2006-II Employee Stock Incentive Plan


     

    

      EXHIBIT
        4.1

      


      U.S.
        Microbics, Inc.

      


      2006-II
        EMPLOYEE STOCK INCENTIVE PLAN

      


      As
        Adopted July 18, 2006

      


      


      1. PURPOSE.

      


      The
        purpose of this Plan is to provide incentives to attract, retain and motivate
        eligible persons whose present and potential contributions are important
        to the
        success of the Company, its Parent and Subsidiaries, by offering them an
        opportunity to participate in the Company’s future performance through awards of
        Options, Restricted Stock and Stock Bonuses. Capitalized terms not defined
        in
        the text are defined in Section 2.

      


      2. DEFINITIONS.

      


      As
        used
        in this Plan, the following terms will have the following meanings:

      


      “AWARD”
means
        any award under this Plan, including any Option, Restricted Stock or Stock
        Bonus.

      


      “AWARD
        AGREEMENT”
means,
        with respect to each Award, the signed written agreement between the Company
        and
        the Participant setting forth the terms and conditions of the
        Award.

      


      “BOARD”
means
        the Board of Directors of the Company.

      


      “CAUSE”
means
        any cause, as defined by applicable law, for the termination of a Participant’s
        employment with the Company or a Parent or Subsidiary of the
        Company.

      


      “CODE”
means
        the Internal Revenue Code of 1986, as amended.

      


      “COMPANY”
means
        U.S. Microbics, Inc., a Colorado corporation, or any successor
        corporation.

      


      “DISABILITY”
means
        a
        disability, whether temporary or permanent, partial or total, as determined
        by
        the Board.

      


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

      


      “EXERCISE
        PRICE”
means
        the price at which a holder of an Option may purchase the Shares issuable
        upon
        exercise of the Option.

      


      “FAIR
        MARKET VALUE”
means,
        as of any date, the value of a share of the Company’s Common Stock determined as
        follows:



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      
        	
                (a)

              	
                if
                  such Common Stock is publicly traded and is then listed on a national
                  securities exchange, its closing price on the date of determination
                  on the
                  principal national securities exchange on which the Common Stock
                  is listed
                  or admitted to trading as reported in The Wall Street
                  Journal;

              
	 	 
	
                (b)

              	
                if
                  such Common Stock is quoted on the NASDAQ National Market, its
                  closing
                  price on the NASDAQ National Market on the date of determination
                  as
                  reported in The Wall Street Journal;

              
	 	 
	
                (c)

              	
                if
                  such Common Stock is publicly traded but is not listed or admitted
                  to
                  trading on a national securities exchange, the average of the closing
                  bid
                  and asked prices on the date of determination as reported by Bloomberg,
                  L.P.;

              
	 	 
	
                (d)

              	
                in
                  the case of an Award made on the Effective Date, the price per
                  share at
                  which shares of the Company’s Common Stock are initially offered for sale
                  to the public by the Company’s underwriters in the initial public offering
                  of the Company’s Common Stock pursuant to a registration statement filed
                  with the SEC under the Securities Act; or

              
	 	 
	
                (e)

              	
                if
                  none of the foregoing is applicable, by the Board in good
                  faith.

              


      

      


      “INSIDER”
means
        an officer or director of the Company or any other person whose transactions
        in
        the Company’s Common Stock are subject to Section 16 of the Exchange
        Act.

      


      “OPTION”
means
        an award of an option to purchase Shares pursuant to Section 6.

      


      “PARENT”
means
        any corporation (other than the Company) in an unbroken chain of corporations
        ending with the Company if each of such corporations other than the Company
        owns
        stock possessing 50% or more of the total combined voting power of all classes
        of stock in one of the other corporations in such chain.

      


      “PARTICIPANT”
means
        a
        person who receives an Award under this Plan.

      


      “PERFORMANCE
        FACTORS”
means
        the factors selected by the Board, in its sole and absolute discretion, from
        among the following measures to determine whether the performance goals
        applicable to Awards have been satisfied:

      


      
        	
                (a)

              	
                Net
                  revenue and/or net revenue growth;

              
	 	 
	
                (b)

              	
                Earnings
                  before income taxes and amortization and/or earnings before income
                  taxes
                  and amortization growth;

              
	 	 
	
                (c)

              	
                Operating
                  income and/or operating income
                  growth;

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      
        	 	 
	
                (d)

              	
                Net
                  income and/or net income growth;

              
	 	 
	
                (e)

              	
                Earnings
                  per share and/or earnings per share growth;

              
	 	 
	
                (f)

              	
                Total
                  stockholder return and/or total stockholder return
                  growth;

              
	 	 
	
                (g)

              	
                Return
                  on equity;

              
	 	 
	
                (h)

              	
                Operating
                  cash flow return on income;

              
	 	 
	
                (i)

              	
                Adjusted
                  operating cash flow return on income;

              
	 	 
	
                (j)

              	
                Economic
                  value added; and

              
	 	 
	
                (k)

              	
                Individual
                  confidential business objectives.

              


      

      


      “PERFORMANCE
        PERIOD”
means
        the period of service determined by the Board, not to exceed five years,
        during
        which years of service or performance is to be measured for Restricted Stock
        Awards or Stock Bonuses.

      


      “PLAN”
means
        this U.S. Microbics, Inc. 2006-II Employee Stock Incentive Plan, as amended
        from
        time to time.

      


      “RESTRICTED
        STOCK AWARD”
means
        an award of Shares pursuant to Section 7.

      


      “SEC”
means
        the Securities and Exchange Commission.

      


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

      


      “SHARES”
means
        shares of the Company’s Common Stock reserved for issuance under this Plan, as
        adjusted pursuant to Sections 3 and 19, and any successor security.

      


      “STOCK
        BONUS”
means
        an award of Shares, or cash in lieu of Shares, pursuant to Section
        8.

      


      “SUBSIDIARY”
means
        any corporation (other than the Company) in an unbroken chain of corporations
        beginning with the Company if each of the corporations other than the last
        corporation in the unbroken chain owns stock possessing 50% or more of the
        total
        combined voting power of all classes of stock in one of the other corporations
        in such chain.

      


      “TERMINATION”
or
        “TERMINATED”
means,
        for purposes of this Plan with respect to a Participant, that the Participant
        has for any reason ceased to provide services as an employee, officer, director,
        consultant, independent contractor, or advisor to the Company or a Parent
        or
        Subsidiary of the Company. An employee will not be deemed to have ceased
        to
        provide services in the case of (i) sick leave, (ii) military leave, or (iii)
        any other leave of absence approved by the Company, provided that such leave
        is
        for a period of not more than 90 days, unless reemployment upon the expiration
        of such leave is guaranteed by contract or statute or unless provided otherwise
        pursuant to a formal policy adopted from time to time by the Company and
        issued
        and promulgated to employees in writing. In the case of any employee on an
        approved leave of absence, the Board may make such provisions respecting
        suspension of vesting of the Award while on leave from the employ of the
        Company
        or a Subsidiary as it may deem appropriate, except that in no event may an
        Option be exercised after the expiration of the term set forth in the Option
        agreement. The Board will have sole discretion to determine whether a
        Participant has ceased to provide services and the effective date on which
        the
        Participant ceased to provide services (the “TERMINATION DATE”).



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “UNVESTED
        SHARES”
means
        “Unvested Shares” as defined in the Award Agreement.

      


      “VESTED
        SHARES”
means
        “Vested Shares” as defined in the Award Agreement.

      


      3. SHARES
        SUBJECT TO THE PLAN.

      


      3.1 Number
        of Shares Available.
        Subject
        to Sections 3.2 and 19, the total aggregate number of Shares reserved and
        available for grant and issuance pursuant to this Plan will be 50,000,000
        plus
        Shares that are subject to: (a) issuance upon exercise of an Option but cease
        to
        be subject to such Option for any reason other than exercise of such Option;
        (b)
        an Award granted hereunder but forfeited or repurchased by the Company at
        the
        original issue price; and (c) an Award that otherwise terminates without
        Shares
        being issued. At all times the Company shall reserve and keep available a
        sufficient number of Shares as shall be required to satisfy the requirements
        of
        all outstanding Options granted under this Plan and all other outstanding
        but
        unvested Awards granted under this Plan.

      


      3.2 Adjustment
        of Shares.
        In the
        event that the number of outstanding shares is changed by a stock dividend,
        recapitalization, stock split, reverse stock split, subdivision, combination,
        reclassification or similar change in the capital structure of the Company
        without consideration, then (a) the number of Shares reserved for issuance
        under
        this Plan, (b) the Exercise Prices of and number of Shares subject to
        outstanding Options, and (c) the number of Shares subject to other outstanding
        Awards will be proportionately adjusted, subject to any required action by
        the
        Board or the stockholders of the Company and compliance with applicable
        securities laws; provided, however, that fractions of a Share will not be
        issued
        but will either be replaced by a cash payment equal to the Fair Market Value
        of
        such fraction of a Share or will be rounded up to the nearest whole Share,
        as
        determined by the Board.

      


      4. ELIGIBILITY.

      


      ISOs
        (as
        defined in Section 6 below) may be granted only to employees (including officers
        and directors who are also employees) of the Company or of a Parent or
        Subsidiary of the Company. All other Awards may be granted to employees,
        officers, directors, consultants, independent contractors and advisors of
        the
        Company or any Parent or Subsidiary of the Company; provided such consultants,
        contractors and advisors render bona fide services not in connection with
        the
        offer and sale of securities in a capital-raising transaction. 

      


      5. ADMINISTRATION.

      


      5.1 Board
        Authority.
        This
        Plan will be administered by the Board. Subject to the general purposes,
        terms
        and conditions of this Plan, the Board will have full power to implement
        and
        carry out this Plan. Without limitation, the Board will have the authority
        to:

      


      
        	
                (a)

              	
                construe
                  and interpret this Plan, any Award Agreement and any other agreement
                  or
                  document executed pursuant to this Plan;

              
	 	 
	
                (b)

              	
                prescribe,
                  amend and rescind rules and regulations relating to this Plan or
                  any
                  Award;

              
	 	 
	
                (c)

              	
                select
                  persons to receive Awards;

              
	 	 
	
                (d)

              	
                determine
                  the form and terms of Awards;

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      
        	 	 
	
                (e)

              	
                determine
                  the number of Shares or other consideration subject to
                  Awards;

              
	 	 
	
                (f)

              	
                determine
                  whether Awards will be granted singly, in combination with, in
                  tandem
                  with, in replacement of, or as alternatives to, other Awards under
                  this
                  Plan or any other incentive or compensation plan of the Company
                  or any
                  Parent or Subsidiary of the Company;

              
	 	 
	
                (g)

              	
                grant
                  waivers of Plan or Award conditions;

              
	 	 
	
                (h)

              	
                determine
                  the vesting, ability to exercise and payment of Awards;

              
	 	 
	
                (i)

              	
                correct
                  any defect, supply any omission or reconcile any inconsistency
                  in this
                  Plan, any Award or any Award Agreement;

              
	 	 
	
                (j)

              	
                determine
                  whether an Award has been earned; and

              
	 	 
	
                (k)

              	
                make
                  all other determinations necessary or advisable for the administration
                  of
                  this Plan.

              


      

      


      5.2 Board
        Discretion.
        Any
        determination made by the Board with respect to any Award will be made at
        the
        time of grant of the Award or, unless in contravention of any express term
        of
        this Plan or Award, at any later time, and such determination will be final
        and
        binding on the Company and on all persons having an interest in any Award
        under
        this Plan. The Board may delegate to one or more officers of the Company
        the
        authority to grant an Award under this Plan to Participants who are not Insiders
        of the Company.

      


      6. OPTIONS.

      


       The
        Board
        may grant Options to eligible persons and will determine whether such Options
        will be Incentive Stock Options within the meaning of the Code (“ISO”) or
        Nonqualified Stock Options (“NQSO”), the number of Shares subject to the Option,
        the Exercise Price of the Option, the period during which the Option may
        be
        exercised, and all other terms and conditions of the Option, subject to the
        following:

      


      6.1 Form
        of Option Grant.
        Each
        Option granted under this Plan will be evidenced by an Award Agreement that
        will
        expressly identify the Option as an ISO or an NQSO (hereinafter referred
        to as
        the “STOCK OPTION AGREEMENT”), and will be in such form and contain such
        provisions (which need not be the same for each Participant) as the Board
        may
        from time to time approve, and which will comply with and be subject to the
        terms and conditions of this Plan.

      


      6.2 Date
        of Grant.
        The
        date of grant of an Option will be the date on which the Board makes the
        determination to grant such Option, unless otherwise specified by the Board.
        The
        Stock Option Agreement and a copy of this Plan will be delivered to the
        Participant within a reasonable time after the granting of the
        Option.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      6.3 Exercise
        Period.
        Options
        may be exercisable within the times or upon the events determined by the
        Board
        as set forth in the Stock Option Agreement governing such Option; provided,
        however, that no Option will be exercisable after the expiration of ten (10)
        years from the date the Option is granted; and provided further that no ISO
        granted to a person who directly or by attribution owns more than ten percent
        (10%) of the total combined voting power of all classes of stock of the Company
        or of any Parent or Subsidiary of the Company (“TEN PERCENT STOCKHOLDER”) will
        be exercisable after the expiration of five (5) years from the date the ISO
        is
        granted. The Board also may provide for Options to become exercisable at
        one
        time or from time to time, periodically or otherwise, in such number of Shares
        or percentage of Shares as the Board determines.

      


      6.4 Exercise
        Price.
        The
        Exercise Price of an Option will be determined by the Board when the Option
        is
        granted and may be not less than 85% of the Fair Market Value of the Shares
        on
        the date of grant; provided that: (a) the Exercise Price of an ISO will be
        not
        less than 100% of the Fair Market Value of the Shares on the date of grant;
        and
        (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will
        not
        be less than 110% of the Fair Market Value of the Shares on the date of grant.
        Payment for the Shares purchased may be made in accordance with Section 9
        of
        this Plan.

      


      6.5 Method
        of Exercise.
        Options
        may be exercised only by delivery to the Company of a written stock option
        exercise agreement (the “EXERCISE AGREEMENT”) in a form approved by the Board,
        (which need not be the same for each Participant), stating the number of
        Shares
        being purchased, the restrictions imposed on the Shares purchased under such
        Exercise Agreement, if any, and such representations and agreements regarding
        Participant’s investment intent and access to information and other matters, if
        any, as may be required or desirable by the Company to comply with applicable
        securities laws, together with payment in full of the Exercise Price for
        the
        number of Shares being purchased.

      


      6.6 Termination.
        Notwithstanding the exercise periods set forth in the Stock Option Agreement,
        exercise of an Option will always be subject to the following:

      


      (a) If
        the
        Participant’s service is Terminated for any reason except death or Disability,
        then the Participant may exercise such Participant’s Options only to the extent
        that such Options would have been exercisable upon the Termination Date no
        later
        than three (3) months after the Termination Date (or such shorter or longer
        time
        period not exceeding five (5) years as may be determined by the Board, with
        any
        exercise beyond three (3) months after the Termination Date deemed to be
        an
        NQSO), but in any event, no later than the expiration date of the
        Options.

      


      (b) If
        the
        Participant’s service is Terminated because of Participant’s death or Disability
        (or the Participant dies within three (3) months after a Termination other
        than
        for Cause or because of Participant’s Disability), then Participant’s Options
        may be exercised only to the extent that such Options would have been
        exercisable by Participant on the Termination Date and must be exercised
        by
        Participant (or Participant’s legal representative or authorized assignee) no
        later than twelve (12) months after the Termination Date (or such shorter
        or
        longer time period not exceeding five (5) years as may be determined by the
        Board, with any such exercise beyond (i) three (3) months after the Termination
        Date when the Termination is for any reason other than the Participant’s death
        or Disability, or (ii) twelve (12) months after the Termination Date when
        the
        Termination is for Participant’s death or Disability, deemed to be an NQSO), but
        in any event no later than the expiration date of the Options.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      (c) Notwithstanding
        the provisions in paragraph 6.6(a) above, if a Participant’s service is
        Terminated for Cause, neither the Participant, the Participant’s estate nor such
        other person who may then hold the Option shall be entitled to exercise any
        Option with respect to any Shares whatsoever, after Termination, whether
        or not
        after Termination the Participant may receive payment from the Company or
        Subsidiary for vacation pay, for services rendered prior to Termination,
        for
        services rendered for the day on which Termination occurs, for salary in
        lieu of
        notice, or for any other benefits. For the purpose of this paragraph,
        Termination shall be deemed to occur on the date when the Company dispatches
        notice or advice to the Participant that his service is Terminated.

      


      6.7 Limitations
        on Exercise.
        The
        Board may specify a reasonable minimum number of Shares that may be purchased
        on
        any exercise of an Option, provided that such minimum number will not prevent
        Participant from exercising the Option for the full number of Shares for
        which
        it is then exercisable.

      


      6.8 Limitations
        on ISO.
        The
        aggregate Fair Market Value (determined as of the date of grant) of Shares
        with
        respect to which ISO are exercisable for the first time by a Participant
        during
        any calendar year (under this Plan or under any other incentive stock option
        plan of the Company, Parent or Subsidiary of the Company) will not exceed
        $100,000. If the Fair Market Value of Shares on the date of grant with respect
        to which ISO are exercisable for the first time by a Participant during any
        calendar year exceeds $100,000, then the Options for the first $100,000 worth
        of
        Shares to become exercisable in such calendar year will be ISO and the Options
        for the amount in excess of $100,000 that become exercisable in that calendar
        year will be NQSOs. In the event that the Code or the regulations promulgated
        thereunder are amended after the Effective Date of this Plan to provide for
        a
        different limit on the Fair Market Value of Shares permitted to be subject
        to
        ISO, such different limit will be automatically incorporated herein and will
        apply to any Options granted after the effective date of such
        amendment.

      


      6.9 Modification,
        Extension or Renewal.
        The
        Board may modify, extend or renew outstanding Options and authorize the grant
        of
        new Options in substitution therefor, provided that any such action may not,
        without the written consent of a Participant, impair any of such Participant’s
        rights under any Option previously granted. Any outstanding ISO that is
        modified, extended, renewed or otherwise altered will be treated in accordance
        with Section 424(h) of the Code. The Board may reduce the Exercise Price
        of
        outstanding Options without the consent of Participants affected by a written
        notice to them; provided, however, that the Exercise Price may not be reduced
        below the minimum Exercise Price that would be permitted under Section 6.4
        of
        this Plan for Options granted on the date the action is taken to reduce the
        Exercise Price.

      


      6.10 No
        Disqualification.
        Notwithstanding any other provision in this Plan, no term of this Plan relating
        to ISO will be interpreted, amended or altered, nor will any discretion or
        authority granted under this Plan be exercised, so as to disqualify this
        Plan
        under Section 422 of the Code or, without the consent of the Participant
        affected, to disqualify any ISO under Section 422 of the Code.

      


      7. RESTRICTED
        STOCK.

      


      A
        Restricted Stock Award is an offer by the Company to sell to an eligible
        person
        Shares that are subject to restrictions. The Board will determine to whom
        an
        offer will be made, the number of Shares the person may purchase, the price
        to
        be paid (the “PURCHASE PRICE”), the restrictions to which the Shares will be
        subject, and all other terms and conditions of the Restricted Stock Award,
        subject to the following:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      7.1 Form
        of Restricted Stock Award.
        All
        purchases under a Restricted Stock Award made pursuant to this Plan will
        be
        evidenced by an Award Agreement (the “RESTRICTED STOCK PURCHASE AGREEMENT”) that
        will be in such form (which need not be the same for each Participant) as
        the
        Board will from time to time approve, and will comply with and be subject
        to the
        terms and conditions of this Plan. The offer of Restricted Stock will be
        accepted by the Participant’s execution and delivery of the Restricted Stock
        Purchase Agreement and full payment for the Shares to the Company within
        thirty
        (30) days from the date the Restricted Stock Purchase Agreement is delivered
        to
        the person. If such person does not execute and deliver the Restricted Stock
        Purchase Agreement along with full payment for the Shares to the Company
        within
        thirty (30) days, then the offer will terminate, unless otherwise extended
        by
        the Board.

      


      7.2 Purchase
        Price.
        The
        Purchase Price of Shares sold pursuant to a Restricted Stock Award will be
        determined by the Board on the date the Restricted Stock Award is granted,
        except in the case of a sale to a Ten Percent Stockholder, in which case
        the
        Purchase Price will be 100% of the Fair Market Value. Payment of the Purchase
        Price must be made in accordance with Section 9 of this Plan.

      


      7.3 Terms
        of Restricted Stock Awards.
        Restricted Stock Awards shall be subject to such restrictions as the Board
        may
        impose. These restrictions may be based upon completion of a specified number
        of
        years of service with the Company or upon completion of the performance goals
        as
        set out in advance in the Participant’s individual Restricted Stock Purchase
        Agreement. Restricted Stock Awards may vary from Participant to Participant
        and
        between groups of Participants. Prior to the grant of a Restricted Stock
        Award,
        the Board shall: (a) determine the nature, length and starting date of any
        Performance Period for the Restricted Stock Award; (b) select from among
        the
        Performance Factors to be used to measure performance goals, if any; and
        (c)
        determine the number of Shares that may be awarded to the Participant. Prior
        to
        the payment of any Restricted Stock Award, the Board shall determine the
        extent
        to which such Restricted Stock Award has been earned. Performance Periods
        may
        overlap and Participants may participate simultaneously with respect to
        Restricted Stock Awards that are subject to different Performance Periods
        and
        have different performance goals and other criteria.

      


      7.4 Termination
        During Performance Period.
        If a
        Participant is Terminated during a Performance Period for any reason, then
        such
        Participant will be entitled to payment (whether in Shares, cash or otherwise)
        with respect to the Restricted Stock Award only to the extent earned as of
        the
        date of Termination in accordance with the Restricted Stock Purchase Agreement,
        unless the Board determines otherwise.

      


      8. STOCK
        BONUSES.

      


      8.1 Awards
        of Stock Bonuses.
        A Stock
        Bonus is an award of Shares (which may consist of Restricted Stock) for
        extraordinary services rendered to the Company or any Parent or Subsidiary
        of
        the Company. A Stock Bonus will be awarded pursuant to an Award Agreement
        (the
“STOCK BONUS AGREEMENT”) that will be in such form (which need not be the same
        for each Participant) as the Board will from time to time approve, and will
        comply with and be subject to the terms and conditions of this Plan. A Stock
        Bonus may be awarded upon satisfaction of such performance goals as are set
        out
        in advance in the Participant’s individual Award Agreement (the “PERFORMANCE
        STOCK BONUS AGREEMENT”) that will be in such form (which need not be the same
        for each Participant) as the Board will from time to time approve, and will
        comply with and be subject to the terms and conditions of this Plan. Stock
        Bonuses may vary from Participant to Participant and between groups of
        Participants, and may be based upon the achievement of the Company, Parent
        or
        Subsidiary and/or individual performance factors or upon such other criteria
        as
        the Board may determine.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      8.2 Terms
        of Stock Bonuses.
        The
        Board will determine the number of Shares to be awarded to the Participant.
        If
        the Stock Bonus is being earned upon the satisfaction of performance goals
        pursuant to a Performance Stock Bonus Agreement, then the Board will: (a)
        determine the nature, length and starting date of any Performance Period
        for
        each Stock Bonus; (b) select from among the Performance Factors to be used
        to
        measure the performance, if any; and (c) determine the number of Shares that
        may
        be awarded to the Participant. Prior to the payment of any Stock Bonus, the
        Board shall determine the extent to which such Stock Bonuses have been earned.
        Performance Periods may overlap and Participants may participate simultaneously
        with respect to Stock Bonuses that are subject to different Performance Periods
        and different performance goals and other criteria. The number of Shares
        may be
        fixed or may vary in accordance with such performance goals and criteria
        as may
        be determined by the Board. The Board may adjust the performance goals
        applicable to the Stock Bonuses to take into account changes in law and
        accounting or tax rules and to make such adjustments as the Board deems
        necessary or appropriate to reflect the impact of extraordinary or unusual
        items, events or circumstances to avoid windfalls or hardships.

      


      8.3 Form
        of Payment.
        The
        earned portion of a Stock Bonus may be paid to the Participant by the Company
        either currently or on a deferred basis, with such interest or dividend
        equivalent, if any, as the Board may determine. Payment may be made in the
        form
        of cash or whole Shares or a combination thereof, either in a lump sum payment
        or in installments, all as the Board will determine.

      


      9. PAYMENT
        FOR SHARE PURCHASES.

      


      9.1 Payment.
        Payment
        for Shares purchased pursuant to this Plan may be made in cash (by check)
        or,
        where expressly approved for the Participant by the Board and where permitted
        by
        law:


         

      
        	
                (a)

              	
                by
                  cancellation of indebtedness of the Company to the
                  Participant;

              
	 	 
	
                (b)

              	
                by
                  surrender of shares that either: (1) have been owned by Participant
                  for
                  more than one year and have been paid for within the meaning of
                  Rule 144
                  of the Securities Act of 1933 (and, if such shares were purchased
                  from the
                  Company by use of a promissory note, such note has been fully paid
                  with
                  respect to such shares); or (2) were obtained by Participant in
                  the public
                  market;

              
	 	 
	
                (c)

              	
                by
                  waiver of compensation due or accrued to the Participant for services
                  rendered;

              
	 	 
	
                (d)

              	
                with
                  respect only to purchases upon exercise of an Option, and provided
                  that a
                  public market for the Company’s stock
                  exists:

              


      

      


      
        	
                 

              	
                (1)

              	
                through
                  a “same day sale” commitment from the Participant and a broker-dealer that
                  is a member of the National Association of Securities Dealers (an
“NASD
                  DEALER”) whereby the Participant irrevocably elects to exercise the Option
                  and to sell a portion of the Shares so purchased to pay for the
                  Exercise
                  Price, and whereby the NASD Dealer irrevocably commits upon receipt
                  of
                  such Shares to forward the Exercise Price directly to the Company;
                  or

              
	 	 	 
	
                 

              	
                (2)

              	
                through
                  a “margin” commitment from the Participant and a NASD Dealer whereby the
                  Participant irrevocably elects to exercise the Option and to pledge
                  the
                  Shares so purchased to the NASD Dealer in a margin account as security
                  for
                  a loan from the NASD Dealer in the amount of the Exercise Price,
                  and
                  whereby the NASD Dealer irrevocably commits upon receipt of such
                  Shares to
                  forward the Exercise Price directly to the Company;
                  or

              


      

      


      
        	
                (e)

              	
                by
                  any combination of the foregoing.

              


      

      


      10.
         WITHHOLDING
        TAXES.

      


      10.1 Withholding
        Generally.
        Whenever Shares are to be issued in satisfaction of Awards granted under
        this
        Plan, the Company may require the Participant to remit to the Company an
        amount
        sufficient to satisfy federal, state and local withholding tax requirements
        prior to the delivery of any certificate or certificates for such Shares.
        Whenever, under this Plan, payments in satisfaction of Awards are to be made
        in
        cash, such payment will be net of an amount sufficient to satisfy federal,
        state, and local withholding tax requirements.

      


      10.2 Stock
        Withholding.
        When,
        under applicable tax laws, a participant incurs tax liability in connection
        with
        the exercise or vesting of any Award that is subject to tax withholding and
        the
        Participant is obligated to pay the Company the amount required to be withheld,
        the Board may allow the Participant to satisfy the minimum withholding tax
        obligation by electing to have the Company withhold from the Shares to be
        issued
        that number of Shares having a Fair Market Value equal to the minimum amount
        required to be withheld, determined on the date that the amount of tax to
        be
        withheld is to be determined. All elections by a Participant to have Shares
        withheld for this purpose will be made in accordance with the requirements
        established by the Board and be in writing in a form acceptable to the
        Board.

      


      11. PRIVILEGES
        OF STOCK OWNERSHIP.

      


      11.1 Voting
        and Dividends.
        No
        Participant will have any of the rights of a stockholder with respect to
        any
        Shares until the Shares are issued to the Participant. After Shares are issued
        to the Participant, the Participant will be a stockholder and will have all
        the
        rights of a stockholder with respect to such Shares, including the right
        to vote
        and receive all dividends or other distributions made or paid with respect
        to
        such Shares; provided, that if such Shares are Restricted Stock, then any
        new,
        additional or different securities the Participant may become entitled to
        receive with respect to such Shares by virtue of a stock dividend, stock
        split
        or any other change in the corporate or capital structure of the Company
        will be
        subject to the same restrictions as the Restricted Stock; provided, further,
        that the Participant will have no right to retain such stock dividends or
        stock
        distributions with respect to Shares that are repurchased at the Participant’s
        Purchase Price or Exercise Price pursuant to Section 12.

      


      11.2 Financial
        Statements.
        Pursuant to regulation 260.140.46 of the Rules of the California Corporations
        Commissioner, the Company will provide financial statements to each Participant
        prior to such Participant’s purchase of Shares under this Plan, and to each
        Participant annually during the period such Participant has Awards outstanding;
        provided, however, the Company will not be required to provide such financial
        statements to Participants whose services in connection with the Company
        assure
        them access to equivalent information.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      12. TRANSFERABILITY.

      


      Awards
        granted under this Plan, and any interest therein, will not be transferable
        or
        assignable by Participant, and may not be made subject to execution, attachment
        or similar process, other than by will or by the laws of descent and
        distribution. During the lifetime of the Participant an Award will be
        exercisable only by the Participant. During the lifetime of the Participant,
        any
        elections with respect to an Award may be made only by the Participant unless
        otherwise determined by the Board and set forth in the Award Agreement with
        respect to Awards that are not ISOs.

      


      13. RESTRICTIONS
        ON SHARES.

      


      At
        the
        discretion of the Board, the Company may reserve to itself and/or its
        assignee(s) in the Award Agreement a right to repurchase a portion of or
        all
        Unvested Shares held by a Participant following such Participant’s Termination
        at any time within ninety (90) days after the later of (a) Participant’s
        Termination Date, or (b) the date Participant purchases Shares under this
        Plan.
        Such repurchase by the Company shall be for cash and/or cancellation of purchase
        money indebtedness, and the price per share shall be the Participant’s Exercise
        Price or the Purchase Price, as applicable.

      


      14. CERTIFICATES.

      


      All
        certificates for Shares or other securities delivered under this Plan will
        be
        subject to such stock transfer orders, legends and other restrictions as
        the
        Board may deem necessary or advisable, including restrictions under any
        applicable federal, state or foreign securities law, or any rules, regulations
        and other requirements of the SEC or any stock exchange or automated quotation
        system upon which the Shares may be listed or quoted.

      


      15. ESCROW;
        PLEDGE OF SHARES.

      


      To
        enforce any restrictions on a Participant’s Shares, the Board may require the
        Participant to deposit all certificates representing Shares, together with
        stock
        powers or other instruments of transfer approved by the Board appropriately
        endorsed in blank, with the Company or an agent designated by the Company
        to
        hold in escrow until such restrictions have lapsed or terminated, and the
        Board
        may cause a legend or legends referencing such restrictions to be placed
        on the
        certificates. Any Participant who is permitted to execute a promissory note
        as
        partial or full consideration for the purchase of Shares under this Plan
        will be
        required to pledge and deposit with the Company all or part of the Shares
        so
        purchased as collateral to secure the payment of Participant’s obligation to the
        Company under the promissory note; provided, however, that the Board may
        require
        or accept other or additional forms of collateral to secure the payment of
        such
        obligation and, in any event, the Company will have full recourse against
        the
        Participant under the promissory note notwithstanding any pledge of the
        Participant’s Shares or other collateral. In connection with any pledge of the
        Shares, Participant will be required to execute and deliver a written pledge
        agreement in such form as the Board will from time to time approve. The Shares
        purchased with the promissory note may be released from the pledge on a pro
        rata
        basis as the promissory note is paid.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      16. EXCHANGE
        AND BUYOUT OF AWARDS.

      


      The
        Board
        may, at any time or from time to time, authorize the Company, with the consent
        of the respective Participants, to issue new Awards in exchange for the
        surrender and cancellation of any or all outstanding Awards. The Board may
        at
        any time buy from a Participant an Award previously granted with payment
        in
        cash, Shares (including Restricted Stock) or other consideration, based on
        such
        terms and conditions as the Board and the Participant may agree.

      


      17. SECURITIES
        LAW AND OTHER REGULATORY COMPLIANCE.

      


      An
        Award
        will not be effective unless such Award is in compliance with all applicable
        federal and state securities laws, rules and regulations of any governmental
        body, and the requirements of any stock exchange or automated quotation system
        upon which the Shares may then be listed or quoted, as they are in effect
        on the
        date of grant of the Award and also on the date of exercise or other issuance.
        Notwithstanding any other provision in this Plan, the Company will have no
        obligation to issue or deliver certificates for Shares under this Plan prior
        to:
        (a) obtaining any approvals from governmental agencies that the Company
        determines are necessary or advisable; and/or (b) completion of any registration
        or other qualification of such Shares under any state or federal law or ruling
        of any governmental body that the Company determines to be necessary or
        advisable. The Company will be under no obligation to register the Shares
        with
        the SEC or to effect compliance with the registration, qualification or listing
        requirements of any state securities laws, stock exchange or automated quotation
        system, and the Company will have no liability for any inability or failure
        to
        do so.

      


      18. NO
        OBLIGATION TO EMPLOY.

      


      Nothing
        in this Plan or any Award granted under this Plan will confer or be deemed
        to
        confer on any Participant any right to continue in the employ of, or to continue
        any other relationship with, the Company or any Parent or Subsidiary of the
        Company or limit in any way the right of the Company or any Parent or Subsidiary
        of the Company to terminate Participant’s employment or other relationship at
        any time, with or without cause.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      19. CORPORATE
        TRANSACTIONS.

      


      19.1 Assumption
        or Replacement of Awards by Successor.
        In the
        event of (a) a dissolution or liquidation of the Company, (b) a merger or
        consolidation in which the Company is not the surviving corporation (other
        than
        a merger or consolidation with a wholly-owned subsidiary, a reincorporation
        of
        the Company in a different jurisdiction, or other transaction in which there
        is
        no substantial change in the stockholders of the Company or their relative
        stock
        holdings and the Awards granted under this Plan are assumed, converted or
        replaced by the successor corporation, which assumption will be binding on
        all
        Participants), (c) a merger in which the Company is the surviving corporation
        but after which the stockholders of the Company immediately prior to such
        merger
        (other than any stockholder that merges, or which owns or controls another
        corporation that merges, with the Company in such merger) cease to own their
        shares or other equity interest in the Company, (d) the sale of substantially
        all of the assets of the Company, or (e) the acquisition, sale, or transfer
        of
        more than 50% of the outstanding shares of the Company by tender offer or
        similar transaction, any or all outstanding Awards may be assumed, converted
        or
        replaced by the successor corporation (if any), which assumption, conversion
        or
        replacement will be binding on all Participants. In the alternative, the
        successor corporation may substitute equivalent Awards or provide substantially
        similar consideration to Participants as was provided to stockholders (after
        taking into account the existing provisions of the Awards). The successor
        corporation may also issue, in place of outstanding Shares of the Company
        held
        by the Participant, substantially similar shares or other property subject
        to
        repurchase restrictions no less favorable to the Participant. In the event
        such
        successor corporation (if any) refuses to assume or substitute Awards, as
        provided above, pursuant to a transaction described in this Subsection 19.1,
        such Awards will expire on such transaction at such time and on such conditions
        as the Board will determine. Notwithstanding anything in this Plan to the
        contrary, the Board may provide that the vesting of any or all Awards granted
        pursuant to this Plan will accelerate upon a transaction described in this
        Section 19. If the Board exercises such discretion with respect to Options,
        such
        Options will become exercisable in full prior to the consummation of such
        event
        at such time and on such conditions as the Board determines, and if such
        Options
        are not exercised prior to the consummation of the corporate transaction,
        they
        shall terminate at such time as determined by the Board.

      


      19.2 Other
        Treatment of Awards.
        Subject
        to any greater rights granted to Participants under the foregoing provisions
        of
        this Section 19, in the event of the occurrence of any transaction described
        in
        Section 19.1, any outstanding Awards will be treated as provided in the
        applicable agreement or plan of merger, consolidation, dissolution, liquidation,
        or sale of assets.

      


      19.3 Assumption
        of Awards by the Company.
        The
        Company, from time to time, also may substitute or assume outstanding awards
        granted by another company, whether in connection with an acquisition of
        such
        other company or otherwise, by either: (a) granting an Award under this Plan
        in
        substitution of such other company’s award; or (b) assuming such award as if it
        had been granted under this Plan if the terms of such assumed award could
        be
        applied to an Award granted under this Plan. Such substitution or assumption
        will be permissible if the holder of the substituted or assumed award would
        have
        been eligible to be granted an Award under this Plan if the other company
        had
        applied the rules of this Plan to such grant. In the event the Company assumes
        an award granted by another company, the terms and conditions of such award
        will
        remain unchanged (except that the exercise price and the number and nature
        of
        Shares issuable upon exercise of any such option will be adjusted appropriately
        pursuant to Section 424(a) of the Code). In the event the Company elects
        to
        grant a new Option rather than assuming an existing option, such new Option
        may
        be granted with a similarly adjusted Exercise Price.


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      20. ADOPTION
        AND STOCKHOLDER APPROVAL.

      


      This
        Plan
        will become effective on the date on which it is adopted by the Board (the
        “EFFECTIVE DATE”). This Plan shall be approved by the stockholders of the
        Company within twelve (12) months before or after the date this Plan is adopted
        by the Board. Upon the Effective Date, the Board may grant Awards pursuant
        to
        this Plan. In the event that stockholder approval of this Plan is not obtained
        within the time period provided herein, all Awards granted hereunder shall
        be
        cancelled, any Shares issued pursuant to any Awards shall be cancelled and
        any
        purchase of Shares issued hereunder shall be rescinded.

      


      21. TERM
        OF PLAN/GOVERNING LAW.

      


      Unless
        earlier terminated as provided herein, this Plan will terminate ten (10)
        years
        from the date this Plan is adopted by the Board or, if earlier, the date
        of
        stockholder approval. This Plan and all agreements there under shall be governed
        by and construed in accordance with the laws of the State of
        California.

      


      22. AMENDMENT
        OR TERMINATION OF PLAN.

      


      The
        Board
        may at any time terminate or amend this Plan in any respect, including without
        limitation amendment of any form of Award Agreement or instrument to be executed
        pursuant to this Plan; provided, however, that the Board will not, without
        the
        approval of the stockholders of the Company, amend this Plan in any manner
        that
        requires such stockholder approval.

      


      23. NONEXCLUSIVITY
        OF THE PLAN.

      


      Neither
        the adoption of this Plan by the Board, the submission of this Plan to the
        stockholders of the Company for approval, nor any provision of this Plan
        will be
        construed as creating any limitations on the power of the Board to adopt
        such
        additional compensation arrangements as it may deem desirable, including,
        without limitation, the granting of stock options and bonuses otherwise than
        under this Plan, and such arrangements may be either generally applicable
        or
        applicable only in specific cases.

      


      24. ACTION
        BY BOARD.

      


      Any
        action permitted or required to be taken by the Board or any decision or
        determination permitted or required to be made by the Board pursuant to this
        Plan shall be taken or made in the Board’s sole and absolute
        discretion.