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Exhibit 10.3

LUMOS PHARMA, INC.

2016 STOCK PLAN

 
1.
ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

 
1.1         Establishment. The Lumos Pharma, Inc. 2016 Stock Plan (the “Plan”)
is hereby established effective as of July 11, 2016 (the “Effective Date”).
 
1.2         Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options and Restricted Stock
Awards.
 
1.3         Term of Plan. The Plan shall continue in effect until its
termination by the Board; provided, however, that all Awards shall be granted,
if at all, within ten (10) years from the earlier of the date the Plan is
adopted by the Board or the date the Plan is duly approved by the stockholders
of the Company.

2.
DEFINITIONS AND CONSTRUCTION.

2.1         Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
 
(a)          “Award” means an Option, Restricted Stock Purchase Right or
Restricted Stock Bonus granted under the Plan.
 
(b)         “Award Agreement” means a written or electronic agreement between
the Company and a Participant setting forth the terms, conditions and
restrictions applicable to an Award.
 
(c)         “Board” means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, “Board” also
means such Committee(s).
 
(d)         “Cause” means, unless such term or an equivalent term is otherwise
defined by the applicable Award Agreement or other written agreement between a
Participant and a Participating Company applicable to an Award, any of the
following: (i) the Participant’s theft, dishonesty, willful misconduct, breach
of fiduciary duty for personal profit, or falsification of any Participating
Company documents or records; (ii) the Participant’s material failure to abide
by a Participating Company’s code of conduct or other policies (including,
without limitation, policies relating to confidentiality and reasonable
workplace conduct);
 
(iii) the Participant’s unauthorized use, misappropriation, destruction or
diversion of any tangible or intangible asset or corporate opportunity of a
Participating Company (including, without limitation, the Participant’s improper
use or disclosure of a Participating Company’s confidential or proprietary
information); (iv) any intentional act by the Participant which has a material
detrimental effect on a Participating Company’s reputation or business; (v) the
Participant’s repeated failure or inability to perform any reasonable assigned
duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (vi) any material breach by the
Participant of any employment or service agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vii) the Participant’s conviction (including any plea of guilty
or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Participant’s ability
to perform his or her duties with a Participating Company.

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(e)         “Change in Control” means, unless such term or an equivalent term is
otherwise defined by the applicable Award Agreement or other written agreement
between the Participant and a Participating Company applicable to an Award, the
occurrence of any one or a combination of the following:
 
(i)           an Ownership Change Event or a series of related Ownership Change
Events (collectively, a “Transaction”) in which the stockholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding securities entitled
to vote generally in the election of Directors or, in the case of an Ownership
Change Event described in Section 2.1(u)(iii), the entity to which the assets of
the Company were transferred (the “Transferee”), as the case may be; or
 
(ii)          a date specified by the Board following approval by the
stockholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall not include a transaction
described in subsection (i) of this Section 2.1(e) in which a majority of the
members of the board of directors of the continuing, surviving or successor
entity, or parent thereof, immediately after such transaction is comprised of
Incumbent Directors. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting securities of one or more corporations or other business
entities which own the Company or the Transferee, as the case may be, either
directly or through one or more subsidiary corporations or other business
entities. The Board shall determine whether multiple events described in
subsections (i) and (ii) of this Section 2.1(e) are related and to be treated in
the aggregate as a single Change in Control, and its determination shall be
final, binding and conclusive.
 
(f)          “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations and administrative guidelines promulgated thereunder.
 
(g)         “Committee” means the compensation committee or other committee or
subcommittee of the Board duly appointed to administer the Plan and having such
powers as specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
 
(h)         “Company” means Lumos Pharma, Inc., a Delaware corporation, and any
successor thereto.
 

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(i)          “Consultant” means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration
Statement under the Securities Act.
 
(j)           “Director” means a member of the Board.
 
(k)          “Disability” means the inability of the Participant, in the opinion
of a qualified physician acceptable to the Company, to perform the major duties
of the Participant’s position with the Participating Company Group because of
the sickness or injury of the Participant.
 
(l)          “Employee” means any person treated as an employee (including an
Officer or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director’s fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual’s employment or termination of employment,
as the case may be. For purposes of an individual’s rights, if any, under the
terms of the Plan as of the time of the Company’s determination of whether or
not the individual is an Employee, all such determinations by the Company shall
be final, binding and conclusive as to such rights, if any, notwithstanding that
the Company or any court of law or governmental agency subsequently makes a
contrary determination as to such individual’s status as an Employee.
 
(m)        “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(n)         “Fair Market Value” means, as of any date, the value of a share of
Stock or other property as determined by the Board, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:
 
(i)           If, on such date, the Stock is listed or quoted on a national or
regional securities exchange or quotation system, the Fair Market Value of a
share of Stock shall be the closing price of a share of Stock as quoted on the
national or regional securities exchange or quotation system constituting the
primary market for the Stock, as reported in The Wall Street Journal or such
other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or quotation
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded or quoted prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
discretion.

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(ii)          If, on such date, the Stock is not listed or quoted on a national
or regional securities exchange or quotation system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith without regard
to any restriction other than a restriction which, by its terms, will never
lapse, and in a manner consistent with the requirements of Section 409A.
 
(o)         “Incentive Stock Option” means an Option intended to be (as set
forth in the Award Agreement) and which qualifies as an incentive stock option
within the meaning of Section 422(b) of the Code.
 
(p)         “Incumbent Director” means a director who either (i) is a member of
the Board as of the Effective Date or (ii) is elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but excluding a
director who was elected or nominated in connection with an actual or threatened
proxy contest relating to the election of directors of the Company).
 
(q)         “Insider” means an Officer, a Director or other person whose
transactions in Stock are subject to Section 16 of the Exchange Act.
 
(r)         “Nonstatutory Stock Option” means an Option not intended to be (as
set forth in the Award Agreement) or which does not qualify as an incentive
stock option within the meaning of Section 422(b) of the Code.
 

(s)          “Officer” means any person designated by the Board as an officer of
the Company.
 
(t)          “Option” means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
 
(u)         “Ownership Change Event” means the occurrence of any of the
following with respect to the Company: (i) the direct or indirect sale or
exchange in a single or series of related transactions by the stockholders of
the Company of securities of the Company representing more than fifty percent
(50%) of the total combined voting power of the Company’s then outstanding
securities entitled to vote generally in the election of Directors; (ii) a
merger or consolidation in which the Company is a party; or (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company
(other than a sale, exchange or transfer to one or more subsidiaries of the
Company).
 
(v)         “Parent Corporation” means any present or future “parent
corporation” of the Company, as defined in Section 424(e) of the Code.
 
(w)         “Participant” means any eligible person who has been granted one or
more Awards.
 
(x)         “Participating Company” means the Company or any Parent Corporation
or Subsidiary Corporation.
 
(y)         “Participating Company Group” means, at any point in time, all
entities collectively which are then Participating Companies.

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(z)          “Predecessor Plan” means the Company’s 2012 Equity Incentive Plan.
 
(aa)       “Restricted Stock Award” means an Award in the form of a Restricted
Stock Bonus or a Restricted Stock Purchase Right.
 
(bb)       “Restricted Stock Bonus” means Stock granted to a Participant
pursuant to Section 7.
 
(cc)       “Restricted Stock Purchase Right” means a right to purchase Stock
granted to a Participant pursuant to Section 7.
 
(dd)       “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from
time to time, or any successor rule or regulation.
 
(ee)       “Section 409A” means Section 409A of the Code.
 
(ff)        “Securities Act” means the Securities Act of 1933, as amended.
 
(gg)       “Service” means a Participant’s employment or service with the
Participating Company Group, whether as an Employee, a Director or a Consultant.
Unless otherwise provided by the Board, a Participant’s Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders Service or a change in the Participating Company for
which the Participant renders Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service
shall not be deemed to have been interrupted or terminated if the Participant
takes any military leave, sick leave, or other bona fide leave of absence
approved by the Company. However, unless otherwise provided by the Board, if any
such leave taken by a Participant exceeds ninety (90) days, then on the
ninety-first (91st) day following the commencement of such leave the
Participant’s Service shall be deemed to have terminated, unless the
Participant’s right to return to Service is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, an unpaid leave of absence shall not be treated as Service for
purposes of determining vesting under the Participant’s Award Agreement. A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the business entity for which the Participant
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Participant’s Service has terminated and the effective date of and reason for
such termination.
 
(hh)       “Stock” means the common stock of the Company, as adjusted from time
to time in accordance with Section 4.44.4. (ii)   “Subsidiary Corporation” means
any present or future “subsidiary corporation” of the Company, as defined in
Section 424(f) of the Code.
 
(jj)         “Ten Percent Stockholder” means a person who, at the time an Award
is granted to such person, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of a Participating
Company within the meaning of Section 422(b)(6) of the Code.
 

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(kk)       “Trading Compliance Policy” means the written policy of the Company
pertaining to the purchase, sale, transfer or other disposition of the Company’s
equity securities by Directors, Officers, Employees or other service providers
who may possess material, nonpublic information regarding the Company or its
securities.
 
(ll)         “Vesting Conditions” mean those conditions established in
accordance with the Plan prior to the satisfaction of which an Award or shares
subject to an Award remain subject to forfeiture or a repurchase option in favor
of the Company exercisable for the Participant’s monetary purchase price, if
any, for such shares upon the Participant’s termination of Service or failure of
a performance condition to be satisfied.
 
2.2         Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise.

3.
ADMINISTRATION.

3.1         Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan, of any Award Agreement or of
any other form of agreement or other document employed by the Company in the
administration of the Plan or of any Award shall be determined by the Board, and
such determinations shall be final, binding and conclusive upon all persons
having an interest in the Plan or such Award, unless fraudulent or made in bad
faith. Any and all actions, decisions and determinations taken or made by the
Board in the exercise of its discretion pursuant to the Plan or Award Agreement
or other agreement thereunder (other than determining questions of
interpretation pursuant to the preceding sentence) shall be final, binding and
conclusive upon all persons having an interest therein. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
 
3.2          Authority of Officers. Any Officer shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation,
determination or election that is the responsibility of or that is allocated to
the Company herein, provided that the Officer has apparent authority with
respect to such matter, right, obligation, determination or election.
 
3.3          Powers of the Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its discretion:
 
(a)          to determine the persons to whom, and the time or times at which,
Awards shall be granted and the number of shares of Stock to be subject to each
Award;
 

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(b)          to determine the type of Award granted;
 
(c)          to determine the Fair Market Value of shares of Stock or other
property;
 
(d)          to determine the terms, conditions and restrictions applicable to
each Award (which need not be identical) and any shares acquired pursuant
thereto, including, without limitation, (i) the exercise or purchase price of
shares pursuant to any Award, (ii) the method of payment for shares purchased
pursuant to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with any Award, including by the withholding or
delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the time of expiration of any Award, (vi) the effect of any Participant’s
termination of Service on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to any Award or shares acquired pursuant
thereto not inconsistent with the terms of the Plan;
 
(e)          to approve one or more forms of Award Agreement;
 
(f)           to amend, modify, extend, cancel or renew any Award or to waive
any restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
 
(g)          to reprice or otherwise adjust the exercise price of any Option, or
to grant in substitution for any Option a new Award covering the same or
different number of shares of Stock;
 
(h)          to accelerate, continue, extend or defer the exercisability or
vesting of any Award or any shares acquired pursuant thereto, including with
respect to the period following a Participant’s termination of Service;
 
(i)           to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt sub-plans or supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose
residents may be granted Awards; and
 
(j)           to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
 
3.4          Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

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3.5         Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or as officers or employees of the
Participating Company Group, to the extent permitted by applicable law, members
of the Board and any officers or employees of the Participating Company Group to
whom authority to act for the Board or the Company is delegated shall be
indemnified by the Company against all reasonable expenses, including attorneys’
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any right granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

 
4.
SHARES SUBJECT TO PLAN.

4.1         Maximum Number of Shares Issuable. Subject to adjustment as provided
in Sections 4.2 and 4.4, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two million, seven hundred ninety
thousand, five hundred eighty-three (2,790,583) and shall consist of authorized
but unissued or reacquired shares of Stock or any combination thereof.
Notwithstanding the foregoing, at any such time as the offer and sale of
securities pursuant to the Plan is subject to compliance with Section 260.140.45
of Title 10 of the California Code of Regulations (“Section 260.140.45”), the
total number of shares of Stock issuable upon the exercise of all outstanding
Awards (together with options outstanding under any other stock plan of the
Company) and the total number of shares provided for under any stock bonus or
similar plan of the Company shall not exceed thirty percent (30%) (or such other
higher percentage limitation as may be approved by the stockholders of the
Company pursuant to Section 260.140.45) of the then outstanding shares of the
Company as calculated in accordance with the conditions and exclusions of
Section 260.140.45.
 
4.2         Adjustment for Unissued or Forfeited Predecessor Plan Shares. The
maximum aggregate number of shares of Stock that may be issued under the Plan as
set forth in Section 4.1 shall be cumulatively increased from time to time by:
 
(a)          the aggregate number of shares of Stock that remain available for
the future grant of awards under the Predecessor Plan immediately prior to its
termination as of the Effective Date;
 
(b)          the number of shares of Stock subject to that portion of any option
or other award outstanding pursuant to the Predecessor Plan as of the Effective
Date which, on or after the Effective Date, expires or is terminated or canceled
for any reason without having been exercised or settled in full; and
 
(c)           the number of shares of Stock acquired pursuant to the Predecessor
Plan subject to forfeiture or repurchase by the Company for an amount not
greater than the Participant’s purchase price which, on or after the Effective
Date, is so forfeited or repurchased; provided, however, that the aggregate
number of shares of Stock authorized for issuance under the Predecessor Plan
that may become authorized for issuance under the Plan pursuant to this Section
4.2 shall not exceed nine hundred twenty thousand, nine hundred seven (920,907)
shares.
 

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4.3         Share Counting. If an outstanding Award for any reason expires or is
terminated or canceled without having been exercised or settled in full, or if
shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company for an amount not greater
than the Participant’s exercise or purchase price, the shares of Stock allocable
to the terminated portion of such Award or such forfeited or repurchased shares
of Stock shall again be available for issuance under the Plan. Shares of Stock
shall not be deemed to have been issued pursuant to the Plan (a) with respect to
any portion of an Award that is settled in cash or (b) to the extent such shares
are withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to Section 10.2. If the exercise price of an Option is paid
by tender to the Company, or attestation to the ownership, of shares of Stock
owned by the Participant, or by means of a Net Exercise, the number of shares
available for issuance under the Plan shall be reduced by the net number of
shares issued upon the exercise of the Option.
 
4.4         Adjustments for Changes in Capital Structure. Subject to any
required action by the stockholders of the Company and the requirements of
Sections 409A and 424 of the Code to the extent applicable, in the event of any
change in the Stock effected without receipt of consideration by the Company,
whether through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting regular, periodic cash dividends) that has a
material effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and kind of shares subject
to the Plan and to any outstanding Awards, in the ISO Share Limit set forth in
Section 5.3(a), and in the exercise or purchase price per share under any
outstanding Awards in order to prevent dilution or enlargement of Participants’
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as “effected without
receipt of consideration by the Company.” If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the “New Shares”), the
Board may unilaterally amend the outstanding Awards to provide that such Awards
are for New Shares. In the event of any such amendment, the number of shares
subject to, and the exercise or purchase price per share of, the outstanding
Awards shall be adjusted in a fair and equitable manner as determined by the
Board, in its discretion. Any fractional share resulting from an adjustment
pursuant to this Section shall be rounded down to the nearest whole number, and
the exercise or purchase price per share shall be rounded up to the nearest
whole cent. In no event may the exercise or purchase price, if any, under any
Award be decreased to an amount less than the par value, if any, of the stock
subject to the Award. Such adjustments shall be determined by the Board, and its
determination shall be final, binding and conclusive.
 
4.5          Assumption or Substitution of Awards. The Board may, without
affecting the number of shares of Stock available pursuant to Section 4.1,
authorize the issuance or assumption of benefits under this Plan in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate,
subject to compliance with Section 409A and any other applicable provisions of
the Code.
 

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5.
ELIGIBILITY, PARTICIPATION AND OPTION LIMITATIONS.

 
5.1         Persons Eligible for Awards. Awards may be granted only to
Employees, Consultants and Directors.

5.2         Participation in the Plan. Awards are granted solely at the
discretion of the Board. Eligible persons may be granted more than one Award.
However, eligibility in accordance with this Section shall not entitle any
person to be granted an Award, or, having been granted an Award, to be granted
an additional Award.

5.3         Incentive Stock Option Limitations.
 
(a)          Maximum Number of Shares Issuable Pursuant to Incentive Stock
Options. Subject to Section 4.1 and adjustment as provided in Sections 4.2 and
4.4, the maximum aggregate number of shares of Stock that may be issued under
the Plan pursuant to the exercise of Incentive Stock Options shall not exceed
three million, seven hundred eleven thousand, four hundred ninety (3,711,490)
shares (the “ISO Share Limit”). The maximum aggregate number of shares of Stock
that may be issued under the Plan pursuant to all Awards other than Incentive
Stock Options shall be the number of shares determined in accordance with
Section 4.1, subject to adjustment as provided in Sections 4.2 and 4.4.
 
(b)          Persons Eligible. An Incentive Stock Option may be granted only to
a person who, on the effective date of grant, is an Employee. Any person who is
not an Employee on the effective date of the grant of an Option to such person
may be granted only a Nonstatutory Stock Option.
 
(c)          Fair Market Value Limitation. To the extent that options designated
as Incentive Stock Options (granted under all stock plans of the Participating
Company Group, including the Plan) become exercisable by a Participant for the
first time during any calendar year for stock having a Fair Market Value greater
than One Hundred Thousand Dollars ($100,000), the portion of such options which
exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes
of this Section, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of stock shall be determined as of the time the option with respect to such
stock is granted. If the Code is amended to provide for a limitation different
from that set forth in this Section, such different limitation shall be deemed
incorporated herein effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code. If an Option is treated as
an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by
reason of the limitation set forth in this Section, the Participant may
designate which portion of such Option the Participant is exercising. In the
absence of such designation, the Participant shall be deemed to have exercised
the Incentive Stock Option portion of the Option first. Upon exercise of the
Option, shares issued pursuant to each such portion shall be separately
identified.
 

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6.
STOCK OPTIONS.

 
Options shall be evidenced by Award Agreements specifying the number of shares
of Stock covered thereby, in such form as the Board shall establish. Such Award
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:
 
6.1         Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Option shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the Option and (b)
no Incentive Stock Option granted to a Ten Percent Stockholder shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price less than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner that would qualify
under the provisions of Section 409A or Section 424(a) of the Code, as
applicable.
 
6.2         Exercisability and Term of Options. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Award Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Stockholder shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to an Employee who is a non-exempt employee for
purposes of the Fair Labor Standards Act of 1938, as amended, shall be first
exercisable until at least six (6) months following the date of grant of such
Option (except in the event of such Employee’s death, disability or retirement,
upon a Change in Control, or as otherwise permitted by the Worker Economic
Opportunity Act). Subject to the foregoing, unless otherwise specified by the
Board in the grant of an Option, each Option shall terminate ten (10) years
after the effective date of grant of the Option, unless earlier terminated in
accordance with its provisions.
 
6.3         Payment of Exercise Price. (a) Forms of Consideration Authorized.
Except as otherwise provided below, payment of the exercise price for the number
of shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check or in cash equivalent, (ii) if permitted by the Company and
subject to the limitations contained in Section 6.3(b), by means of (1) a Stock
Tender Exercise, (2) a Cashless Exercise or (3) a Net Exercise; (iii) by such
other consideration as may be approved by the Board from time to time to the
extent permitted by applicable law, or (iv) by any combination thereof. The
Board may at any time or from time to time grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the exercise
price or which otherwise restrict one or more forms of consideration.
 
(b)          Limitations on Forms of Consideration.
 
(i)           Stock Tender Exercise. A “Stock Tender Exercise” means the
delivery of a properly executed exercise notice accompanied by a Participant’s
tender to the Company, or attestation to the ownership, in a form acceptable to
the Company of whole shares of Stock owned by the Participant having a Fair
Market Value that does not exceed the aggregate exercise price for the shares
with respect to which the Option is exercised. A Stock Tender Exercise shall not
be permitted if it would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock. If
required by the Company, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for a period of time required by the
Company (and not used for another option exercise by attestation during such
period) or were not acquired, directly or indirectly, from the Company.
 

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(ii)          Cashless Exercise. A Cashless Exercise shall be permitted only
upon the class of shares subject to the Option becoming publicly traded in an
established securities market. A “Cashless Exercise” means the delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker providing for the assignment to the Company of the proceeds of a sale or
loan with respect to some or all of the shares being acquired upon the exercise
of the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company’s sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.
 
(iii)         Net Exercise. A “Net Exercise” means the delivery of a properly
executed exercise notice followed by a procedure pursuant to which (1) the
Company will reduce the number of shares otherwise issuable to a Participant
upon the exercise of an Option by the largest whole number of shares having a
Fair Market Value that does not exceed the aggregate exercise price for the
shares with respect to which the Option is exercised, and (2) the Participant
shall pay to the Company in cash the remaining balance of such aggregate
exercise price not satisfied by such reduction in the number of whole shares to
be issued.
 

6.4
Effect of Termination of Service.

 
(a)          Option Exercisability. Subject to earlier termination of the Option
as otherwise provided by this Plan and unless a longer exercise period is
provided by the Board, an Option shall terminate immediately upon the
Participant’s termination of Service to the extent that it is then unvested and
shall be exercisable after the Participant’s termination of Service to the
extent it is then vested only during the applicable time period determined in
accordance with this Section and thereafter shall terminate:
 
(i)           Disability. If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant (or the Participant’s guardian
or legal representative) at any time prior to the expiration twelve (12) months
(or such longer or shorter period (but not less than six (6) months) provided by
the Award Agreement) after the date on which the Participant’s Service
terminated, but in any event no later than the date of expiration of the
Option’s term as set forth in the Award Agreement evidencing such Option (the
“Option Expiration Date”).

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(ii)          Death. If the Participant’s Service terminates because of the
death of the Participant, the Option, to the extent unexercised and exercisable
for vested shares on the date on which the Participant’s Service terminated, may
be exercised by the Participant’s legal representative or other person who
acquired the right to exercise the Option by reason of the Participant’s death
at any time prior to the expiration of twelve (12) months (or such longer or
shorter period (but not less than six (6) months) provided by the Award
Agreement) after the date on which the Participant’s Service terminated, but in
any event no later than the Option Expiration Date. The Participant’s Service
shall be deemed to have terminated on account of death if the Participant dies
within thirty (30) days (or such longer period provided by the Board) after the
Participant’s termination of Service.
 
(iii)         Termination for Cause. Notwithstanding any other provision of the
Plan to the contrary, if the Participant’s Service is terminated for Cause, the
Option shall terminate in its entirety and cease to be exercisable immediately
upon such termination of Service.
 
(iv)         Other Termination of Service. If the Participant’s Service
terminates for any reason, except Disability, death or Cause, the Option, to the
extent unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of three (3) months (or such longer or shorter
period (but not less than thirty (30) days) provided by the Award Agreement)
after the date on which the Participant’s Service terminated, but in any event
no later than the Option Expiration Date.
 
(b)          Extension if Exercise Prevented by Law. Notwithstanding the
foregoing other than termination of Service for Cause, if the exercise of an
Option within the applicable time periods set forth in Section 6.4(a) is
prevented by the provisions of Section 11 below, the Option shall remain
exercisable until the later of (i) thirty (30) days after the date such exercise
first would no longer be prevented by such provisions or (ii) the end of the
applicable time period under Section 6.4(a), but in any event no later than the
Option Expiration Date.
 
6.5         Transferability of Options. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant or the Participant’s
guardian or legal representative. An Option shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and distribution;
provided, however, that to the extent permitted by the Board, in its discretion,
and set forth in the Award Agreement evidencing such Option, an Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in Rule 701 under the Securities Act and the General Instructions to
Form S-8 Registration Statement under the Securities Act or, in the case of an
Incentive Stock Option, only as permitted by applicable regulations under
Section 421 of the Code in a manner that does not disqualify such Option as an
Incentive Stock Option. Notwithstanding the foregoing, for so long as the
Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange
Act, no Option or, prior to its exercise, the shares to be issued upon the
exercise of the Option, shall be transferred except in compliance with the
restrictions on transfer under Rule 12h-1(f) (including the requirement under
such rule that any permitted transferee may not further transfer the Option) or
be made subject to any short position, “put equivalent position” or “call
equivalent position” by the Participant, as such terms are defined in Rule 16a-1
of the Exchange Act.
 

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7.
RESTRICTED STOCK AWARDS.

 
Restricted Stock Awards shall be evidenced by Award Agreements specifying
whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase
Right and the number of shares of Stock subject to the Award, in such form as
the Board shall establish. Such Award Agreements may incorporate all or any of
the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
 
7.1         Types of Restricted Stock Awards Authorized. Restricted Stock Awards
may be granted in the form of either a Restricted Stock Bonus or a Restricted
Stock Purchase Right. Restricted Stock Awards may be granted upon such
conditions as the Board shall determine, including, without limitation, upon the
attainment of one or more performance goals.
 
7.2         Purchase Price. The purchase price for shares of Stock issuable
under each Restricted Stock Purchase Right shall be established by the Board in
its discretion. No monetary payment (other than applicable tax withholding)
shall be required as a condition of receiving shares of Stock pursuant to a
Restricted Stock Bonus, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the
foregoing, if required by applicable state corporate law, the Participant shall
furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock subject to a Restricted Stock Award.
 
7.3         Purchase Period. A Restricted Stock Purchase Right shall be
exercisable within a period established by the Board, which shall in no event
exceed thirty (30) days from the effective date of the grant of the Restricted
Stock Purchase Right.
 
7.4         Payment of Purchase Price. Except as otherwise provided below,
payment of the purchase price for the number of shares of Stock being purchased
pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by
check or in cash equivalent, (b) by such other consideration as may be approved
by the Board from time to time to the extent permitted by applicable law, or (c)
by any combination thereof.
 
7.5         Vesting and Restrictions on Transfer. Shares issued pursuant to any
Restricted Stock Award may (but need not) be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, as shall be established by the Board and
set forth in the Award Agreement evidencing such Award. During any period in
which shares acquired pursuant to a Restricted Stock Award remain subject to
Vesting Conditions, such shares may not be sold, exchanged, transferred,
pledged, assigned or otherwise disposed of other than pursuant to an Ownership
Change Event or as provided in Section 7.8. The Board, in its discretion, may
provide in any Award Agreement evidencing a Restricted Stock Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to such
Restricted Stock Award would otherwise occur on a day on which the sale of such
shares would violate the provisions of the Trading Compliance Policy, then
satisfaction of the Vesting Conditions automatically shall be determined on the
next trading day on which the sale of such shares would not violate the Trading
Compliance Policy. Upon request by the Company, each Participant shall execute
any agreement evidencing such transfer restrictions prior to the receipt of
shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement
on such certificates of appropriate legends evidencing any such transfer
restrictions.

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7.6         Voting Rights; Dividends and Distributions. Except as provided in
this Section, Section 7.5 and any Award Agreement, during any period in which
shares acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, the Participant shall have all of the rights of a stockholder of the
Company holding shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to such shares;
provided, however, that if so determined by the Board and provided by the Award
Agreement, such dividends and distributions shall be subject to the same Vesting
Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid, and otherwise shall be paid no
later than the end of the calendar year in which such dividends or distributions
are paid to stockholders (or, if later, the 15th day of the third month
following the date such dividends or distributions are paid to stockholders). In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.4, any and all new, substituted or
additional securities or other property (other than regular, periodic cash
dividends) to which the Participant is entitled by reason of the Participant’s
Restricted Stock Award shall be immediately subject to the same Vesting
Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.
 
7.7         Effect of Termination of Service. Unless otherwise provided by the
Board in the Award Agreement evidencing a Restricted Stock Award, if a
Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then (a) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Restricted
Stock Purchase Right which remain subject to Vesting Conditions as of the date
of the Participant’s termination of Service and (b) the Participant shall
forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the date
of the Participant’s termination of Service. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right
is then exercisable, to one or more persons as may be selected by the Company.
 
7.8         Nontransferability of Restricted Stock Award Rights. Rights to
acquire shares of Stock pursuant to a Restricted Stock Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Restricted Stock Award granted to
a Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant’s guardian or legal representative.
 

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8.
STANDARD FORMS OF AWARD AGREEMENTS.

 
8.1         Award Agreements. Each Award shall comply with and be subject to the
terms and conditions set forth in the appropriate form of Award Agreement
approved by the Board and as amended from time to time. No Award or purported
Award shall be a valid and binding obligation of the Company unless evidenced by
a fully executed Award Agreement, which execution may be evidenced by electronic
means.
 
8.2         Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the Plan.
 

 
9.
CHANGE IN CONTROL.

 
9.1         Effect of Change in Control on Awards. Subject to the requirements
and limitations of Section 409A, if applicable, the Board may provide for any
one or more of the following:
 
(a)          Acceleration on Non-Assumption. In its discretion, the Board may
provide in the grant of any Award or at any other time may take action it deems
appropriate to provide for acceleration of the exercisability and/or vesting in
connection with a Change in Control of each or any outstanding Award or portion
thereof and shares acquired pursuant thereto upon such conditions, including
termination of the Participant’s Service prior to, upon, or following the Change
in Control, and to such extent as the Board determines. Further, unless
otherwise provided by the applicable Award Agreement or determined by the Board
and subject to Section 11.2(c), in the event that the Acquiror (as defined
below) elects not to assume, continue or substitute for, in accordance with
Section 9.1(b), any portion of an Award outstanding immediately prior to the
Change in Control, the exercisability and/or vesting of such portion of the
Award held by a Participant whose Service has not terminated prior to the Change
in Control shall be accelerated in full effective as of a date prior to, but
conditioned upon, the consummation of the Change in Control as determined by the
Board.

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(b)          Assumption, Continuation or Substitution of Awards. In the event of
a Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
“Acquiror”), may, without the consent of any Participant, assume or continue the
Company’s rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each or
any such outstanding Award or portion thereof a substantially equivalent award
with respect to the Acquiror’s stock. For purposes of this Section, if so
determined by the Board, in its discretion, an Award or any portion thereof
shall be deemed assumed if, following the Change in Control, the Award confers
the right to receive, subject to the terms and conditions of the Plan and the
applicable Award Agreement, for each share of Stock subject to such portion of
the Award immediately prior to the Change in Control, the consideration (whether
stock, cash, other securities or property or a combination thereof) to which a
holder of a share of Stock on the effective date of the Change in Control was
entitled (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Stock); provided, however, that if such consideration is not solely common stock
of the Acquiror, the Board may, with the consent of the Acquiror, provide for
the consideration to be received upon the exercise of the Award, for each share
of Stock subject to the Award, solely common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock
pursuant to the Change in Control. If any portion of such consideration may be
received by holders of Stock pursuant to the Change in Control on a contingent
or delayed basis, the Board may, in its discretion, determine such Fair Market
Value per share as of the time of the Change in Control on the basis of the
Board’s good faith estimate of the present value of the probable future payment
of such consideration. Any Award or portion thereof which is neither assumed or
continued by the Acquiror in connection with the Change in Control nor exercised
as of the time of consummation of the Change in Control shall terminate and
cease to be outstanding effective as of the time of consummation of the Change
in Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Award prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of the Award Agreement evidencing such Award except
as otherwise provided in such Award Agreement.
 
(c)          Cash-Out of Outstanding Awards. The Board may, in its discretion
and without the consent of any Participant, determine that, upon the occurrence
of a Change in Control, each or any Award or portion thereof outstanding
immediately prior to the Change in Control and not previously exercised or
settled shall be canceled in exchange for a payment with respect to each vested
share (and each unvested share, if so determined by the Board) of Stock subject
to such canceled Award in (i) cash, (ii) stock of the Company or of a
corporation or other business entity a party to the Change in Control, or (iii)
other property which, in any such case, shall be in an amount having a Fair
Market Value equal to the Fair Market Value of the consideration to be paid per
share of Stock in the Change in Control, reduced (but not below zero) by the
exercise or purchase price per share, if any, under such Award. If any portion
of such consideration may be received by holders of Stock pursuant to the Change
in Control on a contingent or delayed basis, the Board may, in its sole
discretion, determine such Fair Market Value per share as of the time of the
Change in Control on the basis of the Board’s good faith estimate of the present
value of the probable amount of future payment of such consideration. In the
event such determination is made by the Board, an Award having an exercise or
purchase price per share equal to or greater than the Fair Market Value of the
consideration to be paid per share of Stock in the Change in Control may be
canceled without payment of consideration to the holder thereof. Payment
pursuant to this Section (reduced by applicable withholding taxes, if any) shall
be made to Participants in respect of the vested portions of their canceled
Awards as soon as practicable following the date of the Change in Control and in
respect of the unvested portions of their canceled Awards in accordance with the
vesting schedules applicable to such Awards.

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9.2
Federal Excise Tax Under Section 4999 of the Code.

 
(a)          Excess Parachute Payment. If any acceleration of vesting pursuant
to an Award and any other payment or benefit received or to be received by a
Participant would subject the Participant to any excise tax pursuant to Section
4999 of the Code due to the characterization of such acceleration of vesting,
payment or benefit as an “excess parachute payment” under Section 280G of the
Code, then, provided such election would not subject the Participant to taxation
under Section 409A, the Participant may elect to reduce the amount of any
acceleration of vesting called for under the Award in order to avoid such
characterization.
 
(b)          Determination by Tax Firm. To aid the Participant in making any
election called for under Section 9.2(a), no later than the date of the
occurrence of any event that might reasonably be anticipated to result in an
“excess parachute payment” to the Participant as described in Section 9.2(a),
the Company shall request a determination in writing by the professional firm
engaged by the Company for general tax purposes, or, if the tax firm so engaged
by the Company is serving as accountant or auditor for the Acquiror, the Company
will appoint a nationally recognized tax firm to make the determinations
required by this Section (the “Tax Firm”). As soon as practicable thereafter,
the Tax Firm shall determine and report to the Company and the Participant the
amount of such acceleration of vesting, payments and benefits which would
produce the greatest after-tax benefit to the Participant. For the purposes of
such determination, the Tax Firm may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Participant shall furnish to the Tax Firm such
information and documents as the Tax Firm may reasonably request in order to
make its required determination. The Company shall bear all fees and expenses
the Tax Firm may charge in connection with its services contemplated by this
Section.
 

 
10.
TAX WITHHOLDING.

 
10.1       Tax Withholding in General. The Company shall have the right to
deduct from any and all payments made under the Plan, or to require the
Participant, through payroll withholding, cash payment or otherwise, to make
adequate provision for, the federal, state, local and foreign taxes (including
social insurance), if any, required by law to be withheld by any Participating
Company with respect to an Award or the shares acquired pursuant thereto. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to an Award Agreement until the
Participating Company Group’s tax withholding obligations have been satisfied by
the Participant.
 
10.2       Withholding in or Directed Sale of Shares. The Company shall have the
right, but not the obligation, to deduct from the shares of Stock issuable to a
Participant upon the exercise or vesting of an Award, or to accept from the
Participant the tender of, a number of whole shares of Stock having a Fair
Market Value, as determined by the Company, equal to all or any part of the tax
withholding obligations of any Participating Company. The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company may require a Participant to direct a
broker, upon the vesting or exercise of an Award, to sell a portion of the
shares subject to the Award determined by the Company in its discretion to be
sufficient to cover the tax withholding obligations of any Participating Company
and to remit an amount equal to such tax withholding obligations to the
Participating Company in cash.

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11.
COMPLIANCE WITH SECTION 409A.

 
11.1       In General. The Plan and all Awards granted hereunder are intended to
comply with, or otherwise be exempt from, Section 409A. The Plan and all Awards
granted under the Plan shall be administered, interpreted, and construed in a
manner consistent with Section 409A, as determined by the Company in good faith,
to the extent necessary to avoid the imposition of additional taxes under
Section 409A(a)(1)(B) of the Code. It is intended that any election, payment or
benefit which is made or provided pursuant to or in connection with any Award
that may result in deferred compensation within the meaning of Section 409A
shall comply in all respects with the applicable requirements of Section 409A.
 
11.2       Certain Limitations. With respect to any Award that is subject to
Section 409A, the following shall apply, as applicable:
 
(a)          Notwithstanding anything to the contrary in the Plan or any Award
Agreement, to the extent required to avoid tax penalties under Section 409A,
amounts that would otherwise be payable and benefits that would otherwise be
provided pursuant to the Plan on account of, and during the six (6) month period
immediately following, the Participant's termination of Service shall instead be
paid on the first payroll date after the six-month anniversary of the
Participant’s separation from service (or the Participant's death, if earlier).
 
(b)          Neither any Participant nor the Company shall take any action to
accelerate or delay the payment of any amount or benefits under an Award in any
manner which would not be in compliance with Section 409A.
 
(c)          Notwithstanding anything to the contrary in the Plan or any Award
Agreement, to the extent that any amount constituting deferred compensation
subject to Section 409A would become payable under the Plan by reason of a
Change in Control, such amount shall become payable only if the event
constituting the Change in Control would also constitute a change in ownership
or effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company within the meaning of Section
409A. Any Award which constitutes deferred compensation subject to Section 409A
and which would vest and otherwise become payable upon a Change in Control as a
result of the failure of the Acquiror to assume, continue or substitute for such
Award in accordance with Section 9.1(b) shall vest to the extent provided by
such Award but shall be converted automatically at the effective time of such
Change in Control into a right to receive, in cash on the date or dates such
award would have been settled in accordance with its then existing settlement
schedule, an amount or amounts equal in the aggregate to the intrinsic value of
the Award at the time of the Change in Control.
 

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(d)          Should any provision of the Plan, any Award Agreement, or any other
agreement or arrangement contemplated by the Plan be found not to comply with,
or otherwise be exempt from, the provisions of Section 409A, such provision
shall be modified and given effect (retroactively if necessary), in the sole
discretion of the Board, and without the consent of the holder of the Award, in
such manner as the Board determines to be necessary or appropriate to comply
with, or to effectuate an exemption from, Section 409A.
 
(e)          Notwithstanding the foregoing, neither the Company nor the Board
shall have any obligation to take any action to prevent the assessment of any
tax or penalty on any Participant under Section 409A, and neither the Company
nor the Board will have any liability to any Participant for such tax or
penalty.
 

 
12.
COMPLIANCE WITH SECURITIES LAW.

The grant of Awards and the issuance of shares of Stock pursuant to any Award
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities and the requirements of
any stock exchange or market system upon which the Stock may then be listed. In
addition, no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the shares issuable pursuant
to the Award or (b) in the opinion of legal counsel to the Company, the shares
issuable pursuant to the Award may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
Except as otherwise determined by the Board, the Company intends that securities
issued pursuant to the Plan be exempt from requirements of registration and
qualification of such securities pursuant the exemptions afforded by Rule 701
promulgated under the Securities Act and Section 25102(o) of the of the
California Corporations Code or any other applicable exemptions, and the Plan
shall be so construed. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to issuance of any Stock, the Company may
require the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.

 
13.
AMENDMENT OR TERMINATION OF PLAN.

The Board may amend, suspend or terminate the Plan at any time. However, without
the approval of the Company’s stockholders, there shall be (a) no increase in
the maximum aggregate number of shares of Stock that may be issued under the
Plan (except by operation of the provisions of Sections 4.2 and 4.4), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule, including the rules
of any stock exchange or quotation system upon which the Stock may then be
listed or quoted. No amendment, suspension or termination of the Plan shall
affect any then outstanding Award unless expressly provided by the Board. Except
as provided by the next sentence, no amendment, suspension or termination of the
Plan may have a materially adverse effect on any then outstanding Award without
the consent of the Participant. Notwithstanding any other provision of the Plan
or any Award Agreement to the contrary, the Board may, in its sole and absolute
discretion and without the consent of any Participant, amend the Plan or any
Award Agreement, to take effect retroactively or otherwise, as it deems
necessary or advisable for the purpose of conforming the Plan or such Award
Agreement to any present or future law, regulation or rule applicable to the
Plan, including, but not limited to, Section 409A.

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14.
MISCELLANEOUS PROVISIONS.

 
14.1       Restrictions on Transfer of Shares.
 
(a)          Shares issued under the Plan may be subject to a right of first
refusal, one or more repurchase options, or other conditions and restrictions as
determined by the Board in its discretion at the time the Award is granted. The
Company shall have the right to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company. Upon request by the Company, each Participant
shall execute any agreement evidencing such transfer restrictions prior to the
receipt of shares of Stock hereunder and shall promptly present to the Company
any and all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
 
(b)          Notwithstanding the provisions of any Award Agreement to the
contrary, at any time prior to the date on which the Stock is listed on a
national securities exchange (as such term is used in the Exchange Act) or is
traded on the over-the-counter market and prices therefore are published daily
on business days in a recognized financial journal, the Board may prohibit any
Participant who acquires shares of Stock pursuant to the Plan or any transferee
of such Participant from selling, transferring, assigning, pledging, or
otherwise disposing of or encumbering any such shares (each, a “Transfer”)
without the prior written consent of the Board. The Board may withhold consent
to any Transfer for any reason, including without limitation any Transfer (i) to
any individual or entity identified by the Company as a potential competitor or
considered by the Company to be unfriendly, or (ii) if such Transfer increases
the risk of the Company having a class of security held of record by such number
of persons as would require the Company to register any class of securities
under the Exchange Act; or (iii) if such Transfer would result in the loss of
any federal or state securities law exemption relied upon by the Company in
connection with the initial issuance of such shares or the issuance of any other
securities; or (iv) if such Transfer is facilitated in any manner by any public
posting, message board, trading portal, Internet site, or similar method of
communication, including without limitation any trading portal or Internet site
intended to facilitate secondary transfers of securities; or (v) if such
Transfer is to be effected in a brokered transaction; or (vi) if such Transfer
would be of less than all of the shares of Stock then held by the stockholder
and its affiliates or is to be made to more than a single transferee.
 
14.2       Forfeiture Events. The Board may determine that the Participant’s
rights, payments, and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture, or recoupment upon the occurrence of
specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause, any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service, or any accounting restatement due to material noncompliance of the
Company with any financial reporting requirements of securities laws as a result
of which, and to the extent that, such reduction, cancellation, forfeiture, or
recoupment is required by applicable securities laws.
 

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14.3       Provision of Information. At least annually, copies of the Company’s
balance sheet and income statement for the just completed fiscal year shall be
made available to each Participant and purchaser of shares of Stock upon the
exercise of an Award; provided, however, that this requirement shall not apply
if all offers and sales of securities pursuant to the Plan comply with all
applicable conditions of Rule 701 under the Securities Act. The Company shall
not be required to provide such information to key persons whose duties in
connection with the Company assure them access to equivalent information. The
Company shall deliver to each Participant such disclosures as are required in
accordance with Rule 701 under the Securities Act. Notwithstanding the
foregoing, at any time the Company is relying on the exemption provided by Rule
12h-1(f) under the Exchange Act, the Company shall provide to the applicable
Participants the information described in Securities Act Rules 701(e)(3), (4)
and (5) by a method allowed under Rule 12h-1(f)(1)(vi) and in accordance with
the requirements of Rule 12h-1(f)(1)(vi), provided that the Participant agrees
to keep the information confidential until the Company becomes subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act.
 
14.4       Rights as Employee, Consultant or Director. No person, even though
eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee, Consultant or Director or interfere
with or limit in any way any right of a Participating Company to terminate the
Participant’s Service at any time. To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award shall in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.
 
14.5       Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.4 or another provision of the Plan.
 
14.6       Delivery of Title to Shares. Subject to any governing rules or
regulations, the Company shall issue or cause to be issued the shares of Stock
acquired pursuant to an Award and shall deliver such shares to or for the
benefit of the Participant by means of one or more of the following: (a) by
delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant, (b) by depositing such shares of Stock for the
benefit of the Participant with any broker with which the Participant has an
account relationship, or (c) by delivering such shares of Stock to the
Participant in certificate form.
 
14.7       Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.
 

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14.8       Retirement and Welfare Plans. Neither Awards made under this Plan nor
shares of Stock or cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits payable to any Participant
under any Participating Company’s retirement plans (both qualified and
non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a
Participant’s benefits.
 
14.9       Severability. If any one or more of the provisions (or any part
thereof) of this Plan shall be held invalid, illegal or unenforceable in any
respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected or
impaired thereby.
 
14.10     No Constraint on Corporate Action. Nothing in this Plan shall be
construed to: (a) limit, impair, or otherwise affect the Company’s or another
Participating Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be necessary
or appropriate.
 
14.11     Choice of Law. Except to the extent governed by applicable federal
law, the validity, interpretation, construction and performance of the Plan and
each Award Agreement shall be governed by the laws of the State of Delaware,
without regard to its conflict of law rules.
 
14.12     Stockholder Approval. The Plan or any increase in the maximum
aggregate number of shares of Stock issuable thereunder as provided in Section
4.1 (the “Authorized Shares”) shall be approved by a majority of the outstanding
securities of the Company entitled to vote by the later of (a) a period
beginning twelve (12) months before and ending twelve (12) months after the date
of adoption thereof by the Board or (b) the first issuance of any security
pursuant to the Plan in the State of California (within the meaning of Section
25008 of the California Corporations Code). Awards granted prior to security
holder approval of the Plan or in excess of the Authorized Shares previously
approved by the security holders shall become exercisable no earlier than the
date of security holder approval of the Plan or such increase in the Authorized
Shares, as the case may be, and such Awards shall be rescinded if such security
holder approval is not received in the manner described in the preceding
sentence.

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