**Exhibit 10.3**

**2004 EMPLOYEE STOCK PURCHASE PLAN**

**OF**

**DEPOMED, INC**

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**Table ofContents**
|        | ** **                                                                    | **Page** |
|--------|-------------------------------------------------------------------------------|----------|
|   |                                                                          |     |
| 1.     | Establishment of Plan                                                         | 1        |
| 2.     | Number of Shares                                                              | 1        |
| 3.     | Purpose                                                                       | 1        |
| 4.     | Administration                                                                | 1        |
| 5.     | Eligibility                                                                   | 2        |
| 6.     | Offering Dates                                                                | 2        |
| 7.     | Participation in this Plan                                                    | 2        |
| 8.     | Grant of Option on Enrollment                                                 | 3        |
| 9.     | Purchase Price                                                                | 3        |
| 10.    | Payment of Purchase Price; Changes in Payroll  Deductions; Issuance of Shares | 4        |
| 11.    | Limitations on Shares to be Purchased                                         | 5        |
| 12.    | Withdrawal                                                                    | 5        |
| 13.    | Termination of Employment                                                     | 6        |
| 14.    | Return of Payroll Deductions                                                  | 6        |
| 15.    | Capital Changes                                                               | 6        |
| 16.    | Nonassignability                                                              | 7        |
| 17.    | Reports                                                                       | 7        |
| 18.    | Notice of Disposition                                                         | 7        |
| 19.    | No Rights to Continued Employment                                             | 7        |
| 20.    | Equal Rights and Privileges                                                   | 7        |
| 21.    | Notices                                                                       | 8        |
| 22.    | Term; Shareholder Approval                                                    | 8        |
| 23.    | Designation of Beneficiary                                                    | 8        |
| 24.    | Conditions upon Issuance of Shares; Limitation on  Sale of Shares             | 8        |
| 25.    | Applicable Law                                                                | 8        |
| 26.    | Amendment or Termination                                                      | 8        |

 

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**DEPOMED, INC.2004 EMPLOYEE STOCK PURCHASE PLAN**

(as amendedthrough May 31, 2007)

# **1.****                                      Establishmentof Plan.**

Depomed,Inc. (the “***Company***”)proposes to grant options for purchase of the Company’s common stock (the “***Common Stock***”) toeligible employees of the Company and its Participating Subsidiaries (ashereinafter defined) pursuant to this 2004 Employee Stock Purchase Plan (this “***Plan***”).  For the purposes of this Plan, “ParentCorporation” and “Subsidiary” shall have the same meanings as “parentcorporation” and “subsidiary corporation” in Sections 424(e) and 424(f),respectively, of the Internal Revenue Code of 1986, as amended (the “***Code***”).  “Participating Subsidiaries” are ParentCorporations or Subsidiaries that the Board of Directors of the Company (the “***Board***”) designatesfrom time to time as corporations that shall participate in this Plan.  The Company intends this Plan to qualify asan “employee stock purchase plan” under Section 423 of the Code (including anyamendments to or replacements of such Section), and this Plan shall be soconstrued.  Any term not expresslydefined in this Plan but defined for purposes of Section 423 of the Code shallhave the same definition herein.

# **2.****                                      Numberof Shares.**

Thetotal number of shares of Common Stock reserved and available for issuancepursuant to this Plan shall be 1,000,000 (the “***Share Limit***”), subject to adjustmentseffected in accordance with Section 15 of this Plan. Shares issued under thisPlan may consist, in whole or in part, of authorized and unissued shares ortreasury shares reacquired in private transactions or open market purchases,but all shares issued under this Plan shall be counted against the Share Limit.

# **3.****                                      Purpose.**

Thepurpose of this Plan is to provide eligible employees of the Company and ParticipatingSubsidiaries with a convenient means of acquiring an equity interest in theCompany through payroll deductions, to enhance such employees’ sense ofparticipation in the affairs of the Company and Participating Subsidiaries, andto provide an incentive for continued employment.  For the purposes of this Plan, “employee”shall mean any individual who is an employee of the Company or a ParticipatingSubsidiary. Whether an individual qualifies as an employee shall be determinedby the Committee (as hereinafter defined), in its sole discretion. TheCommittee shall be guided by the provisions of Treasury Regulation Section1.421-7 and Section 3401(c) of the Code and the Treasury Regulationsthereunder, with the intent that the Plan cover all “employees” within themeaning of those provisions other than those who are not eligible toparticipate in the Plan, provided, however, that any determinations regardingwhether an individual is an “employee” shall be prospective only, unlessotherwise determined by the Committee. Unless the Committee makes a contrarydetermination, the employees of the Company shall, for all purposes of thisPlan, be those individuals who are carried as employees of the Company or aParticipating Subsidiary for regular payroll purposes or are on a leave ofabsence for not more than 90 days. Any inquiries regarding eligibility toparticipate in the Plan shall be directed to the Committee, whose decisionshall be final.

# **4.****                                      Administration.**

ThisPlan shall be administered by the Compensation Committee of the Board (the “***Committee***”).  Subject to the provisions of this Plan andthe limitations of Section 423 of the Code or any successor provision in theCode, all questions of interpretation or application of this Plan shall bedetermined by the Committee and its decisions shall be final and binding uponall participants.  Members of theCommittee shall receive no compensation for their services in connection withthe administration of this Plan, other than standard fees as established from timeto time by the Board for services rendered by Board members serving on Boardcommittees.  All expenses incurred inconnection with the administration of this Plan shall be paid by the Company.

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# **5.****                                      Eligibility.**

Anyemployee of the Company or the Participating Subsidiaries is eligible toparticipate in an Offering Period (as hereinafter defined) under this Planexcept the following:

## a)              employees who are not employed by the Companyor a Participating Subsidiary prior to the beginning of such Offering Period orprior to such other time period as specified by the Committee;

## b)             employees who are customarily employed fortwenty (20) hours or less per week;

## c)              employees who are customarily employed forfive (5) months or less in a calendar year;

## d)             employees who, together with any other personwhose stock would be attributed to such employee pursuant to Section 424(d) ofthe Code, own stock or hold options to purchase stock possessing five percent(5%) or more of the total combined voting power or value of all classes ofstock of the Company or any of its Participating Subsidiaries or who, as aresult of being granted an option under this Plan with respect to such OfferingPeriod, would own stock or hold options to purchase stock possessing fivepercent (5%) or more of the total combined voting power or value of all classesof stock of the Company or any of its Participating Subsidiaries;

## e)              individuals who provide services to theCompany or any of its Participating Subsidiaries as independent contractors whoare reclassified as common law employees for any reason except for federalincome and employment tax purposes; and

## f)                employees who reside in countries for whomsuch employees’ participation in the Plan would result in a violation under anycorporate or securities laws of such country of residence.

# **6.****                                      OfferingDates.**

Theoffering periods of this Plan (each, an “***Offering Period***”) shall be of twenty-four(24) months duration commencing on December 1 and June 1 of each year (orat such time or times as may be determined by the Committee).  Each Offering Period shall consist of four(4) six month purchase periods (individually, a “***Purchase Period***”) during which payrolldeductions of the participants are accumulated under this Plan.  The first business day of each OfferingPeriod is referred to as the “***Offering Date***.” The last business day of each Purchase Period is referred to as the “***Purchase Date***.”  The Committee shall have the power to changethe Offering Dates, the Purchase Dates and the duration of Offering Periods orPurchase Periods without shareholder approval if such change is announced priorto the relevant Offering Period or prior to such other time period as specifiedby the Committee.

# **7.****                                      Participationin this Plan.**

Eligibleemployees may become participants in an Offering Period under this Plan on theOffering Date, after satisfying the eligibility requirements, by delivering asubscription agreement to the Company prior to such Offering Date, or suchother time period as specified by the Committee.  An eligible employee who does not deliver asubscription agreement to the Company after becoming eligible to participate inan Offering Period shall not participate in that Offering Period or anysubsequent Offering Period unless such employee enrolls in this Plan by filinga subscription agreement with the Company prior to such Offering Period, orsuch other time period as specified by the Committee.  Once an employee becomes a participant in anOffering Period by filing a subscription agreement, such employee shallautomatically participate in the Offering Period commencing immediatelyfollowing the last day of the prior Offering Period unless the employeewithdraws or is deemed to withdraw from this Plan or terminates furtherparticipation in the Offering Period as set forth in Section 12 below.  Such participant is not required to file anyadditional subscription agreement in order to continue participation in thisPlan.

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# **8.****                                      Grantof Option on Enrollment.**

Enrollmentby an eligible employee in this Plan with respect to an Offering Period shallconstitute the grant (as of the Offering Date) by the Company to such employeeof an option to purchase on the Purchase Date up to that number of shares ofCommon Stock determined by a fraction, the numerator of which is the amountaccumulated in such employee’s payroll deduction account during such PurchasePeriod and the denominator of which is the lower of (i) eighty-five percent(85%) of the fair market value of a share of Common Stock on the Offering Date(but in no event less than the par value of a share of Common Stock), or (ii)eighty-five percent (85%) of the fair market value of a share of Common Stockon the Purchase Date (but in no event less than the par value of a share ofCommon Stock), provided, however, that the number of shares of Common Stocksubject to any option granted pursuant to this Plan shall not exceed the lesserof (x) the maximum number of shares set by the Committee pursuant to Section11(c) below with respect to the applicable Purchase Date, or (y) the maximumnumber of shares which may be purchased pursuant to Section 11(b) below withrespect to the applicable Purchase Date. The fair market value of a share of Common Stock shall be determined asprovided in Section 9 below.

# **9.****                                      PurchasePrice.**

Thepurchase price per share at which a share of Common Stock shall be sold in anyOffering Period shall be eighty-five percent (85%) of the lesser of:

## a)              the fair market value on the Offering Date;or

## b)             the fair market value on the Purchase Date.

Forthe purposes of this Plan, the term “***fair market value***” means, as of any date, thevalue of a share of the Common Stock determined as follows:

## a)              If the Common Stock is traded on anyestablished stock exchange or quoted on a national market system, fair marketvalue shall be the closing sales price for the Common Stock as quoted on thatstock exchange or system for the date the value is to be determined (the “*Value Date*”) as reported by such stock exchange ornational market system, or, if not reported by such stock exchange or nationalmarket system, as reported in *The**WallStreet Journal* or a similarpublication.  If no sales are reported ashaving occurred on the Value Date, fair market value shall be that closingsales price for the last preceding trading day on which sales of Common Stockare reported as having occurred.  If nosales are reported as having occurred during the five trading days before theValue Date, Fair Market Value shall be the closing bid for Common Stock on theValue Date.  If the Common Stock islisted on multiple exchanges or systems, fair market value shall be based onsales or bid prices on the primary exchange or system on which the Common Stockis traded or quoted;

## b)             If the Common Stock is regularly quoted by arecognized securities dealer but selling prices are not reported on anyestablished stock exchange or quoted on a national market system, fair marketvalue shall be the mean between the high bid and low asked prices on the ValueDate.  If no prices are quoted for theValue Date, fair market value shall be the mean between the high bid and lowasked prices on the last preceding trading day on which any bid and askedprices were quoted; or

## c)              If the Common Stock is not traded on anyestablished stock exchange or quoted on a national market system and are notquoted by a recognized securities dealer, the Board or Committee will determinefair market value in good faith.  TheBoard or Committee will consider the following factors, and any others itconsiders significant, in determining fair market value: (i) the price atwhich other securities of the Company have been issued to purchasers other thanemployees, directors, or consultants, (ii) the Company’s shareholder’sequity, prospective earning power, dividend-paying capacity, and non-operatingassets, if any, and (iii) any other relevant factors, including theeconomic outlook for the Company and the Company’s industry, the Company’sposition in that industry, the Company’s goodwill and other intellectualproperty, and the values of securities of other businesses in the sameindustry.

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# **10.****                               Paymentof Purchase Price; Changes in Payroll Deductions; Issuance of Shares.**

## a)     The purchase price of the shares isaccumulated by regular payroll deductions made during each Offering Period. Thedeductions are made as a percentage of the participant’s compensation in onepercent (1%) increments, not less than one percent (1%), nor greater thanfifteen percent (15%), or such lower limit set by the Committee.  Compensation shall mean all regular straight-timegross earnings, and shall not include payments for overtime, shift premium,incentive compensation or payments, bonuses, commissions or othercompensation.  Payroll deductions shallcommence on the first payday of the Offering Period and shall continue to theend of the Offering Period unless sooner altered or terminated as provided inthis Plan.

## b)    A participant may increase or decrease therate of payroll deductions during an Offering Period by filing with the Companya new authorization for payroll deductions, in which case the new rate shallbecome effective for the next payroll period commencing after the Company’stimely receipt of the authorization and shall continue for the remainder of theOffering Period unless changed as described below.  Such change in the rate of payroll deductionsmay be made at any time during an Offering Period, but not more than one (1)change may be made effective during any Purchase Period.  A participant may increase or decrease therate of payroll deductions for any subsequent Offering Period by filing withthe Company a new authorization for payroll deductions prior to the beginningof such Offering Period, or such other time period as specified by theCommittee.

## c)     A participant may reduce his or her payrolldeduction percentage to zero during an Offering Period by filing with theCompany a request for cessation of payroll deductions.  Such reduction shall be effective beginningwith the next payroll period after the Company’s timely receipt of the requestand no further payroll deductions shall be made for the duration of theOffering Period.  Payroll deductionscredited to the participant’s account prior to the effective date of therequest shall be used to purchase shares of Common Stock of the Company in accordancewith Section (e) below.  A participantmay not resume making payroll deductions during the Offering Period in which heor she reduced his or her payroll deductions to zero.

## d)    All payroll deductions made for a participantare credited to his or her account under this Plan and are deposited with thegeneral funds of the Company.  Nointerest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used bythe Company for any corporate purpose, and the Company shall not be obligatedto segregate such payroll deductions.

## e)     On each Purchase Date, for so long as thisPlan remains in effect and provided that the participant has not submitted asigned and completed withdrawal form before that date, which notifies theCompany that the participant wishes to withdraw from that Offering Period underthis Plan and have all payroll deductions accumulated in the account maintainedon behalf of the participant, as of that date returned to the participant, theCompany shall apply the funds then in the participant’s account to the purchaseof whole shares of Common Stock reserved under the option granted to suchparticipant with respect to the Offering Period to the extent that such optionis exercisable on the Purchase Date.  Thepurchase price per share shall be as specified in Section 9 of this Plan.  Any cash remaining in a participant’s accountafter such purchase of shares shall be refunded to such participant in cash,without interest, provided, however, that any amount remaining in suchparticipant’s account on a Purchase Date which is less than the amountnecessary to purchase a full share of Common Stock shall be carried forward,without interest, into the next Purchase Period or Offering Period, as the casemay be.  In the event that this Plan hasbeen oversubscribed, all funds not used to purchase shares on the Purchase Dateshall be returned to the participant, without interest.  No Common Stock shall be purchased on aPurchase Date on behalf of any employee whose participation in this Plan hasterminated prior to such Purchase Date.

## f)     As soon as practicable after the PurchaseDate, the Company shall issue shares for the 

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## participant’sbenefit representing the shares purchased upon exercise of his or her option.

## g)             During a participant’s lifetime, his or heroption to purchase shares hereunder is exercisable only by him or her.  The participant shall have no interest orvoting rights in shares covered by his or her option until such option has beenexercised.

# **11.****                               Limitationson Shares to be Purchased.**

## a)              No participant shall be entitled to purchasestock under this Plan at a rate which, when aggregated with his or her rightsto purchase stock under all other employee stock purchase plans of the Companyor any Subsidiary, exceeds $25,000 in fair market value, determined as of theOffering Date (or such other limit as may be imposed by the Code) for eachcalendar year in which the employee participates in this Plan.  The Company shall automatically suspend thepayroll deductions of any participant as necessary to enforce such limitprovided that when the Company automatically resumes such payroll deductions,the Company must apply the rate in effect immediately prior to such suspension.

## b)             No participant shall be entitled to purchasemore than 3,000 shares of Common Stock (the “*Maximum Share Amount*”)on any single Purchase Date.  Prior tothe commencement of any Offering Period or prior to such time period asspecified by the Committee, the Committee may, in its sole discretion, set anew Maximum Share Amount.  If a newMaximum Share Amount is set, then all participants must be notified of suchMaximum Share Amount prior to the commencement of the next Offering Period.  The Maximum Share Amount shall continue toapply with respect to all succeeding Purchase Dates and Offering Periods unlessrevised by the Committee as set forth above.

## c)              If the number of shares to be purchased on aPurchase Date by all employees participating in this Plan exceeds the number ofshares then available for issuance under this Plan, then the Company shall makea pro rata allocation of the remaining shares in as uniform a manner as shallbe reasonably practicable or as the Committee shall determine to be equitable.  In such event, the Company shall give writtennotice of such reduction of the number of shares to be purchased under aparticipant’s option to each participant affected.

## d)             Any payroll deductions accumulated in aparticipant’s account which are not used to purchase stock due to the limitationsin this Section 11 shall be returned to the participant as soon as practicableafter the end of the applicable Purchase Period, without interest.

# **12.****                               Withdrawal.**

## a)              Each participant may withdraw from anOffering Period under this Plan by signing and delivering to the Company awritten notice to that effect on a form provided for such purpose.  Such withdrawal may be elected at any timeprior to the end of an Offering Period, or such other time period as specifiedby the Committee.

## b)             Upon withdrawal from this Plan, theaccumulated payroll deductions shall be returned to the withdrawn participant,without interest, and his or her interest in this Plan shall terminate.  In the event a participant voluntarily electsto withdraw from this Plan, he or she may not resume his or her participationin this Plan during the same Offering Period, but he or she may participate inany Offering Period under this Plan which commences on a date subsequent tosuch withdrawal by filing a new authorization for payroll deductions in thesame manner as set forth in Section 7 above for initial participation in thisPlan.

## c)              If the fair market value on the first day ofthe current Offering Period in which a participant is enrolled is higher thanthe fair market value on the first day of any subsequent Offering Period, theCompany shall automatically enroll such participant in the subsequent OfferingPeriod.  Any 

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## funds accumulated in aparticipant’s account prior to the first day of such subsequent Offering Periodshall be applied to the purchase of shares on the Purchase Date immediatelyprior to the first day of such subsequent Offering Period, if any.

# **13.****                               Terminationof Employment.**

Terminationof a participant’s employment for any reason, including retirement, death orthe failure of a participant to remain an eligible employee of the Company orof a Participating Subsidiary, shall immediately terminate his or herparticipation in this Plan.  In suchevent, the payroll deductions credited to the participant’s account shall bereturned to him or her or, in the case of his or her death, to his or her legalrepresentative, without interest.  Forpurposes of this Section 13, an employee shall not be deemed to have terminatedemployment or failed to remain in the continuous employ of the Company or of aParticipating Subsidiary in the case of sick leave, military leave, or anyother leave of absence approved by the Committee, provided, however that suchleave is for a period of not more than ninety (90) days or reemployment upon theexpiration of such leave is guaranteed by contract or statute.

# **14.****                               Returnof Payroll Deductions.**

In theevent a participant’s interest in this Plan is terminated by withdrawal,termination of employment or otherwise, or in the event this Plan is terminatedby the Board, the Company shall deliver to the participant all payrolldeductions credited to such participant’s account.  No interest shall accrue on the payrolldeductions of a participant in this Plan.

# **15.****                               CapitalChanges.**

## a)              Subject to any required action by theshareholders of the Company, the number and type of shares of Common Stockcovered by each option under this Plan which has not yet been exercised and thenumber and type of shares of Common Stock which have been authorized forissuance under this Plan but have not yet been placed under option(collectively, the “*Reserves*”), as well as the price per share of CommonStock covered by each option under this Plan which has not yet been exercised,shall be proportionately adjusted for any increase or decrease in the number ofissued and outstanding shares of Common Stock resulting from a stock split,stock dividend, combination or reclassification of the Common Stock or anyother increase or decrease in the number of issued and outstanding shares ofCommon Stock effected without receipt of any consideration by the Company,provided, however, that conversion of any convertible securities of the Companyshall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by theCommittee, whose determination shall be final, binding and conclusive.  Except as expressly provided herein, no issueby the Company of shares of stock of any class, or securities convertible intoshares of stock of any class, shall affect, and no adjustment by reason thereofshall be made with respect to, the number or price of shares of Common Stocksubject to an option.

## b)             In the event of the proposed dissolution orliquidation of the Company, the Offering Period will terminate immediatelyprior to the consummation of such proposed action, unless otherwise provided bythe Board.  In the event of (i) a mergeror consolidation in which the Company is not the surviving corporation (otherthan a merger or consolidation with a wholly-owned subsidiary, areincorporation of the Company in a different jurisdiction, or othertransaction in which there is no substantial change in the shareholders of theCompany or their relative stock holdings and the options under this Plan areassumed, converted or replaced by the successor corporation, which assumptionshall be binding on all participants), (ii) a merger in which the Company isthe surviving corporation but after which the shareholders of the Companyimmediately prior to such merger (other than any shareholder that merges, orwhich owns or controls another corporation that merges, with the Company insuch merger) cease to own their shares or other equity interest in the Company,(iii) the sale of all or substantially all of the assets of the Company, or(iv) the acquisition, sale, or transfer of more than 50% of the outstandingshares of the Company by tender offer or similar transaction, each option underthis Plan shall be assumed or an equivalent option 

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## shall be substituted by thesuccessor corporation or a parent or subsidiary of the successor corporation,unless the successor corporation does not agree to assume the option or tosubstitute an equivalent option, in which case the Board may determine, in theexercise of its sole discretion and in lieu of such assumption or substitution,to shorten the Offering Period then in progress by setting a new Purchase Date(the “*NewPurchase Date*”).  If the Board shortens the Offering Periodthen in progress, the Board shall notify each participant in writing, at leastten (10) days prior to the New Purchase Date, that the Purchase Date for his orher option has been changed to the New Purchase Date and that his or her optionwill be exercised automatically on the New Purchase Date, unless prior to such datehe or she has withdrawn from the Offering Period as provided inSection 12.

## c)              The Committee may, if it so determines in theexercise of its sole discretion, also make provision for adjusting theReserves, as well as the price per share of Common Stock covered by eachoutstanding option, in the event that the Company effects one or morereorganizations, recapitalizations, rights offerings or other increases orreductions of shares of its outstanding Common Stock, or in the event of theCompany being consolidated with or merged into any other corporation.

# **16.****                               Nonassignability.**

Neitherpayroll deductions credited to a participant’s account nor any rights withregard to the exercise of an option or to receive shares under this Plan may beassigned, transferred, pledged or otherwise disposed of in any way (other thanby the laws of descent and distribution or as provided in Section 23 below) bythe participant.  Any such attempt atassignment, transfer, pledge or other disposition shall be void and without effect.

# **17.****                               Reports.**

Individualaccounts shall be maintained for each participant in this Plan.  Each participant shall receive, as soon aspracticable after the end of each Purchase Period, a report of his or heraccount setting forth the total payroll deductions accumulated, the number ofshares purchased, the per share price thereof and the remaining cash balance,if any, carried forward to the next Purchase Period or Offering Period, as thecase may be.

# **18.****                               Noticeof Disposition.**

Eachparticipant shall notify the Company in writing if the participant disposes ofany of the shares purchased in any Offering Period pursuant to this Plan ifsuch disposition occurs within two (2) years from the Offering Date or withinone (1) year from the Purchase Date on which such shares were purchased (the “***Notice Period***”).  The Company may, at any time during theNotice Period, place a legend or legends on any certificate representing sharesacquired pursuant to this Plan requesting the Company’s transfer agent tonotify the Company of any transfer of the shares.  The obligation of the participant to providesuch notice shall continue notwithstanding the placement of any such legend onthe certificates.

# **19.****                               NoRights to Continued Employment.**

Neitherthis Plan nor the grant of any option hereunder shall confer any right on anyemployee to remain in the employ of the Company or any ParticipatingSubsidiary, or restrict the right of the Company or any ParticipatingSubsidiary to terminate such employee’s employment.

# **20.****                               EqualRights and Privileges.**

Alleligible employees shall have equal rights and privileges with respect to thisPlan so that this Plan qualifies as an “employee stock purchase plan” withinthe meaning of Section 423 or any successor provision of the Code and the relatedregulations.  Any provision of this Planwhich is inconsistent with Section 423 or any successor provision of the Codeshall, without further act or amendment by the Company, the Committee or theBoard, be reformed to comply with the requirements of Section 423.  This Section 20 shall take precedence overall other 

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provisions in thisPlan.

# **21.****                               Notices.**

Allnotices or other communications by a participant to the Company under or inconnection with this Plan shall be deemed to have been duly given when receivedin the form specified by the Company at the location, or by the person,designated by the Company for the receipt thereof.

# **22.****                               Term;Shareholder Approval.**

ThisPlan shall be approved by the shareholders of the Company, in any mannerpermitted by applicable corporate law, within twelve (12) months after the datethis Plan is adopted by the Board.  Nopurchase of shares pursuant to this Plan shall occur prior to such shareholderapproval.  This Plan shall continue untilthe earliest to occur of (a) termination of this Plan by the Board (whichtermination may be effected by the Board at any time), (b) issuance of all ofthe shares of Common Stock reserved for issuance under this Plan, or (c) ten(10) years from the adoption of this Plan by the Board.

# **23.****                               Designationof Beneficiary.**

## a)              A participant may file a written designationof a beneficiary who is to receive any shares and cash, if any, from theparticipant’s account under this Plan in the event of such participant’s deathsubsequent to the end of a Purchase Period but prior to delivery to him of suchshares and cash.  The participant shalldeliver along with such designation a written acknowledgment of the participant’sspouse, if any, consenting to the designation. In addition, a participant may file a written designation of abeneficiary who is to receive any cash from the participant’s account underthis Plan in the event of such participant’s death prior to a Purchase Date.

## b)             Such designation of beneficiary may bechanged by the participant at any time by written notice.  The participant shall deliver along with suchdesignation a written acknowledgment of the participant’s spouse, if any,consenting to the designation.  In theevent of the death of a participant and in the absence of a beneficiary validlydesignated under this Plan who is living at the time of such participant’sdeath, the Company shall deliver such shares or cash to the executor oradministrator of the estate of the participant, or if no such executor oradministrator has been appointed (to the knowledge of the Company), theCompany, in its discretion, may deliver such shares or cash to the spouse or toany one or more dependents or relatives of the participant, or if no spouse,dependent or relative is known to the Company, then to such other person as theCompany may designate.

# **24.****                               Conditionsupon Issuance of Shares.**

Sharesshall not be issued with respect to an option unless the exercise of suchoption and the issuance and delivery of such shares pursuant thereto shall complywith all applicable provisions of law, domestic or foreign, including, withoutlimitation, the Securities Act of 1933, as amended, the Securities Exchange Actof 1934, as amended, the rules and regulations promulgated thereunder, and therequirements of any stock exchange or automated quotation system upon which theshares may then be listed, and shall be further subject to the approval ofcounsel for the Company with respect to such compliance.

# **25.****                               ApplicableLaw.**

ThePlan shall be governed by the substantive laws (excluding the conflict of lawsrules) of the State of California.

# **26.****                               Amendmentor Termination.**

TheBoard may at any time amend, terminate or extend the term of this Plan;provided, however, that:  (i) 

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any suchtermination cannot affect options previously granted under this Plan; (ii) noamendment may make any change in an option previously granted which wouldadversely affect the right of any participant, nor may any amendment be madewithout approval of the shareholders of the Company obtained in accordance withSection 22 above within twelve (12) months of the adoption of such amendment ifsuch amendment would:

## a)              increase the number of shares that may beissued under this Plan; or

## b)             change the designation of the employees (orclass of employees) eligible for participation in this Plan.

Notwithstandingthe foregoing, the Board may make such amendments to the Plan as the Boarddetermines to be advisable, if the continuation of the Plan or any OfferingPeriod would result in financial accounting treatment for the Plan that isdifferent from the financial accounting treatment in effect on the date thisPlan is adopted by the Board.

Adopted by the Boardon:  March 19, 2004

Approved by theshareholders on:  May 27, 2004

Effective date of thisPlan:  May 27, 2004

Amended by the Boardon:  March 22, 2007

Amendment approvedby the shareholders on:  May 31, 2007

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