Exhibit 10.1

            

            


            
            QUALITY SYSTEMS, INC.


             


            
            AMENDED AND RESTATED


            
            1998 STOCK OPTION PLAN


             


            
            NOTICE: QUALIFIED OPTIONS UNDER THIS PLAN BEAR RESTRICTIONS GOVERNED BY
            SECTION 422 OF THE INTERNAL REVENUE CODE. PLAN PARTICIPANTS ARE URGED TO READ SECTION
            422 AND TO UNDERSTAND THE RESTRICTIONS CONTAINED THEREIN. NOT ALL SECTION 422
            RESTRICTIONS ARE REFERENCED IN THIS PLAN. OPTIONS GRANTED HEREUNDER MAY BEAR
            RESTRICTIONS IMPOSED BY FEDERAL AND STATE SECURITIES LAWS. PLAN PARTICIPANTS ARE URGED
            TO CONSULT WITH THEIR TAX AND LEGAL ADVISORS CONCERNING THE NATURE AND RESTRICTIONS
            UPON THE OPTIONS GOVERNED HEREBY.


            
                	
                            
                            1.

                        	
                            
                            Purposes.

                        


            


            
            (a)           The
            purpose of the Plan is to provide a means by which selected Employees, Directors and
            Consultants of the Company and its Affiliates, may be given an opportunity to benefit
            from increases in value of the stock of the Company through the granting of Incentive
            Stock Options and Nonstatutory Stock Options, as defined below.


            
            (b)           The
            Company, by means of the Plan, seeks to retain the services of persons who are now
            Employees, Directors or Consultants of the Company or its Affiliates, to secure and
            retain the services of new Employees, Directors and Consultants, and to provide
            incentives for such persons to exert maximum efforts for the success of the Company and
            its Affiliates.


            
            (c)           The
            Company intends that the Options issued under the Plan shall, in the discretion of the
            Board or any Committee to which responsibility for administration of the Plan has been
            delegated pursuant to Section 3(c),
            be either Incentive Stock Options or Nonstatutory Stock Options. All Options shall be
            separately designated Incentive Stock Options or Nonstatutory Stock Options at the time
            of grant, and in such form as issued pursuant to
            Section 6, and a certificate or
            certificates will be issued for shares purchased on exercise of such
            Options.


            
                	
                            
                            2.

                        	
                            
                            Definitions.

                        


            


            
            (a)           “Affiliate” means any parent
            corporation or subsidiary corporation, 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 Section 3(c)
            of the Plan.


            
                	
                             

                        	
                            
                            (e)

                        	
                            
                            “Company” means Quality Systems, Inc., a California
                            corporation.

                        


            


            
            (f)            “Consultant” means any person, including
            an advisor, engaged by the Company or an Affiliate to render consulting or advisory
            services and who is compensated for such services, provided that the term
            “Consultant” shall not include Directors who are paid only a
            director’s fee by the Company or who are not compensated by the Company for their
            services as Directors.


            
            (g)           “Continuous Status as an Employee, Director or
            Consultant” means the employment or relationship as a
            Director or Consultant is not interrupted or terminated. The Board, in its sole
            discretion, may determine whether Continuous Status as an Employee, Director or
            Consultant shall be considered interrupted in the case of: (i) any leave of absence
            approved by the Board, including sick leave, military leave or any other personal
            leave; provided, however, that for purposes of Incentive Stock Options, any such leave
            may not exceed three (3) months, unless reemployment upon the expiration of such leave
            is guaranteed by contract, Company policies or statute; or (ii) transfers between
            locations of the Company or between the Company, Affiliates or their
            successors.


            
                	
                             

                        	
                            
                            (h)

                        	
                            
                            “Director
                            ” means a member of the Board.

                        


            


            
            (i)            “Employee” means any person, including
            Officers and Directors, employed by the Company or any Affiliate of the Company.
            Neither service as a Director nor payment of a director’s fee by the Company
            shall be sufficient to constitute “employment” by the Company.


            
                	
                             

                        	
                            
                            (j)

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

                        


            


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


            
            (i)            If
            the Common Stock is listed on any established stock exchange or market
            or is quoted on a system of automated dissemination of quotations of
            securities prices in common use, the Fair Market Value of a share of Common Stock shall
            be the closing sales price for such stock as quoted on such system or exchange on the
            day the Option is granted, or the last preceding date on which there was a sale of such
            Common Stock on such exchange or market if no sale occurred on the day the Option is
            granted, if said closing prices are reported;


            
            (ii)           In
            the case that the Common Stock is listed on any established stock exchange or
            market or is quoted on a system of automated dissemination of
            quotations of securities prices in common use but selling prices
            are not reported, the Fair Market Value of a share of Common Stock shall be the mean
            between the closing bid and asked prices for the Common Stock on the day the Option is
            granted, as reported in the Wall Street Journal or such other source as the Board deems
            reliable;


            
                	
                             

                        	
                            

                        


            


            


            
            -2-


             

            
            


            

            

            
            (iii)           In
            the absence of an established market for
            the Common Stock, the Fair Market Value shall be determined in good faith by the Board,
            provided that such valuation shall take into account all available information material
            to the value of the company, including but not limited to the value of the tangible and
            intangible assets of the company, the present value of its anticipated future cash
            flows, the market value of the stock or equity interests in other entities engaged in
            substantially the same business, recent arm’s length transactions involving the
            sale of such stock, and other relevant factors.


            
            (l)            “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.


            
                	
                             

                        	
                            
                            (m)

                        	
                            
                            “Non-Employee
                            Director” shall mean a Director
                            who:

                        


            


            
            (i)            Is
            not currently an officer (as defined in Rule 16a-1(f) of the Exchange Act) of the
            Company or a parent or subsidiary of the Company, or otherwise currently employed by
            the Company or a parent or subsidiary of the Company;


            
            (ii)           Does
            not receive compensation, either directly or indirectly, from the Company or a parent
            or subsidiary of the Company, for services rendered as a consultant or in any capacity
            other than as a Director, except for an amount that does not exceed the dollar amount
            for which disclosure would be required pursuant to Rule 404(a) of the Exchange
            Act;


            
            (iii)          Does
            not possess an interest in any other transaction for which disclosure would be required
            pursuant to Rule 404(a) of the Exchange Act; and


            
            (iv)          Is not
            engaged in a business relationship for which disclosure would be required pursuant to
            Rule 404(b) of the Exchange Act.


            
            (n)           “Nonstatutory Stock Option” means an
            Option not intended to qualify as an Incentive Stock Option.


            
            (o)           “Officer” means a person who is an
            officer of the Company within the meaning of Section 16 of the Exchange Act and the
            rules and regulations promulgated thereunder.


            
                	
                             

                        	
                            
                            (p)

                        	
                            
                            “Option
                            ” means a stock option granted pursuant to the
                            Plan.

                        


            


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


            
                	
                             

                        	
                            
                            (r)

                        	
                            
                            “Optionee
                            ” means an Employee, Director or Consultant who
                            holds an outstanding Option.

                        


            


            
                
                               (s)           “Participant” means
                an Employee, Director or Consultant who is granted Options.


                 

            


            


            
            -3-


             

            
            


            

            

            
                	
                             

                        	
                            
                            (t)

                        	
                            
                            “Plan
                            ” means this 1998 Stock Option Plan.

                        


            


            
            (u)           “Rule 16b-3” means Rule 16b-3 of the
            Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being
            exercised with respect to the Plan.


            
                	
                             

                        	
                            
                            (v)

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

                        


            


            
                	
                            
                            3.

                        	
                            
                            Administration.

                        


            


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


            
            (b)           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 Options; when and how Options shall be granted; whether an Option will be an
            Incentive Stock Option or a Nonstatutory Stock Option, the provisions of each Option
            granted (which need not be identical), including the vesting schedule for the Options,
            and the number of shares underlying such Options to be granted to each such
            person;


            
            (ii)           To
            construe and interpret the Plan and Options granted under it, and to establish amend
            and revoke rules and regulations for its administration. The Board, in the exercise of
            this power, may correct any defect, omission or inconsistency in the Plan or in any
            Option Agreement, in a manner and to the extent it shall deem necessary or expedient to
            make the Plan fully effective;


            
                	
                             

                        	
                            
                            (iii)

                        	
                            
                            To amend the Plan as provided in
                            Section 12; and

                        


            


            
            (iv)          Generally,
            to exercise such powers and to perform such acts as the Board deems necessary or
            advisable to promote the best interests of the Company.


            
            (c)           The
            Board may delegate administration of the Plan to a committee composed of not fewer than
            two (2) members of the Board (the
            “Committee”), all of the
            members of which Committee shall be Non-Employee Directors. 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 (and
            references in this Plan to the Board shall thereafter be to the Committee), 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.


            
                	
                            
                            4.

                        	
                            
                            Shares Subject to the
                            Plan.

                        


            


            
            Subject to the provisions of Section
            11 relating to adjustments upon changes in stock, the stock
            that may be issued pursuant to Options shall not exceed in the aggregate One
            Million


             


            
            -4-


             

            
            


            

            

            
            (1,000,000) shares of the Company’s Common Stock. If any Option
            shall for any reason expire or otherwise terminates, in whole or in part, without
            having been exercised in full, the stock not acquired under such Option shall revert to
            and again become available for issuance under the Plan.


            
                	
                            
                            5.

                        	
                            
                            Eligibility.

                        


            


            
            (a)           Incentive
            Stock Options may be granted only to Employees. Nonstatutory Stock Options may be
            granted only to Employees, Directors or Consultants.


            
            (b)           A
            Director shall be eligible for the benefits of the Plan provided that such
            Director’s participation conforms to the requirements of Rule 16b-3, if
            applicable.


            
            (c)           No
            person shall be eligible for the grant of an Incentive Stock Option if, at the time of
            grant, such person 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 unless the exercise price
            of such Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
            Market Value of such stock at the date of grant.


            
            (d)           No
            person shall be eligible to receive an Option with respect to the stock of an Affiliate
            that is a subsidiary of the entity to which such person is providing direct services on
            the date of grant.


            
                	
                            
                            6.

                        	
                            
                            Option
                            Provisions.

                        


            


            
            Each Option shall cover a fixed number of shares of stock as of the date
            of grant, and shall be in such form and shall contain such terms and conditions as the
            Board shall deem appropriate. 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. No Option shall be exercisable
            after the expiration of ten (10) years from the date it was granted. In addition, any
            Option granted to 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 Affiliate may not be made
            exercisable after the expiration of five (5) years from the date the Option is
            granted.


            
            (b)           
            Price. The exercise price of each
            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, the exercise price of any Incentive Stock Option granted hereunder to any
            stockholder possessing at least 10% of the total combined voting power of all classes
            of stock of the Company shall be not less than one hundred ten percent (110%) of the
            Fair Market Value of the stock subject to the Option on the date the Option is
            granted.


            
            (c)           
            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


             


            
            -5-


             

            
            


            

            

            time
            the Option is exercised, (ii) at the discretion of the Board or the Committee, either
            at the time of the grant or exercise of the Option, by delivering to the Company other
            shares of Common Stock of the Company (provided that the shares have been held for the
            period required to avoid a charge to the Company’s reported earnings), (iii) at
            the discretion of the Board or the Committee, either at the time of the grant or
            exercise of the Option, by delivering to the Company all or any part of an Option
            granted under this Plan for a cashless exercise (provided that such cashless exchange
            will not result in a charge to the Company’s reported earnings), or (iv) by
            tendering any other form of legal consideration that may be acceptable to the
            Board.


            
            (d)           
            Transferability. 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 person to whom the
            Incentive Stock Option is granted only by such person. A Nonstatutory Stock Option
            granted to an Optionee subject to Section 16 of the Exchange Act on the date of grant
            shall not be transferable except by will or by the laws of descent and distribution,
            and shall be exercisable during the lifetime of the person to whom the Option is
            granted only by such person. A Nonstatutory Stock Option granted to an Optionee who is
            not subject to Section 16 of the Exchange Act on the date of grant may not be
            transferable except by will or by the laws of descent and distribution, unless
            otherwise permitted by the Board, and shall be exercisable during the lifetime of the
            person to whom the Option is granted only by such person or, subsequent to any
            permitted transfer, only by a permitted transferee. The person to whom the Option is
            granted 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 Optionee or in
            the case of a permitted transfer of a Nonstatutory Stock Option during the
            Optionee’s lifetime, shall thereafter be entitled to exercise the
            Option.


            
            (e)           
            Vesting. The total number of shares
            of stock subject to an Option may, but need not, be allotted in periodic installments
            (which may, but need not, be equal). The Option Agreement may provide that from time to
            time during each of such installment periods, the Option may become exercisable
            (“vest”) with respect to
            some or all of the shares allotted to that period, and may be exercised with respect to
            some or all of the shares allotted to such period and/or any prior period as to which
            the Option became vested but was not fully exercised. 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
            provisions of this Section 6(e) are
            subject to any Option provisions governing the minimum number of shares as to which an
            Option may be exercised.


            
            (f)           
            Termination of Employment or Relationship as a Director or
            Consultant Other than by Disability or Death. In the
            event that an Optionee’s Continuous Status as an Employee, Director or Consultant
            is terminated either by the voluntary resignation by the Optionee or for cause by the
            Company, all Options granted to the Optionee shall terminate immediately. In the event
            an Optionee’s Continuous Status as an Employee, Director or Consultant is
            terminated without cause by the Company, the Optionee may exercise his or her Option
            (to the extent that the Optionee was entitled to exercise it at the date of
            termination) but only within such period of time ending on the earlier of (i) the date
            thirty (30) days after the termination of the Optionee’s Continuous Status as an
            Employee, Director or Consultant (or such longer period specified in the Option
            Agreement), or (ii) the expiration of the term of the Option as set forth in the Option
            Agreement. If, at the date of termination, the Optionee is not entitled to exercise his
            or her entire Option or the Option terminated as specified above, the shares covered by
            the unexercisable portion of the Option or terminated Option shall revert to and again
            become


             


            
            -6-


             

            
            


            

            

            
            available for issuance under the Plan. If, after termination, the
            Optionee does not exercise his or her Option within the time specified in the Option
            Agreement, the Option shall terminate, and the shares covered by such Option shall
            revert to and again become available for issuance under the Plan.


            
            (g)           
            Disability of Optionee. In the event
            an Optionee’s Continuous Status as an Employee, Director or Consultant terminates
            as a result of the Optionee’s disability, the Optionee may exercise his or her
            Option (to the extent that the Optionee was entitled to exercise it at the date of
            termination), but only within such period of time ending on the earlier of (i) the date
            three hundred sixty-five (365) days following such termination (or such longer period
            specified in the Option Agreement), or (ii) the expiration of the term of the Option as
            set forth in the Option Agreement. If, at the date of termination, the Optionee is not
            entitled to exercise his or her entire Option, the shares covered by the unexercisable
            portion of the Option shall revert to and again become available for issuance under the
            Plan. If, after termination, the Optionee does not exercise his or her Option within
            the time specified herein, the Option shall terminate, and the shares covered by such
            Option shall revert to and again become available for issuance under the
            Plan.


            
            (h)           
            Death of Optionee. In the event of
            the death of an Optionee during, or within a period specified in the Option after the
            termination of, the Optionee’s Continuous Status as an Employee, Director or
            Consultant, the Option may be exercised (to the extent the Optionee was entitled to
            exercise the Option at the date of death) by the Optionee’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 Optionee’s death pursuant to
            Section 6(d), but only within the period
            ending on the earlier of (i) the date three hundred sixty-five (365) days following the
            date of death (or such longer period specified in the Option Agreement), or (ii) the
            expiration of the term of such Option as set forth in the Option Agreement. If, at the
            time of death, the Optionee was not entitled to exercise his or her entire Option, the
            shares covered by the unexercisable portion of the Option shall revert to and again
            become available for issuance under the Plan. If, after death, the Option is not
            exercised within the time specified herein, the Option shall terminate, and the shares
            covered by such Option shall revert to and again become available for issuance under
            the Plan.


            
                	
                            
                            7.

                        	
                            
                            Cancellation and Regrant of
                            Option.

                        


            


            
            The Board or the Committee shall have the authority to effect, at any
            time and from time to time, (i) the repricing of any outstanding Options under the
            Plan, and/or (ii) with the consent of the affected holders of Options, the cancellation
            of any outstanding Options under the Plan and the grant in substitution therefor of new
            Options under the Plan covering the same or different numbers of shares of stock, but
            having an exercise price per share not less than one hundred percent (100%) of the Fair
            Market Value or, in the case of a ten percent (10%) stockholder (as described in
            Section 5(c)) not less than one hundred ten
            percent (110%) of the Fair Market Value in the case of an Incentive Stock Option.
            Nothwithstanding the foregoing, the Board shall not modify or amend any outstanding
            Option in such a way as to extend the Option period beyond the original term of the
            Option at a time when the fair market value of the stock underlying the option is
            greater than the Exercise Price or to otherwise provide for the deferral of
            compensation under Section 409A of the Code.


            
                 
            


            


            
            -7-


            

            

            


   8.          
    Covenants of the Company.


            
            (a)           During
            the terms of the Options, the Company shall keep available at all times the number of
            shares of stock which would be issuable under such outstanding Options.


            
            (b)           The
            Company shall seek to obtain from each regulatory commission or agency having
            jurisdiction over the Plan such authority as may be required to issue and sell shares
            of stock upon exercise of the Options; provided, however, that this undertaking shall
            not require the Company to register under the Securities Act either the Plan, any
            Options or any stock issued or issuable pursuant to any such Options. 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 Options unless and
            until such authority is obtained.


            
                	
                            
                            9.

                        	
                            
                            Use of Proceeds from
                            Stock.

                        


            


            
            Proceeds from the sale of Common Stock upon exercise of the Options
            shall constitute general funds of the Company.


            
                	
                            
                            10.

                        	
                            
                            Miscellaneous.

                        


            


            
            (a)           Neither
            an Optionee nor any person to whom an Option is transferred under
            Section 6(d) 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 Option unless and until such person has satisfied all requirements for exercise
            of the Option pursuant to its terms.


            
            (b)           Nothing
            in the Plan or any Option granted pursuant thereto shall confer upon any Employee,
            Director, Consultant or other holder of Options any right to continue in the employ of
            the Company or any Affiliate (or to continue acting as a Director or Consultant) or
            shall affect the right of the Company or any Affiliate to terminate the employment or
            relationship as a Director or Consultant of any Employee, Director, Consultant or other
            holder of Options with or without cause.


            
            (c)           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 granted are exercisable for the
            first time by an Optionee 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.


            
            (d)           The
            Company may require any person to whom an Option is granted, or any person to whom an
            Option is transferred under Section
            6(d), as a condition of exercising any Option, (1) to give
            written assurances satisfactory to the Company as to such person’s knowledge and
            experience in financial and business matters and/or to employ a purchaser
            representative reasonably satisfactory to the Company who is knowledgeable and
            experienced in financial and business matters, and that he or she is capable of
            evaluating, alone or together with the purchaser representative, the merits and risks
            of exercising the Option; and (2) to give written


             


            
            -8-


             

            
            


            

            

            
            assurances satisfactory to the Company stating that such person is
            acquiring the stock subject to the Option for such person’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 (i) the issuance of the shares upon the exercise or acquisition of
            stock under the Option has been registered under a then currently effective
            registration statement under the Securities Act, or (ii) 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.


            
            (e)           To
            the extent provided by the terms of an Option Agreement, the person to whom an Option
            is granted may, at the discretion of the Board, satisfy any mandatory federal, state or
            local tax withholding obligation relating to the exercise or acquisition of stock under
            an Option by any of the following means or by a combination of such means: (1)
            tendering cash payment; (2) authorizing the Company to withhold shares from the shares
            of the Common Stock otherwise issuable to the Participant as a result of the exercise
            or acquisition of stock under the Option provided that such arrangement will not result
            in a charge to the Company’s reported earnings; or (3) delivering to the Company
            owned and unencumbered shares of the Common Stock of the Company that have been held
            for the period required to avoid a charge to the Company’s reported earnings. The
            exercise of the Option may be conditioned upon the receipt by the Company of
            satisfactory evidence of the Participant’s satisfaction of any withholding
            obligations.


            
                	
                            
                            11.

                        	
                            
                            Adjustments Upon Changes in
                            Stock.

                        


            


            
            (a)           Subject
            to any required action by stockholders, the number and type of (i) shares which have
            been authorized for issuance under this Plan but as to which Options have not yet been
            granted or that have been returned to the Plan upon cancellation or expiration of an
            Option, and (ii) shares which may be purchased upon the exercise of each outstanding
            Option, shall be appropriately changed and proportionately increased or decreased upon
            the occurrence of any change, increase or decrease in the number and type of issued
            shares of Common Stock of the Company, without receipt of consideration by the Company,
            which change results from a stock split, stock dividend, merger, consolidation,
            reorganization, reincorporation, recapitalization, combination of shares, change in
            corporate structure or other like capital adjustment. As a result of the foregoing
            adjustment, appropriate adjustment shall be made in the number and type of shares for
            which Options may be granted under this Plan and, upon the exercise of each then
            outstanding Option, the holders of such Options shall receive the number and type of
            securities which the holders would have received had the Options been exercised on the
            date preceding such change, increase or decrease. In the event of any such adjustment,
            the exercise price for each share shall be likewise adjusted in inverse proportion to
            the increase or decrease in the number of shares purchasable.


            
            (b)           In
            the event of: (1) a dissolution, liquidation or sale of substantially all of the assets
            of the Company; (2) a merger or consolidation in which the Company is not the surviving
            corporation; or (3) a reverse merger in which the Company is the surviving corporation
            but the


             


            
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            shares of the Company’s Common Stock outstanding immediately
            preceding the merger are converted by virtue of the merger into other property, whether
            in the form of securities, cash or otherwise, then to the extent permitted by
            applicable law: (i) any surviving corporation shall assume any Options outstanding
            under the Plan or shall substitute similar Options for those outstanding under the
            Plan, or (ii) such Options shall continue in full force and effect. In the event any
            surviving corporation refuses to assume or continue such Options, or to substitute
            similar options for those outstanding under the Plan, then, with respect to Options
            held by persons then performing services as Employees, Directors or Consultants, the
            time during which such Options vest may, at the discretion of the Board, be accelerated
            and the Options terminated if not exercised prior to such event.


            
                	
                            
                            12.

                        	
                            
                            Amendment of the
                            Plan.

                        


            


            
            (a)           The
            Board at any time, and from time to time, may amend the Plan provided that the
            implementation of such amendment by the Company complies with all applicable
            law.


            
            (b)           The
            Board may in its sole discretion submit any amendment to the Plan for stockholder
            approval, including, but not limited to, amendments to the Plan intended to satisfy the
            requirements of Section 162(m) of the Code and the regulations promulgated thereunder
            regarding the exclusion of performance-based compensation from the limit on corporate
            deductibility of compensation paid to certain executive officers.


            
            (c)           It
            is expressly contemplated that the Board may amend the Plan in any respect the Board
            deems necessary or advisable to provide eligible Employees, Directors or Consultants
            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)           Rights
            and obligations under any Option granted before amendment of the Plan shall not be
            altered or impaired by any amendment of the Plan unless (i) the Company requests the
            consent of the person to whom the Option was granted, and (ii) such person consents in
            writing.


            
                	
                            
                            13.

                        	
                            
                            Termination or Suspension of the
                            Plan.

                        


            


            
            (a)           The
            Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan
            shall terminate on December 31, 2007, which shall be within ten (10) years from the
            date the Plan is adopted by the Board or approved by the stockholders of the Company,
            whichever is earlier. No Options may be granted under the Plan while the Plan is
            suspended or after it is terminated.


            
            (b)           Rights
            and obligations under any Option granted while the Plan is in effect shall not be
            altered or impaired by suspension or termination of the Plan, except with the consent
            of the person to whom the Option was granted.


             


            
            -10-


             

            
            


            

            

            


            
                	
                            
                            14.

                        	
                            
                            Effective Date of
                            Plan.

                        


            


            
            The Plan shall become effective as determined by the Board, but no
            Options granted under the Plan shall be exercised unless and until the Plan has been
            approved by the stockholders of the Company, which approval shall be within twelve (12)
            months before or after the date the Plan is adopted by the Board.


            
                	
                            
                            15.

                        	
                            
                            Financial
                            Information.

                        


            


            
            The Company will provide to each Optionee financial statements of the
            Company at least annually in accordance with Section 260.140.46 of Title 10 of the
            California Code of Regulations.


             


            
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