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     **“Disability”**unless otherwise defined by the Plan Administrator or in the instrumentevidencing the Award or in a written employment or services agreement between the Participant andthe Company or a Related Company, means a mental or physical impairment of the Participant that isexpected to result in death or that has lasted or is expected to last for a continuous period of 12months or more and that causes the Participant to be unable, in the opinion of the PlanAdministrator, to perform his or her duties for the Company or a Related Company and to be engagedin any substantial gainful activity.     **“Early Retirement”**means Termination of Service prior to Retirement on terms and conditionsapproved by the Plan Administrator.     **“Exchange Act”**means the Securities Exchange Act of 1934, as amended.     **“Fair Market Value”**means the per share value of the Common Stock as established in good faithby the Plan Administrator or, if the Common Stock is (a) listed on the Nasdaq National Market, theclosing sales price for the Common Stock as reported by that market for regular session trading fora single trading day, or (b) listed on the New York Stock Exchange or the American Stock Exchange,the closing sales price for the Common Stock as such price is officially quoted in the compositetape of transactions on such exchange for regular session trading for a single trading day. Ifthere is no such reported price for the Common Stock for the date in question, then such price onthe last preceding date for which such price exists shall be determinative of Fair Market Value.     **“Grant Date”**means the date on which the Plan Administrator completes the corporate actionauthorizing the grant of an Award or such later date specified by the Plan Administrator providedthat conditions to the exercisability or vesting of Awards shall not defer the Grant Date.     **“Incentive Stock Option”**means an Option granted with the intention that it qualify as an“incentive stock option” as that term is defined in Section 422 of the Code.     **“Nonqualified Stock Option”**means an Option other than an Incentive Stock Option.     **“Option”**means the right to purchase Common Stock granted under Section 7.     **“Option Expiration Date”**has the meaning set forth in Section 7.6.     **“Option Term”**has the meaning set forth in Section 7.3.     **“Participant”**means the person to whom an Award is granted.     **“Plan Administrator”**has the meaning set forth in Section 3.1.     **“Related Company”**means any entity that, directly or indirectly, is in control of or iscontrolled by, the Company.
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     **“Related Party Transaction”**means (a) a merger or consolidation of the Company in which theholders of the outstanding voting securities of the Company immediately prior to the merger orconsolidation hold at least a majority of the outstanding voting securities of the SuccessorCompany immediately after the merger or consolidation; (b) a sale, lease, exchange or othertransfer of the Company’s assets to a majority-owned subsidiary company; (c) a transactionundertaken for the principal purpose of restructuring the capital of the Company, including but notlimited to, reincorporating the Company in a different jurisdiction or creating a holding company;or (d) a corporate dissolution or liquidation.     **“Retirement**,**”**unless otherwise defined by the Plan Administrator from time to time forpurposes of the Plan, means Termination of Service on or after the date the individual reaches“normal retirement age” as that term is defined in Section 411(a)(8) of the Code.     **“Securities Act”**means the Securities Act of 1933, as amended.     **“Stock Award”**means an Award of shares of Common Stock or units denominated in Common Stockgranted under Section 9, the rights of ownership of which may be subject to restrictions prescribedby the Plan Administrator.     **“Successor Company”**means the surviving company, the successor company or its parent, asapplicable, in connection with a Company Transaction.     **“Termination of Service”**means a termination of employment or service relationship with theCompany or a Related Company for any reason, whether voluntary or involuntary, including death,Disability, Early Retirement or Retirement, as determined by the Plan Administrator in its solediscretion. Any question as to whether and when there has been a Termination of Service for thepurposes of an Award and the cause of such Termination of Service shall be determined by the PlanAdministrator and its determination shall be final. Transfer of the Participant’s employment orservice relationship between Related Companies, or between the Company and any Related Company,shall not be considered a Termination of Service for purposes of an Award, but unless the PlanAdministrator determines otherwise, a Termination of Service shall be deemed to occur if theParticipant’s employment or service relationship is with an entity that has ceased to be a RelatedCompany.     **“Vesting Commencement Date”**means the Grant Date or such other date selected by the PlanAdministrator as the date from which the Option begins to vest for purposes of Section 7.4.**SECTION 3. ADMINISTRATION****3.1 Plan Administrator**     The Plan shall be administered by the Board and/or a committee or committees (which termincludes subcommittees) appointed by, and consisting of two or more members
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of, the Board (a “PlanAdministrator”). If and so long as the Common Stock is registered under Section 12(b) or 12(g) ofthe Exchange Act, the Board shall consider in selecting the members of any committee acting as PlanAdministrator, with respect to any persons subject or likely to become subject to Section 16 of theExchange Act, the provisions regarding (a) “outside directors” as contemplated by Section 162(m) ofthe Code and (b) “nonemployee directors” as contemplated by Rule 16b-3 under the Exchange Act.Notwithstanding the foregoing, the Board may delegate the responsibility for administering the Planwith respect to designated classes of eligible persons to different committees consisting of one ormore members of the Board, subject to such limitations as the Board deems appropriate. Committeemembers shall serve for such term as the Board may determine, subject to removal by the Board atany time. To the extent consistent with applicable law, the Board may authorize one or moreofficers of the Company to grant Awards to designated classes of eligible persons, within thelimits specifically prescribed by the Board.**3.2 Administration and Interpretation by Plan Administrator**     Except for the terms and conditions explicitly set forth in the Plan, the Plan Administratorshall have exclusive authority, in its discretion, to determine all matters relating to Awardsunder the Plan, including selecting the persons to be granted Awards, determining the type ofAwards, the number of shares of Common Stock subject to an Award, and all terms, conditions,restrictions and limitations, if any, of an Award, and approving the forms of agreement for useunder the Plan. The Plan Administrator shall also have exclusive authority to interpret the Planand the terms of any instrument evidencing the Award and may from time to time adopt and changerules and regulations of general application for the Plan’s administration. The PlanAdministrator’s interpretation of the Plan and its rules and regulations, and all actions taken anddeterminations made by the Plan Administrator pursuant to the Plan, shall be conclusive and bindingon all parties involved or affected. The Plan Administrator may delegate ministerial duties tosuch of the Company’s officers as it so determines. For purposes of determining the effect on anAward of a Company-approved leave of absence or a Participant’s working less than full time, thehuman resources director or other person performing that function may be deemed the PlanAdministrator.**SECTION 4. STOCK SUBJECT TO THE PLAN****4.1 Authorized Number of Shares**     Subject to adjustment from time to time as provided in Section 12.1, the maximum number ofshares of Common Stock available for issuance under the Plan shall be:     (a) 87,709 shares; plus     (b) an annual increase to be added as of the first day of each fiscal year of the Companyequal to the least of (i) 526,260 shares and (ii) 3% of the outstanding Common Stock ofthe Company as of the end of the Company’s immediately preceding fiscal year on a
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fully diluted basis (assuming exercise of all outstanding options and warrants and conversion of alloutstanding convertible securities) and (iii) a lesser amount determined by the Board; providedthat any shares from any such increases in previous years that are not actually issued shallcontinue to be available for issuance under the Plan; plus     (c) any authorized shares (i) not issued or subject to outstanding awards under the Company’s1998 Equity Incentive Plan (the “Prior Plan”) on the date the initial registration of the CommonStock under 12(b) or 12(g) of the Exchange Act first becomes effective and (ii) any shares subjectto outstanding awards under the Prior Plan on such date that thereafter cease to be subject to suchawards (other than by reason of exercise or settlement of the awards to the extent they areexercised for or settled in vested and nonforfeitable shares), up to an aggregate maximum of1,132,570 shares.     Shares issued under the Plan shall be drawn from authorized and unissued shares or shares nowheld or subsequently acquired by the Company.**4.2 Reuse of Shares**     Any shares of Common Stock that have been made subject to an Award that are not issued underthe Plan upon exercise or settlement of the Award shall again be available for issuance inconnection with future grants of Awards under the Plan. In addition, if shares issued under thePlan are reacquired by the Company pursuant to any forfeiture provision, such shares shall again beavailable for the purposes of the Plan. Notwithstanding the foregoing, the maximum number ofshares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregateshare number stated in Section 4.1, subject to adjustment from time to time as provided in Section12.1.**SECTION 5. ELIGIBILITY**     An Award may be granted to any officer, director or employee of the Company or a RelatedCompany that the Plan Administrator from time to time selects. An Award may also be granted to anyconsultant, advisor or independent contractor who provides services to the Company or any RelatedCompany, so long as such Participant (a) renders bona fide services that are not in connection withthe offer and sale of the Company’s securities in a capital-raising transaction and (b) does notdirectly or indirectly promote or maintain a market for the Company’s securities.**SECTION 6. AWARDS****6.1 Form and Grant of Awards**     The Plan Administrator shall have the authority, in its sole discretion, to determine the typeor types of Awards to be granted under the Plan. Awards may be granted singly or in combination.
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**6.2 Settlement of Awards**     The Company may settle Awards through the delivery of shares of Common Stock, the granting ofreplacement Awards or any combination thereof as the Plan Administrator shall determine. Any Awardsettlement may be subject to such conditions, restrictions and contingencies as the PlanAdministrator shall determine. The Plan Administrator may permit or require the deferral of anyAward payment, subject to such rules and procedures as it may establish, which may includeprovisions for the payment or crediting of interest, or dividend equivalents, including convertingsuch credits into deferred stock equivalents.**6.3 Acquired Company Awards**     Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awardsunder the Plan in substitution for awards issued under other plans, or assume under the Plan awardsissued under other plans, if the other plans are or were plans of other acquired entities(“Acquired Entities”) (or the parent of an Acquired Entity) and the new Award is substituted, orthe old award is assumed, by reason of a merger, consolidation, acquisition of property or stock,reorganization or liquidation (the “Acquisition Transaction”). In the event that a writtenagreement pursuant to which the Acquisition Transaction is completed is approved by the Board andsaid agreement sets forth the terms and conditions of the substitution for or assumption ofoutstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be theaction of the Plan Administrator without any further action by the Plan Administrator, except asmay be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding suchawards shall be deemed to be Participants.**SECTION 7. AWARDS OF OPTIONS****7.1 Grant of Options**     The Plan Administrator shall have the authority, in its sole discretion, to grant Optionsdesignated as Incentive Stock Options or as Nonqualified Stock Options.**7.2 Option Exercise Price**     The exercise price for shares purchased under an Option shall be as determined by the PlanAdministrator, but shall not be less than the minimum exercise price required by Section 8.3 withrespect to Incentive Stock Options.**7.3 Term of Options**     Subject to earlier termination in accordance with the terms of the Plan and the instrumentevidencing the Option, the maximum term of an Option (the “Option Term”) shall be as establishedfor that Option by the Plan Administrator or, if not so established, shall be ten years from theGrant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.
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**7.4 Exercise of Options**     The Plan Administrator shall establish and set forth in each instrument that evidences anOption the time at which, or the installments in which, the Option shall vest and becomeexercisable, any of which provisions may be waived or modified by the Plan Administrator at anytime. If not so established in the instrument evidencing the Option, the Option shall vest andbecome exercisable according to the following schedule, which may be waived or modified by the PlanAdministrator at any time:     **Period of Participant’s ContinuousEmployment or Service With the Companyor Its Related Companies From the VestingCommencement Date** **Portion of Total OptionThat Is Vested and Exercisable**     After twelve (12) months 1/4th     Each additional one-month period ofcontinuous service completed thereafter An additional 1/36thof the remaining shares     After four (4) years 100%      The Plan Administrator, in its sole discretion, may adjust the vesting schedule of an Optionheld by a Participant who works less than “full time” as that term is defined by the PlanAdministrator or who takes a Company-approved leave of absence.     To the extent an Option has vested and become exercisable, the Option may be exercised inwhole or from time to time in part by delivery to the Company of a written stock option exerciseagreement or notice, in a form and in accordance with procedures established by the PlanAdministrator, setting forth the number of shares with respect to which the Option is beingexercised, the restrictions imposed on the shares purchased under such exercise agreement, if any,and such representations and agreements as may be required bythe Plan Administrator, accompanied by payment in full as described in Section 7.5. An Optionmay be exercised only for whole shares and may not be exercised for less than a reasonable numberof shares at any one time, as determined by the Plan Administrator.**7.5 Payment of Exercise Price**     The exercise price for shares purchased under an Option shall be paid in full to the Companyby delivery of consideration equal to the product of the Option exercise price and the number ofshares purchased. Such consideration must be paid before the Company will issue the shares beingpurchased and must be in a form or a combination of forms acceptable to the Plan Administrator forthat purchase, which forms may include:     (a) cash;     (b) check;
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     (c) tendering (either actually or, if the Common Stock is registered under Section 12(b) or12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by the Participantfor at least six months (or any shorter period necessary to avoid a charge to the Company’searnings for financial reporting purposes) that on the day prior to the exercise date have a FairMarket Value equal to the aggregate exercise price of the shares being purchased under the Option;     (d) if the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,delivery of a properly executed exercise notice, together with irrevocable instructions to abrokerage firm designated by the Company to deliver promptly to the Company the aggregate amount ofsale or loan proceeds to pay the Option exercise price and any withholding tax obligations that mayarise in connection with the exercise, all in accordance with the regulations of the FederalReserve Board; or     (e) such other consideration as the Plan Administrator may permit.     In addition, to assist a Participant (including a Participant who is an officer or a directorof the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan,the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or at anytime before the acquisition of Common Stock pursuant to the Award, (i) the payment by a Participantof the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Companyof a loan obtained by the Participant from a third party. Such notes or loans must be fullrecourse to the extent necessary to avoid charges to the Company’s earnings for financial reportingpurposes and bear a marked rate of interest. Subject to the foregoing, the Plan Administratorshall in its sole discretion specify the terms of any loans or loan guarantees, including theinterest rate and terms of and security for repayment.**7.6 Post-Termination Exercises**     The Plan Administrator shall establish and set forth in each instrument that evidences anOption whether the Option shall continue to be exercisable, and the terms and conditions of suchexercise, if a Participant ceases to be employed by, or to provide services to, the Company or aRelated Company, which provisions may be waived or modified by the Plan Administrator at any time.If not so established in the instrument evidencing the Option, the Option shall be exercisableaccording to the following terms and conditions, which may be waived or modified by the PlanAdministrator at any time:     (a) Any portion of an Option that is not vested and exercisable on the date of a Participant’sTermination of Service shall expire on such date.     (b) Any portion of an Option that is vested and exercisable on the date of a Participant’sTermination of Service shall expire on the earliest to occur of
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          (i) if the Participant’s Termination of Service occurs for reasons other than Cause,Disability or death, the date which is three months after such Termination of Service;          (ii) if the Participant’s Termination of Service occurs by reason of Disability or death, theone-year anniversary of such Termination of Service; and          (iii) the last day of the Option Term (the “Option Expiration Date”).     Notwithstanding the foregoing, if a Participant dies after his or her Termination of Servicebut while an Option is otherwise exercisable, the portion of the Option that is vested andexercisable on the date of such Termination of Service shall expire upon the earlier to occur of(y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless thePlan Administrator determines otherwise.     Also notwithstanding the foregoing, in case a Participant’s Termination of Service occurs forCause, all Options granted to the Participant shall automatically expire upon first notification tothe Participant of such termination, unless the Plan Administrator determines otherwise. If aParticipant’s employment or service relationship with the Company is suspended pending aninvestigation of whether the Participant shall be terminated for Cause, all the Participant’srights under any Option shall likewise be suspended during the period of investigation. If anyfacts that would constitute termination for Cause are discovered after a Participant’s Terminationof Service, any Option then held by the Participant may be immediately terminated by the PlanAdministrator, in its sole discretion.     (c) A Participant’s change in status from an employee to a consultant, advisor or independentcontractor or a change in status from a consultant, advisor or independent contractor to anemployee, shall not be considered a Termination of Service for purposes of this Section 7.     (d) The effect of a Company-approved leave of absence on the application of this Section 7shall be determined by the Plan Administrator, in its sole discretion.**SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS**     Notwithstanding any other provisions of the Plan, and to the extent required by Section 422 ofthe Code, Incentive Stock Options shall be subject to the following additional terms andconditions:**8.1 Dollar Limitation**     To the extent the aggregate Fair Market Value (determined as of the Grant Date) of CommonStock with respect to which a Participant’s Incentive Stock Options become exercisable for thefirst time during any calendar year (under the Plan and all other stock option plans of the Companyand its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000shall be treated as a Nonqualified Stock Option. In the
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event the Participant holds two or moresuch Options that become exercisable for the first time in the same calendar year, such limitationshall be applied on the basis of the order in which such Options are granted.**8.2 Eligible Employees**     Individuals who are not employees of the Company or one of its parent or subsidiarycorporations may not be granted Incentive Stock Options.**8.3 Exercise Price**     The exercise price of an Incentive Stock Option shall be at least 100% of the Fair MarketValue of the Common Stock on the Grant Date, and in the case of an Incentive Stock Option grantedto a Participant who owns more than 10% of the total combined voting power of all classes of thestock of the Company or of its parent or subsidiary corporations (a “Ten Percent Shareholder”),shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date. Thedetermination of more than 10% ownership shall be made in accordance with Section 422 of the Code.**8.4 Option Term**     Subject to earlier termination in accordance with the terms of the Plan and the instrumentevidencing the Option, the Option Term of an Incentive Stock Option shall not exceed ten years, andin the case of an Incentive Stock Option granted to a Ten Percent Shareholder, shall not exceedfive years.**8.5 Exercisability**     An Option designated as an Incentive Stock Option shall cease to qualify for favorable taxtreatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms ofthe Option) (a) more than three months after the date of a Participant’s Termination of Service iftermination was for reasons other than death or Disability, (b) more than one year after the dateof a Participant’s Termination of Service if termination was by reason of Disability, or (c) afterthe Participant has been on leave of absence for more than 90 days, unless the Participant’sreemployment rights are guaranteed by statute or contract.**8.6 Taxation of Incentive Stock Options**     In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive StockOption for two years after the Grant Date and one year after the date of exercise.     A Participant may be subject to the alternative minimum tax at the time of exercise of anIncentive Stock Option. The Participant shall give the Company prompt notice of any
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disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of suchholding periods.**8.7 Promissory Notes**     The amount of any promissory note delivered pursuant to Section 7.5 in connection with anIncentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in nocase less than the rate required to avoid imputation of interest (taking into account anyexceptions to the imputed interest rules) for federal income tax purposes.**8.8 Code Definitions**     For the purposes of this Section 8, “parent corporation” and “subsidiary corporation” shallhave the meanings attributed to those terms for purposes of Section 422 of the Code.**SECTION 9. STOCK AWARDS****9.1 Grant of Stock Awards**     The Plan Administrator is authorized to make Awards of Common Stock or Awards denominated inunits of Common Stock on such terms and conditions and subject to such repurchase or forfeiturerestrictions, if any (which may be based on continuous service with the Company or the achievementof performance goals, where such goals may be stated in absolute terms or relative to comparisoncompanies), as the Plan Administrator shall determine, in its sole discretion, which terms,conditions and restrictions shall be set forth inthe instrument evidencing the Award. The terms, conditions and restrictions that the PlanAdministrator shall have the power to determine shall include, without limitation, the manner inwhich shares subject to Stock Awards are held during the periods they are subject to restrictionsand the circumstances under which repurchase or forfeiture of the Stock Award shall occur by reasonof a Participant’s Termination of Service.**9.2 Issuance of Shares**     Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to aStock Award, or upon a Participant’s release from any terms, conditions and restrictions of a StockAward, as determined by the Plan Administrator, the Company shall release, as soon as practicable,to the Participant or, in the case of the Participant’s death, to the personal representative ofthe Participant’s estate or as the appropriate court directs, the appropriate number of shares ofCommon Stock.**9.3 Waiver of Restrictions**     Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its solediscretion, waive the repurchase or forfeiture period and any other terms, conditions or
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restrictions on any Stock Award under such circumstances and subject to such terms and conditionsas the Plan Administrator shall deem appropriate.**SECTION 10. WITHHOLDING**     The Company may require the Participant to pay to the Company the amount of any taxes that theCompany is required by applicable federal, state, local or foreign law to withhold with respect tothe grant, vesting or exercise of an Award. The Company shall not be required to issue any sharesof Common Stock under the Plan until such obligations are satisfied.     The Plan Administrator may permit or require a Participant to satisfy all or part of his orher tax withholding obligations by (a) paying cash to the Company, (b) having the Company withholdfrom any cash amounts otherwise due or to become due from the Company to the Participant, or (c)having the Company withhold a number of shares of Common Stock that would otherwise be issued tothe Participant (or become vested in the case of Stock Awards) having a value equal to the taxwithholding obligations, or (d) surrendering a number of shares of Common Stock the Participantalready owns having a value equal to the tax withholding obligations. The value of the shares sowithheld may not exceed the employer’s minimum required tax withholding rate, and the value of theshares so tendered may not exceed such rate to the extent the Participant has owned the tenderedshares for less than six months if such limitation is necessary to avoid a charge to the Companyfor financial reporting purposes.**SECTION 11. ASSIGNABILITY**     No Award or interest in an Award may be assigned, pledged or transferred by the Participant ormade subject to attachment or similar proceedings otherwise than by will or by the applicable lawsof descent and distribution, except to the extent a Participant designates a beneficiary on aCompany-approved form who may exercise the Award or receive payment under the Award after theParticipant’s death. During a Participant’s lifetime, an Award may be exercised only by theParticipant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code,the Plan Administrator, in its sole discretion, may permit a Participant to assign or transfer anAward; provided, however, that an Award so assigned or transferred shall be subject to all theterms and conditions of the Plan and those contained in the instrument evidencing the Award.**SECTION 12. ADJUSTMENTS****12.1 Adjustment of Shares**     In the event, at any time or from time to time after board approval of the Plan, a stockdividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger,consolidation, distribution to shareholders other than a normal cash dividend, or other change inthe Company’s corporate or capital structure results in (a) the outstanding shares of
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Common Stock,or any securities exchanged therefor or received in their place, being exchanged for a differentnumber or kind of securities of the Company or of any other company or (b) new, different oradditional securities of the Company or of any other company being received by the holders ofshares of Common Stock of the Company, then the Plan Administrator shall make proportionaladjustments in (i) the maximum number and kind of securities subject to the Plan and issuable asIncentive Stock Options as set forth in Section 4 and (ii) the number and kind of securities thatare subject to any outstanding Award and the per share price of such securities, without any changein the aggregate price to be paid therefor. The determination by the Plan Administrator as to theterms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding theforegoing, a dissolution or liquidation of the Company or a Company Transaction shall not begoverned by this Section 12.1 but shall be governed by Sections 12.2 and 12.3, respectively.**12.2 Dissolution or Liquidation**     To the extent not previously exercised or settled, and unless otherwise determined by the PlanAdministrator in its sole discretion, Options and Stock Awards denominated in units shall terminateimmediately prior to the dissolution or liquidation of the Company. To the extent a forfeitureprovision or repurchase right applicable to an Award has not been waived by the Plan Administrator,the Award shall be forfeited immediately prior to the consummation of the dissolution orliquidation.**12.3 Company Transaction**     **12.3.1 Options**     In the event of a Company Transaction, except as otherwise provided in the instrumentevidencing an Option or in a written employment or services agreement between a Participant and theCompany or a Related Company,     (a) Except as provided in subsection (b) below, each outstanding Option shall be assumed or anequivalent option or right substituted by the Successor Company.     (b) If in connection with a Company Transaction the Successor Company refuses to assume orsubstitute for an Option, then each such outstanding Option shall become fully vested andexercisable with respect to 100% of the unvested portion of the Option. In such case, the PlanAdministrator shall notify the Participant in writing or electronically that the unvested portionof the Option specified above shall be fully vested and exercisable for a specified time period.At the expiration of the time period, the Option shall terminate, provided that the CompanyTransaction has occurred.     (c) For the purposes of this Section 12.3, the Option shall be considered assumed orsubstituted for if following the Company Transaction the option or right confers the right topurchase or receive, for each share of Common Stock subject to the Option immediately prior to theCompany Transaction, the consideration (whether stock, cash, or other securities
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or property)received in the Company Transaction by holders of Common Stock for each share held on the effectivedate of the transaction (and if holders were offered a choice of consideration, the type ofconsideration chosen by the holders of a majority of the outstanding shares); provided, however,that if such consideration received in the Company Transaction is not solely common stock of theSuccessor Company, the Plan Administrator may, with the consent of the Successor Company, providefor the consideration to be received upon the exercise of the Option, for each share of CommonStock subject thereto, to be solely common stock of the Successor Company substantially equal infair market value to the per share consideration received by holders of Common Stock in the CompanyTransaction. The determination of such substantial equality of value of consideration shall bemade by the Plan Administrator, and its determination shall be conclusive and binding.     (d) All Options shall terminate and cease to remain outstanding immediately following theCompany Transaction, except to the extent assumed by the Successor Company.     **12.3.2 Stock Awards**     In the event of a Company Transaction, except as otherwise provided in the instrumentevidencing the Award and unless otherwise provided in a written employment or services agreementbetween a Participant and the Company or a Related Company, the vesting of shares subject to StockAwards shall accelerate, and the forfeiture provisions towhich such shares are subject shall lapse, if and to the same extent that the vesting ofoutstanding Options accelerates in connection with the Company Transaction. If unvested Optionsare to be assumed or substituted by a Successor Company without acceleration upon the occurrence ofa Company Transaction, the repurchase or forfeiture provisions to which such Stock Awards aresubject shall continue with respect to shares of the Successor Company that may be issued inexchange for such shares.**12.4 Further Adjustment of Awards**     Subject to Sections 12.2 and 12.3, the Plan Administrator shall have the discretion,exercisable at any time before a sale, merger, consolidation, reorganization, liquidation,dissolution or change of control of the Company, as defined by the Plan Administrator, to take suchfurther action as it determines to be necessary or advisable with respect to Awards. Suchauthorized action may include (but shall not be limited to) establishing, amending or waiving thetype, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier,later, extended or additional time for exercise, lifting restrictions and other modifications, andthe Plan Administrator may take such actions with respect to all Participants, to certaincategories of Participants or only to individual Participants. The Plan Administrator may takesuch action before or after granting Awards to which the action relates and before or after anypublic announcement with respect to such sale, merger, consolidation, reorganization, liquidation,dissolution or change of control that is the reason for such action.
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**12.5 Limitations**     The grant of Awards shall in no way affect the Company’s right to adjust, reclassify,reorganize or otherwise change its capital or business structure or to merge, consolidate,dissolve, liquidate or sell or transfer all or any part of its business or assets.**12.6 Fractional Shares**     In the event of any adjustment in the number of shares covered by any Award, each such Awardshall cover only the number of full shares resulting from such adjustment.**SECTION 13. [RESERVED]****SECTION 14. AMENDMENT AND TERMINATION****14.1 Amendment, Suspension or Termination of Plan**     The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time andin such respects as it shall deem advisable; provided, however, that to the extent required forcompliance with Section 422 of the Code or any applicable law or regulation,shareholder approval shall be required for any amendment that would (a) increase the totalnumber of shares available for issuance under the Plan, (b) modify the class of employees eligibleto receive Options, or (c) otherwise require shareholder approval under any applicable law orregulation. Any amendment made to the Plan that would constitute a “modification” to IncentiveStock Options outstanding on the date of such amendment shall not, without the consent of theParticipant, be applicable to such outstanding Incentive Stock Options but shall have prospectiveeffect only.**14.2 Term of Plan**     Unless sooner terminated as provided herein, the Plan shall terminate ten years after theearlier of the Plan’s adoption by the Board and approval by the shareholders.**14.3 Consent of Participant**     The suspension, amendment or termination of the Plan or a portion thereof or the amendment ofan outstanding Award shall not, without the Participant’s consent, materially adversely affect anyrights under any Award theretofore granted to the Participant under the Plan. Any change oradjustment to an outstanding Incentive Stock Option shall not, without the consent of theParticipant, be made in a manner so as to constitute a “modification” that would cause suchIncentive Stock Option to fail to continue to qualify as an Incentive Stock Option.Notwithstanding the foregoing, any adjustments made pursuant to Sections 12.1 through 12.3 shallnot be subject to these restrictions.
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**SECTION 15. GENERAL****15.1 Evidence of Awards**     Awards granted under the Plan shall be evidenced by a written instrument that shall containsuch terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisableand that are not inconsistent with the Plan.**15.2 No Individual Rights**     Nothing in the Plan or any Award granted under the Plan shall be deemed to constitute anemployment contract or confer or be deemed to confer on any Participant any right to continue inthe employ of, or to continue any other relationship with, the Company or any Related Company orlimit in any way the right of the Company or any Related Company to terminate a Participant’semployment or other relationship at any time, with or without Cause.**15.3 Issuance of Shares**     Notwithstanding any other provision of the Plan, the Company shall have no obligation to issueor deliver any shares of Common Stock under the Plan or make any otherdistribution of benefits under the Plan unless, in the opinion of the Company’s counsel, suchissuance, delivery or distribution would comply with all applicable laws (including, withoutlimitation, the requirements of the Securities Act or the laws of any state or foreignjurisdiction), and the applicable requirements of any securities exchange or similar entity.     The Company shall be under no obligation to any Participant to register for offering or resaleor to qualify for exemption under the Securities Act, or to register or qualify under the laws ofany state or foreign jurisdiction, any shares of Common Stock, security or interest in a securitypaid or issued under, or created by, the Plan, or to continue in effect any such registrations orqualifications if made. The Company may issue certificates for shares with such legends andsubject to such restrictions on transfer and stop-transfer instructions as counsel for the Companydeems necessary or desirable for compliance by the Company with federal, state and foreignsecurities laws.     To the extent the Plan or any instrument evidencing an Award provides for issuance of stockcertificates to reflect the issuance of shares of Common Stock, the issuance may be effected on anoncertificated basis, to the extent not prohibited by applicable law or the applicable rules ofany stock exchange.**15.4 No Rights as a Shareholder**     No Option or Stock Award denominated in units shall entitle the Participant to any cashdividend, voting or other right of a shareholder unless and until the date of issuance under thePlan of the shares that are the subject of such Award.
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**15.5 Compliance With Laws and Regulations**     Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in its solediscretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provisionof the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Actwithout so restricting, limiting or conditioning the Plan with respect to other Participants.Additionally, in interpreting and applying the provisions of the Plan, any Option granted as anIncentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed asan “incentive stock option” within the meaning of Section 422 of the Code.**15.6 Participants in Other Countries**     The Plan Administrator shall have the authority to adopt such modifications, procedures andsubplans as may be necessary or desirable to comply with provisions of the laws of other countriesin which the Company or any Related Company may operate to ensure the viability of the benefitsfrom Awards granted to Participants employed in such countries and to meet the objectives of thePlan.**15.7 No Trust or Fund**     The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall requirethe Company to segregate any monies or other property, or shares of Common Stock, or to create anytrusts, or to make any special deposits for any immediate or deferred amounts payable to anyParticipant, and no Participant shall have any rights that are greater than those of a generalunsecured creditor of the Company.**15.8 Severability**     If any provision of the Plan or any Award is determined to be invalid, illegal orunenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Awardunder any law deemed applicable by the Plan Administrator, such provision shall be construed ordeemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amendedwithout, in the Plan Administrator’s determination, materially altering the intent of the Plan orthe Award, such provision shall be stricken as to such jurisdiction, person or Award, and theremainder of the Plan and any such Award shall remain in full force and effect.**15.9 Choice of Law**     The Plan and all determinations made and actions taken pursuant hereto, to the extent nototherwise governed by the laws of the United States, shall be governed by the laws of the state ofCalifornia without giving effect to principles of conflicts of law.
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**SECTION 16. EFFECTIVE DATE**     The effective date is the date on which the Plan is adopted by the Board. If the shareholdersof the Company do not approve the Plan within 12 months after the Board’s adoption of the Plan, anyIncentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.
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**PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS**