Exhibit
10.11


2004 EQUITY INCENTIVE PLAN

OF

DEPOMED, INC.


















TABLE
OF CONTENTS


	
  

  	
   

  	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Purpose of this Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions and Rules of Interpretation

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  2.2

  	
  Rules of Interpretation

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Shares Subject to this Plan; Term of this Plan

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Number of Award Shares

  	
   

  	
  6

  
	
   

  	
  3.2

  	
  Term of this Plan.

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Administration

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  General.

  	
   

  	
  6

  
	
   

  	
  4.2

  	
  Authority of the Administrator

  	
   

  	
  7

  
	
   

  	
  4.3

  	
  Scope of Discretion

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Participants Eligible to Receive Awards

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Eligible Participants

  	
   

  	
  8

  
	
   

  	
  5.2

  	
  Section 162(m) Limitation.

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Terms and Conditions of Options

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Price

  	
   

  	
  9

  
	
   

  	
  6.2

  	
  Term

  	
   

  	
  9

  
	
   

  	
  6.3

  	
  Vesting

  	
   

  	
  9

  
	
   

  	
  6.4

  	
  Form and Method of Payment.

  	
   

  	
  10

  
	
   

  	
  6.5

  	
  Assignability of Options

  	
   

  	
  11

  
	
   

  	
  6.6

  	
  Substitute Options

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Incentive Stock Options

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Stock Awards

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  General

  	
   

  	
  13

  
	
   

  	
  8.2

  	
  Right of Repurchase

  	
   

  	
  13

  



 



 ii
 









 


	
  

  	
  8.3

  	
  Form of Payment for Stock Awards

  	
   

  	
  13

  
	
   

  	
  8.4

  	
  Nonassignability of Stock Awards

  	
   

  	
  13

  
	
   

  	
  8.5

  	
  Substitute Stock Award

  	
   

  	
  14

  
	
   

  	
  8.6

  	
  Maximum Number of Stock Awards

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Exercise of Awards

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  In General

  	
   

  	
  14

  
	
   

  	
  9.2

  	
  Time of Exercise

  	
   

  	
  14

  
	
   

  	
  9.3

  	
  Issuance of Award Shares

  	
   

  	
  14

  
	
   

  	
  9.4

  	
  Termination.

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Certain Transactions and Events

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  In General

  	
   

  	
  17

  
	
   

  	
  10.2

  	
  Changes in Capital Structure

  	
   

  	
  17

  
	
   

  	
  10.3

  	
  Fundamental Transactions

  	
   

  	
  18

  
	
   

  	
  10.4

  	
  Changes in Control

  	
   

  	
  19

  
	
   

  	
  10.5

  	
  Divestiture

  	
   

  	
  19

  
	
   

  	
  10.6

  	
  Dissolution

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Automatic Option Grants to Non-Employee Directors

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Automatic Option Grants to Non-Employee Directors.

  	
   

  	
  19

  
	
   

  	
  11.2

  	
  Certain Transactions and Events.

  	
   

  	
  21

  
	
   

  	
  11.3

  	
  Limited Transferability of Options

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Withholding and Tax Reporting

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Tax Withholding Alternatives.

  	
   

  	
  22

  
	
   

  	
  12.2

  	
  Reporting of Dispositions

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Compliance with Law

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Amendment or Termination of this Plan or Outstanding
  Awards

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Amendment and Termination

  	
   

  	
  23

  
	
   

  	
  14.2

  	
  Shareholder Approval

  	
   

  	
  23

  
	
   

  	
  14.3

  	
  Effect

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Reserved Rights

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Nonexclusivity of this Plan

  	
   

  	
  24

  



 



 iii
 









 


	
  

  	
  15.2

  	
  Unfunded Plan

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Special Arrangements Regarding Award Shares

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Escrow of Stock Certificates

  	
   

  	
  24

  
	
   

  	
  16.2

  	
  Repurchase Rights.

  	
   

  	
  25

  
	
   

  	
  16.3

  	
  Market Standoff

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Beneficiaries

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Miscellaneous

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Governing Law

  	
   

  	
  26

  
	
   

  	
  18.2

  	
  Determination of Value

  	
   

  	
  26

  
	
   

  	
  18.3

  	
  Reservation of Shares

  	
   

  	
  26

  
	
   

  	
  18.4

  	
  Electronic Communications

  	
   

  	
  27

  
	
   

  	
  18.5

  	
  Notices

  	
   

  	
  27

  



 



 iv















2004 EQUITY INCENTIVE
PLAN

OF

DEPOMED, INC.


(As Amended through March 23, 2006)


1.                                       Purpose
of this Plan


The purpose of this 2004 Equity Incentive Plan is to
enhance the long-term shareholder value of Depomed, Inc. by offering
opportunities to eligible participants to share in the growth in value of the
equity of Depomed, Inc. and to provide incentives to eligible Employees,
Company Directors and Consultants to contribute to the success of the Company.


2.                                       Definitions
and Rules of Interpretation


2.1                                 Definitions.  This Plan uses the following defined terms:


(a)                                  “Administrator”  means the
Board, the Committee, or any officer or employee of the Company to whom the
Board or the Committee delegates authority to administer this Plan.


(b)                                 “Affiliate” means a “parent” or
“subsidiary” (as each is defined in Section 424 of the Code) of the Company and
any other entity that the Board or Committee designates as an “Affiliate” for
purposes of this Plan.


(c)                                  “Applicable Law” means any
and all laws of whatever jurisdiction, within or without the United States, and
the rules of any stock exchange or quotation system on which Shares are listed
or quoted, applicable to the taking or refraining from taking of any action
under this Plan, including the administration of this Plan and the issuance or
transfer of Awards or Award Shares.


(d)                                 “Award”
means a Stock Award or Option granted in accordance with the terms of this
Plan.


(e)                                  “Award Agreement” means the
document evidencing the grant of an Award.


(f)                                    “Award Shares” means Shares
covered by an outstanding Award or purchased under an Award.


(g)                                 “Awardee” means: (i) a
person to whom an Award has been granted, including a holder of a Substitute
Award, (ii) a person to whom an Award has been transferred in accordance
with all applicable requirements of Sections 6.5, 7(h), and 17, or (iii) a
person who holds Award Shares subject to a right of repurchase under Section
16.2.


(h)                                 “Board” means the board of
directors of the Company.













(i)                                     “Change in Control” means any
transaction or event that the Board specifies as a Change in Control under
Section 10.4.


(j)                                     “Code” means the Internal
Revenue Code of 1986.


(k)                                  “Committee” means a committee
composed of Company Directors appointed in accordance with the Company’s
charter documents and Section 4.


(l)                                     “Company” means Depomed,
Inc., a California corporation.


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


(n)                                 “Consultant” means an
individual who, or an entity or employee of any entity that, provides bona fide
services to the Company or an Affiliate not in connection with the offer or
sale of securities in a capital-raising transaction, but who is not an
Employee.


(o)                                 “Director” means a member of
the board of directors of the Company or an Affiliate.


(p)                                 “Divestiture” means any
transaction or event that the Board specifies as a Divestiture under Section
10.5.


(q)                                 “Domestic Relations Order” means a “domestic relations order” as
defined in, and otherwise meeting the requirements of, Section 414(p) of
the Code, except that reference to a “plan” in that definition shall be to this
Plan.


(r)                                    “Employee” means a regular
employee of the Company or an Affiliate, including an Officer or Director, who
is treated as an employee in the personnel records of the Company or an
Affiliate, but not individuals who are classified by the Company or an
Affiliate as: (i) leased from or otherwise employed by a third party,
(ii) independent contractors, or (iii) intermittent or temporary
workers.  The Company’s or an Affiliate’s
classification of an individual as an “Employee” (or as not an “Employee”) for
purposes of this Plan shall not be altered retroactively even if that
classification is changed retroactively for another purpose as a result of an
audit, litigation or otherwise.  An Awardee
shall not cease to be an Employee due to transfers between locations of the
Company, or between the Company and an Affiliate, or to any successor to the
Company or an Affiliate that assumes the Awardee’s Options under
Section 10.  Neither service as a
Director nor receipt of a director’s fee shall be sufficient to make a Director
an “Employee.”


(s)                                  “Exchange Act” means the
Securities Exchange Act of 1934.



 2
 









(t)                                    “Executive” means, if the
Company has any class of any equity security registered under Section 12 of the
Exchange Act, an individual who is subject to Section 16 of the Exchange Act or
who is a “covered employee” under Section 162(m) of the Code, in either
case  because of the individual’s
relationship with the Company or an Affiliate. 
If the Company does not have any class of any equity security registered
under Section 12 of the Exchange Act, “Executive” means any (i) Director or
(ii) officer elected or appointed by the Board.


(u)                                 “Expiration Date” means, with
respect to an Award, the date stated in the Award Agreement as the expiration
date of the Award or, if no such date is stated in the Award Agreement, then
the last day of the maximum exercise period for the Award, disregarding the
effect of an Awardee’s Termination or any other event that would shorten that
period.


(v)                                 “Fair Market Value” means the
value of Shares as determined under Section 18.2.


(w)                               “Fundamental Transaction”
means any transaction or event described in Section 10.3.


(x)                                   “Grant Date” means the date
the Administrator approves the grant of an Award.  However, if the Administrator specifies that
an Award’s Grant Date is a future date or the date on which a condition is
satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.


(y)                                 “Incentive Stock Option”
means an Option intended to qualify as an incentive stock option under Section
422 of the Code and designated as an Incentive Stock Option in the Award
Agreement for that Option.


(z)                                   “Nonstatutory Option”
means any Option other than an Incentive Stock Option.


(aa)                            “Non-Employee Director”
means any person who is a member of the Board but is not an Employee of the
Company or any Affiliate of the Company and has not been an Employee of the
Company or any Affiliate of the Company at any time during the preceding twelve
months.  Service as a Director does not
in itself constitute employment for purposes of this definition.



 3
 









(bb)                          “Objectively Determinable Performance
Condition”  shall mean a performance condition (i) that is
established (A) at the time an Award is granted or (B)  no later than
the earlier of (1) 90 days after the beginning of the period of service to
which it relates, or (2) before the elapse of 25% of the period of service
to which it relates, (ii) that is uncertain of achievement at the time it is
established, and (iii) the achievement of which is determinable by a third
party with knowledge of the relevant facts. 
Examples of measures that may be used in Objectively Determinable
Performance Conditions include achievement of a Company goal, net order
dollars, net profit dollars, net profit growth, net revenue dollars, revenue
growth, individual performance, earnings per share, return on assets, return on
equity, and other financial objectives, objective customer satisfaction
indicators and efficiency measures, each with respect to the Company and/or an
Affiliate or individual business unit.


(cc)                            “Officer” means an officer of
the Company as defined in Rule 16a-1 adopted under the Exchange Act.


(dd)                          “Option” means a right to
purchase Shares of the Company granted under this Plan.


(ee)                            “Option Price” means the
price payable under an Option for Shares, not including any amount payable in
respect of withholding or other taxes.


(ff)                                “Option Shares” means Shares
covered by an outstanding Option or purchased under an Option.


(gg)                          “Plan” means this 2004 Equity
Incentive Plan of Depomed, Inc.


(hh)                          “Purchase Price” means the
price payable under a Stock Award for Shares, not including any amount payable
in respect of withholding or other taxes.


(ii)                                  “Reverse Vesting” means that an
Option is or was fully exercisable but that, subject to a “reverse” vesting
schedule, the Company has a right to repurchase the Option Shares as specified
in Section 16.2(a), with the Company’s right of repurchase expiring in
accordance with a “forward” vesting schedule that would otherwise have applied
to the Option under which the Option Shares were purchased or in accordance
with some other vesting schedule described in the Award Agreement.


(jj)                                  “Rule 16b-3” means Rule 16b-3
adopted under Section 16(b) of the Exchange Act.


(kk)                            “Securities Act” means the
Securities Act of 1933.


(ll)                                  “Share” means a share of the
Common Stock of the Company or other securities substituted for the Common
Stock under Section 10.



 4
 









(mm)                      “Stock Award”  means an offer
by the Company to sell shares subject to certain restrictions pursuant to the
Award Agreement as described in Section 8. 
A Stock Award does not include an option.


(nn)                          “Substitute Award” means a
Substitute Option or Substitute Stock Award granted in accordance with the
terms of this Plan.


(oo)                          “Substitute Option” means an
Option granted in substitution for, or upon the conversion of, an option
granted by another entity to purchase equity securities in the granting entity.


(pp)                          “Substitute Stock Award” means
a Stock Award granted in substitution for, or upon the conversion of, a stock
award granted by another entity to purchase equity securities in the granting
entity.


(qq)                          “Ten Percent Shareholder”
means any person who, directly or by attribution under Section 424(d) of
the Code, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any Affiliate on the
Grant Date.


(rr)                                “Termination” means that the
Awardee has ceased to be, with or without any cause or reason, an Employee,
Director or Consultant.  However, unless
so determined by the Administrator, or otherwise provided in this Plan,
“Termination” shall not include a change in status from an Employee, Consultant
or Director to another such status.  An
event that causes an Affiliate to cease being an Affiliate shall be treated as
the “Termination” of that Affiliate’s Employees, Directors, and Consultants.


2.2                                 Rules of Interpretation.  Any
reference to a “Section,” without more, is to a Section of this Plan.  Captions and titles are used for convenience
in this Plan and shall not, by themselves, determine the meaning of this
Plan.  Except when otherwise indicated by
the context, the singular includes the plural and vice versa.  Any reference to a statute is also a
reference to the applicable rules and regulations adopted under that
statute.  Any reference to a statute,
rule or regulation, or to a section of a statute, rule or regulation, is a
reference to that statute, rule, regulation, or section as amended from time to
time, both before and after the effective date of this Plan and including any
successor provisions.



 5
 









3.                                       Shares
Subject to this Plan; Term of this Plan


3.1                                 Number of Award Shares.  The Shares issuable under this Plan
shall be authorized but unissued or reacquired Shares, including but not
limited to Shares  repurchased by the Company on
the open market.  Subject to adjustment
under Section 10, the maximum number of Shares that may be issued under this
Plan is 3,500,000.  When an Award is granted, the maximum number
of Shares that may be issued under this Plan shall be reduced by the number of
Shares covered by that Award.  However,
if an Award later terminates or expires without having been exercised in full,
the maximum number of shares that may be issued under this Plan shall be
increased by the number of Shares that were covered by, but not purchased
under, that Award.  By contrast, the
repurchase of Shares by the Company shall not increase the maximum number of
Shares that may be issued under this Plan.


3.2                                 Term of this Plan.


(a)                                  This
Plan shall be effective on, and Awards may be granted under this Plan after,
the date it has been both adopted by the Board and approved by the Company’s
shareholders (the “Effective
Date”).


(b)                                 Subject
to the provisions of Section 14, Awards may be granted under this Plan for
a period of ten years from the earlier of the date on which the Board approves
this Plan and the date the Company’s shareholders approve this Plan.  Accordingly, Awards may not be granted under
this Plan after ten years from the earlier of those dates.


4.                                       Administration


4.1                                 General.


(a)                                  The
Board shall have ultimate responsibility for administering this Plan.  The Board may delegate certain of its
responsibilities to a Committee, which shall consist of at least two members of
the Board.  The Board or the Committee
may further delegate its responsibilities to any Employee of the Company or any
Affiliate.  Where this Plan specifies
that an action is to be taken or a determination made by the Board, only the
Board may take that action or make that determination.  Where this Plan specifies that an action is
to be taken or a determination made by the Committee, only the Committee may
take that action or make that determination. 
Where this Plan references the “Administrator,” the action may be taken
or determination made by the Board, the Committee, or other Administrator.  However, only the Board or the Committee may
approve grants of Awards to Executives and such other participants as may be
specifically designated by the Board, and an Administrator other than the Board
or the Committee may grant Awards only within guidelines established by the
Board or Committee.  Moreover, all
actions and determinations by any Administrator are subject to the provisions
of this Plan.



 6
 









(b)                                 So
long as the Company has registered and outstanding a class of equity securities
under Section 12 of the Exchange Act, the Committee shall consist of
Company Directors who are “Non-Employee Directors” as defined in
Rule 16b-3 and, after the expiration of any transition period permitted by
Treasury Regulations Section 1.162-27(h)(3), who are “outside directors”
as defined in Section 162(m) of the Code.


4.2                                 Authority of the Administrator.  Subject to the other provisions of this Plan,
the Administrator shall have the authority to:


(a)                                  grant
Awards, including Substitute Awards;


(b)                                 determine
the Fair Market Value of Shares;


(c)                                  determine
the Option Price and the Purchase Price of Awards;


(d)                                 select
the Awardees;


(e)                                  determine
the times Awards are granted;


(f)                                    determine
the number of Shares subject to each Award;


(g)                                 determine
the methods of payment that may be used to purchase Award Shares;


(h)                                 determine
the methods of payment that may be used to satisfy withholding tax obligations;


(i)                                     determine
the other terms of each Award, including but not limited to the time or times
at which Awards may be exercised, whether and under what conditions an Award is
assignable, and whether an Option is a Nonstatutory Option or an Incentive
Stock Option;


(j)                                     modify
or amend any Award;


(k)                                  authorize
any person to sign any Award Agreement or other document related to this Plan
on behalf of the Company;


(l)                                     determine
the form of any Award Agreement or other document related to this Plan, and
whether that document, including signatures, may be in electronic form;


(m)                               interpret
this Plan and any Award Agreement or document related to this Plan;


(n)                                 correct
any defect, remedy any omission, or reconcile any inconsistency in this Plan,
any Award Agreement or any other document related to this Plan;



 7
 









(o)                                 adopt,
amend, and revoke rules and regulations under this Plan, including rules and
regulations relating to sub-plans and Plan addenda;


(p)                                 adopt,
amend, and revoke special rules and procedures which may be inconsistent with
the terms of this Plan, set forth (if the Administrator so chooses) in
sub-plans regarding (for example) the operation and administration of this Plan
and the terms of Awards, if and to the extent necessary or useful to
accommodate non-U.S. Applicable Laws and practices as they apply to Awards and
Award Shares held by, or granted or issued to, persons working or resident
outside of the United States or employed by Affiliates incorporated outside the
United States;


(q)                                 in
the case of the Board, determine whether a transaction or event should be
treated as a Change in Control, a Divestiture or neither;


(r)                                    determine
the effect of a Fundamental Transaction and, if the Board determines that a
transaction or event should be treated as a Change in Control or a Divestiture,
then the effect of that Change in Control or Divestiture; and


(s)                                  make
all other determinations the Administrator deems necessary or advisable for the
administration of this Plan.


4.3           Scope of Discretion.  Subject to the last sentence of this Section
4.3, on all matters for which this Plan confers the authority, right or power
on the Board, the Committee, or other Administrator to make decisions, that
body may make those decisions.  Those decisions
will be final, binding and conclusive. 
Moreover, but again subject to the last sentence of this Section 4.3, in
making those decisions, the Board, Committee or other Administrator need not
treat all persons eligible to receive Awards, all Awardees, all Awards or all
Award Shares the same way.  However,
except as provided in Section 14.3, the discretion of the Board, Committee
or other Administrator is subject to the specific provisions and specific
limitations of this Plan, as well as all rights conferred on specific Awardees
by Award Agreements and other agreements.


5.                                       Participants
Eligible to Receive Awards


5.1           Eligible Participants.  Awards (including Substitute Awards) may be
granted to, and only to, Employees, Directors and Consultants, including to
prospective Employees, Directors and Consultants conditioned on the beginning
of their service for the Company or an Affiliate.  However, Incentive Stock Options may only be
granted to Employees, as provided in Section 7(g).



 8
 









5.2                                 Section 162(m) Limitation.


(a)                                  Options.  So long as the Company
is a “publicly held corporation” within the meaning of Section 162(m) of the
Code: (i) no Employee may be granted one or more Options within any fiscal
year of the Company under this Plan to purchase more than 500,000 Shares under
Options, subject to adjustment pursuant to Section 10, (ii) Options may be
granted to an Executive only by the Committee (and, notwithstanding Section
4.1(a), not by the Board).  If an Option
is cancelled without being exercised or if the Option Price of an Option is
reduced, that cancelled or repriced Option shall continue to be counted against
the limit on Awards that may be granted to any participant under this Section
5.2.  Notwithstanding anything herein to
the contrary, in connection with his or her initial employment with the Company
or an Affiliate, a new Employee or prospective Employee shall be eligible to
receive up to a maximum of 750,000 Shares under Options (subject to adjustment
pursuant to Section 10), which Shares shall not be counted toward the 500,000
limitation set forth in this Section 5.2(a).


(b)                                 Stock Awards.  Any Stock Award intended as “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Code must vest or become exercisable contingent on the achievement of one or
more Objectively Determinable Performance Conditions.  The Committee shall have the discretion to
determine the time and manner of compliance with Section 162(m) of the Code.


6.                                       Terms
and Conditions of Options


The following rules apply to all Options:


6.1           Price.  No Option
intended as “qualified incentive-based compensation” within the meaning of
Section 162(m) of the Code may have an Option Price less than 100% of the
Fair Market Value of the Shares on the Grant Date.  In no event will the Option Price of any
Option be less than the par value of the Shares issuable under the Option if
that is required by Applicable Law.  The
Option Price of an Incentive Stock Option shall be subject to
Section 7(f).


6.2           Term.  No Option shall
be exercisable after its Expiration Date. 
No Option may have an Expiration Date that is more than ten years after
its Grant Date.  Additional provisions
regarding the term of Incentive Stock Options are provided in Sections 7(a)
and 7(e).


6.3           Vesting.  Options
shall be exercisable: (a) on the Grant Date, or (b) in accordance
with a schedule related to the Grant Date, the date the Awardee’s directorship,
employment or consultancy begins, or a different date specified in the Award
Agreement.  If so provided in the Award
Agreement, an Option may be exercisable subject to the application of Reverse
Vesting to the Option Shares.  Additional
provisions regarding the vesting of Incentive Stock Options are provided in
Section 7(c).  No Option granted to
an individual who is subject to the overtime pay provisions of the Fair Labor
Standards Act may be exercised before the expiration of six months after the
Grant Date.



 9
 









6.4                                 Form and Method of Payment.


(a)                                  The
Administrator shall determine the acceptable form and method of payment for
exercising an Option.


(b)                                 Acceptable
forms of payment for all Option Shares are cash, check or wire transfer,
denominated in U.S. dollars except as specified by the Administrator for
non-U.S. Employees or non-U.S. sub-plans.


(c)                                  In
addition, the Administrator may permit payment to be made by any of the
following methods:


(i)                                     other Shares, or
the designation of other Shares, which (A) are “mature” shares for
purposes of avoiding variable accounting treatment under generally accepted
accounting principles (generally mature shares are those that have been owned
by the Awardee for more than six months on the date of surrender), and (B) have
a Fair Market Value on the date of surrender equal to the Option Price of the
Shares as to which the Option is being exercised;


(ii)                                  provided that a
public market exists for the Shares, consideration received by the Company
under a procedure under which a licensed broker-dealer advances funds on behalf
of an Awardee or sells Option Shares on behalf of an Awardee (a “Cashless Exercise Procedure”),
provided that if the Company extends or arranges for the extension of credit to
an Awardee under any Cashless Exercise Procedure, no Officer or Director may
participate in that Cashless Exercise Procedure;


(iii)                               subject to Section 6.4(e), one or more
promissory notes meeting the requirements of Section 6.4(e) provided,
however, that promissory notes may not be used for any portion of an Award
which is not vested at the time of exercise;


(iv)                              cancellation of any debt
owed by the Company or any Affiliate to the Awardee including without
limitation waiver of compensation due or accrued for services previously
rendered to the Company or an Affiliate; and


(v)                                 any combination of the
methods of payment permitted by any paragraph of this Section 6.4.


(d)                                 The Administrator may
also permit any other form or method of payment for Option Shares permitted by
Applicable Law.



 10















(e)           The promissory notes
referred to in Section 6.4(c)(iii) shall be full recourse.  Unless the Administrator specifies otherwise
after taking into account any relevant accounting issues, the promissory notes
shall bear interest at a fair market value rate when the Option is
exercised.  Interest on the promissory
notes shall also be at least sufficient to avoid imputation of interest under
Sections 483, 1274, and 7872 of the Code. 
The promissory notes and their administration shall at all times comply
with any applicable margin rules of the Federal Reserve.  The promissory notes may also include such
other terms as the Administrator specifies. 
Payment may not be made by promissory note by Officers or Directors if
Shares are registered under Section 12 of the Exchange Act.


6.5           Assignability
of Options.  Except as
determined by the Administrator, no Option shall be assignable or otherwise
transferable by the Awardee except by will or by the laws of descent and
distribution.  However, Options may be
transferred and exercised in accordance with a Domestic Relations Order and may
be exercised by a guardian or conservator appointed to act for the
Awardee.  Incentive Stock Options may
only be assigned in compliance with Section 7(h).


6.6           Substitute
Options.  The Board may
cause the Company to grant Substitute Options in connection with the
acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger, tender offer, or other similar transaction) or of all or
a portion of the assets of any entity. 
Any such substitution shall be effective on the effective date of the
acquisition.  Substitute Options may be
Nonstatutory Options or Incentive Stock Options.  Unless and to the extent specified otherwise
by the Board, Substitute Options shall have the same terms and conditions as
the options they replace, except that (subject to the provisions of Section 10)
Substitute Options shall be Options to purchase Shares rather than equity
securities of the granting entity and shall have an Option Price determined by
the Board.


7.                                       Incentive
Stock Options


The following rules apply only to Incentive Stock
Options and only to the extent these rules are more restrictive than the rules
that would otherwise apply under this Plan. 
With the consent of the Awardee, or where this Plan provides that an
action may be taken notwithstanding any other provision of this Plan, the
Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator
will thereafter be treated as a Nonstatutory Option.


(a)           The Expiration Date of an Incentive
Stock Option shall not be later than ten years from its Grant Date, with the
result that no Incentive Stock Option may be exercised after the expiration of ten
years from its Grant Date.


(b)           No Incentive Stock Option may be
granted more than ten years from the date this Plan was approved by the Board.



 11
 









(c)           Options intended to be incentive
stock options under Section 422 of the Code that are granted to any single
Awardee under all incentive stock option plans of the Company and its
Affiliates, including incentive stock options granted under this Plan, may not
vest at a rate of more than $100,000 (or such other amount that may be
hereafter specified in the applicable section of the Code) in Fair Market Value
of stock (measured on the grant dates of the options) during any calendar
year.  For this purpose, an option vests
with respect to a given share of stock the first time its holder may purchase
that share, notwithstanding any right of the Company to repurchase that
share.  Unless the administrator of that
option plan specifies otherwise in the related agreement governing the option,
this vesting limitation shall be applied by, to the extent necessary to satisfy
this $100,000 (or other amount) rule, by treating certain stock options that
were intended to be incentive stock options under Section 422 of the Code as
Nonstatutory Options.  The stock options
or portions of stock options to be reclassified as Nonstatutory Options are
those with the highest option prices, whether granted under this Plan or any
other equity compensation plan of the Company or any Affiliate that permits
that treatment.  This Section 7(c)
shall not cause an Incentive Stock Option to vest before its original vesting
date or cause an Incentive Stock Option that has already vested to cease to be
vested.


(d)           In
order for an Incentive Stock Option to be exercised for any form of payment
other than those described in Section 6.4(b), that form of payment must be
stated at the time of grant in the Award Agreement relating to that Incentive
Stock Option.


(e)           Any
Incentive Stock Option granted to a Ten Percent Shareholder, must have an
Expiration Date that is not later than five years from its Grant Date, with the
result that no such Option may be exercised after the expiration of five years
from the Grant Date.


(f)            The
Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. 
The Option Price for the Shares covered by an Incentive Stock Option
granted to a Ten Percent Shareholder shall never be less than 110% of the Fair
Market Value of the Shares at the Grant Date.


(g)           Incentive
Stock Options may be granted only to Employees. 
If an Awardee changes status from an Employee to a Consultant, that
Awardee’s Incentive Stock Options become Nonstatutory Options if not exercised
within the time period described in Section 7(i) (determined by treating
that change in status as a Termination solely for purposes of this Section
7(g)).


(h)           No
rights under an Incentive Stock Option may be transferred by the Awardee, other
than by will or the laws of descent and distribution.  During the life of the Awardee, an Incentive
Stock Option may be exercised only by the Awardee.  The Company’s compliance with a Domestic
Relations Order, or the exercise of an Incentive Stock Option by a guardian or
conservator appointed to act for the Awardee, shall not violate this Section
7(h).



 12
 









(i)            An Incentive Stock
Option shall be treated as a Nonstatutory Option if it remains exercisable
after, and is not exercised within, the three-month period beginning with the
Awardee’s Termination for any reason other than the Awardee’s death or
disability (as defined in Section 22(e) of the Code).  In the case of Termination due to death, an
Incentive Stock Option shall continue to be treated as an Incentive Stock
Option if it remains exercisable after, and is not exercised within, the
three-month period after the Awardee’s Termination provided it is exercised
before the Expiration Date.  In the case
of Termination due to disability, an Incentive Stock Option shall be treated as
a Nonstatutory Option if it remains exercisable after, and is not exercised
within, one year after the Awardee’s Termination.


(j)            An Incentive Stock
Option may only be modified by the Board or the Committee.


8.                                       Stock
Awards


8.1           General. 
The specific terms and conditions of a Stock Award applicable to the
Awardee shall be provided for in the Award Agreement. The Award Agreement shall
state the number of Shares that the Awardee shall be entitled to receive or
purchase, the terms and conditions on which the Shares shall vest, the price to
be paid and, if applicable, the time within which the Awardee must accept such offer.
The offer shall be accepted by execution of the Award Agreement.  The Administrator may require that all Shares
subject to a right of repurchase or risk of forfeiture be held in escrow until
such repurchase right or risk of forfeiture lapses.  The grant or vesting of a Stock Award may be
made contingent on the achievement of Objectively Determinable Performance
Conditions.


8.2           Right of Repurchase.  If so provided in the Award Agreement, Award
Shares acquired pursuant to a Stock Award may be subject to repurchase by the
Company or an Affiliate if not vested in accordance with the Award Agreement.


8.3           Form of Payment for Stock Awards.  The Administrator shall determine the
acceptable form and method of payment for exercising a Stock Award.  Acceptable forms of payment for all Award
Shares are cash, check or wire transfer, denominated in U.S. dollars except as
specified by the Administrator for non-U.S. Employees or non-U.S.
sub-plans.  In addition, the
Administrator may permit payment to be made by any of the methods permitted
with respect to the exercise of Options pursuant to Section 6.4.


8.4           Nonassignability of Stock Awards.  Except as determined by the Administrator, no
Stock Award shall be assignable or otherwise transferable by the Awardee except
by will or by the laws of descent and distribution (including without
limitation Section 17).  Notwithstanding
anything to the contrary herein, Stock Awards may be transferred and exercised
in accordance with a Domestic Relations Order.



 13
 









8.5           Substitute Stock Award.  The Board may cause the Company to grant
Substitute Stock Awards in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger, tender
offer, or other similar transaction) or of all or a portion of the assets of
any entity.  Any such substitution shall
be effective on the effective date of the acquisition.  Unless and to the extent specified otherwise
by the Board, Substitute Stock Awards shall have the same terms and conditions
as the stock awards they replace, except that (subject to the provisions of
Section 10) Substitute Stock Awards shall be Stock Awards to purchase
Shares rather than equity securities of the granting entity and shall have a
Purchase Price that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution.


8.6           Maximum
Number of Stock Awards.  The
maximum aggregate number of Shares that may be issued pursuant to Stock Awards
under this Plan shall not exceed ten percent (10%) of the number of Shares that
may be issued pursuant to this Plan under Section 3.1.


9.                                       Exercise
of Awards


9.1           In General. 
An Award shall be exercisable in accordance with this Plan and the Award
Agreement under which it is granted.


9.2           Time of Exercise.  Options and Stock Awards
shall be considered exercised when the Company receives: (a) written
notice of exercise from the person entitled to exercise the Option or Stock
Award, (b) full payment, or provision for payment, in a form and method
approved by the Administrator, for the Shares for which the Option or Stock
Award is being exercised, and (c) with respect to Nonstatutory Options,
payment, or provision for payment, in a form approved by the Administrator, of
all applicable withholding taxes due upon exercise.  An Award may not be exercised for a fraction
of a Share.


9.3           Issuance of Award Shares.  The Company shall issue
Award Shares in the name of the person properly exercising the Award.  If the Awardee is that person and so
requests, the Award Shares shall be issued in the name of the Awardee and the
Awardee’s spouse.  The Company shall
endeavor to issue Award Shares promptly after an Award is exercised.  Until Award Shares are actually issued, as
evidenced by the appropriate entry on the stock register of the Company or its
transfer agent, the Awardee will not have the rights of a shareholder with
respect to those Award Shares, even though the Awardee has completed all the
steps necessary to exercise the Award. 
No adjustment shall be made for any dividend, distribution, or other
right for which the record date precedes the date the Award Shares are issued,
except as provided in Section 10.



 14
 









9.4           Termination.


(a)           In General.  Except as provided in an Award Agreement or
in writing by the Administrator, and as otherwise provided in
Sections 9.4(b), (c), (d) and (e) after an Awardee’s Termination, the
Awardee’s Awards shall be exercisable to the extent (but only to the extent)
they are vested on the date of that Termination and only during the three
months after the Termination, but in no event after the Expiration Date.  To the extent the Awardee does not exercise
an Award within the time specified for exercise, the Award shall automatically
terminate.


(b)           Leaves of Absence.  Unless otherwise provided in the Award Agreement
or in writing by the Administrator, no Award may be exercised more than three
months after the beginning of a leave of absence, other than a personal or
medical leave approved by an authorized representative of the Company with
employment guaranteed upon return. 
Awards shall not continue to vest during a leave of absence, unless
otherwise determined in writing by the Administrator with respect to an
approved personal or medical leave with employment guaranteed upon return.


(c)           Death or Disability. 
Unless otherwise provided in the Award Agreement or in writing by the
Administrator, if an Awardee’s Termination is due to death or disability (as
determined by the Administrator with respect to all Awards other than Incentive
Stock Options and as defined by Section 22(e) of the Code with respect to
Incentive Stock Options), all Awards of that Awardee to the extent exercisable
at the date of that Termination may be exercised for one year after that
Termination, but in no event after the Expiration Date.  In the case of Termination due to death, an
Award may be exercised as provided in Section 17.  In the case of Termination due to disability,
if a guardian or conservator has been appointed to act for the Awardee and been
granted this authority as part of that appointment, that guardian or
conservator may exercise the Award on behalf of the Awardee.  Death or disability occurring after an
Awardee’s Termination shall not cause the Termination to be treated as having
occurred due to death or disability.  To
the extent an Award is not so exercised within the time specified for its
exercise, the Award shall automatically terminate.


(d)           Divestiture.  If an Awardee’s Termination is due to a
Divestiture, the Board may take any one or more of the actions described in
Section 10.3 or 10.4 with respect to the Awardee’s Awards.



 15
 









(e)           Termination for Cause.  In the discretion of the Administrator, which
may be exercised on the date of grant, or at a date later in time, if an
Awardee’s Termination is due to Cause, all of the Awardee’s Awards shall
automatically terminate and cease to be exercisable at the time of
Termination.  “Cause” means employment-related dishonesty, fraud,
misconduct or disclosure or misuse of confidential information, or other
employment-related conduct that is likely to cause significant injury to the
Company, an Affiliate, or any of their respective employees, officers or
directors (including, without limitation, commission of a felony or similar
offense whether or not employment-related), in each case as determined by the
Administrator.  “Cause” shall not require
that a civil judgment or criminal conviction have been entered against or
guilty plea shall have been made by the Awardee regarding any of the matters
referred to in the previous sentence.  Accordingly,
the Administrator shall be entitled to determine “Cause” based on the
Administrator’s good faith belief.  If
the Awardee is criminally charged with a felony or similar offense, that shall
be a sufficient, but not a necessary, basis for such a belief.


(f)            Administrator Discretion. 
Notwithstanding the provisions of Section 9.4 (a)-(e), the Administrator
shall have complete discretion, exercisable either at the time an Award is
granted or at any time while the Award remains outstanding, to:


(i)            Extend
the period of time for which the Award is to remain exercisable, following the
Awardee’s Termination, from the limited exercise period otherwise in effect for
that Award to such greater period of time as the Administrator shall deem
appropriate, but in no event beyond the Expiration Date; and/or


(ii)           Permit
the Award to be exercised, during the applicable post-Termination exercise
period, not only with respect to the number of vested Shares for which such
Award may be exercisable at the time of the Awardee’s Termination but also with
respect to one or more additional installments in which the Awardee would have
vested had the Awardee not been subject to Termination.


(g)           Consulting or Employment
Relationship. Nothing in this Plan or in any Award Agreement, and no
Award or the fact that Award Shares remain subject to repurchase rights,
shall:  (A) interfere with or limit
the right of the Company or any Affiliate to terminate the employment or
consultancy of any Awardee at any time, whether with or without cause or
reason, and with or without the payment of severance or any other compensation
or payment, (B) interfere with the application of any provision in any of the
Company’s or any Affiliate’s charter documents or Applicable Law relating to
the election, appointment, term of office, or removal of a Director or (C)
interfere with the Company’s right to terminate any consultancy.



 16
 









10.                                 Certain
Transactions and Events


10.1         In General. 
Except as provided in this Section 10, no change in the capital
structure of the Company, merger, sale or other disposition of assets or a
subsidiary, change in control, issuance by the Company of shares of any class
of securities or securities convertible into shares of any class of securities,
exchange or conversion of securities, or other transaction or event shall
require or be the occasion for any adjustments of the type described in this
Section 10.  Additional provisions
with respect to the foregoing transactions are set forth in Section 14.3.


10.2         Changes in Capital Structure.  In the event of any stock split, reverse
stock split, recapitalization, combination or reclassification of stock, stock
dividend, spin-off, or similar change to the capital structure of the
Company (not including a Fundamental Transaction or Change in Control), the
Board shall make whatever adjustments it concludes are appropriate to:
(a) the number and type of Awards that may be granted under this Plan,
(b) the number and type of Options that may be granted to any participant
under this Plan, (c) the Purchase Price and number and class of securities
issuable under each outstanding Stock Award, (d) the Option Price and
number and class of securities issuable under each outstanding Option, and (e)
the repurchase price of any securities substituted for Award Shares that are
subject to repurchase rights.  The
specific adjustments shall be determined by the Board.  Unless the Board specifies otherwise, any
securities issuable as a result of any such adjustment shall be rounded down to
the next lower whole security.  The Board
need not adopt the same rules for each Award or each Awardee.



 17
 









10.3         Fundamental Transactions.  Except for grants to Non-Employee Directors
pursuant to Section 11, in the event of (a) a merger or consolidation in which
the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption shall be binding on all
participants under this Plan), (b) a merger in which the Company is the surviving
corporation but after which the shareholders of the Company immediately prior
to such merger (other than any shareholder that merges, or which owns or
controls another corporation that merges, with the Company in such merger)
cease to own their shares or other equity interest in the Company, (c) the sale
of all or substantially all of the assets of the Company, or (d) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of
the Company by tender offer or similar transaction (each, a “Fundamental Transaction”),
any or all outstanding Awards may be assumed, converted or replaced by the
successor corporation (if any), which assumption, conversion or replacement
shall be binding on all participants under this Plan.  In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar consideration
to participants as was provided to the Company’s shareholders (after taking
into account the existing provisions of the Awards).  The successor corporation may also issue, in
place of outstanding Shares held by participants, substantially similar shares
or other property subject to repurchase restrictions no less favorable to the
participants. In the event such successor corporation (if any) does not assume
or substitute Awards, as provided above, pursuant to a transaction described in
this Section 10.3, the vesting with respect to such Awards shall fully and
immediately accelerate or the repurchase rights of the Company shall fully and
immediately terminate, as the case may be, so that the Awards may be exercised
or the repurchase rights shall terminate before, or otherwise in connection
with the closing or completion of the Fundamental Transaction or event, but
then terminate.  Notwithstanding anything
in this Plan to the contrary, the Board may, in its sole discretion, provide
that the vesting of any or all Award Shares subject to vesting or a right of
repurchase shall accelerate or lapse, as the case may be, upon a transaction
described in this Section 10.3. If the Board exercises such discretion with
respect to Options, such Options shall become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Board
determines, and if such Options are not exercised prior to the consummation of
the Fundamental Transaction, they shall terminate at such time as determined by
the Board.  The Board need not adopt the
same rules for each Award or each Awardee. 
Subject to any greater rights granted to participants under the
foregoing provisions of this Section 10.3, in the event of the occurrence of
any Fundamental Transaction, any outstanding Awards shall be treated as
provided in the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, or sale of assets.



 18
 









10.4         Changes
in Control.  The Board
may also, but need not, specify that other transactions or events constitute a “Change in Control”.  The Board may do that either before or after
the transaction or event occurs. 
Examples of transactions or events that the Board may treat as Changes
in Control are: (a) any person or entity, including a “group” as
contemplated by Section 13(d)(3) of the Exchange Act, acquires securities
holding 50% or more of the total combined voting power or value of the Company,
or (b) as a result of or in connection with a contested election of
Company Directors, the persons who were Company Directors immediately before
the election cease to constitute a majority of the Board.  In connection with a Change in Control, notwithstanding
any other provision of this Plan, the Board may, but need not, take any one or
more of the actions described in Section 10.3. 
In addition, the Board may extend the date for the exercise of Awards
(but not beyond their original Expiration Date).  The Board need not adopt the same rules for
each Award or each Awardee.


10.5         Divestiture. 
If the Company or an Affiliate sells or otherwise transfers equity
securities of an Affiliate to a person or entity other than the Company or an
Affiliate, or leases, exchanges or transfers all or any portion of its assets
to such a person or entity, then the Board may specify that such transaction or
event constitutes a “Divestiture”.  In connection with a Divestiture,
notwithstanding any other provision of this Plan, the Board may, but need not,  take one or more of the actions described in Section 10.3
or 10.4 with respect to Awards or Award Shares held by, for example, Employees,
Directors or Consultants for whom that transaction or event results in a
Termination.  The Board need not adopt
the same rules for each Award or each Awardee.


10.6         Dissolution. 
If the Company adopts a plan of dissolution, the Board may cause Awards
to be fully vested and exercisable (but not after their Expiration Date) before
the dissolution is completed but contingent on its completion and may cause the
Company’s repurchase rights on Award Shares to lapse upon completion of the
dissolution.  The Board need not adopt
the same rules for each Award or each Awardee. 
However, to the extent not exercised before the earlier of the
completion of the dissolution, Awards shall terminate immediately prior to the
dissolution.


11.                               Automatic
Option Grants to Non-Employee Directors


11.1         Automatic Option Grants to Non-Employee Directors.


(a)           Annual Grant.  On the
date of the last regular meeting of directors during each calendar year each
individual who is serving as a Non-Employee Director shall automatically be
granted a Nonstatutory Option to purchase 15,000 Shares (the “Annual Grant”),
provided, however, that such individual has served as a Non-Employee Director
for at least six months.


(b)           Initial Grant.  Upon
the first appointment or election of an individual as a Non-Employee Director,
such individual shall automatically be granted a Nonstatutory Option to
purchase 25,000 Shares (the “Initial
Grant”).



 19
 









(c)           Exercise Price.


(i)            The
Option Price shall be equal to one hundred percent (100%) of the Fair Market
Value of the Shares on the Option grant date.


(ii)           The
Option Price shall be payable in one or more of the alternative forms
authorized pursuant to Section 6.4. 
Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the Option Price must be made on the date of
exercise.


(d)           Option Term.  Each
Option shall have a term of ten (10) years measured from the Option grant date.


(e)           Exercise and Vesting of Options.  The Shares underlying each Option issued
pursuant to each Initial Grant shall vest and be exercisable in a series of
forty-eight (48) successive equal monthly installments at the end of each full
month from the date of grant, for so long as the Non-Employee Director
continuously remains a Director. The Shares underlying each Option issued
pursuant to each Annual Grant shall vest and be exercisable in a series of
twelve (12) successive equal monthly installments at the end of each full month
from the date of grant, for so long as the Non-Employee Director continuously
remains a Director.


(f)            Termination of Board Service.  The following provisions shall govern the
exercise of any Options held by the Awardee at the time the Awardee ceases to
serve as a Non-Employee Director:


(i)            In General.  Except as otherwise provided in Section 11.3,
after cessation of service as a Director (the “Cessation Date”),
the Awardee’s Options shall be exercisable to the extent (but only to the
extent) they are vested on the Cessation Date and only during the three months
after such Cessation Date, but in no event after the Expiration Date.  To the extent the Awardee does not exercise
an Option within the time specified for exercise, the Option shall
automatically terminate.


(ii)           Death or Disability.  If an Awardee’s cessation of service on the
Board is due to death or disability (as determined by the Board), all
Non-Employee Director Options of that Awardee, whether or not exercisable upon
such Cessation Date, may be exercised at any time on or prior to the Expiration
Date.  In the case of a cessation of
service due to death, an Option may be exercised as provided in
Section 17.  In the case of a
cessation of service due to disability, if a guardian or conservator has been
appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Option on
behalf of the Awardee.  Death or
disability occurring after an Awardee’s cessation of service shall not cause
the cessation of service to be treated as having occurred due to death or
disability.  To the extent an Option is
not so exercised within the time specified for its exercise, the Option shall
automatically terminate.



 20















11.2         Certain Transactions and Events.


(a)           In the event of a
Fundamental Transaction while the Awardee remains a Non-Employee Director, the
Shares at the time subject to each outstanding Option held by such Awardee
pursuant to Section 11, but not otherwise vested, shall automatically vest in
full so that each such Option shall, immediately prior to the effective date of
the Fundamental Transaction, become exercisable for all the Shares as fully
vested Shares and may be exercised for any or all of those vested Shares.
Immediately following the consummation of the Fundamental Transaction, each
Option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or Affiliate thereof).


(b)           In
the event of a Change in Control while the Awardee remains a Non-Employee
Director, the Shares at the time subject to each outstanding Option held by
such Awardee pursuant to Section 11, but not otherwise vested, shall
automatically vest in full so that each such Option shall, immediately prior to
the effective date of the Change in Control, become exercisable for all the
Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. Each such Option shall remain exercisable for such fully vested
Shares until the expiration or sooner termination of the Option term in
connection with a Change in Control.


(c)           Each Option which is
assumed in connection with a Fundamental Transaction shall be appropriately
adjusted, immediately after such Fundamental Transaction, to apply to the
number and class of securities which would have been issuable to the Awardee in
consummation of such Fundamental Transaction had the Option been exercised
immediately prior to such Fundamental Transaction. Appropriate adjustments
shall also be made to the Option Price payable per share under each outstanding
Option, provided the aggregate Option Price payable for such securities shall
remain the same.


(d)           The grant of Options
pursuant to Section 11 shall in no way affect the right of the Company to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.


(e)           The remaining terms
of each Option granted pursuant to Section 11 shall, as applicable, be the same
as terms in effect for Awards granted under this Plan.  Notwithstanding the foregoing, the provisions
of Section 9.4 and Section 10 shall not apply to Options granted pursuant to
Section 11.



 21
 









11.3         Limited Transferability of Options.  Each Option granted pursuant to Section 11
may be assigned in whole or in part during the Awardee’s lifetime to one or
more members of the Awardee’s family or to a trust established exclusively for
one or more such family members or to an entity in which the Awardee is
majority owner or to the Awardee’s former spouse, to the extent such assignment
is in connection with the Awardee’s estate or financial plan or pursuant to a
Domestic Relations Order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the Option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the Option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Administrator may
deem appropriate. The Awardee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding Options under Section
11, and those Options shall, in accordance with such designation, automatically
be transferred to such beneficiary or beneficiaries upon the Awardee’s death
while holding those Options. Such beneficiary or beneficiaries shall take the
transferred Options subject to all the terms and conditions of the applicable
Award Agreement evidencing each such transferred Option, including without
limitation, the limited time period during which the Option may be exercised
following the Awardee’s death.


12.                                 Withholding
and Tax Reporting


12.1         Tax Withholding Alternatives.


(a)           General.  Whenever Award Shares are issued or become
free of restrictions, the Company may require the Awardee to remit to the
Company an amount sufficient to satisfy any applicable tax withholding
requirement, whether the related tax is imposed on the Awardee or the
Company.  The Company shall have no
obligation to deliver Award Shares or release Award Shares from an escrow or
permit a transfer of Award Shares until the Awardee has satisfied those tax
withholding obligations.


(b)           Method of Payment.  The Awardee shall pay any required
withholding using the forms of consideration described in Section 6.4(b),
except that, in the discretion of the Administrator, the Company may also
permit the Awardee to use any of the forms of payment described in Section
6.4(c).  The Administrator, in its sole
discretion, may also permit Award Shares to be withheld to pay required
withholding.  If the Administrator
permits Award Shares to be withheld, the Fair Market Value of the Award Shares
withheld, as determined as of the date of withholding, shall not exceed the
amount determined by the applicable minimum statutory withholding rates.


12.2         Reporting of Dispositions.  Any holder of Option
Shares acquired under an Incentive Stock Option shall promptly notify the
Administrator, following such procedures as the Administrator may require, of
the sale or other disposition of any of those Option Shares if the disposition
occurs during:  (a) the longer of
two years after the Grant Date of the Incentive Stock Option and one year after
the date the Incentive Stock Option was exercised, or (b) such other
period as the Administrator has established.



 22
 









13.                                 Compliance
with Law


The grant of Awards and the issuance and subsequent
transfer of Award Shares shall be subject to compliance with all Applicable
Law, including all applicable securities laws. 
Awards may not be exercised, and Award Shares may not be transferred, in
violation of Applicable Law.  Thus, for
example, Awards may not be exercised unless: 
(a) a registration statement under the Securities Act is then in
effect with respect to the related Award Shares, or (b) in the opinion of
legal counsel to the Company, those Award Shares may be issued in accordance
with an applicable exemption from the registration requirements of the
Securities Act and any other applicable securities laws.  The failure or inability of the Company to
obtain from any regulatory body the authority considered by the Company’s legal
counsel to be necessary or useful for the lawful issuance of any Award Shares
or their subsequent transfer shall relieve the Company of any liability for
failing to issue those Award Shares or permitting their transfer.  As a condition to the exercise of any Award
or the transfer of any Award Shares, the Company may require the Awardee to
satisfy any requirements or qualifications that may be necessary or appropriate
to comply with or evidence compliance with any Applicable Law.


14.                                 Amendment
or Termination of this Plan or Outstanding Awards


14.1         Amendment and Termination.  Subject to Section 14.2 and 14.3, the Board
may at any time amend, suspend, or terminate this Plan.


14.2         Shareholder Approval.  The Company shall obtain the approval of the
Company’s shareholders for any amendment to this Plan if shareholder approval
is necessary or desirable to comply with any Applicable Law or with the
requirements applicable to the grant of Awards intended to be Incentive Stock
Options.  The Board may also, but need
not, require that the Company’s shareholders approve any other amendments to
this Plan.


14.3         Effect.  No amendment, suspension, or
termination of this Plan, and no modification of any Award even in the absence
of an amendment, suspension, or termination of this Plan, shall impair any
existing contractual rights of any Awardee unless the affected Awardee consents
to the amendment, suspension, termination, or modification.  However, no such consent shall be required if
the Board determines, in its sole and absolute discretion, that the amendment,
suspension, termination, or modification: 
(a) is required or advisable in order for the Company, this Plan or the
Award to satisfy Applicable Law, to meet the requirements of any accounting
standard or to avoid any adverse accounting treatment, or (b) in connection
with any transaction or event described in Section 10, is in the best interests
of the Company or its shareholders.  The
Board may, but need not, take the tax or accounting consequences to affected
Awardees into consideration in acting under the preceding sentence.  Those decisions shall be final, binding and
conclusive.  Termination of this Plan
shall not affect the Administrator’s ability to exercise the powers granted to
it under this Plan with respect to (i) Awards granted before the termination of
this Plan or (ii) Award Shares issued under such Awards even if those Award
Shares are issued after the termination of this Plan.



 23
 









15.                                 Reserved
Rights


15.1         Nonexclusivity of this Plan.  This
Plan shall not limit the power of the Company or any Affiliate to adopt other
incentive arrangements including, for example, the grant or issuance of stock
options, stock, or other equity-based rights under other plans.


15.2         Unfunded Plan.  This Plan shall be
unfunded.  Although bookkeeping accounts
may be established with respect to Awardees, any such accounts will be used
merely as a convenience.  The Company
shall not be required to segregate any assets on account of this Plan, the
grant of Awards, or the issuance of Award Shares.  The Company and the Administrator shall not
be deemed to be a trustee of stock or cash to be awarded under this Plan.  Any obligations of the Company to any Awardee
shall be based solely upon contracts entered into under this Plan, such as
Award Agreements.  No such obligations
shall be deemed to be secured by any pledge or other encumbrance on any assets
of the Company.  Neither the Company nor
the Administrator shall be required to give any security or bond for the
performance of any such obligations.


16.                                 Special
Arrangements Regarding Award Shares


16.1         Escrow of Stock Certificates.  To enforce any restrictions on Award Shares,
the Administrator may require their holder to deposit the certificates
representing Award Shares, with stock powers or other transfer instruments
approved by the Administrator endorsed in blank, with the Company or an agent
of the Company to hold in escrow until the restrictions have lapsed or
terminated.  The Administrator may also
cause a legend or legends referencing the restrictions to be placed on the
certificates.  Any Awardee who delivers a
promissory note as partial or full consideration for the purchase of Award
Shares will be required to pledge and deposit with the Company some or all of
the Award Shares as collateral to secure the payment of the note.  However, the Administrator may require or
accept other or additional forms of collateral to secure the note and, in any
event, the Company will have full recourse against the maker of the note,
notwithstanding any pledge or other collateral.



 24
 









16.2         Repurchase Rights.


(a)           General.  If
an Option is subject to Reverse Vesting or a Stock Award is subject to vesting
conditions, the Company shall have the right, during the seven months after the
Awardee’s Termination, to repurchase any or all of the Award Shares that were
unvested as of the date of that Termination. 
If the Award Shares were purchased with a promissory note, the
repurchase price shall be the lower of: 
(a) the Purchase Price for the Award Shares (minus the amount of any
cash dividends paid or payable with respect to the Award Shares for which the
record date precedes the repurchase) and (b) the Fair Market Value at the date
of Termination.  In all other cases, the
repurchase price shall be determined by the Administrator in accordance with
this Section 16.2 which shall be either (i) the Purchase Price for the
Award Shares (minus the amount of any cash dividends paid or payable with
respect to the Award Shares for which the record date precedes the repurchase)
or (ii) the lower of (A) the Option Price or Purchase Price for the
Award Shares or (B) the Fair Market Value of those Award Shares as of the
date of the Termination.  The repurchase
price shall be paid in cash or if the Award Shares were purchased in whole or
in part with a promissory note, cancellation in whole or in part of
indebtedness under that note, or a combination of those means.  The Company may assign this right of
repurchase.


(b)           Procedure.  The Company or its assignee may choose to
give the Awardee a written notice of exercise of its repurchase rights under
this Section 16.2.  However, the Company’s
failure to give such a notice shall not affect its rights to repurchase Award
Shares.  The Company must, however,
tender the repurchase price during the period specified in this Section 16.2
for exercising its repurchase rights in order to exercise such rights.


Market Standoff.  If requested by the Company or a
representative of its underwriters in connection with a registration of any
securities of the Company under the Securities Act, Awardees or certain
Awardees shall be prohibited from selling some or all of their Award Shares
during a period not to exceed 180 days after the effective date of the Company’s
registration statement.  This restriction
shall not apply to any registration statement on Form S-8, Form S-4 or an
equivalent registration statement.


17.                                 Beneficiaries


An Awardee may file a written designation of one or
more beneficiaries who are to receive the Awardee’s rights under the Awardee’s
Awards after the Awardee’s death.  Such
designation shall be accompanied by a signed acknowledgment from the Awardee’s
spouse, if any, consenting to such designation. 
An Awardee may change such a designation at any time by written
notice.  If an Awardee designates a
beneficiary, the beneficiary may exercise the Awardee’s Awards after the
Awardee’s death.  If an Awardee dies when
the Awardee has no living beneficiary designated under this Plan, the Company
shall allow the executor or administrator of the Awardee’s estate to exercise
the Award or, if there is none, the person entitled to exercise the Option
under the Awardee’s will or the laws of descent and distribution.  In any case, no Award may be exercised after
its Expiration Date.



 25
 









18.                                 Miscellaneous


18.1         Governing Law.  This Plan, the Award
Agreements and all other agreements entered into under this Plan, and all
actions taken under this Plan or in connection with Awards or Award Shares,
shall be governed by the laws of the State of California.


18.2         Determination of Value.  Fair Market Value shall be determined as
follows:


(a)           Listed Stock.  If the Shares are traded on any established
stock exchange or quoted on a national market system, Fair Market Value shall
be the closing sales price for the Shares as quoted on that stock exchange or
system for the date the value is to be determined (the “Value Date”) as reported by such stock exchange or
national market system, or, if not reported by such stock exchange or national
market system, as reported in The  Wall Street Journal or a similar publication.  If no sales are reported as having occurred
on the Value Date, Fair Market Value shall be that closing sales price for the
last preceding trading day on which sales of Shares are reported as having
occurred.  If no sales are reported as
having occurred during the five trading days before the Value Date, Fair Market
Value shall be the closing bid for Shares on the Value Date.  If Shares are listed on multiple exchanges or
systems, Fair Market Value shall be based on sales or bid prices on the primary
exchange or system on which Shares are traded or quoted.


(b)           Stock Quoted by Securities
Dealer.  If Shares are
regularly quoted by a recognized securities dealer but selling prices are not
reported on any established stock exchange or quoted on a national market system,
Fair Market Value shall be the mean between the high bid and low asked prices
on the Value Date.  If no prices are
quoted for the Value Date, Fair Market Value shall be the mean between the high
bid and low asked prices on the last preceding trading day on which any bid and
asked prices were quoted.


(c)           No Established Market.  If Shares are not traded on any established
stock exchange or quoted on a national market system and are not quoted by a
recognized securities dealer, the Board or Committee will determine Fair Market
Value in good faith.  The Board or
Committee will consider the following factors, and any others it considers
significant, in determining Fair Market Value: (i) the price at which
other securities of the Company have been issued to purchasers other than
Employees, Directors, or Consultants, (ii) the Company’s shareholder’s
equity, prospective earning power, dividend-paying capacity, and non-operating
assets, if any, and (iii) any other relevant factors, including the
economic outlook for the Company and the Company’s industry, the Company’s
position in that industry, the Company’s goodwill and other intellectual
property, and the values of securities of other businesses in the same
industry.


18.3         Reservation of Shares.  During the term of this
Plan, the Company shall at all times reserve and keep available such number of
Shares as are still issuable under this Plan.



 26
 









18.4         Electronic Communications.  Any Award Agreement,
notice of exercise of an Award, or other document required or permitted by this
Plan may be delivered in writing or, to the extent determined by the
Administrator, electronically. 
Signatures may also be electronic if permitted by the Administrator.


18.5         Notices.  Unless the Administrator specifies
otherwise, any notice to the Company under any Award Agreement or with respect
to any Awards or Award Shares shall be in writing (or, if so authorized by
Section 18.4, communicated electronically), shall be addressed to the
Company, and shall only be effective when received by the Company.


Adopted by the Board on:  March 19, 2004


Approved by the shareholders on:  May 27, 2004


Effective date of this Plan:  May 27, 2004


Amended by the Board
on:  March 23, 2006



 27