exv4w3



 





Exhibit 4.3





LOGICAL APPS, INC.




2003 Equity Incentive Plan




Adopted March 13, 2003

Approved By Shareholders March 24, 2003




1. Purposes.




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



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



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



2. Definitions.




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



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



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



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



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



     (f) “Company” means Logical Apps, Inc., a California corporation.



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



     (h) “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Participant’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the Participant’s Continuous
Service. For example, a change in status from an Employee of the Company to a Consultant of an
Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the
chief executive officer of the Company, in that party’s sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of absence approved by
that party, including sick leave, military leave or any other personal leave.



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



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



     (k) “Disability” means (i) before the Listing Date, the inability of a person, in the opinion
of a qualified physician acceptable to the Company, to perform the major duties of that person’s
position with the Company or an Affiliate of the Company because of the sickness or injury of the
person and (ii) after the Listing Date, the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code.



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



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



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



          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading
in the Common Stock) on the last market trading day prior to the day





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of determination, as reported in The Wall Street Journal or such other source as the Board deems
reliable.




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




          (iii) Prior to the Listing Date, the value of the Common Stock shall be determined in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of Regulations.




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



     (p) “Listing Date” means the first date upon which any security of the Company is listed (or
approved for listing) upon notice of issuance on any securities exchange or designated (or
approved for designation) upon notice of issuance as a national market security on an interdealer
quotation system if such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate Securities Law of
1968.



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



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



     (s) “Officer” means (i) before the Listing Date, any person designated by the Company as an
officer and (ii) on and after the Listing Date, a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.



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



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



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



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



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



     (y) “Plan” means this Logical Apps, Inc. 2003 Equity Incentive Plan.



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



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



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



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



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



3. Administration.




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



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



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





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permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common
Stock with respect to which a Stock Award shall be granted to each such person.




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




          (iii) To amend the Plan or a Stock Award as provided in Section 12.




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




     (c) Delegation to Committee.



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




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




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



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4. Shares Subject to the Plan.




     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in Common Stock, the Common Stock that may be issued pursuant to Stock Awards shall not
exceed in the aggregate five hundred thousand (500,000) shares of Common Stock.



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



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



     (d) Share Reserve Limitation. Prior to the Listing Date and to the extent then required by
Section 260.140.45 of Title 10 of the California Code of Regulations, the total number of shares of
Common Stock issuable upon exercise of all outstanding Options and the total number of shares of
Common Stock provided for under any stock bonus or similar plan of the Company shall not exceed the
applicable percentage as calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on the shares of Common
Stock of the Company that are outstanding at the time the calculation is made.1



5. Eligibility.




     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to Employees,
Directors and Consultants.



     (b) Ten Percent Shareholders.



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




          (ii) Prior to the Listing Date, a Ten Percent Shareholder shall not be granted a Nonstatutory
Stock Option unless the exercise price of such Option is at least (i) one hundred ten






 




			
	1	 	Section 260.140.45 generally provides that the total number of shares issuable upon
exercise of all outstanding options (exclusive of certain rights) and the total number of shares
called for under any stock bonus or similar plan shall not exceed a number of shares which is equal
to 30% of the then outstanding shares of the issuer (convertible preferred or convertible senior
common shares counted on an as if converted basis), exclusive of shares subject to promotional
waivers under Section 260.141, unless a percentage higher than 30% is approved by at least
two-thirds of the outstanding shares entitled to vote.






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percent (110%) of the Fair Market Value of the Common Stock at the date of grant or (ii) such lower
percentage of the Fair Market Value of the Common Stock at the date of grant as is permitted by
Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of
the Option.




          (iii) Prior to the Listing Date, a Ten Percent Shareholder shall not be granted a restricted
stock award unless the purchase price of the restricted stock is at least (i) one hundred percent
(100%) of the Fair Market Value of the Common Stock at the date of grant or (ii) such lower
percentage of the Fair Market Value of the Common Stock at the date of grant as is permitted by
Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of
the restricted stock award.




     (c) Section 162(m) Limitation. Subject to the provisions of Section 11 relating to
adjustments upon changes in the shares of Common Stock, no Employee shall be eligible to be granted
Options covering more than two hundred fifty thousand (250,000) shares of Common Stock during any
calendar year. This subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of shares of Common Stock
reserved for issuance under the Plan in accordance with Section 4); (2) the issuance of all of the
shares of Common Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or (4)
the first meeting of shareholders at which Directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which occurred the first registration of
an equity security under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.



     (d) Consultants.



          (i) Prior to the Listing Date, a Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, either the offer or the sale of the Company’s securities to such
Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”) because of the nature
of the services that the Consultant is providing to the Company, or because the Consultant is not
a natural person, or as otherwise provided by Rule 701, unless the Company determines that such
grant need not comply with the requirements of Rule 701 and will satisfy another exemption under
the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.




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




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order to comply with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.




          (iii) Rule 701 and Form S-8 generally are available to consultants and advisors only if (i)
they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its
majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the
services are not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for the issuer’s
securities.




6. Option Provisions.




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



     (a) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent Shareholders,
no Option granted prior to the Listing Date shall be exercisable after the expiration of ten (10)
years from the date it was granted, and no Incentive Stock Option granted on or after the Listing
Date shall be exercisable after the expiration of ten (10) years from the date it was granted.



     (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of subsection
5(b) regarding Ten Percent Shareholders, the exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.



     (c) Exercise Price of a Nonstatutory Stock Option. Subject to the provisions of subsection
5(b) regarding Ten Percent Shareholders, the exercise price of each Nonstatutory Stock Option
granted prior to the Listing Date shall be not less than eighty-five percent (85%) of the Fair
Market Value of the Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.



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     (d) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the
time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the
Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company
of other Common Stock, (2) according to a deferred payment or other similar arrangement with the
Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board.
Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the
Company that have been held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). At any time that the
Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.



     In the case of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the market rate of interest necessary to avoid a charge to
earnings for financial accounting purposes.



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



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



     (g) Vesting Generally. The total number of shares of Common Stock subject to an Option may,
but need not, vest and therefore become exercisable in periodic installments that may, but need
not, be equal. The Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may



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vary. The provisions of this subsection 6(g) are subject to any Option provisions governing the
minimum number of shares of Common Stock as to which an Option may be exercised.




     (h) Minimum Vesting Prior to the Listing Date. Notwithstanding the foregoing subsection 6(g),
to the extent that the following restrictions on vesting are required by Section 260.140.4 l(f) of
Title 10 of the California Code of Regulations at the time of the grant of the Option, then:



          (i) Options granted prior to the Listing Date to an Employee who is not an Officer, Director
or Consultant shall provide for vesting of the total number of shares of Common Stock at a rate of
at least twenty percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment; and




          (ii) Options granted prior to the Listing Date to Officers, Directors or Consultants may be
made fully exercisable, subject to reasonable conditions such as continued employment, at any time
or during any period established by the Company.




     (i) Termination of Continuous Service. In the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of
the date of termination) but only within such period of time ending on the earlier of (i) the date
one (1) month following the termination of the Optionholder’s Continuous Service (or such longer
or shorter period specified in the Option Agreement, which period shall not be less than thirty
(30) days for Options granted prior to the Listing Date unless such termination is for cause), or
(ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate.



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



     (k) Disability of Optionholder. In the event that an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i) the date twelve
(12) months following such termination (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than six (6) months for Options granted prior to the
Listing Date) or (ii) the expiration of the term of the Option as set forth in the Option



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Agreement. If, after termination, the Optionholder does not exercise his or her Option within the
time specified herein, the Option shall terminate.




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



     (m) Early Exercise. The Option may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to
exercise the Option as to any part or all of the shares of Common Stock subject to the Option
prior to the full vesting of the Option. Subject to the “Repurchase Limitation” in subsection
10(h), any unvested shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be appropriate.



     (n) Right of Repurchase. Subject to the “Repurchase Limitation” in subsection 10(h), the
Option may, but need not, include a provision whereby the Company may elect, prior to the Listing
Date, to repurchase all or any part of the vested shares of Common Stock acquired by the
Optionholder pursuant to the exercise of the Option.



     (o) Right of First Refusal. The Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to exercise a right of first refusal following
receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of
Common Stock received upon the exercise of the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply with any applicable provisions
of the Bylaws of the Company.



7. Provisions of Stock Awards other than Options.




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



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




          (ii) Vesting. Subject to the “Repurchase Limitation” in subsection 10(h), shares of Common
Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be determined by the
Board.




          (iii) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation”
in subsection 10(h), in the event a Participant’s Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.




          (iv) Transferability. For a stock bonus award made before the Listing Date, rights to acquire
shares of Common Stock under the stock bonus agreement shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a stock bonus award made on or after the Listing Date,
rights to acquire shares of Common Stock under the stock bonus agreement shall be transferable by
the Participant only upon such terms and conditions as are set forth in the stock bonus agreement,
as the Board shall determine in its discretion, so long as Common Stock awarded under the stock
bonus agreement remains subject to the terms of the stock bonus agreement.




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



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




          (ii) Consideration. The purchase price of Common Stock acquired pursuant to the restricted
stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the
discretion of the Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be




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acceptable to the Board in its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.




          (iii) Vesting. Subject to the “Repurchase Limitation” in subsection 10(h), shares of Common
Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a
share repurchase option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.




          (iv) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation”
in subsection 10(h), in the event a Participant’s Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the restricted stock
purchase agreement.




          (v) Transferability. For a restricted stock award made before the Listing Date, rights to
acquire shares of Common Stock under the restricted stock purchase agreement shall not be
transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Participant only by the Participant. For a restricted stock award made
on or after the Listing Date, rights to acquire shares of Common Stock under the restricted stock
purchase agreement shall be transferable by the Participant only upon such terms and conditions as
are set forth in the restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.




8. Covenants of the Company.




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



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



9. Use of Proceeds from Stock.




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



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10. Miscellaneous.




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



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



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



     (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.



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



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issued under the Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting the transfer of the
Common Stock.




     (f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Participant may satisfy any federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under a Stock Award by any of the following means (in
addition to the Company’s right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to
the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.



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



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



          (i) Fair Market Value. If the repurchase option gives the Company the right to repurchase the
shares of Common Stock upon termination of employment at not less than the Fair Market Value of
the shares of Common Stock to be purchased on the date of termination of Continuous Service, then
(i) the right to repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of Stock Awards after such
date of termination, within ninety (90) days after the date of the exercise) or such longer period
as may be agreed to by the Company and the Participant (for example, for purposes of satisfying
the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”) and
(ii) the right terminates when the shares of Common Stock become publicly traded.




          (ii) Original Purchase Price. If the repurchase option gives the Company the right to
repurchase the shares of Common Stock upon termination of Continuous Service at the original
purchase price, then (i) the right to repurchase at the original purchase price shall lapse at the
rate of at least twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock Award was
exercised or became exercisable) and (ii) the right to repurchase shall be exercised for cash or




15









 




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




11. Adjustments upon Chances in Stock.




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



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



     (c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of (i) a
sale, lease or other disposition of all or substantially all of the assets of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse
merger in which the Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise (individually, a “Corporate Transaction”), then any
surviving corporation or acquiring corporation shall assume any Stock Awards outstanding under the
Plan or shall substitute similar stock awards (including an award to acquire the same consideration
paid to the shareholders in the Corporate Transaction) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with respect to Stock
Awards held by Participants whose Continuous Service has not terminated, the vesting of such Stock
Awards (and, if applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to the Corporate Transaction. With respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall terminate if not exercised (if applicable) prior to the Corporate
Transaction.



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12. Amendment of the Plan and Stock Awards.




     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no
amendment shall be effective unless approved by the shareholders of the Company to the extent
shareholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or any Nasdaq or securities exchange listing requirements.



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



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



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



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



13. Termination or Suspension of the Plan.




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



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



14. Effective Date of Plan.




     The Plan shall become effective as determined by the Board, but no Stock Award shall be
exercised (or, in the case of a stock bonus, shall be granted) unless and until the Plan has been



17









 




approved by the shareholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.




15. Choice of Law.




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



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