exv10w1











EXHIBIT 10.1




THIRD AMENDED AND RESTATED 2004 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN




Blue Nile, Inc.




2004 Non-Employee Directors’ Stock Option Plan





Adopted by the Board of Directors: March 9, 2004


Approved by Stockholders: April 27, 2004

Amended and Restated: April 27, 2004

Amended and Restated: June 19, 20061

Amended and Restated: July 29, 2008




1. Purposes.




     (a) Eligible Option Recipients. The persons eligible to receive Options are the Non-Employee
Directors of the Company.



     (b) Available Options. The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the Common Stock
through the granting of Nonstatutory Stock Options.



     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of its
Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to
provide incentives for such persons to exert maximum efforts for the success of the Company and its
Affiliates.



2. Definitions.




     (a) “Accountant” means the independent public accountants of the Company.



     (b) “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.



     (c) “Amendment Effective Date” shall mean July 1, 2006.



     (d) “Annual Grant” means an Option granted annually to all Non-Employee Directors who meet the
specified criteria pursuant to 

Section 6(c).



     (e) “Annual Meeting” means the annual meeting of the stockholders of the Company.



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



     (g) “Capitalization Adjustment” has the meaning ascribed to that term in Section 11(a).



     (h) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:





 




			
	
1	 	All share numbers contained herein as of the
date of this amendment and restatement give effect to a 1 for 2.5 reverse split
of the Company’s Common Stock effective April 30, 2004.




 









 










          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because the
level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated
percentage threshold of the outstanding voting securities as a result of a repurchase or other
acquisition of voting securities by the Company reducing the number of shares outstanding, provided
that if a Change in Control would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share acquisition, the Subject
Person becomes the Owner of any additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then outstanding voting securities
Owned by the Subject Person over the designated percentage threshold, then a Change in Control
shall be deemed to occur;




          (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, outstanding voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such merger, consolidation or similar
transaction or more than fifty percent (50%) of the combined outstanding voting power of the parent
of the surviving Entity in such merger, consolidation or similar transaction;




          (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;




          (iv) there is consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the consolidated assets of the Company
and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of
the voting securities of which are Owned by stockholders of the Company in substantially the same
proportions as their Ownership of the Company immediately prior to such sale, lease, license or
other disposition; or




          (v) individuals who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of
the Board; (provided, however, that if the appointment or election (or nomination for election) of
any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a
member of the Incumbent Board).




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



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



     (k) “Company” means Blue Nile, Inc., a Delaware corporation.



     (l) “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) serving as a member of the Board of Directors of an Affiliate. However, the term “Consultant”
shall not include either Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a director’s fee by the
Company for their services as Directors.



     (m) “Continuous Service” means that the Optionholder’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Optionholder’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Optionholder renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the Optionholder renders such
service, provided that there is no interruption or termination of the Optionholder’s Continuous
Service. For example, a change in status from a Non-Employee Director of the Company to a
Consultant of an Affiliate or an Employee of the Company 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.



 









 





     (n) “Corporate Transaction” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:



          (i) a sale or other disposition of all or substantially all, as determined by the Board in its
discretion, of the consolidated assets of the Company and its Subsidiaries;




          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;




          (iii) a merger, consolidation or similar transaction following which the Company is not the
surviving corporation; or




          (iv) a merger, consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately preceding the merger,
consolidation or similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of securities, cash
or otherwise.




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



     (p) “Disability” means 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.



     (q) “Employee” means any person employed by the Company or an Affiliate. 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.



     (r) “Entity” means a corporation, partnership or other entity.



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



     (t) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company.



     (u) “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 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.




     (v) “Initial Grant” means an Option granted to a Non-Employee Director who meets the specified
criteria pursuant to Section 6(a).



 









 





     (w) “IPO Date” means the date on which the registration statement in connection with the
Company’s initial public offering is declared effective.



     (x) “Non-Employee Director” means a Director who is not an Employee.



     (y) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.



     (z) “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.



     (aa) “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.



     (bb) “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.



     (cc) “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.



     (dd) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.



     (ee) “Plan” means this Blue Nile, Inc. 2004 Non-Employee Directors’ Stock Option Plan.



     (ff) “Reload Grant” means an Option granted to a Non-Employee Director who meets the specified
criteria pursuant to Section 6(b).



     (gg) “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.



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



     (ii) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).



3. Administration.




     (a) Administration by Board. The Board shall administer the Plan. The Board may not delegate
administration of the Plan to a committee.



     (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 the provisions of each Option to the extent not specified in the Plan.




 









 








          (ii) To construe and interpret the Plan and Options granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Option 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 an Option 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 and that are not in conflict with the
provisions of the Plan.




     (c) 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.



4. Shares Subject to the Plan.




     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in the Common Stock, the Common Stock that may be issued pursuant to Options shall not
exceed in the aggregate Four Hundred Thousand (400,000) shares of Common Stock, plus an annual
increase for ten years beginning on January 1, 2005 and ending on (and including) January 1, 2014
equal to the number of shares subject to Options granted during the prior calendar year.
Notwithstanding the foregoing, the Board may act, prior to the first day of any fiscal year of the
Company, to increase the share reserve by such number of shares of Common Stock as the Board shall
determine, which number shall be less than the amount described in the foregoing sentence.



     (b) Reversion of Shares to the Share Reserve. If any Option 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 Option 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.



5. Eligibility.




     The Options, as set forth in Section 6, automatically shall be granted under the Plan to all
Non-Employee Directors who meet the criteria specified in Section 6.



6. Non-Discretionary Grants.




     (a) Initial Grants. Without any further action of the Board, (i) each person who after the
IPO Date and prior to the Amendment Effective Date is elected or appointed for the first time to be
a Non-Employee Director automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director, be granted an Initial Grant to purchase Twenty Thousand
(20,000) shares of Common Stock on the terms and conditions set forth herein; and (ii) each person
who on or after the Amendment Effective Date is elected or appointed for the first time to be a
Non-Employee Director automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director, be granted an Initial Grant to purchase Eleven Thousand
Two Hundred and Fifty (11,250) shares of Common Stock on the terms and conditions set forth herein.



     (b) Reload Grants. Without any further action of the Board, (i) each Non-Employee Director
who was granted a nonstatutory stock option on April 27, 2004 to purchase Twenty Thousand (20,000)
shares of Common Stock under the Company’s 2004 Equity Incentive Plan (“EIP Option”) and each
person who receives an Initial Grant pursuant to Section 6(a) automatically shall, upon the date
that such EIP Option or Initial Grant, as applicable, becomes fully vested in accordance with the
terms of such EIP Option or Section 7(e), as applicable, be granted a Reload Grant to purchase Nine
Thousand (9,000) shares of Common Stock on the terms and conditions set forth herein, provided that
such person is a Non-Employee Director on the date of such Reload Grant; and (ii) each Non-Employee
Director who receives a Reload Grant in accordance with the foregoing automatically shall be
granted a Reload Grant upon the date that any previously granted



 









 




Reload Grant becomes fully vested in accordance with Section 7(e), provided that such person
is a Non-Employee Director on such date.




     (c) Annual Grants. Without any further action of the Board, (i) on the day following each
Annual Meeting prior to the Amendment Effective Date, commencing with the Annual Meeting in 2005,
each person who is then a Non-Employee Director automatically shall be granted an Annual Grant to
purchase Four Thousand (4,000) shares of Common Stock on the terms and conditions set forth herein;
(ii) on the day following each Annual Meeting on or following the Amendment Effective Date but
prior to July 29, 2008, each person who is then a Non-Employee Director automatically shall be
granted an Annual Grant to purchase Two Thousand Two Hundred and Fifty (2,250) shares of Common
Stock on the terms and conditions set forth herein; and (iii) on the day following each Annual
Meeting on or following July 29, 2008, each person who is then a Non-Employee Director
automatically shall be granted an Annual Grant to purchase Two Thousand Five Hundred (2,500) shares
of Common Stock on the terms and conditions set forth herein; provided, however, that, in each
case, if the person has not been serving as a Non-Employee Director for the entire period since the
preceding Annual Meeting, then the number of shares subject to such Annual Grant shall be reduced
pro rata for each full quarter prior to the date of grant during which such person did not serve as
a Non- Employee Director.



7. Option Provisions.




     Each Option shall be in such form and shall contain such terms and conditions as required by
the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with
the Plan, as the Board shall deem appropriate. 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. No Option shall be exercisable after the expiration of ten (10) years from the date
it was granted.



     (b) Exercise Price. The exercise price of each Option shall be one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option is granted.



     (c) Consideration. The purchase price of stock acquired pursuant to an Option may be paid, to
the extent permitted by applicable law, in any combination of (i) cash or check, (ii) delivery to
the Company of other Common Stock or (iii) pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds. 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).



     (d) Transferability. Except as otherwise provided for in this Section, an Option is
transferable only by will or by the laws of descent and distribution and exercisable only by the
Optionholder during the life of the Optionholder. However, an Option may be transferred for no
consideration upon written consent of the Board (i) if, at the time of transfer, a Form S-8
registration statement under the Securities Act is available for the issuance of shares by the
Company upon the exercise of such transferred Option or (ii) the transfer is to the Optionholder’s
employer at the time of transfer or an affiliate of the Optionholder’s employer at the time of
transfer. Any such transfer is subject to such limits as the Board may establish, and subject to
the transferee agreeing to remain subject to all the terms and conditions applicable to the Option
prior to such transfer. The forgoing right to transfer the Option shall apply to the right to
consent to amendments to the Stock Option Agreement for such Option. In addition, until the
Optionholder transfers the Option, an Optionholder may, by delivering written notice to the
Company, in a form provided by or otherwise 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.



     (e) Vesting. Options shall vest as follows:



          (i) Initial Grants: 1/30th of the shares shall vest monthly from the date of grant
for one (1) year and 1/60th of the shares shall vest monthly thereafter over the next
three (3) years.




 









 








          (ii) Reload Grants: 1/48th of the shares shall vest monthly from the date of grant
for four (4) years.




          (iii) Annual Grants: 1/12th of the shares shall vest monthly from the date of grant
for one (1) year.




     (f) 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. Any unvested shared 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. The Company will not exercise its repurchase option until at least six (6) months
(or such longer or shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the Board otherwise
specifically provides in the Option.



     (g) Termination of Continuous Service. In the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death or Disability), (i) the Optionholder may
exercise his or her Option granted prior to the Amendment Effective Date (to the extent that the
Optionholder was entitled to exercise it as of the date of termination) but only within such period
of time ending on the earlier of (A) the date three (3) months following the termination of the
Optionholder’s Continuous Service, or (B) the expiration of the term of the Option as set forth in
the Option Agreement; and (ii) the Optionholder may exercise his or her Option granted on or after
the Amendment Effective Date (to the extent that the Optionholder was entitled to exercise it as of
the date of termination) but only within such period of time ending on the earlier of (A) the date
twelve (12) months following the termination of the Optionholder’s Continuous Service, or (B) the
expiration of the term of the Option as set forth in the Option Agreement. If the Optionholder’s
Continuous Service terminates in a manner described in Section 11(d), then the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to exercise it 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 the termination of the Optionholder’s Continuous Service, 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.



     (h) Extension of Termination Date. 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 would violate the
registration requirements under the Securities Act, then (i) an Option granted prior to the
Amendment Effective Date shall terminate on the earlier of (A) the expiration of the term of the
Option as set forth in the Option Agreement or (B) 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; and (ii) an Option granted on
or after the Amendment Effective Date shall terminate on the earlier of (A) the expiration of the
term of the Option as set forth in the Option Agreement or (B) the expiration of a period of twelve
(12) 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.



     (i) Disability of Optionholder. In the event 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 it 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 (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 herein, the Option shall terminate.



     (j) 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 three-month period
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 the 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, but only within the period ending on the earlier of (1) the date eighteen
(18) months following the date of death 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.



 









 





8. Securities Law Compliance.




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



9. Use of Proceeds from Stock.




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



10. Miscellaneous.




     (a) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to such Option unless and until such
Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.



     (b) No Service Rights. Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a
Non-Employee Director 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.



     (c) Investment Assurances. The Company may require an Optionholder, as a condition of
exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the
Company as to the Optionholder’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 Option;
and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder’s own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the
shares upon the exercise or acquisition of stock under the Option 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 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 stock.



     (d) Withholding Obligations. The Optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an Option by any of
the following means (in addition to the Company’s right to withhold from any compensation paid to
the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option;
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 the Common Stock.



11. Adjustments upon Changes in Common Stock.




     (a) Capitalization Adjustments. If, on or after the date the Plan is adopted by the Board,
any change is made in, or other events occur with respect to, the stock subject to the Plan, or
subject to any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock



 









 







dividend, 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 (each a “Capitalization Adjustment”)), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities subject both to the Plan
pursuant to Section 4 and to the nondiscretionary Options specified in Section 6, and the
outstanding Options will be appropriately adjusted in the class(es) and number of securities and
price per share of stock subject to such outstanding Options. 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 Options shall terminate immediately prior to the completion of such
dissolution or liquidation.



     (c) Corporate Transaction. In the event of a Corporate Transaction, any surviving corporation
or acquiring corporation may assume any or all Options outstanding under the Plan or may substitute
similar stock options for Options outstanding under the Plan (it being understood that similar
stock options include, but are not limited to, options to acquire the same consideration paid to
the stockholders or the Company, as the case may be, pursuant to the Corporate Transaction). In
the event that any surviving corporation or acquiring corporation does not assume any or all such
outstanding Options or substitute similar stock options for such outstanding Options, then with
respect to Options that have been neither assumed nor substituted and that are held by
Optionholders whose Continuous Service has not terminated prior to the effective time of the
Corporate Transaction, the vesting of such Options (and, if applicable, the time at which such
Options may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be
accelerated in full to a date prior to the effective time of such Corporate Transaction as the
Board shall determine (or, if the Board shall not determine such a date, to the date that is five
(5) days prior to the effective time of the Corporate Transaction), and the Options shall terminate
if not exercised (if applicable) at or prior to such effective time. With respect to any other
Options outstanding under the Plan that have been neither assumed nor substituted, the vesting of
such Options (and, if applicable, the time at which such Options may be exercised) shall not be
accelerated unless otherwise provided in Section 11(d) or in a written agreement between the
Company or any Affiliate and the holder of such Options, and such Options shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate Transaction.



     (d) Change in Control. If a Change in Control occurs and the Optionholder’s Continuous
Service has not terminated as of, or immediately prior to, the effective time of the Change in
Control, then, as of the effective time of such Change in Control, the Optionholder’s Options shall
become fully vested and exercisable.



     (e) Parachute Payments. If the acceleration of the vesting and exercisability of Options
provided for in Section 11(c) or (d), together with payments and other benefits of an Optionholder,
(collectively, the “Payment”) (i) constitute a “parachute payment” within the meaning of Section
280G of the Code, or any comparable successor provisions, and (ii) but for this Section 11(e) would
be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor
provisions (the “Excise Tax”), then such Payment shall be either (1) provided to such Optionholder
in full, or (2) provided to such Optionholder as to such lesser extent that would result in no
portion of such Payment being subject to the Excise Tax, whichever of the foregoing amounts, when
taking into account applicable federal, state, local and foreign income and employment taxes, the
Excise Tax, and any other applicable taxes, results in the receipt by such Optionholder, on an
after-tax basis, of the greatest amount of the Payment, notwithstanding that all or some portion of
the Payment may be subject to the Excise Tax.



          Unless the Company and such Optionholder otherwise agree in writing, any determination
required under this Section 11(e) shall be made in writing in good faith by the Accountant. If a
reduction in the Payment is to be made as provided above, reductions shall occur in the following
order unless the Optionholder elects in writing a different order (provided, however, that such
election shall be subject to Company approval if made on or after the date that triggers the
Payment or a portion thereof): reduction of cash payments; cancellation of accelerated vesting of
Options; reduction of employee benefits. If acceleration of vesting of Options is to be reduced,
such acceleration of vesting shall be cancelled in the reverse order of date of grant of Options
(i.e., earliest granted Option cancelled last) unless the Optionholder elects in writing a
different order for cancellation.




          For purposes of making the calculations required by this Section 11(e), the Accountant may
make reasonable assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of the Code and other applicable
legal authority. The Company and the



 









 






Optionholder shall furnish to the Accountant such information and documents as the Accountant
may reasonably request in order to make such a determination. The Company shall bear all costs the
Accountant may reasonably incur in connection with any calculations contemplated by this Section
11(e).




          If, notwithstanding any reduction described above, the Internal Revenue Service (the “IRS”)
determines that the Optionholder is liable for the Excise Tax as a result of the Payment, then the
Optionholder shall be obligated to pay back to the Company, within thirty (30) days after a final
IRS determination or, in the event that the Optionholder challenges the final IRS determination, a
final judicial determination, a portion of the Payment equal to the “Repayment Amount.” The
Repayment Amount with respect to the Payment shall be the smallest such amount, if any, as shall be
required to be paid to the Company so that the Optionholder’s net after-tax proceeds with respect
to the Payment (after taking into account the payment of the Excise Tax and all other applicable
taxes imposed on the Payment) shall be maximized. The Repayment Amount with respect to the Payment
shall be zero if a Repayment Amount of more than zero would not result in the Optionholder’s net
after-tax proceeds with respect to the Payment being maximized. If the Excise Tax is not
eliminated pursuant to this paragraph, the Optionholder shall pay the Excise Tax.




          Notwithstanding any other provision of this Section 11(e), if (i) there is a reduction in the
Payment as described above, (ii) the IRS later determines that the Optionholder is liable for the
Excise Tax, the payment of which would result in the maximization of the Optionholder’s net
after-tax proceeds of the Payment (calculated as if the Payment had not previously been reduced),
and (iii) the Optionholder pays the Excise Tax, then the Company shall pay or otherwise provide to
the Optionholder that portion of the Payment that was reduced pursuant to this Section 11(e)
contemporaneously or as soon as administratively possible after the Optionholder pays the Excise
Tax so that the Optionholder’s net after-tax proceeds with respect to the Payment are maximized.




          If the Optionholder either (i) brings any action to enforce rights pursuant to this Section
11(e), or (ii) defends any legal challenge to his or her rights under this Section 11(e), the
Optionholder shall be entitled to recover attorneys’ fees and costs incurred in connection with
such action, regardless of the outcome of such action; provided, however, that if such action is
commenced by the Optionholder, the court finds that the action was brought in good faith.




12. Amendment of the Plan and Options.




     (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 stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of applicable laws.



     (b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment
to the Plan for stockholder approval.



     (c) No Impairment of Rights. Rights under any Option 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 Optionholder and (ii) the Optionholder consents in writing.



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



13. Termination or Suspension of the Plan.




     (a) Plan Term. The Board may suspend or terminate the Plan at any time. No Options 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 Option granted while the Plan is in effect except with the written
consent of the Optionholder.



 









 





14. Effective Date of Plan.




     The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and
until the Plan has been approved by the stockholders 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 Delaware shall govern all questions concerning the construction, validity
and interpretation of this Plan, without regard to such state’s conflict of laws rules.