exv10w13



 





Exhibit 10.13




CATALYTICA ENERGY SYSTEMS, INC.



(formerly Catalytica Combustion Systems, Inc.)




1995 STOCK PLAN

(As amended and restated effective August 31, 2005)




     1. Purposes of the Plan. The purposes of this 1995 Stock Plan are:




	 	•	 	to attract and retain the best available personnel for positions of
substantial responsibility,
	 
	 	•	 	to provide additional incentive to Employees, Directors and Consultants, and
	 
	 	•	 	to promote the success of the Company’s business.





          The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock
Purchase Rights and Restricted Stock Units.




     2. Definitions. As used herein, the following definitions shall apply:



          (a) “Administrator” means the Board or any of its Committees as shall be administering
the Plan, in accordance with Section 4 of the Plan.




          (b) “Applicable Laws” means the requirements relating to the administration of stock
plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws
of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.




          (c) “Award” means, individually or collectively, a grant under the Plan of Options,
Stock Purchase Rights, or Restricted Stock Units.




          (d) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The Award Agreement is
subject to the terms and conditions of the Plan.




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




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




          (g) “Committee” means a committee of Directors appointed by the Board in accordance
with Section 4 of the Plan.




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




 









 








          (i) “Company” means Catalytica Energy Systems, Inc., a Delaware corporation.




          (j) “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.




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




          (l) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code.




          (m) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of
a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director’s fee by the Company shall be sufficient to constitute
“employment” by the Company.




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




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




                         (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;



                         (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or



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



          (p) “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.




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




          (r) “Notice of Grant” means a written or electronic notice evidencing certain terms
and conditions of an individual Award grant. The Notice of Grant is part of the Award Agreement.




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




          (t) “Option” means a stock option granted pursuant to the Plan.




          (u) “Option Exchange Program” means a program whereby outstanding Options are
surrendered in exchange for Options with a lower exercise price.




          (v) “Optioned Stock” means the Common Stock subject to an Option.




          (w) “Optionee” means the holder of an outstanding Option granted under the Plan.




          (x) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.




          (y) “Participant” means the holder of an outstanding Award granted under the Plan.




          (z) “Plan” means this 1995 Stock Plan.




          (aa) “Restricted Stock” means shares of Common Stock acquired pursuant to a grant of
Stock Purchase Rights under Section 11 of the Plan.




          (bb) “Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Participant evidencing the terms and restrictions applying to stock purchased under
a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and
conditions of the Plan and the Notice of Grant.




          (cc) “Restricted Stock Unit” means an Award granted pursuant to Section 12 of the
Plan.




          (dd) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.




          (ee) “Section 16(b) “ means Section 16(b) of the Exchange Act.




          (ff) “Service Provider” means an Employee, Director or Consultant.




          (gg) “Share” means a share of the Common Stock, as adjusted in accordance with Section
14 of the Plan.




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          (hh) “Stock Purchase Right” means the right to purchase Common Stock pursuant to
Section 11 of the Plan, as evidenced by a Notice of Grant.




          (ii) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.




     3. Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan,
the maximum aggregate number of Shares that may be optioned and sold under the Plan is 5,000,000
Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.



          If an Award expires or becomes unexercisable without having been exercised in full, or is
surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under the Plan,
whether upon exercise of an Option or Stock Purchase Right or upon vesting of Restricted Stock or a
Restricted Stock Unit, shall not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for future grant under
the Plan.




     4. Administration of the Plan.



          (a) Procedure.




                         (i) Multiple Administrative Bodies. Different Committees with respect to different
groups of Service Providers may administer the Plan.



                         (ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code.



                         (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.



                         (iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws.



          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:




                         (i) to determine the Fair Market Value;



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                         (ii) to select the Service Providers to whom Awards may be granted hereunder;



                         (iii) to determine the number of shares of Common Stock to be covered by each Award granted
hereunder;



                         (iv) to approve forms of agreement for use under the Plan;



                         (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any
Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise
price, the time or times when Options or Stock Purchase Rights may be exercised or Restricted Stock
Units vest (which may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Award or the shares of
Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;



                         (vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such Award shall have
declined since the date the Award was granted;



                         (vii) to institute an Option Exchange Program;



                         (viii) to construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan;



                         (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;



                         (x) to modify or amend each Award (subject to Section 17(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of Options longer than
is otherwise provided for in the Plan;



                         (xi) to allow Participants to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise of an Award that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of
the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is
to be determined. All elections by a Participant to have Shares withheld for this purpose shall be
made in such form and under such conditions as the Administrator may deem necessary or advisable;



                         (xii) to authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Award previously granted by the Administrator;



                         (xiii) to make all other determinations deemed necessary or advisable for administering the
Plan.



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          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Participants and any other holders of Awards.




     5. Eligibility. Nonstatutory Stock Options, Stock Purchase Rights and Restricted
Stock Units may be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.



     6. Limitations.



          (a) Each Option shall be designated in the Award Agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is granted.




          (b) Neither the Plan nor any Award shall confer upon a Participant any right with respect to
continuing the Participant’s relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause.




          (c) The following limitations shall apply to grants of Options:




                         (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to
purchase more than 500,000 Shares.



                         (ii) In connection with his or her initial service, a Service Provider may be granted Options
to purchase up to an additional 500,000 Shares, which shall not count against the limit set forth
in subsection (i) above.



          (d) The foregoing limitations shall be adjusted proportionately in connection with any change
in the Company’s capitalization as described in Section 14.




          (e) If an Option is cancelled in the same fiscal year of the Company in which it was granted
(other than in connection with a transaction described in Section 14), the cancelled Option will be
counted against the limits set forth in subsections (c)(i), (c)(ii), (d)(i) and (d)(ii) above. For
this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.




     7. Term of Plan. Subject to Section 21 of the Plan, the Plan shall become effective
upon its adoption by the Board. Unless terminated earlier under Section 17, it shall continue in
effect for a term of ten (10) years from the later of (i) the effective date of the Plan, or (ii)
the date of the most recent Board approval of an increase in the number of shares reserved for
issuance under the Plan.



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     8. Term of Options. The term of each Option shall be stated in the Award Agreement.
In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant
or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock
Option shall be five (5) years from the date of grant or such shorter term as may be provided in
the Award Agreement.



     9. Option Exercise Price and Consideration.



          (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be determined by the Administrator, subject to the following:




                         (i) In the case of an Incentive Stock Option



                                   (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.



                                   (B) granted to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.



                         (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.



                         (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of
less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or
other corporate transaction.



          (b) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and shall determine any
conditions that must be satisfied before the Option may be exercised.




          (c) Form of Consideration. The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration may consist entirely of:




                         (i) cash;



                         (ii) check;



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                         (iii) promissory note;



                         (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have
been owned by the Optionee 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 aggregate exercise price of the Shares as to
which said Option shall be exercised;



                         (v) consideration received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;



                         (vi) a reduction in the amount of any Company liability to the Optionee, including any
liability attributable to the Optionee’s participation in any Company-sponsored deferred
compensation program or arrangement;



                         (vii) any combination of the foregoing methods of payment; or



                         (viii) such other consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.



     10. Exercise of Option.



          (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.




                         An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option shall
be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee
and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.



                         Exercising an Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.



          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a
Service Provider, other than upon the Optionee’s death or Disability, the Optionee may



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exercise his or her Option within such period of time as is specified in the Award Agreement
to the extent that the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, the Option shall remain exercisable for three (3) months
following the Optionee’s termination. If, on the date of termination, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.




          (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Award Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in
the Award Agreement). In the absence of a specified time in the Award Agreement, the Option shall
remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does
not exercise his or her Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.




          (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may
be exercised within such period of time as is specified in the Award Agreement (but in no event
later than the expiration of the term of such Option as set forth in the Notice of Grant), by the
Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of death. In the absence
of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee’s termination. If, at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor or administrator of
the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the
Optionee’s will or the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.




     11. Stock Purchase Rights.



          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree
must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.




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          (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted
Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary
or involuntary termination of the purchaser’s service with the Company for any reason (including
death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock
Purchase Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator.




          (c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.




          (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder
when his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment will be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 14 of the
Plan.




     12. Restricted Stock Units.



          (a) Grant. Restricted Stock Units may be granted at any time and from time to time as
determined by the Administrator. The Administrator shall have complete discretion to determine
(i) the number of Shares subject to a Restricted Stock Unit award granted to any Participant, and
(ii) the conditions that must be satisfied, which typically will be based principally or solely on
continued service but may include a performance-based component, upon which is conditioned the
grant or vesting of Restricted Stock Units. Restricted Stock Units shall be granted in the form of
units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of
determining the number of Shares subject to an Award. Until the Shares are issued, no right to
vote or receive dividends or any other rights as a stockholder shall exist with respect to the
units to acquire Shares.




          (b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in
its discretion, which, depending on the extent to which the criteria are met, will determine the
number of Shares that will be paid out to the Participant. The Administrator may set vesting
criteria based upon the achievement of Company-wide, business unit, or individual goals (including,
but not limited to, continued employment), or any other basis determined by the Administrator in
its discretion.




          (c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant shall be entitled to receive a payout as specified in the Award Agreement.
Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.




          (d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be
made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator
shall pay earned Restricted Stock Units in Shares.




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          (e) Cancellation. On the date set forth in the Award Agreement, all unearned
Restricted Stock Units shall be forfeited to the Company.




     13. Non-Transferability of Awards. Unless determined otherwise by the Administrator,
an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be exercised, during
the lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as the Administrator
deems appropriate.



     14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.



          (a) Changes in Capitalization. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding Award, and the number
of shares of Common Stock which have been authorized for issuance under the Plan but as to which no
Awards have yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Award, as well as the price per share of Common Stock covered by each such
outstanding Award, shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company shall not be deemed
to have been “effected without receipt of consideration.” Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common Stock subject to an
Award.




          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. The Administrator in its discretion may
provide for a Participant to have the right to exercise his or her Award until ten (10) days prior
to such transaction as to all of the Shares covered thereby, including Shares as to which the Award
would not otherwise be exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an Award shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed action.




          (c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the Company:




                         (i) Unless otherwise provided in the Notice of Grant and Award Agreement, each Award may be
assumed or an equivalent option or right substituted by such successor corporation (including as a
“successor” any purchaser of substantially all of the assets of the Company) or a parent or
subsidiary of such successor corporation. In the event that the



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successor corporation refuses to assume or substitute for the Award, the Participant shall
fully vest in and have the right to exercise the Award as to all of the Shares, including Shares as
to which it would not otherwise be vested or exercisable. In such event the Administrator shall
notify the Participant as soon as practicable prior to the effective date of such transaction that
the Award shall be fully exercisable for a period of ten (10) days from the date of such notice,
and the Award shall terminate upon the expiration of such period if the successor corporation does
not assume or substitute for such option or right. For the purposes of this paragraph, an Award
shall be considered assumed if, following the merger or sale of assets, the option or right confers
the right to purchase or receive, for each Share subject to the Award immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares). If such
consideration received in the merger is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Award, for each Share subject to the Award,
to be solely common stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger or sale of assets.



                         (ii) Any Shares subject to a repurchase option of the Company shall be exchanged for the
consideration (whether stock, cash, or other securities or property) received in the merger or
asset sale by the holders of Common Stock for each Share held on the effective date of the
transaction, as described in the preceding paragraph. If in such exchange the Participant receives
shares of stock of the successor corporation or a parent or subsidiary of such successor
corporation, and if the successor corporation has agreed to assume or substitute for Awards as
provided in the preceding paragraph, such exchanged shares shall continue to be subject to a
repurchase option as provided in the Participant’s restricted stock purchase agreement. If, as
provided in the preceding paragraph, the Participants shall have the right to exercise Awards as to
all of the Shares covered thereby, all of the Shares that are subject to a repurchase option of the
Company will automatically be released from such repurchase option.



     15. Change of Control.



          (a) In the event of a Change of Control (as defined below), a Participant shall (i) have the
right to exercise each Option and Stock Purchase Right as to all or a portion of the Shares covered
thereby, including Shares as to which the Award would not otherwise be exercisable, and (ii) fully
vest in any Restricted Stock Unit, in either case on the date six (6) months after such Change of
Control or earlier if a Participant’s status as a Service Provider with the successor corporation
is terminated by the successor corporation as a result of an Involuntary Termination (as defined
below). Thereafter, the Option or Stock Purchase Right shall remain exercisable in accordance with
terms of the Plan.




          (b) For purposes of this Section 15, the following definitions shall apply:




                         (i) a “Change of Control” means the happening of any of the following events:



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                                   (A) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent (50%) or more of
the total voting power represented by the Company’s then outstanding voting securities; or



                                   (B) A change in the composition of the Board occurring within a one-year period, as a result
of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors”
shall mean directors who either (i) are directors of the Company as of the date hereof, or (ii) are
elected, or nominated for election, to the Board with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company); or



                                   (C) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than fifty percent (50%) of
the total voting power represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or



                                   (D) the consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets.



                         (ii) “Involuntary Termination” shall mean any of the following events: (A) without the
Participant’s express written consent, a significant reduction of the Participant’s duties,
authority or responsibilities, relative to the Participant’s duties, authority or responsibilities
as in effect immediately prior to the Change of Control; (B) without the Participant’s express
written consent, a substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Participant immediately prior to
the Change of Control; (C) without the Participant’s express written consent, a reduction in the
base salary of the Participant as in effect immediately prior to the Change of Control; (D) without
the Participant’s express written consent, a material reduction in the kind or level of employee
benefits, including bonuses, to which the Participant was entitled immediately prior to the Change
of Control with the result that the Participant’s overall benefits package is significantly
reduced; (E) without the Participant’s express written consent, the relocation of the Participant
to a facility or a location more than thirty (30) miles from the Participant’s then present
location; (F) any purported termination of the Participant which is not effected for Disability or
for Cause (as defined below), or any purported termination for which the grounds relied upon are
not valid; or (G) or any act or set of facts or circumstances which would, under California case
law or statute, constitute a constructive termination of the Participant.



                         (iii) “Cause” shall mean (A) any act of personal dishonesty taken by the Participant in
connection with his responsibilities as a Service Provider and intended to result



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in substantial personal enrichment of the Participant, (B) Participant’s conviction of or plea
of nolo contendere to a felony, (C) a willful act by the Participant which constitutes gross
misconduct and which is injurious to the successor corporation, or (D) following delivery to the
Participant of a written demand for performance from the successor corporation which describes the
basis for the successor corporation’s belief that the Participant has not substantially performed
his duties, continued violations by the Participant of the Participant’s obligations to the
successor corporation which are demonstrably willful and deliberate on the Participant’s part.




     16. Date of Grant. The date of grant of an Award shall be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is determined by the Administrator. Notice of the determination shall be provided to each
Participant within a reasonable time after the date of such grant.



     17. Amendment and Termination of the Plan.



          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.




          (b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.




          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company. Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.




     18. Conditions Upon Issuance of Shares.



          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise or vesting
of an Award unless the exercise or vesting of such Award and the issuance and delivery of such
Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel
for the Company with respect to such compliance.




          (b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.




     19. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.



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     20. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.



     21. Shareholder Approval. The Plan shall be subject to approval by the shareholders
of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required under Applicable Laws.




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