Exhibit
10.54


 


PHARSIGHT
CORPORATION


 


AMENDED
AND RESTATED 2000 EQUITY INCENTIVE PLAN


 


Adopted by Board of
Directors April 7, 2000

Approved by Stockholders June 4, 2000


Amended by Board of
Directors July 29, 2002


Approved by Stockholders
September 6, 2002


Amended by Board of
Directors June 13, 2003


Amended by Board of
Directors July 17, 2003


Effective Date: Date of
Initial Public Offering

Termination Date:  April 7, 2010


 


1.                                      PURPOSES.


 


(a)                                  Eligible
Stock Award Recipients.  The persons
eligible to receive Stock Awards are the Employees, Directors and Consultants
of the Company and its Affiliates.


 


(b)                                  Available
Stock Awards.  The purpose of the
Plan is to provide a means by which eligible recipients of Stock Awards may be
given an opportunity to benefit from increases in value of the Common Stock
through the granting of the following Stock Awards:  (i) Incentive Stock Options, (ii) Nonstatutory Stock Options,
(iii) stock bonuses and (iv) rights to acquire restricted stock.  The Plan also provides for non-discretionary
grants of Nonstatutory Stock Options to Non-Employee Directors of the Company.


 


(c)                                  General
Purpose.  The Company, by means of
the Plan, seeks to retain the services of the group of persons eligible to
receive Stock Awards, to secure and retain the services of new members of this
group and to provide incentives for such persons to exert maximum efforts for
the success of the Company and its Affiliates.


 


2.                                      DEFINITIONS.


 


(a)                                  “Affiliate”
means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.


 


(b)                                  “Board”
means the Board of Directors of the Company.


 


(c)                                  “Cause” means the
occurrence of any one or more of the following:  (i) the Participant’s conviction of any felony or any crime
involving moral turpitude or dishonesty which results in material harm to the
business of the Company; (ii) the Participant’s participation in a fraud or act
of dishonesty against the Company which results in material harm to the
business of the Company; or (iii) the Participant’s intentional, material
violation of any material contract between the Company and the Participant or
any statutory duty the Participant owes to the Company that the Participant
does not correct within thirty (30) days after written notice thereof has been
provided to the Participant and which results in material harm to the business
of the Company.


 


(d)                                  “Change in
Control” means the occurrence of any one or more of the following:


 

















 


(i)                                    a
Corporate Transaction after which persons who were not stockholders of the
Company immediately prior to such Corporate Transaction own, directly or
indirectly, immediately following such Corporate Transaction, fifty percent
(50%) or more of the outstanding voting power of each of (a) the continuing or
surviving entity and (b) any direct or indirect parent corporation of the
continuing or surviving entity;


 


(ii)                                after
the IPO Date, an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty
percent (50%) of the combined voting power entitled to vote in the election of
Directors; provided that such acquisition does not occur in connection with, in
contemplation of or as a result of a Corporate Transaction; or


 


(iii)                            after
the IPO Date, during any consecutive two (2) year period the individuals who,
as of the start of such period, are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least fifty percent (50%) of the
Board, provided that such change in the Incumbent Board does not occur in
connection with, in contemplation of or as a result of a Corporate Transaction,
and further provided that if the election, or nomination for election, by the
Company’s stockholders of any new Director was approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new Director shall be
considered as a member of the Incumbent Board.


 


(e)                                  “Code”
means the Internal Revenue Code of 1986, as amended.


 


(f)                                    “Committee”
means a committee of one or more members of the Board appointed by the Board in
accordance with subsection 3(c).


 


(g)                                 “Common
Stock” means the common stock of the Company.


 


(h)                                 “Company”
means Pharsight Corporation, a Delaware corporation.


 


(i)                                    “Consultant”
means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for
such services or (ii) who is a member of the Board of Directors of an
Affiliate.  However, the term
“Consultant” shall not include either Directors who are not compensated by the
Company for their services as Directors or Directors who are merely paid a
director’s fee by the Company for their services as Directors.


 


(j)                                    “Continuous
Service” means that the Participant’s service with the Company
or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The
Participant’s Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders service to
the Company or an Affiliate as an Employee, Consultant or Director or a change
in the entity for which the Participant renders such service, provided that
there is no interruption or termination of the Participant’s Continuous
Service.  For example, a change in
status from an Employee of the Company to a Consultant of an Affiliate or a Director
will not constitute an interruption of Continuous Service.


 


2

















 


The Board or the chief
executive officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.


 


(k)                                “Corporate
Transaction” means the occurrence of any one or more of the
following:


 


(i)                                    a
sale, lease or other disposition of all or substantially all of the securities
or assets of the Company;


 


(ii)                                a
merger or consolidation following which the Company is not the surviving
corporation;


 


(iii)                            a
reverse merger following which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or


 


(iv)                               any
other transaction described as a “corporate transaction” in Treasury Regulations
§1.425-1(a)(1)(ii).


 


(l)                                    “Covered
Employee” means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation
is required to be reported to stockholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code.


 


(m)                              “Director”
means a member of the Board of Directors of the Company.


 


(n)                                 “Disability”
means the inability of a person, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of that person’s
position with the Company or an Affiliate because of the sickness or injury of
the person and such inability results in termination of employment by the
Company or Affiliate.


 


(o)                                  “Eligible
Director” means a Non-Employee Director or any other Director
who is not an Employee or Consultant at the time of grant of an Nonstatutory
Stock Option under section 7 hereof.


 


(p)                                  “Employee”
means any person employed by the Company or an Affiliate.  Mere service as a Director or payment of a
director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.


 


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


 


(r)                                  “Fair Market
Value” means, as of any date, the value of the Common Stock
determined as follows and in each case in a manner consistent with
Section 260.140.50 of Title 10 of the California Code of Regulations:


 


3

















 


(i)                                    If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market, the Nasdaq
SmallCap Market or the Over The Counter Bulletin Board system the Fair Market
Value of a share of Common Stock shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange, market or system (or the exchange, market or system with the greatest
volume of trading the Common Stock) on the last market trading day prior to
determination, as reported in The Wall Street Journal  or such other
source as the Board deems reliable.


 


(ii)                                In
the absence of an established market or system for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.


 


(s)                                  “Good
Reason” means that one or more of the following are undertaken
by the Company without the Participant’s 
express written consent:  (i) the
assignment to the Participant of any duties or responsibilities that results in
a diminution in the Participant’s position or function as in effect immediately
prior to the effective date of the Change in Control; provided, however, that a
mere change in the Participant’s title or reporting relationships shall not
constitute Good Reason;  (ii) a
reduction by the Company in the Participant’s annual base salary, as in effect
on the effective date of the Change in Control; (iii) any failure by the
Company to continue in effect any benefit plan or program, including incentive
plans or plans with respect to the receipt of securities of the Company, in
which the Participant was participating immediately prior to the effective date
of the Change in Control (hereinafter referred to as “Benefit Plans”), or the
taking of any action by the Company that would adversely affect the
Participant’s participation in or reduce the Participant’s benefits under the
Benefit Plans or deprive the Participant of any fringe benefit that the
Participant enjoyed immediately prior to the effective date of the Change in
Control; provided,
however, that Good Reason shall not be deemed to have occurred if
the Company provides for the Participant’s participation in benefit plans and
programs that, taken as a whole, are comparable to the Benefit Plans; (iv) a
relocation of the Participant’s business office to a location more than thirty
(30) miles from the location at which the Participant performs duties as of the
effective date of the Change in Control, except for required travel by the
Participant on the Company’s business to an extent substantially consistent
with the Participant’s business travel obligations prior to the Change in
Control; (v) a material breach by the Company of any provision of the Plan or
the Stock Award Agreement or any other material agreement between the
Participant and the Company concerning the terms and conditions of the Participant’s
employment; or (vi) any failure by the Company to obtain the assumption of the
Plan and Stock Award Agreement by any successor or assign of the Company.


 


(t)                                    “Incentive
Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.


 


(u)                                 “Independent Director”
means each Director of the Company who is (i) not an Employee of the Company,
(ii) is not acting in the capacity of a Consultant to the Company, and (iii)
cannot exercise, individually or in affiliation with any entity or group of
entities that exercises, voting control over more than 20% of the Company’s
voting stock.


 


4

















 


(v)                                   “IPO Date”
means the effective date of the Company’s Form S-1 Registration Statement filed
under the Securities Act in connection with the initial public offering of the
Common Stock.


 


(w)                                “Non-Employee
Director”  means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a “non-employee director” for purposes of Rule 16b-3.


 


(x)                                  “Non-Employee
Director Option” shall have the meaning subscribed in
section 7 hereof.


 


(y)                                  “Non-Employee
Director Option Agreement” means a written agreement between the
Company and an Eligible Director, evidencing the terms and conditions of a
Non-Employee Director Option grant. 
Each Non-Employee Director Option Agreement shall be subject to the
terms and conditions of the Plan.


 


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


 


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


 


(bb)                            “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.


 


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


 


(dd)                            “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.


 


(ee)                            “Outside
Director” means a Director who either (i) is not a current
employee of the Company or an “affiliated corporation” (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not
a former employee of the Company or an “affiliated corporation” receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an “affiliated corporation”
at any time and is not currently receiving direct or indirect remuneration from
the Company or an “affiliated corporation” for services in any capacity other
than as a Director or (ii) is otherwise considered an “outside director” for
purposes of Section 162(m) of the Code.


 


5

















 


(ff)                                “Participant”
means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.


 


(gg)                          “Plan”
means this Pharsight Corporation Amended and Restated 2000 Equity Incentive
Plan.


 


(hh)                          “Predecessor
Plans” means the Company’s 1995 Stock Option Plan and the 1997
Stock Option Plan.


 


(ii)                                “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.


 


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


 


(kk)                        “Stock
Award” means any right granted under the Plan, including an
Option, a Non-Employee Director Option, a stock bonus and a right to acquire
restricted stock.


 


(ll)                                “Stock Award
Agreement” means a written agreement between the Company and a
holder of a Stock Award evidencing the terms and conditions of an individual
Stock Award grant.  Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.


 


(mm)                    “Ten Percent
Stockholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.


 


3.                                      Administration.


 


(a)                                  Administration
by Board.  The Board shall
administer the Plan unless and until the Board delegates administration to a
Committee, as provided in subsection 3(c).


 


(b)                                  Powers
of Board.  The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:


 


(i)                                    To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to a
Stock Award; and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.


 


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


 


(iii)                            To
amend the Plan or a Stock Award as provided in Section 13.


 


6

















 


(iv)                               Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.


 


(c)                                  Delegation
to Committee.


 


(i)                                    General.  The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board, and
the term “Committee” shall apply to any person or persons to whom such
authority has been delegated.  If
administration is delegated to a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references
in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.


 


(ii)                                Committee
Composition when Common Stock is Publicly Traded.  At such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or solely of
two or more Non-Employee Directors, in accordance with Rule 16b-3.  Within the scope of such authority, the
Board or the Committee may (1) delegate to a committee of one or more members
of the Board who are not Outside Directors the authority to grant Stock Awards
to eligible persons who are either (a) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Stock Award or (b) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or) (2) delegate to a
committee of one or more members of the Board who are not Non-Employee
Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.


 


(d)                                  Effect of Board’s Decision.  All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.


 


4.                                      Shares Subject to the Plan.


 


(a)                                  Share
Reserve.  Subject to the provisions
of Section 12 relating to adjustments upon changes in stock and
Section 4(d) below, the Common Stock that may be issued pursuant to Stock
Awards shall not exceed in the aggregate four million seven hundred ninety two
thousand six hundred eleven (4,792,611) shares of Common Stock (the “Reserved
Shares”).  As of each January 1,
beginning with January 1, 2004 and continuing through and including January 1,
2010 (the “Anniversary Date”), the number of Reserved Shares will be increased
automatically by the least of (i) 5 % of the total number of share of Common
Stock outstanding on such Anniversary Date, (ii) two million (2,000,000)
shares, (iii) such fewer number of shares as determined by the Board prior to
such Anniversary Date or (iv) such fewer number of shares as permitted pursuant
to Section 4(d) below.


 


7

















 


(b)                                  Reversion
of Shares to the Share Reserve.  If
any Stock Award shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, the shares of Common Stock not
acquired under such Stock Award shall revert to and again become available for
issuance under the Plan.


 


(c)                                  Source
of Shares.  The shares of Common
Stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.


 


(d)                                  Reserve
Limitation.  Notwithstanding
Section 4(a), if at the time of each grant of a Stock Award under the
Plan, the Company is subject to Section 260.140.45 of Title 10 of the
California Code of Regulations (“Section 260.140.45”), the total number of
securities issuable upon exercise of all outstanding options of the Company and
the total number of shares provided for under this Plan or any other equity
incentive, stock bonus or similar plan or agreement of the Company or outside
any such plan shall not exceed 30% of the then outstanding capital stock of the
Company (as measured as set forth in Section 260.140.45), unless
stockholder approval to exceed 30% has been obtained in compliance with
Section 260.140.45, in which case the limit shall be such higher
percentage as approved by the stockholders.


 


5.                                      Eligibility.


 


(a)                                  Eligibility
for Specific Stock Awards. 
Incentive Stock Options may be granted only to Employees.  Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors (whether or not an Eligible
Director for purposes of section 7 hereof) and Consultants.


 


(b)                                  Ten
Percent Stockholders.


 


(i)                                    A
Ten Percent Stockholder shall not be granted an Option unless the exercise
price of such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.


 


(ii)                                So
long as the Company is subject to Section 260.140.41 of Title 10 of the
California Code of Regulations, a Ten Percent Stockholder shall not be granted
a restricted stock award unless the purchase price of the restricted stock is
at least (A) one hundred percent (100%) of the Fair Market Value of the Common
Stock on the date of grant or (B) such lower percentage of the Fair Market
Value of the Common Stock on the date of grant as is permitted by
Section 260.140.41 of Title 10 of the California Code of Regulations at
the time of the grant of the restricted stock award.


 


(c)                                  Section 162(m)
Limitation.  Subject to the
provisions of Section 12 relating to adjustments upon changes in the
shares of Common Stock, no Employee shall be eligible to be granted Options
covering more than One Million (1,000,000) shares of Common Stock during any
calendar year.


 


8

















 


(d)                                  Consultants.


 


(i)                                    A
Consultant shall not be eligible for the grant of a Stock Award if, at the time
of grant, a Form S-8 Registration Statement under the Securities Act (“Form
S-8”) is not available to register either the offer or the sale of the
Company’s securities to such Consultant because of the nature of the services
that the Consultant is providing to the Company, or because the Consultant is
not a natural person, or as otherwise provided by the rules governing the use
of Form S-8, unless the Company determines both (i) that such grant (A) shall
be registered in another manner under the Securities Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of
all other relevant jurisdictions.


 


(ii)                                Form
S-8 generally is available to consultants and advisors only if (i) they are
natural persons; (ii) they provide bona fide services to the issuer, its
parents, its majority-owned subsidiaries or majority-owned subsidiaries of the
issuer’s parent; and (iii) the services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the issuer’s securities.


 


6.                                      Option Provisions.


 


Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate.  All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates will be issued
for shares of Common Stock purchased on exercise of each type of Option.  The provisions of separate Options need not
be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of
each of the following provisions:


 


(a)                                  Term.  Subject to the provisions of
subsection 5(b) regarding Ten Percent Stockholders, no Option shall be
exercisable after the expiration of ten (10) years from the date it was
granted.


 


(b)                                  Exercise
Price of an Incentive Stock Option. 
Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders,
the exercise price of each Incentive Stock Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option on the date the Option is granted.


 


(c)                                  Exercise
Price of a Nonstatutory Stock Option. 
Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, the exercise price of each Nonstatutory Stock Option shall be not
less than eighty-five percent (85%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted.


 


(d)                                  Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is exercised
or (ii) at the discretion of the Board at the time of the grant of the Option
(or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to
the Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be


 


9

















 


acceptable to the
Board.  Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6) months
(or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). 
At any time that the Company is incorporated in Delaware, payment of the
Common Stock’s “par value,” as defined in the Delaware General Corporation Law,
shall not be made by deferred payment.


 


(e)                                  Transferability
of an Incentive Stock Option.  An
Incentive Stock Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.


 


(f)                                    Transferability
of a Nonstatutory Stock Option.  A
Nonstatutory Stock Option shall be transferable to the extent provided in the
Option Agreement; provided however, to the extent that the Company is subject
to Section 260.140.41(d) of Title 10 of the California Code of Regulations
at the time of the grant of the Nonstatutory Stock Option, the Nonstatutory
Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. 
If the Nonstatutory Stock Option does not provide for transferability,
then the Nonstatutory Stock Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.  Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.


 


(g)                                 Vesting
Generally.  The total number of
shares of Common Stock subject to an Option may, but need not, vest and
therefore become exercisable in periodic installments that may, but need not,
be equal.  The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate.  The vesting provisions of
individual Options may vary.  The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option
may be exercised.  Notwithstanding
the foregoing, to the extent that the Company is subject to the following
restrictions on vesting under Section 260.140.41(f) of Title 10 of the
California Code of Regulations at the time of the grant of the Option, then
options granted to an Employee who is not an Officer, Director or Consultant on
the date of grant shall provide for vesting of the total number of shares of
Common Stock at a rate of at least twenty percent (20%) per year over five (5)
years from the date the Option was granted, subject to reasonable conditions
such as continued employment.


 


(h)                                 Termination
of Continuous Service.  In the event
an Optionholder’s Continuous Service terminates (other than upon the
Optionholder’s death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such


 


10

















 


Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder’s
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period, for so long as the Company is subject to
Section 260.140.41 of Title 10 of the California Code of Regulations,
shall not be less than thirty (30) days unless such termination is for Cause),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement.  If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.


 


(i)                                    Extension
of Termination Date.  An
Optionholder’s Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder’s Continuous Service
(other than upon the Optionholder’s death or Disability) would be prohibited at
any time solely because the issuance of shares of Common Stock would violate
the registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in subsection 6(a) or (ii) the expiration of a period of three (3)
months after the termination of the Optionholder’s Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.


 


(j)                                    Disability
of Optionholder.  In the event that
an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of the
date of termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such longer
or shorter period specified in the Option Agreement, which period, for so long
as the Company is subject to Section 260.140.41 of Title 10 of the
California Code of Regulations, shall not be less than six (6) months) or (ii)
the expiration of the term of the Option as set forth in the Option
Agreement.  If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.


 


(k)                                Death
of Optionholder.  In the event (i)
an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s death or (ii) the Optionholder dies within the period (if any)
specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the Option may be
exercised (to the extent the Optionholder was entitled to exercise such Option
as of the date of death) by the Optionholder’s estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the Option upon the Optionholder’s death pursuant to
subsection 6(e) or 6(f), but only within the period ending on the earlier
of (1) the date eighteen (18) months following the date of death (or such
longer or shorter period specified in the Option Agreement, which period, for
so long as the Company is subject to Section 260.140.41 of Title 10 of the
California Code of Regulations, shall not be less than six (6) months) or (2)
the expiration of the term of such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.


 


(l)                                    Early
Exercise.  The Option may, but need
not, include a provision whereby the Optionholder may elect at any time before
the Optionholder’s Continuous Service terminates to


 


11

















 


exercise the Option as to
any part or all of the shares of Common Stock subject to the Option prior to
the full vesting of the Option.  Subject
to the “Repurchase Limitation” in Section 11(g), any unvested shares of
Common Stock so purchased may be subject to a repurchase option in favor of the
Company or to any other restriction the Board determines to be appropriate.


 


(m)                              Re-Load
Options.


 


(i)                                    Without
in any way limiting the authority of the Board to make or not to make grants of
Options hereunder, the Board shall have the authority (but not an obligation)
to include as part of any Option Agreement a provision entitling the
Optionholder to a further Option (a “Re-Load Option”) in the event the
Optionholder exercises the Option evidenced by the Option Agreement, in whole
or in part, by surrendering other shares of Common Stock in accordance with
this Plan and the terms and conditions of the Option Agreement.  Unless otherwise specifically provided in
the Option, the Optionholder shall not surrender shares of Common Stock
acquired, directly or indirectly from the Company, unless such shares have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).


 


(ii)                                Any
such Re-Load Option shall (1) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock surrendered as part or all of the
exercise price of such Option; (2) have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (3) have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option.  Notwithstanding the foregoing, a Re-Load
Option shall be subject to the same exercise price and term provisions
heretofore described for Options under the Plan.


 


(iii)                            Any
such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock
Option, as the Board may designate at the time of the grant of the original
Option; provided, however, that the designation of any Re-Load Option as an
Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on the exercisability of Incentive Stock Options
described in subsection 11(d) and in Section 422(d) of the Code.  There shall be no Re-Load Options on a Re-Load
Option.  Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the “Section 162(m) Limitation” on the grants of
Options under subsection 5(c) and shall be subject to such other terms and
conditions as the Board may determine which are not inconsistent with the
express provisions of the Plan regarding the terms of Options.


 


7.                                      Non-Employee Director Stock Options


 


Without any further
action from the Board, each Eligible Director, other than an Independent
Director, shall be granted Nonstatutory Stock Options as described in
subsections 7(a) and 7(b) (collectively, the “Non-Employee Director
Options”).  Each Non-Employee Director
Option shall include the substance of the terms set forth in
subsection 7(c) through 7(k) and such other terms and conditions as shall
be determined by the Board as appropriate.


 


12

















 


(a)                                  Initial
Grants and Interim Grants.


 


(i)                                    On
the IPO Date, each Eligible Director, other than an Independent Director, who
has not received a Stock Award under any of the Company’s Predecessor Plans
shall, upon the IPO Date, be granted an Nonstatutory Stock Option to purchase
Five Thousand (5,000) shares of Common Stock on the terms and conditions set
forth herein (the “Initial Grant”).


 


(ii)                                After
the IPO Date, each Eligible Director, other than an Independent Director, who
is elected or appointed to the Board less than six (6) months from the prior
annual meeting of the stockholders of the Company (the “Annual Meeting”), shall
receive a Nonstatutory Stock Option to purchase Five Thousand (5,000) shares of
Common Stock on the terms and conditions set forth herein (the “Interim
Grant”); provided, however, that the Interim Grant shall be reduced to Two
Thousand Five Hundred (2,500) shares of Common Stock if the Eligible Director
is elected or appointed to serve on the Board six (6) months or more from the
prior Annual Meeting.


 


(b)                                  Annual
Grants.  On the day following each
Annual Meeting commencing with the Annual Meeting in calendar year 2001, each
person who is then an Eligible Director, other than an Independent Director,
automatically shall be granted an Annual Grant to Purchase Ten Thousand
(10,000) shares of Common Stock on the terms and conditions set forth herein.


 


(c)                                  Term.  Each Non-Employee Director Option shall have
a term of ten (10) years from the date it is granted.


 


(d)                                  Exercise
Price.  Subject to the provisions of
Section 5(b) regarding Ten Percent Stockholders, the exercise price of
each Non-Employee Director Option shall be one hundred percent (100%) of the
Fair Market Value of the stock subject to the Non-Employee Director Option on
the date of grant.


 


(e)                                  Vesting.  Non-Employee Director Options shall vest and
become exercisable as follows:


 


(i)                                    Initial
Grants shall vest in full on the day of the Company’s Annual Meeting
immediately following the IPO Date; provided however, that the Initial Grant
shall terminate in the event the Eligible Director is not providing service to
the Company at the time of the commencement of such Annual Meeting.


 


(ii)                                Interim
Grants shall vest in full on the day of the Company’s Annual Meeting next
following the date of grant; provided, however, that the Interim Grant
shall terminate if the Eligible Director is not providing service to the
Company at the time of the commencement of such Annual Meeting.


 


(iii)                            Annual
Grants shall vest in full on the day of the Annual Meeting next following the
date of grant was made; provided, however, that the Annual Grant
shall terminate in the event the Eligible Director is not providing service to
the Company at the time of such Annual Meeting.


 


(f)                                    Consideration.  The purchase price of stock acquired
pursuant to a Non-Employee Director Option may be paid, to the extent permitted
by applicable statutes and


 


13

















 


regulations, in any
combination of (i) cash or check, (ii) delivery to the Company of other Common
Stock owned by the Director for at least six (6) months; (iii) deferred payment
or (iv) any other form of legal consideration that may be acceptable to the
Board and provided in the Non-Employee Director Option Agreement; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock’s “par value,” as defined in the Delaware Corporation Law,
shall not be made by deferred payment.


 


(g)                                 Transferability.  A Non-Employee Director Option shall be
transferable to the extent provided in the Non-Employee Director Option Agreement;
provided however, to the extent that the Company is subject to
Section 260.140.41(d) of Title 10 of the California Code of Regulations at
the time of the grant of the Non-Employee Director Option, the Eligible
Director shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Eligible
Director only by the Eligible Director. 
If the Non-Employee Director Option Agreement does not provide for
transferability, then the Non-Employee Director Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Eligible Director only by the
Eligible Director.  Notwithstanding the
foregoing, the Eligible Director may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Eligible Director, shall thereafter be entitled
to exercise the Non-Employee Director Option.


 


(h)                                 Termination
of Continuous Service.  In the event
an Eligible Director’s Continuous Service terminates (other than upon the
Eligible Director’s death or Disability), the Eligible Director may exercise
his or her Non-Employee Director Option (to the extent that the Eligible
Director was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date six (6) months
following the termination of the Eligible Director’s Continuous Service, or (ii)
the expiration of the term of the Non-Employee Director Option as set forth in
the Non-Employee Director Option Agreement. 
If, after termination, the Eligible Director does not exercise his or
her Non-Employee Director Option within the time specified herein, the
Non-Employee Director Option shall terminate.


 


(i)                                    Extension
of Termination Date. If the exercise of the Non-Employee Director Option
following the termination of the Eligible Director’s Continuous Service (other
than upon the Eligible Director’s death or Disability) would be prohibited at
any time solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Non-Employee Director Option
shall terminate on the earlier of (i) the expiration of the term of the
Non-Employee Director Option set forth in subsection 7(c) or (ii) the
expiration of a period of three (3) months after the termination of the
Eligible Director’s Continuous Service during which the exercise of the
Non-Employee Director Option would not violate such registration requirements.


 


(j)                                    Disability
of Eligible Director.  In the event
an Eligible Director’s Continuous Service terminates as a result of the
Eligible Director’s Disability, the Eligible Director may exercise his or her
Non-Employee Director Option (to the extent that the Eligible Director was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the
Non-Employee Director Option as set forth in the Non-Employee Director


 


14

















 


Option Agreement.  If, after termination, the Eligible Director
does not exercise his or her Non-Employee Director Option within the time
specified herein, the Non-Employee Director Option shall terminate.


 


(k)                                Death
of Eligible Director.  In the event
(i) an Eligible Director’s Continuous Service terminates as a result of the
Eligible Director’s death or (ii) the Eligible Director dies within the
six-month period after the termination of the Eligible Director’s Continuous
Service for a reason other than death, then the Non-Employee Director Option
may be exercised (to the extent the Eligible Director was entitled to exercise
the Non-Employee Director Option as of the date of death) by the Eligible
Director’s estate, by a person who acquired the right to exercise the
Non-Employee Director Option by bequest or inheritance or by a person
designated to exercise the Non-Employee Director Option upon the Eligible
Director’s death, but only within the period ending on the earlier of (1) the
date eighteen (18) months following the date of death or (2) the expiration of
the term of such Non-Employee Director Option as set forth in the Non-Employee
Director Option Agreement.  If, after
death, the Non-Employee Director Option is not exercised within the time
specified herein, the Non-Employee Director Option shall terminate.


 


8.                                      Provisions of Stock Awards other than Options.


 


(a)                                  Stock
Bonus Awards.  Each stock bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  The
terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:


 


(i)                                    Consideration.  A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an
Affiliate for its benefit.


 


(ii)                                Vesting.  Subject to the “Repurchase Limitation” in
Section 11(g), shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share reacquisition right in favor
of the Company in accordance with a vesting schedule to be determined by
the Board.


 


(iii)                            Termination
of Participant’s Continuous Service. 
Subject to the “Repurchase Limitation” in Section 11(g), in the
event a Participant’s Continuous Service terminates, the Company may reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the stock bonus
agreement.


 


(iv)                               Transferability.  Rights to acquire shares of Common Stock
under a stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement,
as the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement; provided however, to the extent that the Company is subject to
Section 260.140.41(d) of Title 10 of the California Code of Regulations at
the time of the award, such rights to acquire shares of Common Stock under a
stock bonus agreement shall not be


 


15

















 


transferable except by
will or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Participant only by the Participant.


 


(b)                                  Restricted
Stock Purchase Awards.  Each
restricted stock purchase agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be identical,
but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:


 


(i)                                    Purchase
Price.  Subject to the provisions of
Section 5(b) regarding Ten Percent Stockholders, the purchase price under
each restricted stock purchase agreement shall be such amount as the Board
shall determine and designate in such restricted stock purchase agreement.  The purchase price shall not be less than
eighty-five percent (85%) of the Common Stock’s Fair Market Value on the date
such award is made or at the time the purchase is consummated.


 


(ii)                                Consideration.  The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either:  (i) in cash at the time of purchase; (ii) at
the discretion of the Board, according to a deferred payment or other similar
arrangement with the Participant; or (iii) in any other form of legal
consideration that may be acceptable to the Board in its discretion; provided,
however, that at any time that the Company is incorporated in Delaware, then
payment of the Common Stock’s “par value,” as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.


 


(iii)                            Vesting.  Subject to the “Repurchase Limitation” in
Section 11(g), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be
determined by the Board.


 


(iv)                               Termination
of Participant’s Continuous Service. 
Subject to the “Repurchase Limitation” in Section 11(g), in the
event a Participant’s Continuous Service terminates, the Company may repurchase
or otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.


 


(v)                                   Transferability.  Rights to acquire shares of Common Stock
under a restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement; provided however, to the extent that the Company is subject to
Section 260.140.41(d) of Title 10 of the California Code of Regulations at
the time of the award, such rights to acquire shares of Common Stock under a
restricted stock purchase agreement shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant.


 


16

















 


9.                                      Covenants of the Company.


 


(a)                                  Availability
of Shares.  During the terms of the
Stock Awards, the Company shall keep available at all times the number of shares
of Common Stock required to satisfy such Stock Awards.


 


(b)                                  Securities
Law Compliance.  The Company shall
seek to obtain from each regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Stock Award or any Common Stock
issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.


 


10.                               Use of Proceeds from Stock.


 


Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.


 


11.                               Miscellaneous.


 


(a)                                  Acceleration
of Exercisability and Vesting.  The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.


 


(b)                                  Stockholder
Rights.  No Participant shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.


 


(c)                                  No
Employment or other Service Rights. 
Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant pursuant to the
terms of such Consultant’s agreement with the Company or an Affiliate or (iii)
the service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may be.


 


(d)                                  Incentive
Stock Option $100,000 Limitation. 
To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionholder during any


 


17

















 


calendar year (under all
plans of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.


 


(e)                                  Investment
Assurances.  The Company may require
a Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that
the Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the Stock Award
has been registered under a then currently effective registration statement
under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.


 


(f)                                    Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the exercise or
acquisition of Common Stock under a Stock Award by any of the following means
(in addition to the Company’s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that
the Company shall not be authorized to withheld shares of Common Stock in
excess if the minimum statutory rates for federal or state tax purposes
including payroll taxes; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.


 


(g)                                 Repurchase Limitation.  The terms of any repurchase option shall be
specified in the Stock Award, and the repurchase price shall be the original
purchase price.  To the extent required
by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any
repurchase option contained in a Stock Award granted to a person who is not an
Officer, Director or Consultant shall be upon the terms described below:


 


(i)                                    Fair
Market Value.  If the repurchase
option gives the Company the right to repurchase the shares of Common Stock
upon termination of Continuous Status at not less than the Fair Market Value of
the shares of Common Stock to be purchased on the date of termination of
Continuous Status, then (A) the right to repurchase shall be exercised for cash
or


 


18

















 


cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Status (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may
be agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
“qualified small business stock”) and (B) the right terminates when the shares
of Common Stock become publicly traded.


 


(ii)                                Original
Purchase Price.  If the repurchase
option gives the Company the right to repurchase the shares of Common Stock
upon termination of Continuous Status at the lower of (A) the Fair Market Value
of the shares of Common Stock on the date of repurchase or (B) their original
purchase price, then (x) the right to repurchase at the original purchase price
shall lapse at the rate of at least twenty percent (20%) of the shares of
Common Stock per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (y) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares of Common Stock
within ninety (90) days of termination of Continuous Status (or in the case of
shares of Common Stock issued upon exercise of Options after such date of
termination, within ninety (90) days after the date of the exercise) or such
longer period as may be agreed to by the Company and the Participant (for
example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Code regarding “qualified small business stock”).


 


(h)                                 Information Obligation.  To the extent required by
Section 260.140.46 of Title 10 of the California Code of Regulations, the
Company shall deliver financial statements to Participants at least annually.  This Section 11(h) shall not apply to
key Employees whose duties in connection with the Company assure them access to
equivalent information.


 


12.                               Adjustments upon Changes in Common Stock.


 


(a)                                  Capitalization
Adjustments.  If any change is made
in the Common Stock subject to the Plan, or subject to any Stock Award, without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities
subject to the Plan pursuant to subsection 4(a) and the maximum number of
securities subject to award to any person pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of securities and price per share of Common Stock subject to such
outstanding Stock Awards.  The Board
shall make such adjustments, and its determination shall be final, binding and
conclusive.  (The conversion of any
convertible securities of the Company shall not be treated as a transaction
“without receipt of consideration” by the Company.)


 


(b)                                  Dissolution
or Liquidation.  In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.


 


19

















 


(c)                                  Corporate
Transaction.  In the event of a
Corporate Transaction, any surviving corporation or acquiring corporation may
assume any Stock Awards outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders pursuant to the Corporate Transaction).  In the event any surviving corporation or acquiring corporation
refuses to assume such Stock Awards or to substitute similar stock awards for
those outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated as of the effective
date of the Corporate Transaction, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and  the Stock Awards shall terminate
if not exercised (if applicable) at or prior to such effective date.  With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior the effective date of the Corporate Transaction.


 


(d)                                  Change
in Control. If a Change in Control occurs and within thirteen (13) months
after the effective date of such Change in Control the Continuous Service of a
Participant terminates due to an involuntary termination (not including death
or Disability) without Cause or due to a voluntary termination with Good
Reason, then the vesting and exercisability of all Stock Awards held by such
Participant shall be accelerated in full.


 


13.                               Amendment of the Plan and Stock Awards.


 


(a)                                  Amendment
of Plan.  The Board at any time, and
from time to time, may amend the Plan. 
However, except as provided in Section 12 relating to adjustments
upon changes in Common Stock, no amendment shall be effective unless approved
by the stockholders of the Company to the extent stockholder approval is
necessary to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or any Nasdaq or securities exchange listing requirements.


 


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


 


(c)                                  Contemplated
Amendments.  It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the
Plan and/or Incentive Stock Options granted under it into compliance therewith.


 


(d)                                  No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.


 


(e)                                  Amendment
of Stock Awards.  The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights under any Stock Award shall not be
impaired by any such amendment unless (i) the Company requests the consent of
the Participant and (ii) the Participant consents in writing.


 


20

















 


14.                               TERMINATION
OR SUSPENSION OF THE PLAN.


 


(a)                                  Plan
Term.  The Board may suspend or
terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier.  No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.


 


(b)                                  No
Impairment of Rights.  Suspension or
termination of the Plan shall not impair rights and obligations under any Stock
Award granted while the Plan is in effect except with the written consent of
the Participant.


 


15.                               Effective Date of Plan.


 


The Plan shall become effective on the IPO Date, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.


 


16.                               Choice of Law.


 


The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state’s conflict of laws rules.


 


21