Exhibit 10.2


 


2004 EQUITY INCENTIVE PLAN


OF


DEPOMED, INC.


 


(As
Amended through May 23, 2008)


 


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.


 


(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.


 


(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.


 


(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.


 


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
6,750,000.  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.


 


(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;


 


(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).


 

















 


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.


 


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.


 


(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.


 


(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).


 

















 


(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.


 


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.


 


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.


 

















 


(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.


 


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.


 

















 


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.


 


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”).


 


(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.


 


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.


 


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.


 


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.


 


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.


 


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.


 


16.3        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.


 


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.


 


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, May 31, 2007 and May 23,
2008


Effective date of this Plan:  May 27, 2004


Amended by the Board on:  March 23, 2006, March 22, 2007 and March 7,
2008