BILLMYPARENTS, INC.

STOCK OPTION GRANT NOTICE

(2011 INCENTIVE PLAN)

BillMyParents, Inc., a Colorado corporation (the "Company"), pursuant to its
2011 Equity Incentive Plan (the "Plan"), hereby grants to Option holder an
option to purchase the number of shares of the Company's Common Stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and in the Stock Option Agreement, the Plan and the Notice of Exercise,
all of which are attached hereto and incorporated herein in their entirety.

Option holder:

 

Michael Robert McCoy

Date of Grant:

 

July 23, 2012

Vesting Commencement Date:

 

August 23, 2012

Number of Shares Subject to Option:

 

4,400,000

Exercise Price Per Share:

 

$0.43

Expiration Date:

 

July 23, 2017

TYPE OF GRANT:

[X]  Incentive Stock Option

[]  Nonstatutory Stock Option

EXERCISE SCHEDULE:

[X]  Same as Vesting Schedule [ ] Early Exercise Permitted

VESTING SCHEDULE:   

Vesting shall occur as follows: 1) 366,674 shares shall vest upon the first
month’s anniversary of this Agreement; 2) 366,666 shares shall vest each month
on the second through twelfth month’s anniversary dates of this agreement.

PAYMENT:

By one or a combination of the items described in the Stock Option Agreement.

ADDITIONAL TERMS: The undersigned Optionholder acknowledges receipt of, and
understands and agrees to, this Grant Notice, the Stock Option Agreement, and
the Plan. Optionholder further acknowledges that as of the Date of Grant, this
Grant Notice, the Stock Option Agreement, and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on that
subject with the exception of options previously granted and delivered to
Optionholder under the Plan.

BILLMYPARENTS, INC.

By: ______________________

Jonathan Shultz, CFO

OPTIONHOLDER:

By:_______________________

Michael Robert McCoy

ATTACHMENTS:

I

Stock Option Agreement

II

2011 Equity Incentive Plan

III

Notice of Election

ATTACHMENT I

STOCK OPTION AGREEMENT

BILLMYPARENTS, INC. 2011 EQUITY INCENTIVE PLAN

(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)

Pursuant to the Stock Option Grant Notice ("Grant Notice") and this Stock Option
Agreement, BillMyParents, Inc., a Colorado corporation (the "Company") has
granted you an option under its 2011 Equity Incentive Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock indicated in the
Grant Notice at the exercise price indicated in the Grant Notice. Defined terms
not explicitly defined in this Stock Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

The details of your option are as follows:

1.

VESTING. Subject to the limitations contained herein, your option will vest as
provided in the Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.

2.

NUMBER OF SHARES AND EXERCISE PRICE. The number of shares subject to your option
and your exercise price per share referenced in the Grant Notice may be adjusted
from time to time for Capitalization Adjustments, as provided in the Plan.

3.

RESERVED.

4.

METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise
price in cash or by check or in any other manner permitted under the Plan, which
may include one or more of the following:

(a)

In the Company's sole discretion at the time your option is exercised and
provided that at the time of exercise the Common Stock is publicly traded,
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds.

(b)

Provided that at the time of exercise the Common Stock is publicly traded, by
delivery of already-owned shares of Common Stock that either have been held for
the period required to avoid a charge to the Company's reported earnings
(generally six months) or were not acquired, directly or indirectly from the
Company, that are owned free and clear of any liens, claims, encumbrances or
security interests, and that are valued at Fair Market Value on the date of
exercise. "Delivery" for these purposes, in the sole discretion of the Company
at the time your option is exercised, shall include delivery to the Company of
your attestation of ownership of such shares of Common Stock in a form approved
by the Company. Notwithstanding the foregoing, your option may not be exercised
by tender to the Company of Common Stock to the extent such tender would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock.

(c)

Provided that at the time of exercise the Common Stock is publicly traded, by
payment, in whole or in part, through the surrender of shares of Common Stock
then issuable upon exercise of the option having a Fair Market Value on the date
of option exercise equal to the aggregate exercise price of the option or
exercised portion thereof;

(d)

Provided that at the time of exercise the Common Stock is publicly traded, by
payment, in whole or in part, through the delivery of a notice that you have
placed a market sell order with a broker with respect to shares of Common Stock
then issuable upon exercise of the Option, and that the broker has been directed
to pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such sale;

(e)

By payment through any combination of the consideration provided in the
foregoing subparagraphs (a), (b), (c) and (d). Payment in the manner prescribed
by the preceding sentences shall not be permitted to the extent that the
Administrator determines that payment in such manner may result in an extension
or maintenance of credit, an arrangement for the extension of credit, or a
renewal of an extension of credit in the form of a personal loan to or for any
Director or executive officer of the Company that is prohibited by Section 13(k)
of the Exchange Act or other applicable law.

1.

WHOLE SHARES.  Your option may only be exercised for whole shares.

2.

SECURITIES LAW COMPLIANCE.  Notwithstanding anything to the contrary contained
herein, your option may not be exercised unless the shares issuable upon
exercise of your option are then registered under the Securities Act or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the
Securities Act.  The exercise of your option must also comply with other
applicable laws and regulations governing the option, and the option may not be
exercised if the Company determines that the exercise would not be in material
compliance with such laws and regulations.

3.

TERM. The term of your option commences on the Date of Grant and expires upon
the Expiration Date indicated in the Grant Notice.

If your option is an incentive stock option, note that, to obtain the federal
income tax advantages associated with an "incentive stock option," the Code
requires that at all times beginning on the date of grant of the option and
ending on the day three (3) months before the date of the option's exercise, you
must be an employee of the Company or an Affiliate, except in the event of your
death or your Disability.  The Company has provided for extended exercisability
of your option under certain circumstances for your benefit, but cannot
guarantee that your option will necessarily be treated as an "incentive stock
option" if you provide services to the Company or an Affiliate as a Consultant
or Director or if you exercise your option more than three (3) months after the
date your employment with the Company or an Affiliate terminates.

4.

EXERCISE.

(a)

You may exercise the vested portion of your option (and the unvested portion of
your option if the Grant Notice so permits) during its term by delivering a
Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

(b)

By exercising your option you agree that, as a condition to any exercise of your
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of your option, (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise, or (3) the disposition of shares acquired upon such exercise.

(c)

If your option is an incentive stock option, by exercising your option you agree
that you will notify the Company in writing within fifteen (15) days after the
date of any disposition of any of the shares of the Common Stock issued upon
exercise of your option that occurs within two (2) years after the date of your
option grant or within one (1) year after such shares of Common Stock are
transferred upon exercise of your option.

(d)

By exercising your option you agree that the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, require that
you not sell, dispose of, transfer, make any short sale of, grant any option for
the purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any shares of Common Stock or other securities of the
Company held by you, for a period of time specified by the underwriter(s) (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Securities Act. You
further agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) which are consistent with the
foregoing or which are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to your Common Stock until the end of such period.

1.

TRANSFERABILITY. Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you.
Notwithstanding the foregoing, by delivering written notice to the Company, in a
form satisfactory to the Company, you may designate a third party who, in the
event of your death, shall thereafter be entitled to exercise your option.

2.

RESERVED.

3.

CHANGE OF CONTROL.  In the event the Company undergoes an Acquisition (as
defined in Section 11(c)(i) of the Plan), all unvested options granted under
this Agreement shall become immediately vested at the closing of the
Acquisition.

4.

OPTION NOT A SERVICE CONTRACT.  Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company
or an Affiliate, or of the Company or an Affiliate to continue your employment.
In addition, nothing in your option shall obligate the Company or an Affiliate,
their respective shareholders, Boards of Directors, Officers or Employees to
continue any relationship that you might have as a Director or Consultant for
the Company or an Affiliate.

5.

WITHHOLDING OBLIGATIONS.

(a)

At the time your option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, you hereby authorize withholding from
payroll and any other amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a "cashless exercise" pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or
an Affiliate, if any, which arise in connection with your option.

(b)

Upon your request and subject to approval by the Company, in its sole
discretion, and compliance with any applicable conditions or restrictions of
law, the Company may withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of whole shares having
a Fair Market Value, determined by the Company as of the date of exercise, not
in excess of the minimum amount of tax required to be withheld by law.  If the
date of determination of any tax withholding obligation is deferred to a date
later than the date of exercise of your option, share withholding pursuant to
the preceding sentence shall not be permitted unless you make a proper and
timely election under Section 83(b) of the Code, covering the aggregate number
of shares of Common Stock acquired upon such exercise with respect to which such
determination is otherwise deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of your option. Notwithstanding
the filing of such election, shares shall be withheld solely from fully vested
shares of Common Stock determined as of the date of exercise of your option that
are otherwise issuable to you upon such exercise. Any adverse consequences to
you arising in connection with such share withholding procedure shall be your
sole responsibility.

(c)

Your option is not exercisable unless the tax withholding obligations of the
Company and/or any Affiliate are satisfied. Accordingly, you may not be able to
exercise your option when desired even though your option is vested, and the
Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.

1.

NOTICES. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the last address you
provided to the Company.

2.

GOVERNING PLAN DOCUMENT.  Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.

I-1

ATTACHMENT II

2011 EQUITY INCENTIVE PLAN (Subject to minor changes to update language to
conform to legal changes from 2007 to 2011)

BILLMYPARENTS, INC. 2011 EQUITY INCENTIVE PLAN

ADOPTED: August 4, 2011 (subject to minor change for legal review)

APPROVED BY BOARD OF DIRECTORS: August 4, 2011

APPROVED BY SHAREHOLDERS: ________________

TERMINATION DATE: August 4, 2021

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: (i) Incentive Stock Options, (ii) Non-statutory Stock Options,
(iii) stock bonuses, and (iv) 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 BillMyParents, Inc., a Colorado corporation.

g)

"CONSULTANT" means any person, including an advisor, (i) engaged by the Company
or an Affiliate to render consulting or advisory services and who is compensated
for such services or (ii) who is a member of the Board of Directors of an
Affiliate. However, the term "Consultant" shall not include either Directors of
the Company who are not compensated by the Company 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 shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

j)

"DIRECTOR" means a member of the Board of Directors of the Company.

k)

"DISABILITY" means the 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:

(1)

If the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq Small Cap 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.

(2)

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

(3)

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 inter-dealer quotation system if such
securities exchange or inter-dealer 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 (i) before the Listing Date, any person designated by the
Company as an officer and (ii) 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 Option
holder 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 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 BillMyParents, Inc. 2007 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 SHAREHOLDER" 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.

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 (i) 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) (ii) 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 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate 25,000,000 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.

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 SHAREHOLDERS. No Ten Percent Shareholder 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.

i)

Prior to the Listing Date, no Ten Percent Shareholder 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.

ii)

Prior to the Listing Date, no Ten Percent Shareholder 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 100,000 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

i)

the earliest of: (1) 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); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of shareholders 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

ii)

such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.

6)

OPTION PROVISIONS.

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

a)

TERM. Subject to the provisions of subsection 5(b) regarding Ten Percent
Shareholders, 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 Shareholders, 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 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 Shareholders, 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
(i) in cash at the time the Option is exercised or (ii) 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 (1) delivery to the Company of other Common Stock,
(2) 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 (3) 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 subsection6(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.

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 earlier of

i)

the date three (3) 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 thirty (30) days, unless such termination is for cause), or

ii)

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 (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
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

i)

the date twelve (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 (6) months) or

ii)

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 herein, the Option shall terminate.

l)

DEATH OF OPTIONHOLDER. In the event (i)an Optionholder's Continuous Service
terminates as a result of the Optionholder's death or (ii) 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 (1) the date eighteen (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 (6) months) or (2) 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 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.

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 (i) provide for a number of shares equal to the number of
shares surrendered as part or all of the exercise price of such Option; (ii)
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 (iii) have an
exercise price which is equal to one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Re-Load Option on the date of exercise
of the 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:

(1)

CONSIDERATION. A stock bonus shall be awarded in consideration for past services
actually rendered to the Company for its benefit.

(2)

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.

(3)

TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to the "Repurchase
Limitation" in subsection10(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.

(4)

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 hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

(1)

PURCHASE PRICE. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, 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.

(2)

CONSIDERATION. The purchase price of stock acquired pursuant to the restricted
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii)at the discretion of the Board, according to a deferred payment or
other arrangement with the Participant; or (iii) 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.

(3)

VESTING. Subject to the "Repurchase Limitation" in subsection10(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.

(4)

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.

(5)

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 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)

SHAREHOLDER 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 (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of 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, (i) 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 (ii) to give written assurances
satisfactory to the Company 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: (i) tendering a cash payment; (ii) 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 (iii) 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:

(1)

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 (i) the right to repurchase shall be exercised for cash
or cancellation of purchase money indebtedness for the shares within ninety (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 ninety (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 (ii) the right terminates when the shares become publicly
traded.

(2)

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 (i) the right to repurchase at the original purchase price
shall lapse at the rate of at least twenty percent (20%) of the shares per year
over five (5) years from the date the Stock Award is granted (without respect to
the date the Stock Award was exercised or became exercisable) and (ii) the right
to repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within ninety(90) days of termination of Continuous
Service (or in the case of shares issued upon exercise of Options after such
date of termination, within ninety (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 other than in an Acquisition (as defined below), then such Stock Awards
shall be terminated if not exercised (if applicable) prior to such event, unless
such outstanding Stock Awards are assumed by a subsequent purchaser.

c)

CHANGE IN CONTROL.

(1)

For the purposes of this Section 11, "Acquisition" shall mean (1) any
consolidation or merger of the Company with or into any other corporation or
other entity or person in which the shareholders of the Company prior to such
consolidation or merger own less than fifty percent (50%) of the Company's
voting power immediately after such consolidation or merger, excluding any
consolidation or merger effected exclusively to change the domicile of the
Company; or (2) a sale of all or substantially all of the assets of the Company.

(2)

In the event the Company undergoes an Acquisition 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 shareholders in the transaction described in this
subsection 11(c)) for those outstanding under the Plan.

(3)

In the event any surviving corporation or acquiring corporation in an
Acquisition refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to (1) Stock
Awards which (i) are held by Participants whose Continuous Service has not
terminated prior to such event, and (ii) would otherwise vest and become
exercisable within one (1) year of the closing of the Acquisition, the vesting
of such Stock Awards (and, if applicable, the time during which such Stock
Awards may be exercised) shall be accelerated and made fully exercisable at
least thirty (30) days prior to the closing of the Acquisition (and the Stock
Awards terminated if not exercised prior to the closing of such Acquisition),
and (2) any other Stock Awards outstanding under the Plan, such Stock Awards
shall be terminated if not exercised prior to the closing of the Acquisition.

(4)

In the event the Company undergoes an Acquisition and the surviving corporation
or acquiring corporation does assume such Stock Awards (or substitutes similar
stock awards for those outstanding under the Plan), then, with respect to each
Stock Award held by persons then performing services as Employees or Directors,
the vesting of each such Stock Award (and, if applicable, the time during which
such Stock Award may be exercised) shall be accelerated and such Stock Award
shall become fully vested and exercisable, if any of the following events occurs
within one (1) month before or eighteen (18) months after the effective date of
the Acquisition: (1) the service to the Company or an Affiliate of the Employee
or Director holding such Stock Award is terminated without Cause (as defined
below); (2) the Employee holding such Stock Award terminates his or her service
to the Company or an Affiliate due to the fact that the principal place of the
performance of the responsibilities and duties of the Employee is changed to a
location more than fifty (50) miles from such Employee's existing work location
without the Employee's express consent (not applicable to Directors); or (3) the
Employee holding such Stock Award terminates his or her service to the Company
or Affiliate due to the fact that there is a material reduction in such
Employee's responsibilities and duties without the Employee's express consent
(not applicable to Directors).

(5)

For the purposes of this Section11(c), "Cause" means an individual's misconduct,
including but not limited to: (1) conviction of any felony or any crime
involving moral turpitude or dishonesty, (2) participation in a fraud or act of
dishonesty against the Company, (3) conduct that, based upon a good faith and
reasonable factual investigation and determination by the Board, demonstrates
your gross unfitness to serve, or (4) intentional, material violation of any
contract with the Company or any statutory duty to the Company that is not
corrected within thirty (30) days after written notice thereof. Physical or
mental disability shall not constitute "Cause."

(6)

The acceleration of vesting provided for under this Section 11(c) may be limited
in certain circumstances as follows: If any such acceleration (the "Benefit")
would (i) constitute a "parachute payment" within the meaning of Section 280G of
the Code and (ii) but for such acceleration, be subject to the excise tax
imposed by Section 4999 of the Code, then such Benefit shall be reduced to the
extent necessary so that no portion of the Benefit would be subject to such
excise tax, as determined in good faith by the Company; provided, however, that
if, in the absence of any such reduction (or after such reduction), such
Employee believes that the Benefit or any portion thereof (as reduced, if
applicable) would be subject to such excise tax, the Benefit shall be reduced
(or further reduced) to the extent determined by such Employee in his or her
discretion so that the excise tax would not apply. If, notwithstanding any such
reduction (or in the absence of such reduction), the Internal Revenue Service
("IRS") determines that such Employee is liable for the excise tax as a result
of the Benefit, then such Employee shall be obligated to return to the Company,
within thirty (30) days of such determination by the IRS, a portion of the
Benefit sufficient such that none of the Benefit retained by such Employee
constitutes a "parachute payment" within the meaning of Section 280G of the Code
that is subject to the excise tax.

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
shareholders of the Company to the extent shareholder approval is necessary to
satisfy the requirements of Section422 of the Code, Rule16b-3 or any NASDAQ or
securities exchange listing requirements.

b)

SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit any other
amendment to the Plan for shareholder 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 (i) the
Company requests the consent of the Participant and (ii) 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
(i) the Company requests the consent of the Participant and (ii) 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 (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
shareholders 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 shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.

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ATTACHMENT III

NOTICE OF EXERCISE

BillMyParents, Inc.

6190 Cornerstone Court, Suite 216

San Diego California 92121

Date of Exercise: _______________

Ladies and Gentlemen:

This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.

Type of option (check one):

Incentive [X]

Non-statutory [ ]

Stock option dated:

Number of shares as

to which option is

exercised:

_____________

Certificates to be

issued in name of:

_____________

Total exercise price:

$____________

Cash payment delivered

herewith:

$____________

Value of ________ shares of

BillMyParents, Inc. common

stock delivered herewith(1):

$____________

By this exercise, I agree (i) to provide such additional documents as you may
require pursuant to the terms of the 2011 Equity Incentive Plan, (ii) to provide
for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.

(1)

Shares must meet the public trading requirements set forth in the option. Shares
must be valued in accordance with the terms of the option being exercised, must
have been owned for the minimum period required in the option, and must be owned
free and clear of any liens, claims, encumbrances or security interests.
Certificates must be endorsed or accompanied by an executed assignment separate
from certificate.

I hereby make the following certifications and representations with respect to
the number of shares of Common Stock of the Company listed above (the "Shares"),
which are being acquired by me for my own account upon exercise of the Option as
set forth above:

I acknowledge that the Shares have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and are deemed to constitute
"restricted securities" under Rule 701 and "control securities" under Rule 144
promulgated under the Securities Act.  I warrant and represent to the Company
that I have no present intention of distributing or selling said Shares, except
as permitted under the Securities Act and any applicable state securities laws.

I further acknowledge that I will not be able to resell the Shares for at least
ninety days (90) after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply
to affiliates of the Company under Rule 144.

I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.

I further agree that, if required by the Company (or a representative of the
underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred
eighty (180) days) following the effective date of the registration statement of
the Company filed under the Securities Act as may be requested by the Company or
the representative of the underwriters. I further agree that the Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.

Very truly yours,

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