exv10w48






Exhibit 10.48




SCM MICROSYSTEMS, INC.




2007 STOCK OPTION PLAN




AS AMENDED AND RESTATED EFFECTIVE OCTOBER 29, 2009




I. PURPOSES




     1.1 General Purpose. This Plan will serve as the successor to the Company’s 2000
Non-statutory Stock Option Plan (“2000 Plan”), the Company’s Amended 1997 Stock Plan (“1997 Plan”),
and the Company’s 1997 Director Option Plan (“1997 Director Plan”), and seeks to promote the
interests of the Company by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest in the Company as an
incentive for them to remain in the service of the Company. Stock awards granted under the 2000
Plan, the 1997 Plan and the 1997 Director Plan shall continue to be governed by the terms of such
plans.



     1.2 Available Stock Awards. Non-Qualified Stock Options are the only form of stock
award that may be granted under this Plan.



     1.3 Eligible Option Recipients. The persons eligible to receive Options are the
Employees, Directors, and Consultants of the Company and its Affiliates.



II. DEFINITIONS




     2.1 “Affiliate” means a parent or subsidiary of the Company, with “parent” meaning an entity
that controls the Company directly or indirectly, through one or more intermediaries, and
“subsidiary” meaning an entity that is controlled by the Company directly or indirectly, through
one or more intermediaries.



     2.2 “Annual Grant” shall have the meaning as defined in Section 7.2.



     2.3 “Beneficial Owner” means the definition given in Rule 13d-3 promulgated under the
Exchange Act.



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



     2.5 “Change in Control” means the occurrence of any of the following events:



     (i) The sale, exchange, lease or other disposition of all or substantially all of the assets
of the Company to a person or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act, that will continue the business of the Company
in the future;



     (ii) A merger, consolidation or similar transaction involving the Company;



     (iii) Any person or group who is or becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the total voting power of the voting stock of the Company, including by



 









 







way of merger, consolidation or otherwise (for the purposes of this clause (iii), a member of
a group will not be considered the Beneficial Owner of the securities owned by other members of the
group);



     (iv) A change in the composition of the Board occurring within a two-year period, as a result
of which fewer than a majority of the Directors are Directors who either (i) are Directors of the
Company as of the date the Plan first becomes effective pursuant to Article XV hereof or (ii) are
elected, or nominated for election, to the Board with the affirmative votes of at least a majority
of those Directors whose election or nomination was not in connection with any transaction
described in subsections (i), (ii), or (iii) of this Section 2.5, or in connection with an actual
or threatened proxy contest relating to the election of Directors to the Company; or



     (v) A dissolution or liquidation of the Company.



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



     2.7 “Committee” means a committee of one or more members of the Board (or officers who are
not members of the Board to the extent allowed by law) appointed by the Board in accordance with
Section 3.3 of the Plan.



     2.8 “Common Stock” means the common shares of the Company.



     2.9 “Company” means SCM Microsystems, Inc., a Delaware corporation.



     2.10 “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 a
Director or Directors who are compensated by the Company solely for their services as a Director.



     2.11 “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 to a Consultant or a Director will not
constitute an interruption of Continuous Service. A leave of absence approved by the Company or an
Affiliate, including sick leave, military leave, or any other personal leave will generally not be
deemed to be an interruption in Continuous Service; provided, however, that the Board or the chief
executive officer of the Company, in that party’s sole discretion, shall make such determination on
a case by case basis.



     2.12 “Covered Employee” means the chief executive officer and the four 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.



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     2.13 “Designated 162(m) Group” means the group of Employees that includes any person who is
or could become a Covered Employee in the determination of the Board.



     2.14 “Director” means a member of the Board of Directors of the Company.



     2.15 “Disability” means physical or mental incapacitation such that for a period of six
consecutive months or for an aggregate of nine months in any twenty-four consecutive month period,
a person is unable to substantially perform his or her duties. Any question as to the existence of
that person’s physical or mental incapacitation as to which the person or person’s representative
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to the person and the Company. If the person and the Company or an Affiliate
cannot agree as to a qualified independent physician, each shall appoint such a physician and those
two physicians shall select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company or an Affiliate and the person shall be final and
conclusive for all purposes of the Options.



     2.16 “Employee” means any person employed by the Company or an Affiliate. Service as a
Director or compensation by the Company or an Affiliate solely for services as a Director shall not
be sufficient to constitute “employment” by the Company or an Affiliate.



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



     2.18 “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:



     (i) If the Common Stock is listed on any established stock exchange or traded on the NASDAQ
Global Market or NASDAQ Capital Market, 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 such sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading in
the Common Stock) on the date of determination, as published by Yahoo! Finance or such other source
as the Board deems reliable;



     (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the day of determination, as published by
Yahoo! Finance or such other source as the Board deems reliable; or



     (iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.



     2.19 “Initial Grant” shall have the meaning as defined in Section 7.1.



     2.20 “Misconduct” means any of the following: (i) the commission of any act of fraud,
embezzlement or dishonesty by the Optionholder or Participant; (ii) any unauthorized use or
disclosure by such person of confidential information or trade secrets of the Company (or any
Parent of Subsidiary); (iii) any other intentional misconduct by such person adversely affecting
the business or affairs of the Company (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the



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Company (or any Parent or Subsidiary) may consider grounds for dismissal or discharge of any
Optionholder, Participant or other person in the service of the Company (or any Parent or
Subsidiary).



     2.21 “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.



     2.22 “Non-Qualified Stock Option” means an Option not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.



     2.23 “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.



     2.24 “Option” means a Non-Qualified Stock Option granted pursuant to the Plan.



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



     2.26 “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.



     2.27 “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.



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



     2.29 “Plan” means this SCM Microsystems, Inc. 2007 Stock Option Plan.



     2.30 “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.



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



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     2.32 “Share Reserve” shall have the meaning as defined in Section 7.1.



III. ADMINISTRATION




     3.1 Administration by Board. The Board shall administer the Plan unless and until
the Board delegates administration to a Committee, as provided in Section 3.3.



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



     (ii) To approve one or more forms of Option Grant Agreements.



     (iii) To construe and interpret the Plan and Options 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 Option Grant Agreement, in
a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.



     (iv) To amend the Plan or an Option as provided in Article XIII of the Plan.



     (v) To adopt sub-plans and/or special provisions applicable to Options regulated by the laws
of a jurisdiction other than and outside of the United States. Such sub-plans and/or special
provisions may take precedence over other provisions of the Plan, with the exception of Section 4
of the Plan, but unless otherwise superseded by the terms of such sub-plans and/or special
provisions, the provisions of the Plan shall govern.



     (vi) To authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Option previously granted by the Board.



     (vii) To accelerate, continue, extend or defer the exercisability of any Option or the vesting
of any shares acquired upon the exercise thereof, including with respect to the period following an
Participant’s termination of service with the Company.



     (viii) To impose such restrictions, conditions or limitations as it determines appropriate as
to the timing and manner of any resales by a Participant or other subsequent transfers by the
Participant of any shares of Common Stock issued as a result of or under an Option, including,



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without limitation, (A) restrictions under an insider trading policy and (B) restrictions as
to the use of a specified brokerage firm for such resales or other transfers.



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



     3.3 Delegation to Committee.



     (i) General. The Board may delegate administration of the Plan to a Committee or
Committees consisting of one or more members of the Board or one or more officers of the Company
who are not members of the Board (to the extent allowed by law), 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 also may exercise, in connection with the administration of
the Plan, any of the powers and authority granted to the Board under the Plan, and the Committee
may 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, as applicable), 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 any 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 (A) delegate to a committee of one or more individuals who are not
Outside Directors the authority to grant Options to eligible persons who are either (1) not then
Covered Employees and are not expected to be Covered Employees at the time of recognition of income
resulting from such Option or (2) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code and/or (B) delegate to a committee of one or more individuals who
are not Non-Employee Directors the authority to grant Options to eligible persons who are either
(1) not then subject to Section 16 of the Exchange Act or (2) receiving an Option as to which the
Board or Committee elects not to comply with Rule 16b-3 by having two or more Non-Employee
Directors grant such Option.



     3.4 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.



     3.5 Compliance with Section 16 of the Exchange Act. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3, or any successor rule thereto. To the extent any provisions of
this Plan or action by the Board fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Board, to comply with the
requirements of Section 16 of the Exchange Act, and neither the Company nor the Board shall be



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liable if this Plan or any transaction under this Plan fails to comply with the applicable
conditions of Rule 16b-3 or any successor rule thereto, or if any person incurs any liability under
Section 16 of the Exchange Act.



IV. SHARES SUBJECT TO THE PLAN




     4.1 Share Reserve. Subject to the provisions of Article XII of the Plan relating to
adjustments upon changes in Common Stock, the maximum aggregate number of shares of Common Stock
that may be issued pursuant to Options shall not exceed three million five hundred thousand
(3,500,000) shares of Common Stock (“Share Reserve”), provided that each share of Common Stock
issued pursuant to an Option shall reduce the Share Reserve by one share.



     4.2 Reversion of Shares to the Share Reserve.



     (i) If any Option granted under this Plan shall for any reason (A) expire, be cancelled or
otherwise terminate, in whole or in part, without having been exercised or redeemed in full, or (B)
be reacquired by the Company prior to vesting, the shares of Common Stock not acquired by
Participant under such Option shall be retained by, revert or be added to the Share Reserve and
become available for issuance under the Plan.



     (ii) Shares of Common Stock that are not acquired by a holder of an Option granted under the
2000 Plan, the 1997 Plan or the 1997 Director Plan shall not revert or be added to the Share
Reserve or become available for issuance under the Plan.



     4.3 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.



V. ELIGIBILITY




     5.1 Eligibility for Specific Options. Options may be granted to Employees, Directors, and
Consultants.



     5.2 Compliance with Section 162(m) of the Code. To the extent the Board determines that
compliance with the exclusion for performance-based compensation within the meaning of Section
162(m) of the Code (“Performance-Based Exception”) is desirable, the following shall apply:



     (i) Section 162(m) Compliance. All Options granted to persons included in the Designated
162(m) Group may comply with the requirements of the Performance-Based Exception; provided that to
the extent Section 162(m) of the Code requires periodic stockholder approval of performance
measures, such approval shall not be required for the continuation of the Plan or as a condition to
grant any Option hereunder after such approval is required. In addition, if changes are made to
Section 162(m) of the Code to permit flexibility with respect to the Options available under the
Plan, the Board may, subject to this Section 5.2, make any adjustments to such Options as it deems
appropriate.



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     (ii) Annual Individual Limitations. Subject to the provisions of Article X relating to
adjustments upon changes in the shares of Common Stock, no Employee shall be eligible to be granted
Options covering more than 200,000 shares of Common Stock during any calendar year; provided that
in connection with his or her initial service, an Employee may be granted Options covering not more
than an additional 200,000 shares of Common Stock, which shall not count against the limit set
forth in the preceding sentence.



     5.3. Consultants.



     (i) A Consultant shall not be eligible for the grant of an Option 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 (A) that such grant (1) shall be registered in another manner under the
Securities Act (e.g., on a Form S-1 or S-3 Registration Statement) or (2) does not require
registration under the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (B) 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 (A) they are natural
persons; (B) they provide bona fide services to the issuer, its parents, or its majority owned
subsidiaries; and (C) 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.



VI. TERMS AND CONDITIONS OF OPTIONS




     Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be designated Non-Qualified Stock Options at the time of
grant. 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:



     6.1 Term. No Option shall be exercisable after the expiration of seven years from
the date it was granted.



     6.2 Exercise Price. The exercise price of each Non-Qualified Stock Option shall be
not less than one hundred percent of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, a Non-Qualified Stock
Option may be granted with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.



     6.3 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
or by check at the time the Option is exercised or (ii) at the discretion of the Board and only to
the extent set forth in the Option Grant Agreement: (1) by delivery to the Company of other



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Common Stock, (2) pursuant to a “same day sale” program to the extent permitted by law, or (3)
by some combination of the foregoing. In the absence of a provision to the contrary in the
individual



     Optionholder’s Option Grant Agreement, payment for Common Stock pursuant to an Option may only
be made in the form of cash, check, or pursuant to a “same day sale” program.



     Unless otherwise specifically provided in the Option Grant Agreement, 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 months (or such longer or shorter period
of time required to avoid a charge to earnings for financial accounting purposes).



     6.4 Transferability. Unless determined otherwise by the Administrator, an Option may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Optionholder, only by the Optionholder. If the Administrator makes an Option transferable, such
Option or shall contain such additional terms and conditions as the Administrator deems
appropriate. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to
the Company, in a form satisfactory to the Administrator, designate a third party who, in the event
of the death of the Optionholder, shall thereafter be entitled to exercise the Option.



     6.5 Vesting Generally. Options granted under the Plan shall be exercisable at such
time and upon such terms and conditions as may be determined by the Board. The vesting provisions
of individual Options may vary. Generally, however, it is anticipated that:



     (i) grants to Employees shall vest as to one fourth (1/4th) of the total award on each
anniversary of the grant date, such that the award is fully vested after four years of Continuous
Service from the grant date;



     (ii) promotional grants and grants to new-hire Employees shall commence vesting on the one
year anniversary of grant and vest one thirty-sixth (1/36th) monthly thereafter, such that the
award is fully vested after four years of Continuous Service from the grant date; and



     (iii) top-up grants shall vest as to one forty-eighth (1/48th) of the total award on each
monthly anniversary of the grant date, such that the award is fully vested after four years of
Continuous Service from the grant date.



     The provisions of this Section 6.5 are subject to any Option provisions governing the minimum
number of shares of Common Stock as to which an Option may be exercised.



     6.6 Termination of Continuous Service. In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability or by the Company for
Misconduct), 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 as is specified in the Option Grant Agreement and in no event later than the expiration of the
term of such Option as set forth in the Option Grant Agreement). If, after



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termination, the Optionholder does not exercise his or her Option within the time specified in
the Option Grant Agreement, the Option shall terminate. In the absence of a provision to the
contrary in the individual Optionholder’s Option Grant Agreement, the Option shall remain
exercisable for 90 calendar days following the termination of the Optionholder’s Continuous
Service. This period may be adjusted by the Board in its discretion. Notwithstanding the foregoing,
if the Optionholder’s Continuous Service is terminated for Misconduct, the Option shall immediately
terminate as to any unexercised portion thereof, unless the individual Optionholder’s Option Grant
Agreement provides otherwise.



     6.7 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 as is specified in the Option Grant
Agreement (and in no event later than the expiration of the term of such Option as set forth in the
Option Grant Agreement). If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Grant Agreement, the Option shall terminate. In the
absence of a provision to the contrary in the individual Optionholder’s Option Grant Agreement, the
Option shall remain exercisable for twelve months following such termination. This period may be
adjusted by the Board in its discretion.



     6.8 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 Grant 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 Section 6.4 of the Plan, but only within such period of time as is specified in the Option Grant
Agreement (and in no event later than the expiration of the term of such Option as set forth in the
Option Grant Agreement). If, after death, the Option is not exercised within the time specified in
the Option Grant Agreement, the Option shall terminate. In the absence of a provision to the
contrary in the individual Optionholder’s Option Grant Agreement, the Option shall remain
exercisable for twelve months following the Optionholder’s death. This period may be adjusted by
the Board in its discretion.



     6.9 Extension of Termination Date. An Optionholder’s Option Grant 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 or by the Company for
Misconduct) would be prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act or other applicable securities
law, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option
set forth in the Option Grant Agreement or (ii) the expiration of a period of three 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 or other applicable securities law. The
provisions of this Section 6.9 notwithstanding, in the event that a sale of the shares of Common
Stock received upon exercise of his or her Option would subject the Optionholder to liability under
Section 16(b) of the Exchange Act, then the Option will



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terminate on the earlier of (1) the fifteenth day after the last date upon which such sale
would result in liability, or (2) two hundred ten days following the date of termination of the
Optionholder’s employment or other service to the Company (and in no event later than the
expiration of the term of the Option).



     6.10 Early Exercise Generally Not Permitted. The Company’s general policy is not to
allow the Optionholder to exercise the Option as to any part or all of the shares of Common Stock
subject to the Option prior to the vesting of the Option. If, however, an Option Grant Agreement
does permit such early exercise, 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.



VII. NON-DISCRETIONARY OPTIONS FOR CERTAIN DIRECTORS




     In addition to any other Options that any Director who is not an Employee may be granted on a
discretionary basis under the Plan, each Director who is not an Employee shall be automatically
granted without the necessity of action by the Board, the following Options.



     7.1 Initial Grant. On the date that a Director who is not an Employee commences
service on the Board, an initial grant of Non-Qualified Stock Options shall automatically be made
to that Director who is not an Employee (the “Initial Grant”). The number of shares subject to this
Initial Grant and other terms governing this Initial Grant shall be as determined by the Board in
its sole discretion. If the Board does not establish the number of shares subject to the Initial
Grant for a given newly-elected Director who is not an Employee prior to the date of grant for such
Initial Grant, then the number shall be ten thousand (10,000) shares. If at the time a Director who
is also an Employee or does not otherwise Qualify as an Outside Director commences service on the
Board, such Director shall be entitled to an Initial Grant at such time as such Director
subsequently is no longer an Employee or qualifies as an Outside Director and if such Director
remains a Director.



     7.2 Annual Grant. An annual grant of Non-Qualified Stock Options(the “Annual Grant”)
shall automatically be made to each Director who (i) is re-elected to the Board or who otherwise
continues as a Director, (ii) qualifies as an Outside Director on the relevant grant date and (iii)
has served as a Director for at least six months. The number of shares subject to this Annual Grant
and other terms governing this Annual Grant shall be as determined by the Board in its sole
discretion. If the Board does not establish the number of shares subject to the Annual Grant, then
the number shall be five thousand (5,000) shares. The date and time of grant of an Annual Grant is
the date of the annual meeting of the Company’s stockholders and the time shall be immediately upon
the adjournment of the annual meeting of the Company’s stockholders.



     7.3 Vesting. Initial Grants and Annual Grants granted pursuant to this Article VII
shall vest as to one twelfth (1/12th) of the total award on each monthly anniversary of the grant
date, such that the award is fully vested after one year of Continuous Service on the Board from
the grant date.



     7.4 Termination of Continuous Service as a Director. In the event an Optionholder’s
status as a Director terminates for any reason other than death, the Optionholder may exercise his



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or her Option granted under this Article VII to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination, but only within 90 calendar days following
the date of such termination (and in no event later than the expiration of the term of such Option
as set forth in the Option Grant Agreement). This period may be adjusted by the Board in its
discretion, provided that the affected Optionholder shall be recused from such decision of the
Board. If an Optionholder’s status as a Director terminates due to death, the Optionholder’s
estate, a person who acquired the right to exercise the Option by bequest or inheritance, or a
person designated to exercise the Option upon the Optionholder’s death pursuant to Section 6.4 of
the Plan must exercise the Option granted under this Article VII to the extent that the
Optionholder was entitled to exercise such Option as of the date of termination, but only within
twelve months following the date of such termination (and in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). This period may be adjusted by the
Board in its discretion. If, after termination, an Option granted under this Article VII is not
exercised within 90 calendar days or twelve months, as applicable, following the date of such
termination, the Option shall terminate.



VIII. COVENANTS OF THE COMPANY




     8.1 Availability of Shares. During the term of the Options, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Options.



     8.2 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
Options and to issue and sell shares of Common Stock upon exercise, redemption or satisfaction of
the Options; provided, however, that this undertaking shall not require the Company to register
under the Securities Act the Plan or any Option or any Common Stock issued or issuable pursuant to
any such Option. 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 related to such Options unless and until such
authority is obtained.



IX. USE OF PROCEEDS FROM STOCK




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



X. CANCELLATION AND RE-GRANT OF OPTIONS




     10.1 Repricing and/or Cancellation of Options. Other than in connection with a
change in the Company’s capitalization (as described in Section 12), the Board shall have the
authority to effect, at any time and from time to time, with the consent of the affected
Optionholders and stockholder approval, (i) the repricing of any outstanding Options under the Plan
to lower the exercise price and/or (ii) the cancellation of any outstanding Options under the Plan
and the grant in substitution therefor of new Options under the Plan covering the same or different
number of shares of Common Stock, but having an exercise price per share not less than one hundred
percent of the Fair Market Value per share of Common Stock on the new grant date.



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Notwithstanding the foregoing, the Board may grant an Option with an exercise price lower than
that set forth above if such Option is granted as part of a transaction to which Section 424(a) of
the Code applies. As set forth above, prior to the implementation of any such repricing or
cancellation of one or more outstanding Options, the Board shall obtain the approval of the
stockholders of the




     Company to the extent required by any NASDAQ, New York Stock Exchange, or other securities
exchange listing requirements as appropriate, or applicable law.



     10.2 Effect of Cancellation. Shares subject to an Option cancelled under this
Article X shall continue to be counted against the maximum award of Options permitted to be granted
pursuant to Section 5.2 of the Plan. The repricing of an Option under this Article X, resulting in
a reduction of the exercise price, shall be deemed to be a cancellation of the original Option and
the grant of a substitute Option; in the event of such repricing, both the original and the
substituted Options shall be counted against the maximum awards of Options permitted to be granted
pursuant to Section 5.2 of the Plan. The provisions of this Section 10.2 shall be applicable only
to the extent required by Section 162(m) of the Code.



XI. MISCELLANEOUS




     11.1 Acceleration of Exercisability and Vesting. The Board shall have the power to
accelerate exercisability and/or vesting of any Option granted pursuant to the Plan upon a Change
in Control or upon the death or Disability or termination of Continuous Service of the Participant.
In furtherance of such power, the Board or Committee may accelerate the time at which an Option may
be first exercised or the time during which an Option or any part thereof will vest in accordance
with the Plan, notwithstanding any provisions in the Option Grant Agreement to the contrary.



     11.2 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 an Option
except to the extent that the Company has issued the shares of Common Stock relating to such
Option.



     11.3 No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Option 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 Option 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, and any applicable provisions of the
corporate law of the state or other jurisdiction in which the Company is domiciled, as the case may
be.



     11.4 Investment Assurances. The Company may require a Participant, as a condition of
exercising or redeeming an Option or acquiring Common Stock under any Option, (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



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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 acquiring the Common Stock; (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the
Option for the Participant’s own account and not with any present intention of selling or otherwise
distributing the Common Stock; and (iii) to give such other written assurances as the Company may
determine are reasonable in order to comply with applicable law. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the
shares of Common Stock under the Option has been registered under a then currently effective
registration statement under the Securities Act or (B) 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, and in either case otherwise complies with
applicable law. 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 laws, including, but not limited to, legends restricting the transfer of the
Common Stock.



     11.5 Withholding Obligations. To the extent provided by the terms of an Option Grant
Agreement, the Participant may satisfy any federal, state, local, or foreign tax withholding
obligation relating to the exercise or redemption of an Option or the acquisition, vesting,
distribution, or transfer of Common Stock under an Option by any of the following means (in
addition to the Company’s right to withhold from any compensation or other amounts payable 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, provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii)
delivering to the Company owned and unnumbered shares of Common Stock.



     11.6 Section 409A. Notwithstanding anything in the Plan to the contrary, it is the
intent of the Company that all Options granted under this Plan shall not cause an imposition of the
additional taxes provided for in Section 409A(a)(1)(B) of the Code; furthermore, it is the intent
of the Company that the Plan shall be administered so that the additional taxes provided for in
Section 409A(a)(1)(B) of the Code are not imposed. In the event that the Company determines in good
faith that any provision of this Plan does not comply with Section 409A of the Code, the Company
may amend this Plan to the minimum extent necessary to cause the Plan to comply.



XII. ADJUSTMENTS UPON CHANGES IN STOCK




     12.1 Capitalization Adjustments. If any change is made in the Common Stock subject
to the Plan, or subject to any Option, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, spinoff,
dividend in property other than cash, stock split, liquidating dividend, extraordinary dividends or
distributions, combination of shares, exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the Company), the Plan may be
appropriately adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4.1 above, the maximum number of securities subject to award to any person



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pursuant to Section 5.2 above, and the number of securities subject to Initial Grants and
Annual Grants to Directors that are not Employees under Article VII of the Plan, and the terms of
the outstanding Options may be appropriately adjusted. The Board may make such adjustments in its
sole discretion, and its determination shall be final, binding, and conclusive. For the avoidance
of doubt, the conversion of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.



     12.2 Adjustments Upon a Change in Control.



     (i) If a Change in Control occurs as defined in Section 2.5(i) through 2.5(iv), then the Board
or the board of directors of any surviving entity or acquiring entity may provide or require that
the surviving or acquiring entity shall have the power but not the obligation to: (1) assume or
continue all or any part of the Options outstanding under the Plan or (2) substitute substantially
equivalent stock awards (including an award to acquire substantially the same consideration paid to
the stockholders in the transaction by which the Change in Control occurs) for those outstanding
under the Plan. In the event any surviving entity or acquiring entity refuses to assume or continue
such Options or to substitute similar stock awards for those outstanding under the Plan, then with
respect to Options held by Participants whose Continuous Service has not terminated, the Board in
its sole discretion and without liability to any person may: (1) provide for the payment of a cash
amount in exchange for the cancellation of an Option equal to the product of (x) the excess, if
any, of the Fair Market Value per share of Common Stock at such time over the exercise price, times
(y) the total number of shares then subject to such Option; (2) continue the Options; or (3) notify
Participants holding an Option that they must exercise any portion of such Option (including, at
the discretion of the Board, any unvested portion of such Option) at or prior to the closing of the
transaction by which the Change in Control occurs and that the Options shall terminate if not so
exercised or redeemed at or prior to the closing of the transaction by which the Change in Control
occurs. With respect to any other Options outstanding under the Plan, such Options shall terminate
if not exercised or redeemed prior to the closing of the transaction by which the Change in Control
occurs. The Board shall not be obligated to treat all Options, even those that are of the same
type, in the same manner.



     (ii) In the event of a Change in Control as defined in Section 2.5(v), all outstanding Options
shall terminate immediately prior to such event.



XIII. AMENDMENT OF THE PLAN AND OPTIONS




     13.1 Amendment of Plan. The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 12 of the Plan 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 the Code, any NASDAQ,
New York Stock Exchange, or other securities exchange listing requirements, or other applicable law
or regulation.



     13.2 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



15









 







thereunder regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive officers.



     13.3 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 and/or to bring the Plan and/or Options granted under it into
compliance therewith.



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



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



XIV. TERMINATION OR SUSPENSION OF THE PLAN




     14.1 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 anniversary of the date
that the Plan is approved by the stockholders of the Company, as the adoption of the Plan by the
Board is conditioned upon such stockholder approval. No Options may be granted under the Plan while
the Plan is suspended or after it is terminated.



     14.2 No Material Impairment of Rights. Suspension or termination of the Plan shall
not materially impair rights and obligations under any Option granted while the Plan is in effect
except with the written consent of the Participant.



XV. EFFECTIVE DATE OF PLAN




     The Plan shall become effective immediately following its approval by the stockholders of the
Company, which approval shall be within twelve months before or after the date the Plan is adopted
by the Board. No Options may be granted under the Plan prior to the time that the stockholders have
approved the Plan.



XVI. 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.
The laws of jurisdiction and venue shall be governed by the laws of the county and city of San
Francisco, California. Notwithstanding the foregoing, with respect to matters affecting the Plan
that are addressed by the General Corporation Law of the State of Delaware, the laws of the State
of Delaware shall control.




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