exv10w2






Exhibit 10.2




REPLY! INC.

2004 STOCK PLAN




     1. Establishment, Purpose And Term Of Plan.



          1.1 Establishment. Reply! Inc. 2004 Stock Plan (the “Plan”) is hereby established effective as of
May 3, 2004.




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




          1.3 Term of 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 the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the
date the Plan is duly approved by the shareholders of the Company.




     2. Definitions And Construction.



          2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set
forth below:




               (a) “Award” means an Option or Stock Purchase Right granted under the Plan.



               (b) “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).



               (c) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.



               (d) “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 specifically limited, the Committee shall have all of the powers of the
Board granted herein, including, without limitation, the power to amend or terminate the Plan at
any time, subject to the terms of the Plan and any applicable limitations imposed by law.



               (e) “Company” means Reply! Inc., a California corporation, or any successor corporation thereto.



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               (f) “Consultant” means a person engaged to provide consulting or advisory services (other than as
an Employee or a Director) to a Participating Company, provided that the identity of such person,
the nature of such services or the entity to which such services are provided would not preclude
the Company from offering or selling securities to such person pursuant to the Plan in reliance on
either the exemption from registration provided by Rule 701 under the Securities Act or, if the
Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act,
registration on a Form S-8 Registration Statement under the Securities Act.



               (g) “Director” means a member of the Board or of the board of directors of any other Participating
Company.



               (h) “Disability” means the inability of the Participant, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Participant’s position with the
Participating Company Group because of the sickness or injury of the Participant.



               (i) “Employee” means any person treated as an employee (including an Officer or a Director who is
also treated as an employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine
in good faith and in the exercise of its discretion whether an individual has become or has ceased
to be an Employee and the effective date of such individual’s employment or termination of
employment, as the case may be. For purposes of an individual’s rights, if any, under the Plan as
of the time of the Company’s determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.



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



               (k) “Fair Market Value” means, as of any date, the value of a share of Stock or other property as
determined by the Board, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:



                    (i) If, on such date, the Stock is listed on a national or regional securities exchange or market
system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock
(or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national
or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which the Fair Market
Value shall be established shall be the last day on which the Stock was so traded prior to



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the relevant date, or such other appropriate day as shall be determined by the Board, in its
discretion.




                    (ii) If, on such date, the Stock is not listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be as determined by the Board in
good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.



               (l) “Incentive Stock Option” 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.



               (m) “Insider” means an Officer, a Director of the Company or other person whose transactions in
Stock are subject to Section 16 of the Exchange Act.



               (n) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Option
Agreement) or which does not qualify as an Incentive Stock Option.



               (o) “Officer” means any person designated by the Board as an officer of the Company.



               (p) “Option” means a right granted under Section 6 to purchase Stock pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.



               (q) “Option Agreement” means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Option granted to the Participant and any
shares acquired upon the exercise thereof. An Option Agreement may consist of a form of “Notice of
Grant of Stock Option” and a form of “Stock Option Agreement” incorporated therein by reference, or
such other form or forms as the Board may approve from time to time.



               (r) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.



               (s) “Participant” means any eligible person who has been granted one or more Awards.



               (t) “Participating Company” means the Company or any Parent Corporation or Subsidiary Corporation.



               (u) “Participating Company Group” means, at any point in time, all corporations collectively which
are then Participating Companies.



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



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



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               (x) “Service” means a Participant’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service shall
not be deemed to have terminated merely because of a change in the capacity in which the
Participant renders Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is no interruption or
termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or other bona fide
leave of absence approved by the Company; provided, however, that if any such leave exceeds ninety
(90) days, on the one hundred eighty-first (181st) day following the commencement of such leave any
Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock
Option and instead shall be treated thereafter as a Nonstatutory Stock Option unless the
Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining vesting under the Participant’s Option
Agreement or Stock Purchase Agreement. Except as otherwise provided by the Board, in its
discretion, the Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Participant performs Service ceasing
to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall
determine whether the Participant’s Service has terminated and the effective date of and reason for
such termination.



               (y) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with
Section 4.2.



               (z) “Stock Purchase Agreement” means a written agreement between the Company and a Participant
setting forth the terms, conditions and restrictions of the Stock Purchase Right granted to the
Participant and any shares acquired upon the exercise thereof. A Stock Purchase Agreement may
consist of a form of “Notice of Grant of Stock Purchase Right” and a form of “Stock Purchase
Agreement” incorporated therein by reference, or such other form or forms as the Board may approve
from time to time.



               (aa) “Stock Purchase Right” means a right granted under Section 7 to purchase Stock pursuant to the
terms and conditions of the Plan.



               (bb) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company,
as defined in Section 424(f) of the Code.



               (cc) “Ten Percent Shareholder” means a person who, at the time an Award is granted to such person,
owns stock possessing more than ten percent (10%) of the total combined voting power (as defined in
Section 194.5 of the California Corporations Code) 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 provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall




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include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.




     3. Administration.



          3.1 Administration by the Board. The Plan shall be administered by the Board. All questions of
interpretation of the Plan or of any Award 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
Award.




          3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, determination or election.




          3.3 Powers of the Board. In addition to any other powers set forth in the Plan and subject to the
provisions of the Plan, the Board shall have the full and final power and authority, in its
discretion:




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



               (b) to designate Options as Incentive Stock Options or Nonstatutory Stock Options;



               (c) to determine the Fair Market Value of shares of Stock or other property;



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



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



               (f) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions
applicable to any Award or any shares acquired upon the exercise
thereof;



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               (g) to accelerate, continue, extend or defer the exercisability of any Award or the vesting of any
shares acquired upon the exercise thereof, including with respect to the period following a
Participant’s termination of Service;



               (h) to prescribe, amend or rescind rules, guidelines and policies 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 Awards; and



               (i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any
Option Agreement or Stock Purchase Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Board may deem advisable to the extent
not inconsistent with the provisions of the Plan or applicable law.



          3.4 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan,
at any time that any class of equity security of the Company is registered pursuant to Section 12
of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of
Rule 16b-3.




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




     4. Shares Subject To Plan.



          4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be two million
eight hundred and fifty thousand (2,850,000) which shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof. If an outstanding Award for any reason
expires or is terminated or canceled or if shares of Stock are acquired upon the exercise of an
Award subject to a Company repurchase option and are repurchased by the Company at the
Participant’s exercise or purchase price, the shares of Stock allocable to the unexercised portion
of such Award or such repurchased shares of Stock shall





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again be available for issuance under the Plan. However, except as adjusted pursuant to Section
4.2, in no event shall more than two million eight hundred and fifty thousand (2,850,000) shares
of Stock be available for issuance pursuant to the exercise of
Incentive Stock Options (the “ISO
Share Limit”). Notwithstanding the foregoing, at any such time as the offer and sale of securities
pursuant to the Plan is subject to compliance with Section 260.140.45 of Title 10 of the California
Code of Regulations (“Section 260.140.45”), the total number of shares of Stock issuable upon the
exercise of all outstanding Awards (together with options outstanding under any other stock plan of
the Company) and the total number of shares provided for under any stock bonus or similar plan of
the Company shall not exceed thirty percent (30%) (or such other higher percentage limitation as
may be approved by the shareholders of the Company pursuant to Section 260.140.45) of the then
outstanding shares of the Company as calculated in accordance with the conditions and exclusions of
Section 260.140.45.


          4.2 Adjustments for Changes in Capital Structure. Subject to any required action by the
shareholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the shareholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and class of shares subject to the Plan and
to any outstanding Options, in the ISO Share Limit set forth in Section 4.1, and in the exercise
price per share of any outstanding Options in order to prevent dilution or enlargement of
Optionees’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of
consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, 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 stock subject
to the Option. Such adjustments shall be determined by the Board, and its determination shall be
final, binding and conclusive.


     5. Eligibility And Option Limitations.


          5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants, and
Directors. Eligible persons may be granted more than one (1) Award. However, eligibility in
accordance with this Section shall not entitle any person to be granted an Award, or, having been
granted an Award, to be granted an additional Award.


          5.2 Option Grant Restrictions. An Incentive Stock Option may be granted only to a person who is an
Employee on the effective date of grant of the Option to such person. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option.


          5.3 Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options
(granted under all stock plans of the Participating Company Group, including the Plan) become
exercisable by a Participant for the first time during any calendar


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year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the
portions of such options which exceed such amount shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If the Code is amended
to provide for a different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with respect to such
Options as required or permitted by such amendment to the Code. If an Option is treated as an
Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Participant may designate which portion of such
Option the Participant is exercising. In the absence of such designation, the Participant shall be
deemed to have exercised the Incentive Stock Option portion of the Option first. Separate
certificates representing each such portion shall be issued upon the exercise of the Option.




     6. Terms And Conditions Of Options.



          Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered
thereby, in such form as the Board shall from time to time establish. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement. 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 terms
and conditions:




          6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of
the Board; provided, however, that (a) the exercise price per share for an Incentive Stock Option
shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effective date of
grant of the Option, and (c) no Option granted to a Ten Percent Shareholder shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise
price lower than the minimum exercise price set forth above if such Option is granted pursuant to
an assumption or substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.




          6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Board and set forth in the Option Agreement evidencing such Option;
provided, however, that (a) no Option shall be exercisable after
the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Shareholder shall be exercisable after the expiration of five (5) years after the effective
date of grant of such Option, and (c) with the exception of an Option granted to an Officer, a
Director or a Consultant, no Option shall become exercisable at a rate less than twenty percent
(20%) per year over a period of five (5) years from the effective date of grant of such Option,
subject to the Participant’s continued Service. Subject




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to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option
granted hereunder shall terminate ten (10) years after the effective date of grant of the Option,
unless earlier terminated in accordance with its provisions.




     6.3 Payment of Exercise Price.



               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise
price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise
price, (iii) by delivery of a properly executed notice together with irrevocable instructions to a
broker providing for the assignment to the Company of the proceeds of a sale or loan with respect
to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv)
by such other consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (v) by any combination thereof. The Board may at any time or from
time to time, by approval of or by amendment to the standard forms of Option Agreement described in
Section 8, 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.



               (b) Limitations on Forms of Consideration.



                    (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by
tender to the Company, or attestation to the ownership, of shares of Stock to the extent
such tender or attestation 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, an Option may not be exercised by tender to the Company,
or attestation to the ownership, of shares of Stock unless such shares either have been
owned by the Participant for more than six (6) months (and were not used for another
Option exercise by attestation during such period) or were not acquired, directly or
indirectly, from the Company.



                    (ii) 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.



          6.4 Effect of Termination of Service.




               (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Board in the grant of an Option and set forth in the
Option Agreement, an Option shall be exercisable after a Participant’s termination of Service only
during the applicable time period determined in accordance with this Section 6.4 and thereafter
shall terminate:



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                    (i) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable on the date on which the
Participant’s Service terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the expiration of twelve (12) months (or
such longer period of time as determined by the Board, in its discretion) after the date on which
the Participant’s Service terminated, but in any event no later than the date of expiration of the
Option’s term as set forth in the Option Agreement evidencing such Option (the “Option Expiration Date”).



                    (ii) Death. If the Participant’s Service terminates because of the death of the Participant, the
Option, to the extent unexercised and exercisable on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other person who acquired
the right to exercise the Option by reason of the Participant’s death at any time prior to the
expiration of twelve (12) months (or such longer period of time as determined by the Board, in its
discretion) after the date on which the Participant’s Service terminated, but in any event no later
than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on
account of death if the Participant dies within three (3) months (or such longer period of time as
determined by the Board, in its discretion) after the Participant’s termination of Service.



                    (iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if
the Participant’s Service with the Participating Company Group is terminated for Cause, as defined
by the Participant’s Option Agreement or contract of employment or service (or, if not defined in
any of the foregoing, as defined below), the Option shall terminate and cease to be exercisable
immediately upon such termination of Service. Unless otherwise defined by the Participant’s Option
Agreement or contract of employment or service, for purposes of this Section 6.4(a)(iii) “Cause”
shall mean any of the following: (1) the Participant’s theft, dishonesty, or falsification of any
Participating Company documents or records; (2) the Participant’s improper use or disclosure of a
Participating Company’s confidential or proprietary information; (3) any action by the Participant
which has a material detrimental effect on a Participating Company’s reputation or business; (4)
the Participant’s failure or inability to perform any reasonable assigned duties after written
notice from a Participating Company of, and a reasonable opportunity to cure, such failure or
inability; (5) any material breach by the Participant of any employment or service agreement
between the Participant and a Participating Company, which breach is not cured pursuant to the
terms of such agreement; or (6) the Participant’s conviction (including any plea of guilty or nolo
contendere) of any criminal act which impairs the Participant’s ability to perform his or her
duties with a Participating Company.



                    (iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except
Disability, death or Cause, the Option, to the extent unexercised and exercisable by the
Participant on the date on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months (or such longer period of time
as determined by the Board, in its discretion) after the date on which the Participant’s Service
terminated, but in any event no later than the Option Expiration Date.



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               (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than termination
for Cause, if the exercise of an Option within the applicable time periods set forth in Section
6.4(a) is prevented by the provisions of Section 11 below, the Option shall remain exercisable
until three (3) months (or such longer period of time as determined by the Board, in its
discretion) after the date the Participant is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.



               (c) Extension if Participant Subject to Section 16(b). Notwithstanding the foregoing other than
termination for Cause, if a sale within the applicable time periods set forth in Section 6.4(a) of
shares acquired upon the exercise of the Option would subject the Participant to suit under Section
16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i)
the tenth (10th) day following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Participant’s termination of Service, or (iii) the Option Expiration Date.



          6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participant’s guardian or legal representative. No
Option shall be assignable or transferable by the Participant, except by will or by the laws of
descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Board, in
its discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory Stock
Option shall be assignable or transferable subject to the applicable limitations, if any, described
in Section 260.140.41 of Title 10 of the California Code of Regulations, Rule 701 under the
Securities Act, and the General Instructions to Form S-8 Registration Statement under the
Securities Act.




     7. Terms And Conditions Of Stock Purchase Rights.



          Stock Purchase Rights shall be evidenced by Stock Purchase Agreements, specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to time establish. No
Stock Purchase Right or purported Stock Purchase Right shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Stock Purchase Agreement. Stock Purchase
Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with
and be subject to the following terms and conditions:




          7.1 Purchase Price. The purchase price under each Stock Purchase Right shall be established by the
Board; provided, however, that (a) the purchase price per share shall be at least eighty-five
percent (85%) of the Fair Market Value of a share of Stock either on the effective date of grant of
the Stock Purchase Right or on the date on which the purchase is consummated and (b) the purchase
price per share under a Stock Purchase Right granted to a Ten Percent Shareholder shall be at least
one hundred percent (100%) of the Fair Market Value of a share of Stock either on the effective
date of grant of the Stock Purchase Right or on the date on which the purchase is consummated.





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          7.2 Purchase Period. A Stock Purchase Right shall be exercisable within a period established
by the Board, which shall in no event exceed thirty (30) days from the effective date of the grant
of the Stock Purchase Right.




          7.3 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price
for the number of shares of Stock being purchased pursuant to any Stock Purchase Right shall be
made (a) in cash, by check, or cash equivalent, (b) in the
form of the Participant’s past service
rendered to a Participating Company or for its benefit having a value not less than the aggregate
purchase price of the shares being acquired, (c) by such other consideration as may be approved by
the Board from time to time to the extent permitted by applicable law, or (d) by any combination
thereof. The Board may at any time or from time to time, by adoption of or by amendment to the
standard form of Stock Purchase Agreement described in Section 8, or by other means, grant Stock
Purchase Rights which do not permit all of the foregoing forms of consideration to be used in
payment of the purchase price or which otherwise restrict one or more forms of consideration.




          7.4 Vesting and Restrictions on Transfer. Shares issued pursuant to any Stock Purchase Right may or
may not be made subject to vesting conditioned upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria (the “ Vesting Conditions ” ) as shall be
established by the Board and set forth in the Stock Purchase Agreement evidencing such Award.
During any period (the “ Restriction Period ” ) in which shares acquired pursuant to a Stock
Purchase Right remain subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change
Event, as defined in Section 9.1, or as provided in Section 7.5. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.




          7.5 Effect of Termination of Service. Unless otherwise provided by the Board in the grant of a
Stock Purchase Right and set forth in the Stock Purchase Agreement,
if a Participant’s Service
terminates for any reason, whether voluntary or involuntary
(including the Participant’s death or
disability), then the Company shall have the option to repurchase for the purchase price paid by
the Participant any shares acquired by the Participant pursuant to a Stock Purchase Right which
remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service;
provided, however, that with the exception of shares acquired pursuant to a Stock Purchase Right by
an Officer, a Director or a Consultant, the Company’s repurchase option must lapse at the rate of
at least twenty percent (20%) of the shares per year over the period of five (5) years from the
effective date of grant of the Stock Purchase Right (without regard to the
date on which the Stock Purchase Right was exercised) and the repurchase option must be exercised,
if at all, for cash or cancellation of purchase money indebtedness for the shares within ninety
(90) days following the Participant’s termination of Service. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company.







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          7.6 Nontransferability of Stock Purchase Rights. Rights to acquire shares of Stock pursuant to a
Stock Purchase Right may not be assigned or transferred in any manner except by will or the laws of
descent and distribution, and, during the lifetime of the Participant, shall be exercisable only by
the Participant.




     8. Standard Forms of Agreements.



          8.1 Option Agreement. Unless otherwise provided by the Board at the time the Option is granted, an
Option shall comply with and be subject to the terms and conditions set forth in the form of Option
Agreement approved by the Board concurrently with its adoption of the Plan and as amended from time
to time.




          8.2 Stock Purchase Agreement. Unless otherwise provided by the Board at the time the Stock Purchase
Right is granted, a Stock Purchase Right shall be subject to the terms and conditions set forth in
the form of Stock Purchase Agreement approved by the Board concurrently with its adoption of the
Plan and as amended from time to time.




          8.3 Authority to Vary Terms. The Board shall have the authority from time to time to vary the terms
of any standard form of agreement described in this Section 8 either in connection with the grant
or amendment of an individual Award or in connection with the authorization of a new standard form
or forms; provided, however, that the terms and conditions of any such new, revised or amended
standard form or forms of agreement are not inconsistent with the terms of the Plan.




     9. Change in Control. 



          9.1 Definitions.




               (a) An “Ownership Change Event” shall be deemed to have occurred if any 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 the assets of the Company; or (iv) a
liquidation or dissolution of the Company.



               (b) A “Change in Control” shall mean an Ownership Change Event or a series of related Ownership
Change Events (collectively, a “Transaction” ) wherein the shareholders of the Company immediately
before the Transaction do not retain immediately after the Transaction, in substantially 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 the outstanding voting securities of the Company or, in the case of a
Transaction described in Section 9.1(a)(iii), the corporation or other business entity to which the
assets of the Company were transferred (the “Transferee” ), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting securities of one or more corporations or other business
entities which own the Company or the Transferee, as the case may be, either directly or through
one or more subsidiary corporations or other business entities. The Board shall have the right to



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determine whether multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final, binding and conclusive.




          9.2 Effect of Change in Control on Options.




               (a) Accelerated Vesting. Notwithstanding any other provision of the Plan to the contrary, the
Board, in its sole discretion, may provide in any Award Agreement or, in the event of a Change in
Control, may take such actions as it deems appropriate to provide for the acceleration of the
exercisability and vesting in connection with such Change in Control of any or all outstanding
Options and shares acquired upon the exercise of such Options.



               (b) Assumption of Options. In the event of a Change in Control, the surviving, continuing,
successor, or purchasing corporation or other business entity or parent thereof, as the case may be
(the “Acquiror”), may, without the consent of any Participant,
either assume the Company’s rights and obligations under outstanding Options or substitute for
outstanding Options substantially equivalent options for the Acquiror’s stock. Any Options which
are neither assumed by the Acquiror in connection with the Change in Control nor exercised as of
the date of the Change in Control shall terminate and cease to be outstanding effective as of the
date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Option prior to the Change in Control and any consideration received pursuant to the Change in
Control with respect to such shares shall continue to be subject to all applicable provisions of
the Award Agreement evidencing such Option except as otherwise provided in such Award Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in Section 9.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and immediately after
such Ownership Change 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 Code without regard to the provisions
of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its discretion.



               (c) Cash-Out of Options. The Board may, in its sole discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in Control, each or any Option
outstanding immediately prior to the Change in Control shall be canceled in exchange for a payment
with respect to each vested share of Stock subject to such canceled Option in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the Change in Control, or
(iii) other property which, in any such case, shall be in an amount having a Fair Market Value
equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in
Control over the exercise price per share under such Option (the “Spread” ). In the event such
determination is made by the Board, the Spread (reduced by applicable withholding taxes, if any)
shall be paid to Participants in respect of their canceled Options as soon as practicable following
the date of the Change in Control.



          9.3
Effect of Change in Control on Stock Purchase Right. In the event of a Change in Control, the
Acquiror, may, without the consent of any Participant, either assume
the Company’s rights and
obligations under outstanding Stock Purchase Rights or substitute for











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outstanding Stock Purchase Rights substantially equivalent purchase rights for the Acquiror’s
stock. Any Stock Purchase Rights which are neither assumed or substituted for by the Acquiror in
connection with the Change in Control nor exercised as of the date of the Change in Control shall
terminate and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of a Stock Purchase Right prior to the
Change in Control and any consideration received pursuant to the Change in Control with respect to
such shares shall continue to be subject to all applicable provisions of the Stock Purchase
Agreement evidencing such Stock Purchase Right except as otherwise provided in such Stock Purchase
Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is
subject to the outstanding Stock Purchase Rights immediately prior to an Ownership Change Event
described in Section 9.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change 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
Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Stock
Purchase Rights shall not terminate unless the Board otherwise provides in its discretion.




          9.4 Federal Excise Tax Under Section 4999 of the Code.




               (a) Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award
and any other payment or benefit received or to be received by a Participant would subject the
Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of
such acceleration of vesting, payment or benefit as an “ excess
parachute payment ” under Section
280G of the Code, the Participant may elect, in his or her sole discretion, to reduce the amount of
any acceleration of vesting called for under the Award in order to avoid such characterization.



               (b) Determination by Independent Accountants. To aid the Participant in making any election called
for under Section 9.4(a), no later than the date of the occurrence of any event that might
reasonably be anticipated to result in an “excess parachute payment” to the Participant as
described in Section 9.4(a), the Company shall request a determination in writing by independent
public accountants selected by the Company (the “Accountants”). As soon as practicable thereafter,
the Accountants shall determine and report to the Company and the Participant the amount of such
acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit
to the Participant. For the purposes of such determination, the Accountants may rely on reasonable,
good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The
Company and the Participant shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make
their required determination. The Company shall bear all fees and expenses the Accountants may
reasonably charge in connection with their services contemplated by this Section 9.4(b).



     10. Tax Withholding.




          10.1 Tax Withholding in General. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through








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payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise of an
Option, to make adequate provision for, the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect to an Award or the
shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock
or to release shares of Stock from an escrow established pursuant to an Option Agreement or Stock
Purchase Agreement until the Participating Company Group’s tax withholding obligations have been
satisfied by the Participant.




          10.2 Withholding in Shares. The Company shall have the right, but not the obligation, to deduct
from the shares of Stock issuable to a Participant upon the exercise of an Award, or to accept from
the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding obligations of the
Participating Company Group. The Fair Market Value of any shares of Stock withheld or tendered to
satisfy any such tax withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates.




     11. Compliance with Securities Law. 



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




     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 of the 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. No termination or amendment of the Plan shall affect any then
outstanding Award unless expressly provided by the Board. In any





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event, no termination or amendment of the Plan may adversely affect any then outstanding Award
without the consent of the Participant, unless such termination or amendment is required to enable
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.




     13. Miscellaneous Provisions.



          13.1 Repurchase Rights. Shares issued under the Plan may be subject to a right of first refusal,
one or more repurchase options, or other conditions and restrictions as determined by the Board in
its discretion at the time the Award is granted. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then exercisable, to one or
more persons as may be selected by the Company. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock
hereunder and shall promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing
any such transfer restrictions.




          13.2
Provision of Information. At least annually, copies of the Company’s balance sheet and
income statement for the just completed fiscal year shall be made available to each Participant and
purchaser of shares of Stock upon the exercise of an Award. The Company shall not be required to
provide such information to key employees whose duties in connection with the Company assure them
access to equivalent information. Furthermore, the Company shall deliver to each Participant such
disclosures as are required in accordance with Rule 701 under the Securities Act.




          13.3 Shareholder Approval. The Plan or any increase in the maximum aggregate number of shares of
Stock issuable thereunder as provided in Section 4.1 (the “Authorized Shares” ) shall be approved
by a majority of the outstanding securities of the Company entitled to vote within twelve (12)
months before or after the date of adoption thereof by the Board. Awards granted prior to security
holder approval of the Plan or in excess of the Authorized Shares previously approved by the
security holders shall become exercisable no earlier than the date of security holder approval of
the Plan or such increase in the Authorized Shares, as the case may be.








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