**EXHIBIT 10.46**

 

**JAYCOR NETWORKS, INC.**

 

**1997 STOCK OPTION PLAN**

 

**1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.**

 

1.1 ESTABLISHMENT. The Jaycor Networks, Inc. 1997 Stock Option Plan (the “PLAN”) is hereby established effective as of February 3, 1997(the “EFFECTIVE Date”). 

 

1.2 PURPOSE. Thepurpose of the Plan is to advance the interests of the Company and its shareholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth andprofitability of the Participating Company Group. 

 

1.3 TERMOF PLAN. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under theterms of the Plan and the agreements evidencing Options granted under the Plan have lapsed. However, all Options shall be granted, if at all, before the earlier to occur of (a) the date ten (10) years from the earlier of the date the Plan is adoptedby the Board or the date the Plan is duly approved by the shareholders of the Company, (b) the effective date of the registration statement filed by the Company under the Securities Act in connection with the initial public offering of stock by theCompany, or (c) the date on which Jaymark, pursuant to a sale or exchange of shares, merger, consolidation, or spin-off transaction, no longer owns, directly or indirectly, more than fifty percent (50%) of the total combined voting power of theCompany. 

 

**2. DEFINITIONS AND CONSTRUCTION.**

 

2.1 DEFINITIONS. Whenever used herein, the following terms shallhave their respective meanings set forth below: 

 

(a)“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). 

 

(b) “CODE” means the Internal Revenue Code of 1986, as amended, andany applicable regulations promulgated thereunder. 

 

(c)“COMMITTEE” means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specificallylimited, 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.

(d) “COMPANY” means Jaycor Networks, Inc., a Delaware corporation, or any successor corporationthereto. 

 

(e) “EMPLOYEE” means any person treated asan employee (including an officer or a director who is also treated as an employee) in the records of the Company; provided, however, that neither service as a director nor payment of a director’s fee shall be sufficient to constituteemployment for purposes of the Plan. 

 

(f) “EXCHANGEACT” means the Securities Exchange Act of 1934, as amended. 

 

(g) “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 sole discretion, or by the Company, in its sole discretion, if such determination is expresslyallocated to the Company herein. 

 

(h) “INCENTIVE STOCKOPTION” means an Option intended to be (as set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code. 

 

(i) “INSIDER” means an officer or a director of the Company or any other person whose transactions in Stock aresubject to Section 16 of the Exchange Act. 

 

(j)“JAYMARK” means Jaymark, Inc., a Delaware corporation, or any successor corporation thereto. 

 

(k) “NONSTATUTORY STOCK OPTION” means an Option not intended to be (as set forth in the Option Agreement) or which does not qualify as anIncentive Stock Option. 

 

(l) “OPTION” means a rightto purchase shares of Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option. 

 

(m) “OPTION AGREEMENT” means a written agreement between theCompany and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof. 

 

(n) “OPTIONEE” means a person who has been granted one or more Options. 

 

(o) “PARENT CORPORATION” means any present or future “parentcorporation” of the Company, as defined in Section 424(e) of the Code. 

 

(p) “PARTICIPATING COMPANY” means the Company or any Parent Corporation or Subsidiary Corporation. 

 

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(q) “PARTICIPATING COMPANY GROUP” means, at any point in time, all corporations collectivelywhich are then Participating Companies. 

 

(r) “RULE16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation. 

 

(s) “SECTION 162(M)” means Section 162(m) of the Code, as amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66). 

 

(t) “STOCK” means the common stock of the Company, as adjusted fromtime to time in accordance with Section 4.2. 

 

(u)“SUBSIDIARY CORPORATION” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code. 

 

(v) “TEN PERCENT OWNER OPTIONEE” means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than tenpercent (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. 

 

2.2 CONSTRUCTION. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provisionof the Plan. Except when otherwise indicated by the context, the singular shall include the plural, the plural shall include the singular, and the term “or” shall include the conjunctive as well as the disjunctive. 

 

**3. ADMINISTRATION.**

 

3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by theBoard, including any duly appointed Committee of the Board. 

 

All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. Any officer of a ParticipatingCompany shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparentauthority with respect to such matter, right, obligation, determination or election. 

 

3.2 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 theExchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3. 

 

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3.3 POWERS OF THE BOARD. In addition to any other powers set forth in the Plan and subject to theprovisions of the Plan, the Board shall have the full and final power and authority, in its sole discretion: 

 

(a) to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to eachOption; 

 

(b) to designate Options as Incentive Stock Options orNonstatutory Stock Options; 

 

(c) to determine the Fair MarketValue of shares of Stock; 

 

(d) to determine the terms,conditions and restrictions applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for sharespurchased upon the exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, termsand conditions of the exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s termination of employment on any of theforegoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan; 

 

(e) to approve one or more forms of Option Agreement; 

 

(f) to amend, modify, extend, or renew, or grant a new Option in substitution for, any Option or to waive any restrictions or conditions applicable to anyOption or any shares acquired upon the exercise thereof; 

 

(g)to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee’s termination of employment with the Company;

 

(h) to prescribe, amend or rescind rules, guidelines andpolicies relating to the Plan, or to adopt 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 or custom of,foreign jurisdictions whose citizens may be granted Options; and 

 

(i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deemadvisable to the extent consistent with the Plan and applicable law. 

 

3.4 COMMITTEE COMPLYING WITH SECTION 162(M). If a Participating Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within themeaning of Section 162(m) to approve the grant of any Option which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the limit on employee remuneration deductible for income tax purposespursuant to Section 162(m). 

 

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**4. SHARES SUBJECT TO PLAN.**

 

4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided in Section 4.2, the maximum aggregate numberof shares of Stock that may be issued under the Plan shall be Two Million One Hundred Fifty Thousand (2,150,000). Such shares shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If any outstandingOption for any reason expires or is terminated or canceled or shares, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the shares allocable to the unexercised portion of such Option, or such repurchased shares,shall again be available for issuance under the Plan. 

 

4.2ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriateadjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Options and in the exercise price per share of any outstanding Options. Notwithstanding the foregoing, any fractional share resulting from anadjustment pursuant to this Section 4.2 shall be rounded up or down to the nearest whole number, as determined by the Board, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stocksubject to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive. 

 

**5. ELIGIBILITY AND OPTION LIMITATIONS.**

 

5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to Employees. Eligible persons may be granted more than one (1) Option. 

 

5.2 FAIR MARKET VALUE LIMITATION. To the extent that the aggregateFair Market Value of stock with respect to which options designated as Incentive Stock Options are exercisable by an Optionee for the first time during any calendar year (under all stock option plans of the Participating Company Group, including thePlan) exceeds 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 5.2, options designated as Incentive Stock Options shall betaken 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 different limitation fromthat set forth in this Section 5.2, 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 anIncentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.2, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of suchdesignation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. 

 

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6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option Agreements specifying thenumber of shares of Stock covered thereby, in such form as the Board shall from time to time establish. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following termsand conditions: 

 

6.1 EXERCISE PRICE. The exercise pricefor each Option shall be established in the sole discretion of the Board; provided, however, that (a) the exercise price per share of Stock for an Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grantof the Option, and (b) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share of Stock less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of theOption. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to anassumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code. 

 

6.2 EXERCISE PERIOD. 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 Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after theeffective date of grant of such Option, and (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. 

 

**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 cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Optionee having a FairMarket Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exerciseprice, (iii) by the assignment 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 RegulationT as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “CASHLESS EXERCISE”), (iv) by the Optionee’s promissory note in a form approved by the Company, (v) by such other consideration as may beapproved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at any time or from time to time, by adoption of or by amendment to the standard forms of Option Agreement describedin Section 7, or by other means, 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. 

 

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(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may not be exercised by tender of shares ofStock to the extent such tender would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unless otherwise provided by the Board at the time the Option is granted, anOption may not be exercised by the tender of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. 

 

(c) CASHLESS EXERCISE. 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. 

 

(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be permitted if the exercise of an Option using a promissory notewould be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the time the Option is granted. The Optionee may be required to secure any promissory note used to exercise an Option with theshares acquired upon the exercise of the Option or with other collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the FederalReserve System or any other governmental entity affecting the extension of credit in connection with the securities acquired upon exercise of the Option, any promissory note shall comply with such applicable regulations, and the Optionee shall paythe unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations. 

 

6.4 TAX WITHHOLDING. The Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including bymeans of a Cashless Exercise, to make adequate provision for any tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Company shall have noobligation to deliver shares or to release shares from an escrow established pursuant to the Option Agreement until such tax withholding obligations have been satisfied by the Optionee. 

 

**7. STANDARD FORMS OF OPTION AGREEMENT.**

 

7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the Board at the time the Option is granted, an Optiondesignated as an “Incentive Stock Option” shall comply with and be subject to the terms and conditions set forth in the form of Incentive Stock Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amendedfrom time to time. 

 

7.2 NONSTATUTORY STOCK OPTIONS.Unless otherwise provided by the Board at the time the Option is granted, an Option designated as a “Nonstatutory Stock Option” shall comply with and be subject to the terms and conditions set forth in the form of Nonstatutory Stock OptionAgreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time. 

 

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7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in Section 6.2 or by the Board in thegrant of an Option, any Option granted hereunder shall have a term of ten (10) years from the effective date of grant of the Option. 

 

7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority from time to time to vary the terms of any of the standard forms of OptionAgreement described in this Section 7 either in connection with the grant or amendment of an individual Option 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 Option Agreement are not inconsistent with the terms of the Plan.

 

**8. TRANSFER OF CONTROL.**

 

8.1 DEFINITIONS. 

 

(a) An “OWNERSHIP CHANGE EVENT” shall be deemed to have occurred ifany of the following occurs with respect to the Company: 

 

(i)the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent (50%) of the voting stock of the Company; 

 

(ii) a merger or consolidation in which the Company is a party; 

 

(iii) the sale, exchange, or transfer of all or substantially all of theassets of the Company; or 

 

(iv) a liquidation or dissolutionof the Company. 

 

(b) A “TRANSFER OF CONTROL” shallmean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “TRANSACTION”) wherein the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction, insubstantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of theoutstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “TRANSFEREE CORPORATION(S)”), as the case may be. For purposes of the preceding sentence, indirectbeneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be,either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determinationshall be final, binding and conclusive. 

 

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8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a Transfer of Control, thesurviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “ACQUIRING CORPORATION”), may either assume the Company’s rights and obligations under outstanding Options orsubstitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. For purposes of this Section 8.2, an Option shall be deemed assumed if, following the Transfer of Control, the Option confers the rightto purchase, for each share of Stock subject to the Option immediately prior to the Transfer of Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of theTransfer of Control was entitled. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer of Control shall terminate and cease tobe outstanding effective as of the date of the Transfer of Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Transfer of Control and any consideration received pursuant to the Transfer of Control withrespect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation thestock of which is subject to the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Transfer of Control is the surviving or continuing corporation and immediately after such OwnershipChange Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Codewithout regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board otherwise provides in its sole discretion. 

 

9. PROVISION OF INFORMATION. Each Optionee shall be given access to information concerning the Company equivalent tothat information generally made available to the Company’s common shareholders. 

 

10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative. No Option shall be assignableor transferable by the Optionee, except by will or by the laws of descent and distribution. 

 

11. INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and anyofficers 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 necessarilyincurred 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, orany 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 

 

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faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of suchaction, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 

 

12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law,regulations or rules that would permit otherwise, without the approval of the Company’s shareholders, 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 ofthe provisions of Section 4.2), (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 shareholders under any applicable law,regulation or rule. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is required toenable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule. 

 

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the Jaycor Networks, Inc. 1997 Stock Option Planwas duly adopted by the Board on February 3, 1997 and approved by the Shareholders on February 25, 1997. 

 

/s/    DOROTHYBIDWELL        
**Secretary**
 

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