9, 1999, December 5, 2000,
January 17, 2002 and
August 7, 2003
Termination Date: December 15, 2008

1. PURPOSES.

(a)   Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.   (b)   Available Stock Awards. The purpose of the Plan is to
provide a means by which eligible recipients of Stock Awards may be given an
opportunity to benefit from increases in value of the Common Stock through the
granting of the following Stock Awards: (1) Incentive Stock Options, (2)
Nonstatutory Stock Options, (3) stock bonuses and (4) rights to acquire
restricted stock.   (c)   General Purpose. The Company, by means of the Plan,
seeks to retain the services of the group of persons eligible to receive Stock
Awards, to secure and retain the services of new members of this group and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.

2. Definitions.

(a)   “Affiliate” means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.   (b)   “Board” means the
Board of Directors of the Company.   (c)   “Code” means the Internal Revenue
Code of 1986, as amended.   (d)   “Committee” means a Committee appointed by the
Board in accordance with subsection 3(c).   (e)   “Common Stock” means the
common stock of the Company.   (f)   “Company” means Catena Networks, Inc., a
Delaware corporation.   (g)   “Consultant” means any person, including an
advisor, (1) engaged by the Company or an Affiliate to render consulting or
advisory services and who is compensated for such services or (2) who is a
member of the Board of Directors of an Affiliate. However, the term “Consultant”
shall not include either Directors of the Company who are not compensated by the
Company

 

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    for their services as Directors or Directors of the Company who are merely
paid a director’s fee by the Company for their services as Directors.   (h)  
“Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director 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.   (i)   “Covered Employee” means the chief
executive officer and the four (4) other highest compensated officers of the
Company for whom total compensation is required to be reported to stockholders
under the Exchange Act, as determined for purposes of Section 162(m) of the
Code.   (j)   “Director” means a member of the Board of Directors of the
Company.   (k)   “Disability” means (1) before the Listing Date, 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 and
(2) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.   (l)   “Employee” means any
person employed by the Company or an Affiliate. Mere service as a Director or
payment of a director’s fee by the Company or an Affiliate shall not be
sufficient to constitute “employment” by the Company or an Affiliate.   (m)  
“Exchange Act” means the Securities Exchange Act of 1934, as amended.   (n)  
“Fair Market Value” means, as of any date, the value of the Common Stock
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 in good faith by the
Board.

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(iii)   Prior to the Listing Date, the value of the Common Stock shall be
determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.   (o)   “Incentive Stock Option” means an Option
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.   (p)  
“Listing Date” means the first date upon which any security of the Company is
listed (or approved for listing) upon notice of issuance on any securities
exchange or designated (or approved for designation) upon notice of issuance as
a national market security on an interdealer quotation system if such securities
exchange or interdealer quotation system has been certified in accordance with
the provisions of Section 25100(o) of the California Corporate Securities Law of
1968.   (q)   “Non-Employee Director” means a Director of the Company who either
(1) is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or
(2) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3.   (r)   “Nonstatutory Stock Option” means an Option not intended to
qualify as an Incentive Stock Option.   (s)   “Officer” means (1) before the
Listing Date, any person designated by the Company as an officer and (2) on and
after the Listing Date, a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.   (t)   “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.   (u)   “Option
Agreement” means a written agreement between the Company and an 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.   (v)  
“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.   (w)  
“Outside Director” means a Director of the Company who either (1) is not a
current employee of the Company or an “affiliated corporation” (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an “affiliated corporation” receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an “affiliated corporation”
at any time and is not currently receiving direct or indirect remuneration from
the Company or

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    an “affiliated corporation” for services in any capacity other than as a
Director or (2) is otherwise considered an “outside director” for purposes of
Section 162(m) of the Code.   (x)   “Participant” means a person to whom a Stock
Award is granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Stock Award.   (y)   “Plan” means this Catena Networks,
Inc. 1998 Equity Incentive Plan.   (z)   “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.   (aa)   “Securities Act” means the Securities Act of 1933,
as amended.   (bb)   “Stock Award” means any right granted under the Plan,
including an Option, a stock bonus and a right to acquire restricted stock.  
(cc)   “Stock Award Agreement” means a written agreement between the Company and
a holder of a Stock Award evidencing the terms and conditions of an individual
Stock Award grant. Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.   (dd)   “Ten Percent Stockholder” means a person who
owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates.

3. Administration.

(a)   Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 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:  
(i)   To determine from time to time which of the persons eligible under the
Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.   (ii)   To construe and interpret the
Plan and Stock Awards granted under it, and to establish, amend and revoke rules
and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any
Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.   (iii)   To amend the Plan or a
Stock Award as provided in Section 12.   (iv)   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 which are not in conflict with the
provisions of the Plan.

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(c)   Delegation to Committee.   (i)   General. The Board may delegate
administration of the Plan to a Committee or Committees of one 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, 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 abolish the Committee at any time
and revest in the Board the administration of the Plan.   (ii)   Committee
Composition when Common Stock is Publicly Traded. At such time as the Common
Stock is publicly traded, in the discretion of the Board, a Committee may
consist solely of two or more Outside Directors, in accordance with Section
162(m) of the Code, and/or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (A) delegate to a committee of one or more members of the Board
who are not Outside Directors the authority to grant Stock Awards to eligible
persons who are either (1) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such Stock
Award or (2) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (B) delegate to a committee of one or more
members of the Board who are not Non-Employee Directors the authority to grant
Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act.

4. Shares Subject to the Plan.

(a)   Share Reserve. Subject to the provisions of Section 11 in the case of
increases in shares merely reflecting a change in capitalization such as a stock
dividend or stock split, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate twenty million four hundred seventy-four
thousand one hundred sixty-five (20,474,165) shares of Common Stock.   (b)  
Reversion of Shares to the Share Reserve. If any Stock Award shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full (or vested in the case of restricted stock), the stock not
acquired under such Stock Award shall revert to and again become available for
issuance under the Plan. If any Common Stock acquired pursuant to the exercise
of an Option shall for any reason be repurchased by the Company under an
unvested share repurchase option provided under the Plan, the stock repurchased
by the Company under such repurchase option shall not revert to and again become
available for issuance under the Plan.   (c)   Source of Shares. The stock
subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.   (d)   Share Reserve Limitation. Prior to the Listing
Date, at no time shall the total number of shares issuable upon exercise of all
outstanding Options and the total number of shares provided for under any stock
bonus or similar plan of the Company exceed the applicable

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    percentage as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of Title 10 of the California Code of Regulations, based on
the shares of the Company which are outstanding at the time the calculation is
made.

5. Eligibility.

(a)   Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.   (b)   Ten Percent
Stockholders. No Ten Percent Stockholder shall be eligible for the grant of an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.

               Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.

               Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.

(c)   Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be eligible to
be granted Options covering more than seven hundred fifty thousand (750,000)
shares of the Common Stock during any calendar year. This subsection 5(c) shall
not apply prior to the Listing Date and, following the Listing Date, this
subsection 5(c) shall not apply until (1) the earliest of: (A) the first
material modification of the Plan (including any increase in the number of
shares reserved for issuance under the Plan in accordance with Section 4);
(B) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which Directors of the Company are to be elected that occurs
after the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (2) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.

6. Option Provisions.

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

(a)   Term. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.   (b)   Exercise Price of an Incentive
Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock

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    Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.   (c)   Exercise Price of a Nonstatutory Stock Option.
Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders,
the exercise price of each Nonstatutory Stock Option granted prior to the
Listing Date shall be not less than eighty-five percent (85%) of the Fair Market
Value of the stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.   (d)  
Consideration. The purchase price of stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and regulations, either
(1) in cash at the time the Option is exercised or (2) at the discretion of the
Board at the time of the grant of the Option (or subsequently in the case of a
Nonstatutory Stock Option) by (A) delivery to the Company of other Common Stock,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other Common Stock)
with the Participant or (C) in any other form of legal consideration that may be
acceptable to the Board; provided, however, that at any time that the Company is
incorporated in Delaware, payment of the Common Stock’s “par value,” as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

               In the case of any deferred payment arrangement, interest shall
be compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

(e)   Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.   (f)   Transferability of a Nonstatutory Stock Option. A
Nonstatutory Stock Option granted prior to the Listing Date shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
A Nonstatutory Stock Option granted on or after the Listing Date shall be
transferable to the extent provided in the Option Agreement. If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(f), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

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(g)   Vesting Generally. The total number of shares of Common Stock subject to
an Option may, but need not, vest and therefore become exercisable in periodic
installments which may, but need not, be equal. The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.  
(h)   Minimum Vesting Prior to the Listing Date. Notwithstanding the foregoing
subsection 6(g), Options granted prior to the Listing Date shall provide for
vesting of the total number of shares at a rate of at least twenty percent (20%)
per year over five (5) years from the date the Option was granted, subject to
reasonable conditions such as continued employment. However, in the case of such
Options granted to Officers, Directors or Consultants, the Option may become
fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.   (i)   Termination of Continuous Service. In the event an
Optionholder’s Continuous Service terminates (other than upon the Optionholder’s
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the date three months
following the termination of the Optionholder’s Continuous Service (or such
longer or shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than 30 days, unless such
termination is for cause), or the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.   (j)   Extension of Termination Date. An
Optionholder’s Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder’s Continuous Service (other
than upon the Optionholder’s death or Disability) would be prohibited at any
time solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (1) the expiration of the term of the Option set forth in subsection
6(a) or (2) the expiration of a period of three months after the termination of
the Optionholder’s Continuous Service (or such longer or shorter period
specified in the Option Agreement, which, for Options granted prior to the
Listing Date, shall not be less than 30 days, unless such termination is for
cause), during which the exercise of the Option would not be in violation of
such registration requirements.   (k)   Disability of Optionholder. In the event
an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(1) the date 12 months following such termination (or such longer or shorter
period specified in the Option Agreement, which, for Options granted prior to
the Listing Date, shall not be less than six months) or (2) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination,

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    the Optionholder does not exercise his or her Option within the time
specified herein, the Option shall terminate.   (l)   Death of Optionholder. In
the event (1) an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s death or (2) the Optionholder dies within the period (if any)
specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the Option may be
exercised (to the extent the Optionholder was entitled to exercise the Option as
of the date of death) by the Optionholder’s estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionholder’s death pursuant to subsection 6(e)
or 6(f), but only within the period ending on the earlier of (A) the date
18 months following the date of death (or such longer or shorter period
specified in the Option Agreement, which, for Options granted prior to the
Listing Date, shall not be less than six months) or (B) the expiration of the
term of such Option as set forth in the Option Agreement. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.   (m)   Early Exercise. The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares subject to the Option prior to the full vesting of the
Option. Subject to the “Repurchase Limitation” in subsection 10(h), any unvested
shares so purchased may be subject to an unvested share repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.   (n)   Right of Repurchase. Subject to the “Repurchase Limitation”
in subsection 10(h), the Option may, but need not, include a provision whereby
the Company may elect, prior to the Listing Date, to repurchase all or any part
of the vested shares acquired by the Optionholder pursuant to the exercise of
the Option.   (o)   Right of First Refusal. The Option may, but need not,
include a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal pursuant to the Investor Rights Agreement
dated December 16, 1998 by and between the Company and certain stockholders and
investors therein, following receipt of notice from the Optionholder of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company, as amended from time to time.   (p)   Re-Load Options.
Without in any way limiting the authority of the Board to make or not to make
grants of Options hereunder, the Board shall have the authority (but not an
obligation) to include as part of any Option Agreement a provision entitling the
Optionholder to a further Option (a “Re-Load Option”) in the event the
Optionholder exercises the Option evidenced by the Option Agreement, in whole or
in part, by surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option Agreement. Any such Re-Load
Option shall (1) provide for a number of shares equal to the number of shares
surrendered as part or all of the exercise price of such Option; (2) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (3) have an exercise
price which is equal to 100% of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the

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    original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described for
Options under the Plan.

               Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the “Section 162(m) Limitation” on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7. Provisions of Stock Awards other than Options.

(a)   Stock Bonus Awards. Each stock bonus agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. The
terms and conditions of stock bonus agreements may change from time to time, and
the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:   (i)   Consideration. A stock bonus shall
be awarded in consideration for past services actually rendered to the Company
for its benefit.   (ii)   Vesting. Subject to the “Repurchase Limitation” in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.  
(iii)   Termination of Participant’s Continuous Service. Subject to the
“Repurchase Limitation” in subsection 10(h), in the event a Participant’s
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.   (iv)  
Transferability. For a stock bonus award made before the Listing Date, rights to
acquire shares under the stock bonus agreement shall not be transferable except
by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Participant only by the Participant. For a stock
bonus award made on or after the Listing Date, rights to acquire shares under
the stock bonus agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the stock bonus agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
stock bonus agreement remains subject to the terms of the stock bonus agreement.
  (b)   Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions

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    hereof by reference in the agreement or otherwise) the substance of each of
the following provisions:   (i)   Purchase Price. Subject to the provisions of
subsection 5(b) regarding Ten Percent Stockholders, the purchase price under
each restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five percent (85%) of the stock’s Fair Market Value on
the date such award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of the stock’s Fair Market
Value on the date such award is made or at the time the purchase is consummated.
  (ii)   Consideration. The purchase price of stock acquired pursuant to the
restricted stock purchase agreement shall be paid either: (A) in cash at the
time of purchase; (B) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or (C) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, then payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.   (iii)
  Vesting. Subject to the “Repurchase Limitation” in subsection 10(h), shares of
Common Stock acquired under the restricted stock purchase agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.   (iv)  
Termination of Participant’s Continuous Service. Subject to the “Repurchase
Limitation” in subsection 10(h), in the event a Participant’s Continuous Service
terminates, the Company may repurchase or otherwise reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the restricted stock purchase agreement.
  (v)   Transferability. For a restricted stock award made before the Listing
Date, rights to acquire shares under the restricted stock purchase agreement
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.

8. Covenants of the Company.

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

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

9. Use of Proceeds from Stock.

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

10. Miscellaneous.

(a)   Acceleration of Exercisability and Vesting. The Board shall have the power
to accelerate the time at which a Stock Award may first be exercised or the time
during which a Stock Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.   (b)  
Stockholder Rights. No Participant shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Stock Award unless and until such Participant has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.   (c)   No Employment or
other Service Rights. Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any Participant or other holder
of Stock Awards any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (1) the employment of an
Employee with or without notice and with or without cause, (2) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate or (3) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.   (d)   Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.   (e)   Investment
Assurances. The Company may require a Participant, as a condition of exercising
or acquiring stock under any Stock Award, (1) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (2) to give written assurances satisfactory to
the Company

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    stating that the Participant is acquiring the stock subject to the Stock
Award for the Participant’s own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the Stock Award has been registered under a then currently effective
registration statement under the Securities Act or (iv) 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 stock.  
(f)   Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means (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: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock.   (g)   Information Obligation. Prior to the Listing
Date, to the extent required by Section 260.140.46 of Title 10 of the California
Code of Regulations, the Company shall deliver financial statements to
Participants at least annually. This subsection 10(g) shall not apply to key
Employees whose duties in connection with the Company assure them access to
equivalent information.   (h)   Repurchase Limitation. The terms of any
repurchase option shall be specified in the Stock Award and may be either at
Fair Market Value at the time of repurchase or at not less than the original
purchase price. To the extent required by Section 260.140.41 and
Section 260.140.42 of Title 10 of the California Code of Regulations, any
repurchase option contained in a Stock Award granted prior to the Listing Date
to a person who is not an Officer, Director or Consultant shall be upon the
terms described below:   (i)   Fair Market Value. If the repurchase option gives
the Company the right to repurchase the shares upon termination of employment at
not less than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (1) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within 90 days of termination of Continuous Service (or in the case of shares
issued upon exercise of Stock Awards after such date of termination, within
90 days after the date of the exercise) or such longer period as may be agreed
to by the Company and the Participant (for example, for purposes of satisfying
the requirements of Section 1202(c)(3) of the Code regarding “qualified small
business stock”) and (2) the right terminates when the shares become publicly
traded.   (ii)   Original Purchase Price. If the repurchase option gives the
Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (A) the right to repurchase at the
original purchase price shall lapse at the rate of at least 20% of the

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    shares per year over five years from the date the Stock Award is granted
(without respect to the date the Stock Award was exercised or became
exercisable) and (B) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within 90 days of
termination of Continuous Service (or in the case of shares issued upon exercise
of Options after such date of termination, within 90 days after the date of the
exercise) or such longer period as may be agreed to by the Company and the
Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding “qualified small business stock”).

11. Adjustments upon Changes in Stock.

(a)   Capitalization Adjustments. If any change is made in the stock subject to
the Plan, or subject to any Stock Award, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. The Board, the
determination of which shall be final, binding and conclusive, shall make such
adjustments. (The 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 such Stock Awards shall be terminated if not
exercised (if applicable) prior to such event.   (c)   Asset Sale, Merger,
Consolidation or Reverse Merger. In the event of (1) a sale of substantially all
of the assets of the Company, (2) a merger or consolidation in which the Company
is not the surviving corporation or (3) a reverse merger in which the Company is
the surviving corporation but the             shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 11(c)) for those outstanding under the
Plan. In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if
not exercised (if applicable) at or prior to such event. With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall terminate
if not exercised (if applicable) prior to such event.

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12. Amendment of the Plan and Stock Awards.

(a)   Amendment of Plan. The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 11 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.   (b)   Stockholder Approval. The
Board may, in its sole discretion, submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.   (c)   Contemplated Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the
Plan and/or Incentive Stock Options granted under it into compliance therewith.
  (d)   No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(1) the Company requests the consent of the Participant and (2) the Participant
consents in writing.   (e)   Amendment of Stock Awards. The Board at any time,
and from time to time, may amend the terms of any one or more Stock Awards;
provided, however, that the rights under any Stock Award shall not be impaired
by any such amendment unless (1) the Company requests the consent of the
Participant and (2) the Participant consents in writing.

13. Termination or Suspension of the Plan.

(a)   Plan Term. The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.  
(b)   No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan is in
effect except with the written consent of the Participant.

14. Effective Date of Plan.

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

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