**Exhibit10.2**

**2004 EQUITY INCENTIVE PLANOFDEPOMED, INC.**

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Table of Contents
|        | ** **                                     | **Page**                         |
|--------|------------------------------------------------|----------------------------------|
|   |                                           |                             |
| 1.     | Purpose of this Plan                           | 1                                |
| 2.     | Definitions and Rules of Interpretation        | 1                                |
|   | 2.1                                            | Definitions                      | 1 |
|   | 2.2                                            | Rules of Interpretation          | 4 |
| 3.     | Shares Subject to this plan; Term of this Plan | 4                                |
|   | 3.1                                            | Number of Award Shares           | 4 |
|   | 3.2                                            | Term of this Plan                | 5 |
| 4.     | Administration                                 | 5                                |
|   | 4.1                                            | General                          | 5 |
|   | 4.2                                            | Authority of the Administrator   | 5 |
|   | 4.3                                            | Scope of Discretion              | 7 |
| 5.     | Participant Eligible to Receive Awards         | 7                                |
|   | 5.1                                            | Eligible Participants            | 7 |
|   | 5.2                                            | Section 162(m) Limitation        | 7 |
| 6.     | Terms and Conditions of Options                | 7                                |
|   | 6.1                                            | Price                            | 7 |
|   | 6.2                                            | Term                             | 7 |
|   | 6.3                                            | Vesting                          | 7 |
|   | 6.4                                            | Form and Method of Payment       | 8 |
|   | 6.5                                            | Assignability of Options         | 9 |
|   | 6.6                                            | Substitute Options               | 9 |
| 7.     | Incentive Stock Options                        | 9                                |
| 8.     | Stock Awards                                   | 10                               |
|   | 8.1                                            | General                          | 10 |
|   | 8.2                                            | Right of Repurchase              | 10 |
|   | 8.3                                            | Form of Payment                  | 10 |
|   | 8.4                                            | Nonassignability of Stock Awards | 10 |
|   | 8.5                                            | Substitute Stock Award           | 10 |
|   | 8.6                                            | Maximum Number of Stock Awards   | 11 |
| 9.     | Exercise of Awards                             | 11                               |
|   | 9.1                                            | In General                       | 11 |
|   | 9.2                                            | Time of Exercise                 | 11 |
|   | 9.3                                            | Issuance of Award Shares         | 11 |
|   | 9.4                                            | Termination                      | 11 |
| 10.    | Certain Transactions and Events                | 12                               |
|   | 10.1                                           | In General                       | 12 |
|   | 10.2                                           | Changes in Capital Structure     | 13 |
|   | 10.3                                           | Fundamental Transactions         | 13 |
|   | 10.4                                           | Changes in Control               | 14 |
|        |                                                |                                  |  |  |  |  |

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|        | 10.5                                                         | Divestiture                                       | 14 |
|--------|--------------------------------------------------------------|---------------------------------------------------|----|
|   | 10.6                                                         | Dissolution                                       | 14 |
| 11.    | Automatic Option Grants to Non-Employee Directors            | 14                                                |
|   | 11.1                                                         | Automatic Option Grants to Non-Employee Directors | 14 |
|   | 11.2                                                         | Certain Transactions and Events                   | 15 |
|   | 11.3                                                         | Limited Transferability of Options                | 16 |
| 12.    | Withholding and Tax Reporting                                | 16                                                |
|   | 12.1                                                         | Tax Withholding Alternatives                      | 16 |
|   | 12.2                                                         | Reporting of Disposition                          | 16 |
| 13.    | Compliance with Law                                          | 17                                                |
| 14.    | Amendment or Termination of this Plan or Outstanding  Awards | 18                                                |
|   | 14.1                                                         | Amendment and Termination                         | 18 |
|   | 14.2                                                         | Shareholder Approval                              | 18 |
|   | 14.3                                                         | Effect                                            | 18 |
| 15.    | Reserved Rights                                              | 18                                                |
|   | 15.1                                                         | Nonexclusivity of this Plan                       | 18 |
|   | 15.2                                                         | Unfunded Plan                                     | 18 |
| 16.    | Special Arrangements Regarding Award Shares                  | 18                                                |
|   | 16.1                                                         | Escrow of Stock Certificates                      | 18 |
|   | 16.2                                                         | Repurchase Rights                                 | 19 |
|   | 16.3                                                         | Market Standoff                                   | 19 |
| 17.    | Beneficiaries                                                | 19                                                |
| 18.    | Miscellaneous                                                | 19                                                |
|   | 18.1                                                         | Governing Law                                     | 19 |
|   | 18.2                                                         | Determination of Value                            | 19 |
|   | 18.3                                                         | Reservation of Shares                             | 20 |
|   | 18.4                                                         | Electronic Communication                          | 20 |
|   | 18.5                                                         | Notices                                           | 20 |
|        |                                                              |                                                   |    |  |  |

 

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**2004 EQUITY INCENTIVE PLAN**

**OF**

**DEPOMED, INC.**

(as amendedthrough May 31, 2007)

**1.****             Purpose of this Plan**

The purpose ofthis 2004 Equity Incentive Plan is to enhance the long-term shareholder valueof Depomed, Inc. by offering opportunities to eligible participants to share inthe growth in value of the equity of Depomed, Inc. and to provide incentives toeligible Employees, Company Directors and Consultants to contribute to thesuccess of the Company.

**2.****             Definitions and Rulesof Interpretation**

**2.1****          Definitions**.  This Plan uses the following defined terms:

### (a)   ***“Administrator”*** means the Board, the Committee, or any officer or employee of theCompany to whom the Board or the Committee delegates authority to administerthis Plan.

### (b)   ***“Affiliate”*** means a “parent” or “subsidiary” (as each is defined in Section 424 ofthe Code) of the Company and any other entity that the Board or Committeedesignates as an “Affiliate” for purposes of this Plan.

### (c)   ***“Applicable Law”*******means any and alllaws of whatever jurisdiction, within or without the United States, and therules of any stock exchange or quotation system on which Shares are listed orquoted, applicable to the taking or refraining from taking of any action underthis Plan, including the administration of this Plan and the issuance ortransfer of Awards or Award Shares.

### (d)   ***“Award”*** means a Stock Award or Option granted in accordance with the terms ofthis Plan.

### (e)   ***“Award Agreement”*****means the document evidencing the grant of anAward.

### (f)    ***“Award Shares”*****means Shares covered by an outstanding Awardor purchased under an Award.

### (g)   ***“Awardee”*****means:(i) a person to whom an Award has been granted, including a holder of aSubstitute Award, (ii) a person to whom an Award has been transferred inaccordance with all applicable requirements of Sections 6.5, 7(h), and 17, or(iii) a person who holds Award Shares subject to a right of repurchase underSection 16.2.

### (h)   ***“Board”*** means the board of directors of the Company.

### (i)    ***“Change in Control”*** means any transaction or event that the Boardspecifies as a Change in Control under Section 10.4.

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### (j)    ***“Code”*****meansthe Internal Revenue Code of 1986.

### (k)   ***“Committee*****”** means a committeecomposed of Company Directors appointed in accordance with the Company’scharter documents and Section 4.

### (l)    ***“Company”*** means Depomed, Inc., a California corporation.

### (m)  ***“Company Director****”* means a member of the Board.

### (n)   ***“Consultant”*******means an individualwho, or an entity or employee of any entity that, provides bona fide servicesto the Company or an Affiliate not in connection with the offer or sale ofsecurities in a capital-raising transaction, but who is not an Employee.

### (o)   ***“Director”*** means a member of the board of directors of the Company or anAffiliate.

### (p)   ***“Divestiture”*** means any transaction or event that the Board specifies as aDivestiture under Section 10.5.

### (q)   **“*Domestic Relations Order”*** means a “domestic relations order” asdefined in, and otherwise meeting the requirements of, Section 414(p) ofthe Code, except that reference to a “plan” in that definition shall be to thisPlan.

### (r)    ***“Employee”*** means a regular employee of the Company or an Affiliate, including anOfficer or Director, who is treated as an employee in the personnel records ofthe Company or an Affiliate, but not individuals who are classified by theCompany or an Affiliate as: (i) leased from or otherwise employed by athird party, (ii) independent contractors, or (iii) intermittent ortemporary workers.  The Company’s or anAffiliate’s classification of an individual as an “Employee” (or as not an “Employee”)for purposes of this Plan shall not be altered retroactively even if thatclassification is changed retroactively for another purpose as a result of anaudit, litigation or otherwise.  AnAwardee shall not cease to be an Employee due to transfers between locations ofthe Company, or between the Company and an Affiliate, or to any successor tothe Company or an Affiliate that assumes the Awardee’s Options underSection 10.  Neither service as aDirector nor receipt of a director’s fee shall be sufficient to make a Directoran “Employee.”

### (s)   ***“Exchange Act”*****means the Securities Exchange Act of 1934.

### (t)    ***“Executive”*****means,if the Company has any class of any equity security registered under Section 12of the Exchange Act, an individual who is subject to Section 16 of the ExchangeAct or who is a “covered employee” under Section 162(m) of the Code, ineither case because of the individual’s relationship with the Company or anAffiliate.  If the Company does not haveany class of any equity security registered under Section 12 of the ExchangeAct, “Executive” means any (i) Director or (ii) officer elected or appointed bythe Board.

### (u)   ***“Expiration Date”*****means, with respect to an Award, the datestated in the Award Agreement as the expiration date of the Award or, if nosuch date is stated in the Award Agreement, then the last day of the maximumexercise period for the Award, disregarding the effect of an Awardee’sTermination or any other event that would shorten that period.

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### (v)   ***“Fair Market Value”*****means the value of Shares as determined underSection 18.2.

### (w)  ***“Fundamental Transaction”*** means any transaction or event described inSection 10.3.

### (x)    ***“Grant Date”*****meansthe date the Administrator approves the grant of an Award.  However, if the Administrator specifies thatan Award’s Grant Date is a future date or the date on which a condition issatisfied, the Grant Date for such Award is that future date or the date thatthe condition is satisfied.

### (y)   ***“Incentive Stock Option****”* means an Option intended to qualify as anincentive stock option under Section 422 of the Code and designated as anIncentive Stock Option in the Award Agreement for that Option.

### (z)    ***“Nonstatutory Option”*** means any Option other than an IncentiveStock Option.

### (aa)***“Non-Employee Director”*** means any person who is a member of theBoard but is not an Employee of the Company or any Affiliate of the Company andhas not been an Employee of the Company or any Affiliate of the Company at anytime during the preceding twelve months.  Service as a Director does not in itselfconstitute employment for purposes of this definition.

### (bb)***“Objectively Determinable Performance Condition****”* shall mean a performance condition(i) that is established (A) at the time an Award is granted or(B)  no later than the earlier of (1) 90 days after the beginning ofthe period of service to which it relates, or (2) before the elapse of 25%of the period of service to which it relates, (ii) that is uncertain ofachievement at the time it is established, and (iii) the achievement ofwhich is determinable by a third party with knowledge of the relevantfacts.  Examples of measures that may beused in Objectively Determinable Performance Conditions include achievement ofa Company goal, net order dollars, net profit dollars, net profit growth, netrevenue dollars, revenue growth, individual performance, earnings per share,return on assets, return on equity, and other financial objectives, objectivecustomer satisfaction indicators and efficiency measures, each with respect tothe Company and/or an Affiliate or individual business unit.

### (cc)***“Officer”*****meansan officer of the Company as defined in Rule 16a-1 adopted under the ExchangeAct.

### (dd)***“Option”*****meansa right to purchase Shares of the Company granted under this Plan.

### (ee)***“Option Price”*****means the price payable under an Option forShares, not including any amount payable in respect of withholding or othertaxes.

### (ff)   ***“Option Shares”***means Shares covered by an outstanding Optionor purchased under an Option.

### (gg)***“Plan”*****meansthis 2004 Equity Incentive Plan of Depomed, Inc.

### (hh)***“Purchase Price”*** means the price payable under a Stock Awardfor Shares, not including any amount payable in respect of withholding or othertaxes.

### (ii)   ***“Reverse Vesting”*** means that an Option is or was fullyexercisable but that, subject to a “reverse” vesting schedule, the Company hasa right to repurchase the Option Shares 

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### asspecified in Section 16.2(a), with the Company’s right of repurchase expiringin accordance with a “forward” vesting schedule that would otherwise haveapplied to the Option under which the Option Shares were purchased or inaccordance with some other vesting schedule described in the Award Agreement.

### (jj)   ***“Rule 16b-3”*****meansRule 16b-3 adopted under Section 16(b) of the Exchange Act.

### (kk)***“Securities Act”*****means the Securities Act of 1933.

### (ll)   ***“Share”*****meansa share of the common stock of the Company or other securities substituted forthe common stock under Section 10.

### (mm)   ***“Stock Award”*** means an offer by the Company to sell shares subject to certainrestrictions pursuant to the Award Agreement as described inSection 8.  A Stock Award does notinclude an option.

### (nn)***“Substitute Award”*****means a Substitute Option or Substitute StockAward granted in accordance with the terms of this Plan.

### (oo)***“Substitute Option”*****means an Option granted in substitution for,or upon the conversion of, an option granted by another entity to purchaseequity securities in the granting entity.

### (pp)***“Substitute Stock Award”***means a Stock Award granted in substitutionfor, or upon the conversion of, a stock award granted by another entity topurchase equity securities in the granting entity.

### (qq)**“*Ten Percent Shareholder*”** means any person who, directly or byattribution under Section 424(d) of the Code, owns stock possessing morethan ten percent of the total combined voting power of all classes of stock ofthe Company or of any Affiliate on the Grant Date.

### (rr)   ***“Termination”*****means that the Awardee has ceased to be, withor without any cause or reason, an Employee, Director or Consultant.  However, unless so determined by theAdministrator, or otherwise provided in this Plan, “Termination” shall notinclude a change in status from an Employee, Consultant or Director to anothersuch status.  An event that causes anAffiliate to cease being an Affiliate shall be treated as the “Termination” ofthat Affiliate’s Employees, Directors, and Consultants.

**2.2****          Rules of Interpretation.**  Any reference to a “Section,” without more,is to a Section of this Plan.  Captionsand titles are used for convenience in this Plan and shall not, by themselves,determine the meaning of this Plan. Except when otherwise indicated by the context, the singular includesthe plural and vice versa.  Any referenceto a statute is also a reference to the applicable rules and regulationsadopted under that statute.  Anyreference to a statute, rule or regulation, or to a section of a statute, ruleor regulation, is a reference to that statute, rule, regulation, or section asamended from time to time, both before and after the effective date of thisPlan and including any successor provisions.

# **3.****             Shares Subject tothis Plan; Term of this Plan**

**3.1****          Number of Award Shares.**  The Shares issuable under this Planshall be authorized but unissued or reacquired Shares, including but notlimited to Shares****repurchased bythe Company on the open market.  Subjectto adjustment under Section 10, the maximum number of Shares that may be issuedunder this Plan is 5,000,000.  When anAward is granted, the maximum number of Shares that may be issued under thisPlan shall be reduced by the number of Shares covered by that Award.  However, if an Award 

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later terminates orexpires without having been exercised in full, the maximum number of sharesthat may be issued under this Plan shall be increased by the number of Sharesthat were covered by, but not purchased under, that Award.  By contrast, the repurchase of Shares by theCompany shall not increase the maximum number of Shares that may be issuedunder this Plan.

## **3.2****         ****Term of this Plan.**

### (a)           This Plan shall be effective on, and Awardsmay be granted under this Plan after, the date it has been both adopted by theBoard and approved by the Company’s shareholders (the “*Effective Date*”).

### (b)           Subject to the provisions of Section 14,Awards may be granted under this Plan for a period of ten years from theearlier of the date on which the Board approves this Plan and the date theCompany’s shareholders approve this Plan. Accordingly, Awards may not be granted under this Plan after ten yearsfrom the earlier of those dates.

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

## **4.1****         ****General.**

### (a)           The Board shall have ultimate responsibilityfor administering this Plan.  The Boardmay delegate certain of its responsibilities to a Committee, which shallconsist of at least two members of the Board. The Board or the Committee may further delegate its responsibilities toany Employee of the Company or any Affiliate. Where this Plan specifies that an action is to be taken or adetermination made by the Board, only the Board may take that action or makethat determination.  Where this Planspecifies that an action is to be taken or a determination made by theCommittee, only the Committee may take that action or make thatdetermination.  Where this Planreferences the “Administrator,” the action may be taken or determination madeby the Board, the Committee, or other Administrator.  However, only the Board or the Committee mayapprove grants of Awards to Executives and such other participants as may bespecifically designated by the Board, and an Administrator other than the Boardor the Committee may grant Awards only within guidelines established by theBoard or Committee.  Moreover, allactions and determinations by any Administrator are subject to the provisionsof this Plan.

### (b)           So long as the Company has registered andoutstanding a class of equity securities under Section 12 of the ExchangeAct, the Committee shall consist of Company Directors who are “Non-EmployeeDirectors” as defined in Rule 16b-3 and, after the expiration of anytransition period permitted by Treasury RegulationsSection 1.162-27(h)(3), who are “outside directors” as defined inSection 162(m) of the Code.

**4.2****          Authority of theAdministrator. **Subject to the otherprovisions of this Plan, the Administrator shall have the authority to:

### (a)           grant Awards, including Substitute Awards;

### (b)           determine the Fair Market Value of Shares;

### (c)           determine the Option Price and the PurchasePrice of Awards;

### (d)           select the Awardees;

### (e)           determine the times Awards are granted;

### (f)            determine the number of Shares subject toeach Award;

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### (g)           determine the methods of payment that may beused to purchase Award Shares;

### (h)           determine the methods of payment that may beused to satisfy withholding tax obligations;

### (i)            determine the other terms of each Award,including but not limited to the time or times at which Awards may beexercised, whether and under what conditions an Award is assignable, andwhether an Option is a Nonstatutory Option or an Incentive Stock Option;

### (j)            modify or amend any Award;

### (k)           authorize any person to sign any AwardAgreement or other document related to this Plan on behalf of the Company;

### (l)            determine the form of any Award Agreement orother document related to this Plan, and whether that document, includingsignatures, may be in electronic form;

### (m)          interpret this Plan and any Award Agreementor document related to this Plan;

### (n)           correct any defect, remedy any omission, orreconcile any inconsistency in this Plan, any Award Agreement or any otherdocument related to this Plan;

### (o)           adopt, amend, and revoke rules andregulations under this Plan, including rules and regulations relating tosub-plans and Plan addenda;

### (p)           adopt, amend, and revoke special rules andprocedures which may be inconsistent with the terms of this Plan, set forth (ifthe Administrator so chooses) in sub-plans regarding (for example) theoperation and administration of this Plan and the terms of Awards, if and tothe extent necessary or useful to accommodate non-U.S. Applicable Laws andpractices as they apply to Awards and Award Shares held by, or granted orissued to, persons working or resident outside of the United States or employedby Affiliates incorporated outside the United States;

### (q)           in the case of the Board, determine whether atransaction or event should be treated as a Change in Control, a Divestiture orneither;

### (r)            determine the effect of a FundamentalTransaction and, if the Board determines that a transaction or event should betreated as a Change in Control or a Divestiture, then the effect of that Changein Control or Divestiture; and

### (s)           make all other determinations theAdministrator deems necessary or advisable for the administration of this Plan.

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**4.3****          Scope ofDiscretion. **Subject to the lastsentence of this Section 4.3, on all matters for which this Plan confers theauthority, right or power on the Board, the Committee, or other Administratorto make decisions, that body may make those decisions.  Those decisions will be final, binding andconclusive.  Moreover, but again subjectto the last sentence of this Section 4.3, in making those decisions, the Board,Committee or other Administrator need not treat all persons eligible to receiveAwards, all Awardees, all Awards or all Award Shares the same way.  However, except as provided inSection 14.3, the discretion of the Board, Committee or otherAdministrator is subject to the specific provisions and specific limitations ofthis Plan, as well as all rights conferred on specific Awardees by AwardAgreements and other agreements.

# **5.****             Participants Eligibleto Receive Awards**

**5.1****          Eligible Participants.**  Awards (including Substitute Awards) may begranted to, and only to, Employees, Directors and Consultants, including toprospective Employees, Directors and Consultants conditioned on the beginningof their service for the Company or an Affiliate.  However, Incentive Stock Options may only begranted to Employees, as provided in Section 7(g).

## **5.2****        ****Section 162(m) Limitation.**

### (a)**          ****Options.**  Solong as the Company is a “publicly held corporation” within the meaning ofSection 162(m) of the Code: (i) no Employee may be granted one or moreOptions within any fiscal year of the Company under this Plan to purchase morethan 500,000 Shares under Options, subject to adjustment pursuant to Section10, (ii) Options may be granted to an Executive only by the Committee(and, notwithstanding Section 4.1(a), not by the Board).  If an Option is cancelled without beingexercised or if the Option Price of an Option is reduced, that cancelled orrepriced Option shall continue to be counted against the limit on Awards thatmay be granted to any participant under this Section 5.2.  Notwithstanding anything herein to thecontrary, in connection with his or her initial employment with the Company oran Affiliate, a new Employee or prospective Employee shall be eligible toreceive up to a maximum of 750,000 Shares under Options (subject to adjustmentpursuant to Section 10), which Shares shall not be counted toward the 500,000 limitationset forth in this Section 5.2(a).

### (b)**          ****Stock Awards. **Any Stock Award intended as “qualified performance-based compensation”within the meaning of Section 162(m) of the Code must vest or becomeexercisable contingent on the achievement of one or more ObjectivelyDeterminable Performance Conditions.  TheCommittee shall have the discretion to determine the time and manner ofcompliance with Section 162(m) of the Code.

# **6.****             Terms and Conditionsof Options**

Thefollowing rules apply to all Options:

### **6.1****           ****Price**.** **No Option intended as “qualified incentive-based compensation” withinthe meaning of Section 162(m) of the Code may have an Option Price lessthan 100% of the Fair Market Value of the Shares on the Grant Date.  In no event will the Option Price of anyOption be less than the par value of the Shares issuable under the Option ifthat is required by Applicable Law.  TheOption Price of an Incentive Stock Option shall be subject toSection 7(f).

**6.2****          Term.** No Option shall be exercisable after its Expiration Date.  No Option may have an Expiration Date that ismore than ten years after its Grant Date. Additional provisions regarding the term of Incentive Stock Options areprovided in Sections 7(a) and 7(e).

**6.3****          Vesting.** Options shall be exercisable: (a) on the Grant Date, or (b) inaccordance with a schedule related to the Grant Date, the date the Awardee’sdirectorship, employment or consultancy begins, or a different date specifiedin the Award Agreement.  If so providedin the Award Agreement, an Option may be exercisable subject to the applicationof Reverse Vesting to the Option Shares. Additional 

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provisionsregarding the vesting of Incentive Stock Options are provided inSection 7(c).  No Option granted toan individual who is subject to the overtime pay provisions of the Fair LaborStandards Act may be exercised before the expiration of six months after theGrant Date.

## **6.4****         ****Form and Method of Payment.**

### (a)           The Administrator shall determine theacceptable form and method of payment for exercising an Option.

### (b)           Acceptable forms of payment for all OptionShares are cash, check or wire transfer, denominated in U.S. dollars except asspecified by the Administrator for non-U.S. Employees or non-U.S. sub-plans.

### (c)           In addition, the Administrator may permitpayment to be made by any of the following methods:

#### (i)            otherShares, or the designation of other Shares, which (A) are “mature” sharesfor purposes of avoiding variable accounting treatment under generally acceptedaccounting principles (generally mature shares are those that have been ownedby the Awardee for more than six months on the date of surrender), and (B) havea Fair Market Value on the date of surrender equal to the Option Price of theShares as to which the Option is being exercised;

#### (ii)           providedthat a public market exists for the Shares, consideration received by theCompany under a procedure under which a licensed broker-dealer advances fundson behalf of an Awardee or sells Option Shares on behalf of an Awardee (a “*Cashless Exercise Procedure*”), providedthat if the Company extends or arranges for the extension of credit to anAwardee under any Cashless Exercise Procedure, no Officer or Director mayparticipate in that Cashless Exercise Procedure;

#### (iii)          subject to Section 6.4(e), one or morepromissory notes meeting the requirements of Section 6.4(e) provided,however, that promissory notes may not be used for any portion of an Awardwhich is not vested at the time of exercise;

#### (iv)          cancellation of any debt owed by the Companyor any Affiliate to the Awardee including without limitation waiver ofcompensation due or accrued for services previously rendered to the Company oran Affiliate; and

#### (v)           any combination of the methods of paymentpermitted by any paragraph of this Section 6.4.

### (d)           The Administrator may also permit any otherform or method of payment for Option Shares permitted by Applicable Law.

### (e)           The promissory notes referred to inSection 6.4(c)(iii) shall be full recourse.  Unless the Administrator specifies otherwiseafter taking into account any relevant accounting issues, the promissory notesshall bear interest at a fair market value rate when the Option isexercised.  Interest on the promissorynotes shall also be at least sufficient to avoid imputation of interest underSections 483, 1274, and 7872 of the Code. The promissory notes and their administration shall at all times complywith any applicable margin rules of the Federal Reserve.  The promissory notes may also include suchother terms as the Administrator specifies. Payment may not be made by promissory note by Officers or Directors ifShares are registered under Section 12 of the Exchange Act.

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**6.5          Assignabilityof Options.**  Except asdetermined by the Administrator, no Option shall be assignable or otherwisetransferable by the Awardee except by will or by the laws of descent anddistribution.  However, Options may betransferred and exercised in accordance with a Domestic Relations Order and maybe exercised by a guardian or conservator appointed to act for theAwardee.  Incentive Stock Options mayonly be assigned in compliance with Section 7(h).

**6.6          SubstituteOptions.**  The Board maycause the Company to grant Substitute Options in connection with theacquisition by the Company or an Affiliate of equity securities of any entity(including by merger, tender offer, or other similar transaction) or of all ora portion of the assets of any entity.  Any such substitution shall be effective onthe effective date of the acquisition. Substitute Options may be Nonstatutory Options or Incentive StockOptions.  Unless and to the extentspecified otherwise by the Board, Substitute Options shall have the same termsand conditions as the options they replace, except that (subject to theprovisions of Section 10) Substitute Options shall be Options to purchaseShares rather than equity securities of the granting entity and shall have anOption Price determined by the Board.

# **7.             Incentive Stock Options**

Thefollowing rules apply only to Incentive Stock Options and only to the extentthese rules are more restrictive than the rules that would otherwise applyunder this Plan.  With the consent of theAwardee, or where this Plan provides that an action may be takennotwithstanding any other provision of this Plan, the Administrator may deviatefrom the requirements of this Section, notwithstanding that any Incentive StockOption modified by the Administrator will thereafter be treated as aNonstatutory Option.

### (a)           The Expiration Date of an Incentive Stock Option shall notbe later than ten years from its Grant Date, with the result that no IncentiveStock Option may be exercised after the expiration of ten years from its GrantDate.

### (b)           No Incentive Stock Option may be granted more than tenyears from the date this Plan was approved by the Board.

### (c)           Options intended to be incentive stock options underSection 422 of the Code that are granted to any single Awardee under allincentive stock option plans of the Company and its Affiliates, includingincentive stock options granted under this Plan, may not vest at a rate of morethan $100,000 (or such other amount that may be hereafter specified in theapplicable section of the Code) in Fair Market Value of stock (measured on thegrant dates of the options) during any calendar year.  For this purpose, an option vests withrespect to a given share of stock the first time its holder may purchase thatshare, notwithstanding any right of the Company to repurchase that share.  Unless the administrator of that option planspecifies otherwise in the related agreement governing the option, this vestinglimitation shall be applied by, to the extent necessary to satisfy this$100,000 (or other amount) rule, by treating certain stock options that wereintended to be incentive stock options under Section 422 of the Code asNonstatutory Options.  The stock optionsor portions of stock options to be reclassified as Nonstatutory Options are thosewith the highest option prices, whether granted under this Plan or any otherequity compensation plan of the Company or any Affiliate that permits thattreatment.  This Section 7(c) shallnot cause an Incentive Stock Option to vest before its original vesting date orcause an Incentive Stock Option that has already vested to cease to be vested.

### (d)           In order for an Incentive Stock Option to be exercised forany form of payment other than those described in Section 6.4(b), that form ofpayment must be stated at the time of grant in the Award Agreement relating tothat Incentive Stock Option.

### (e)           Any Incentive Stock Option granted to a Ten PercentShareholder must have an Expiration Date that is not later than five years fromits Grant Date, with the result that no such Option may be exercised after theexpiration of five years from the Grant Date.

### (f)            The Option Price of an Incentive Stock Option shall neverbe less than the Fair Market Value of the Shares at the Grant Date.  The Option Price for the Shares covered by anIncentive Stock 

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### Option granted to a Ten Percent Shareholder shall never be less than110% of the Fair Market Value of the Shares at the Grant Date.

### (g)           Incentive Stock Options may be granted only toEmployees.  If an Awardee changes statusfrom an Employee to a Consultant, that Awardee’s Incentive Stock Options becomeNonstatutory Options if not exercised within the time period described inSection 7(i) (determined by treating that change in status as aTermination solely for purposes of this Section 7(g)).

### (h)           No rights under an Incentive Stock Option may betransferred by the Awardee, other than by will or the laws of descent anddistribution.  During the life of theAwardee, an Incentive Stock Option may be exercised only by the Awardee.  The Company’s compliance with a DomesticRelations Order, or the exercise of an Incentive Stock Option by a guardian orconservator appointed to act for the Awardee, shall not violate this Section7(h).

### (i)            An Incentive Stock Option shall be treated as a NonstatutoryOption if it remains exercisable after, and is not exercised within, thethree-month period beginning with the Awardee’s Termination for any reasonother than the Awardee’s death or disability (as defined in Section 22(e) ofthe Code).  In the case of Terminationdue to death, an Incentive Stock Option shall continue to be treated as anIncentive Stock Option if it remains exercisable after, and is not exercisedwithin, the three-month period after the Awardee’s Termination provided it isexercised before the Expiration Date.  Inthe case of Termination due to disability, an Incentive Stock Option shall betreated as a Nonstatutory Option if it remains exercisable after, and is notexercised within, one year after the Awardee’s Termination.

### (j)            An Incentive Stock Option may only be modified by theBoard or the Committee.

# **8.             Stock Awards**

**8.1          General.**  The specific terms and conditions of a StockAward applicable to the Awardee shall be provided for in the Award Agreement.The Award Agreement shall state the number of Shares that the Awardee shall beentitled to receive or purchase, the terms and conditions on which the Sharesshall vest, the price to be paid and, if applicable, the time within which theAwardee must accept such offer. The offer shall be accepted by execution of theAward Agreement.  The Administrator mayrequire that all Shares subject to a right of repurchase or risk of forfeiturebe held in escrow until such repurchase right or risk of forfeiturelapses.  The grant or vesting of a StockAward may be made contingent on the achievement of Objectively DeterminablePerformance Conditions.

**8.2          Right ofRepurchase.**  If soprovided in the Award Agreement, Award Shares acquired pursuant to a StockAward may be subject to repurchase by the Company or an Affiliate if not vestedin accordance with the Award Agreement.

**8.3          Form ofPayment for Stock Awards.** The Administrator shall determine the acceptable form and method ofpayment for exercising a Stock Award. Acceptable forms of payment for all Award Shares are cash, check or wiretransfer, denominated in U.S. dollars except as specified by the Administratorfor non-U.S. Employees or non-U.S. sub-plans. In addition, the Administrator may permit payment to be made by any ofthe methods permitted with respect to the exercise of Options pursuant toSection 6.4.

**8.4          Nonassignabilityof Stock Awards.** Except as determined by the Administrator, no Stock Award shall beassignable or otherwise transferable by the Awardee except by will or by thelaws of descent and distribution (including without limitation Section17).  Notwithstanding anything to thecontrary herein, Stock Awards may be transferred and exercised in accordancewith a Domestic Relations Order.

**8.5          SubstituteStock Award.**  The Boardmay cause the Company to grant Substitute Stock Awards in connection with theacquisition by the Company or an Affiliate of equity securities of any entity(including by merger, tender offer, or other similar transaction) or of all ora portion of the assets of any 

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entity.  Any such substitution shall be effective onthe effective date of the acquisition. Unless and to the extent specified otherwise by the Board, SubstituteStock Awards shall have the same terms and conditions as the stock awards theyreplace, except that (subject to the provisions of Section 10) SubstituteStock Awards shall be Stock Awards to purchase Shares rather than equitysecurities of the granting entity and shall have a Purchase Price that, asdetermined by the Board in its sole and absolute discretion, properly reflectsthe substitution.

**8.6          MaximumNumber of Stock Awards.** The maximum aggregate number of Shares that may be issued pursuant toStock Awards under this Plan shall not exceed ten percent (10%) of the numberof Shares that may be issued pursuant to this Plan under Section 3.1.

# **9.****                                     ****Exercise of Awards**

**9.1          In General.**  An Award shall be exercisable in accordancewith this Plan and the Award Agreement under which it is granted.

**9.2          Time ofExercise.**  Options andStock Awards shall be considered exercised when the Company receives:(a) written notice of exercise from the person entitled to exercise theOption or Stock Award, (b) full payment, or provision for payment, in a formand method approved by the Administrator, for the Shares for which the Optionor Stock Award is being exercised, and (c) with respect to NonstatutoryOptions, payment, or provision for payment, in a form approved by theAdministrator, of all applicable withholding taxes due upon exercise.  An Award may not be exercised for a fractionof a Share.

**9.3          Issuance ofAward Shares.**  TheCompany shall issue Award Shares in the name of the person properly exercisingthe Award.  If the Awardee is that personand so requests, the Award Shares shall be issued in the name of the Awardeeand the Awardee’s spouse.  The Companyshall endeavor to issue Award Shares promptly after an Award is exercised.  Until Award Shares are actually issued, asevidenced by the appropriate entry on the stock register of the Company or itstransfer agent, the Awardee will not have the rights of a shareholder withrespect to those Award Shares, even though the Awardee has completed all thesteps necessary to exercise the Award. No adjustment shall be made for any dividend, distribution, or otherright for which the record date precedes the date the Award Shares are issued,except as provided in Section 10.

## **9.4          Termination.**

### (a)**           In General.** Except as provided in an Award Agreement or in writing by theAdministrator, and as otherwise provided in Sections 9.4(b), (c), (d) and(e) after an Awardee’s Termination, the Awardee’s Awards shall be exercisableto the extent (but only to the extent) they are vested on the date of thatTermination and only during the three months after the Termination, but in noevent after the Expiration Date.  To theextent the Awardee does not exercise an Award within the time specified forexercise, the Award shall automatically terminate.

### (b)**           Leaves of Absence.** Unless otherwise provided in the Award Agreement or in writing by theAdministrator, no Award may be exercised more than three months after thebeginning of a leave of absence, other than a personal or medical leaveapproved by an authorized representative of the Company with employmentguaranteed upon return.  Awards shall notcontinue to vest during a leave of absence, unless otherwise determined inwriting by the Administrator with respect to an approved personal or medicalleave with employment guaranteed upon return.

### (c)**           Death or Disability.** Unless otherwise provided in the Award Agreement or in writing by theAdministrator, if an Awardee’s Termination is due to death or disability (asdetermined by the Administrator with respect to all Awards other than IncentiveStock Options and as defined by Section 22(e) of the Code with respect toIncentive Stock Options), all Awards of that Awardee to the extent exercisableat the date of that Termination may be exercised for one year after thatTermination, but in no event after the Expiration Date.  In the case of Termination 

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### dueto death, an Award may be exercised as provided in Section 17.  In the case of Termination due to disability,if a guardian or conservator has been appointed to act for the Awardee and beengranted this authority as part of that appointment, that guardian orconservator may exercise the Award on behalf of the Awardee.  Death or disability occurring after anAwardee’s Termination shall not cause the Termination to be treated as havingoccurred due to death or disability.  Tothe extent an Award is not so exercised within the time specified for itsexercise, the Award shall automatically terminate.

### (d)**           Divestiture.**  If anAwardee’s Termination is due to a Divestiture, the Board may take any one ormore of the actions described in Section 10.3 or 10.4 with respect to theAwardee’s Awards.

### (e)**           Termination for Cause.**  Inthe discretion of the Administrator, which may be exercised on the date ofgrant, or at a date later in time, if an Awardee’s Termination is due to Cause,all of the Awardee’s Awards shall automatically terminate and cease to beexercisable at the time of Termination.  “*Cause*” means employment-relateddishonesty, fraud, misconduct or disclosure or misuse of confidentialinformation, or other employment-related conduct that is likely to causesignificant injury to the Company, an Affiliate, or any of their respectiveemployees, officers or directors (including, without limitation, commission ofa felony or similar offense whether or not employment-related), in each case asdetermined by the Administrator.  “Cause”shall not require that a civil judgment or criminal conviction have beenentered against or guilty plea shall have been made by the Awardee regardingany of the matters referred to in the previous sentence.  Accordingly, the Administrator shall beentitled to determine “Cause” based on the Administrator’s good faithbelief.  If the Awardee is criminallycharged with a felony or similar offense, that shall be a sufficient, but not anecessary, basis for such a belief.

### (f)**            Administrator Discretion.** Notwithstanding the provisions of Section 9.4 (a)-(e), the Administratorshall have complete discretion, exercisable either at the time an Award isgranted or at any time while the Award remains outstanding, to:

#### (i)            Extend the period oftime for which the Award is to remain exercisable, following the Awardee’sTermination, from the limited exercise period otherwise in effect for thatAward to such greater period of time as the Administrator shall deemappropriate, but in no event beyond the Expiration Date; and/or

#### (ii)           Permit the Award tobe exercised, during the applicable post-Termination exercise period, not onlywith respect to the number of vested Shares for which such Award may beexercisable at the time of the Awardee’s Termination but also with respect toone or more additional installments in which the Awardee would have vested hadthe Awardee not been subject to Termination.

### (g)**           Consulting or EmploymentRelationship.** Nothing inthis Plan or in any Award Agreement, and no Award or the fact that Award Sharesremain subject to repurchase rights, shall: (A) interfere with or limit the right of the Company or anyAffiliate to terminate the employment or consultancy of any Awardee at any time,whether with or without cause or reason, and with or without the payment ofseverance or any other compensation or payment, (B) interfere with theapplication of any provision in any of the Company’s or any Affiliate’s charterdocuments or Applicable Law relating to the election, appointment, term ofoffice, or removal of a Director or (C) interfere with the Company’s right toterminate any consultancy.

### **10.          Certain Transactionsand Events**

**10.1        In General.**  Except as provided in this Section 10, nochange in the capital structure of the Company, merger, sale or otherdisposition of assets or a subsidiary, change in control, issuance by theCompany of shares of any class of securities or securities convertible intoshares of any class of securities, exchange or conversion of securities, orother transaction or event shall require or be the occasion for any 

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adjustments of thetype described in this Section 10. Additional provisions with respect to the foregoing transactions are setforth in Section 14.3.

**10.2        Changes inCapital Structure.**  Inthe event of any stock split, reverse stock split, recapitalization,combination or reclassification of stock, stock dividend, spin-off, orsimilar change to the capital structure of the Company (not including aFundamental Transaction or Change in Control), the Board shall make whateveradjustments it concludes are appropriate to: (a) the number and type ofAwards that may be granted under this Plan, (b) the number and type ofOptions that may be granted to any participant under this Plan, (c) thePurchase Price and number and class of securities issuable under eachoutstanding Stock Award, (d) the Option Price and number and class ofsecurities issuable under each outstanding Option, and (e) the repurchase priceof any securities substituted for Award Shares that are subject to repurchaserights.  The specific adjustments shallbe determined by the Board.  Unless theBoard specifies otherwise, any securities issuable as a result of any suchadjustment shall be rounded down to the next lower whole security.  The Board need not adopt the same rules foreach Award or each Awardee.

**10.3        FundamentalTransactions.**  Exceptfor grants to Non-Employee Directors pursuant to Section 11, in the event of(a) a merger or consolidation in which the Company is not the surviving corporation(other than a merger or consolidation with a wholly-owned subsidiary, 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 Awards granted under this Planare assumed, converted or replaced by the successor corporation, whichassumption shall be binding on all participants under this Plan), (b) a mergerin which the Company is the surviving corporation but after which theshareholders of the Company immediately prior to such merger (other than anyshareholder that merges, or which owns or controls another corporation thatmerges, with the Company in such merger) cease to own their shares or otherequity interest in the Company, (c) the sale of all or substantially all of theassets of the Company, or (d) the acquisition, sale, or transfer of more than50% of the outstanding shares of the Company by tender offer or similartransaction (each, a “***FundamentalTransaction***”), any or all outstanding Awards may be assumed,converted or replaced by the successor corporation (if any), which assumption,conversion or replacement shall be binding on all participants under thisPlan.  In the alternative, the successorcorporation may substitute equivalent Awards or provide substantially similarconsideration to participants as was provided to the Company’s shareholders(after taking into account the existing provisions of the Awards).  The successor corporation may also issue, inplace of outstanding Shares held by participants, substantially similar sharesor other property subject to repurchase restrictions no less favorable to theparticipants. In the event such successor corporation (if any) does not assumeor substitute Awards, as provided above, pursuant to a transaction described inthis Section 10.3, the vesting with respect to such Awards shall fully andimmediately accelerate or the repurchase rights of the Company shall fully andimmediately terminate, as the case may be, so that the Awards may be exercisedor the repurchase rights shall terminate before, or otherwise in connectionwith the closing or completion of the Fundamental Transaction or event, butthen terminate.  Notwithstanding anythingin this Plan to the contrary, the Board may, in its sole discretion, providethat the vesting of any or all Award Shares subject to vesting or a right ofrepurchase shall accelerate or lapse, as the case may be, upon a transactiondescribed in this Section 10.3. If the Board exercises such discretion withrespect to Options, such Options shall become exercisable in full prior to theconsummation of such event at such time and on such conditions as the Boarddetermines, and if such Options are not exercised prior to the consummation ofthe Fundamental Transaction, they shall terminate at such time as determined bythe Board.  The Board need not adopt thesame rules for each Award or each Awardee. Subject to any greater rights granted to participants under theforegoing provisions of this Section 10.3, in the event of the occurrence ofany Fundamental Transaction, any outstanding Awards shall be treated asprovided in the applicable agreement or plan of merger, consolidation,dissolution, liquidation, or sale of assets.

**10.4        Changes inControl.**  The Board mayalso, but need not, specify that other transactions or events constitute a “***Change in Control***”.  The Board may do that either before or afterthe transaction or event occurs. Examples of transactions or events that the Board may treat as Changesin Control are: (a) any person or entity, including a “group” ascontemplated by Section 13(d)(3) of the Exchange Act, acquires securities holding 50% ormore of the total combined voting power or value of the Company, or (b) asa result of or in connection with a contested election of Company Directors,the persons who were 

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Company Directorsimmediately before the election cease to constitute a majority of theBoard.  In connection with a Change inControl, notwithstanding any other provision of this Plan, the Board may, butneed not, take any one or more of the actions described in Section 10.3.  In addition, the Board may extend the datefor the exercise of Awards (but not beyond their original ExpirationDate).  The Board need not adopt the samerules for each Award or each Awardee.

**10.5        Divestiture.**  If the Company or an Affiliate sells orotherwise transfers equity securities of an Affiliate to a person or entityother than the Company or an Affiliate, or leases, exchanges or transfers allor any portion of its assets to such a person or entity, then the Board mayspecify that such transaction or event constitutes a “***Divestiture***”.  In connection with a Divestiture,notwithstanding any other provision of this Plan, the Board may, but need not,****take one or more of the actions describedin Section 10.3 or 10.4 with respect to Awards or Award Shares held by, forexample, Employees, Directors or Consultants for whom that transaction or eventresults in a Termination.  The Board neednot adopt the same rules for each Award or each Awardee.

**10.6        Dissolution.**  If the Company adopts a plan of dissolution,the Board may cause Awards to be fully vested and exercisable (but not aftertheir Expiration Date) before the dissolution is completed but contingent onits completion and may cause the Company’s repurchase rights on Award Shares tolapse upon completion of the dissolution. The Board need not adopt the same rules for each Award or eachAwardee.  However, to the extent notexercised before the earlier of the completion of the dissolution, Awards shallterminate immediately prior to the dissolution.

## **11.          Automatic OptionGrants to Non-Employee Directors.**

## **11.1        Automatic Option Grants to Non-Employee Directors.**

### (a)**           Annual Grant.**  Onthe date of the last regular meeting of directors during each calendar yeareach individual who is serving as a Non-Employee Director shall automaticallybe granted a Nonstatutory Option to purchase 15,000 Shares (the “*Annual Grant*”), provided, however, thatsuch individual has served as a Non-Employee Director for at least six months.

### (b)**           Initial Grant.**  Uponthe first appointment or election of an individual as a Non-Employee Director,such individual shall automatically be granted a Nonstatutory Option to purchase25,000 Shares (the “*Initial Grant*”).

### (c)**           Exercise Price.**

#### (i)            The Option Priceshall be equal to one hundred percent (100%) of the Fair Market Value of theShares on the Option grant date.

#### (ii)           The Option Priceshall be payable in one or more of the alternative forms authorized pursuant toSection 6.4.  Except to the extent thesale and remittance procedure specified thereunder is utilized, payment of theOption Price must be made on the date of exercise.

### (d)**           Option Term.**  EachOption shall have a term of ten (10) years measured from the Option grant date.

### (e)**           Exercise and Vesting of Options.**  TheShares underlying each Option issued pursuant to each Initial Grant shall vestand be exercisable in a series of forty-eight (48) successive equal monthlyinstallments at the end of each full month from the date of grant, for so longas the Non-Employee Director continuously remains a Director. The Sharesunderlying each Option issued pursuant to each Annual Grant shall vest and beexercisable in a series of twelve (12) successive equal monthly installments atthe end of each full month from the date of grant, for so long as theNon-Employee Director continuously remains a Director.

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### (f)**            Terminationof Board Service.**  The following provisions shall govern the exerciseof any Options held by the Awardee at the time the Awardee ceases to serve as aNon-Employee Director:

#### (i)            ***In General*****.**  Except as otherwise provided in Section 11.3,after cessation of service as a Director (the “*CessationDate*”), the Awardee’s Options shall be exercisable to the extent(but only to the extent) they are vested on the Cessation Date and only duringthe three months after such Cessation Date, but in no event after theExpiration Date.  To the extent theAwardee does not exercise an Option within the time specified for exercise, theOption shall automatically terminate.

#### (ii)           ***Death or Disability*****.**  If anAwardee’s cessation of service on the Board is due to death or disability (asdetermined by the Board), all Non-Employee Director Options of that Awardee,whether or not exercisable upon such Cessation Date, may be exercised at anytime on or prior to the Expiration Date. In the case of a cessation of service due to death, an Option may beexercised as provided in Section 17. In the case of a cessation of service due to disability, if a guardianor conservator has been appointed to act for the Awardee and been granted thisauthority as part of that appointment, that guardian or conservator mayexercise the Option on behalf of the Awardee. Death or disability occurring after an Awardee’s cessation of serviceshall not cause the cessation of service to be treated as having occurred dueto death or disability.  To the extent anOption is not so exercised within the time specified for its exercise, theOption shall automatically terminate.

## **11.2        Certain Transactionsand Events.**

### (a)           In the event of a FundamentalTransaction while the Awardee remains a Non-Employee Director, the Shares atthe time subject to each outstanding Option held by such Awardee pursuant toSection 11, but not otherwise vested, shall automatically vest in full so thateach such Option shall, immediately prior to the effective date of theFundamental Transaction, become exercisable for all the Shares as fully vestedShares and may be exercised for any or all of those vested Shares. Immediatelyfollowing the consummation of the Fundamental Transaction, each Option shallterminate and cease to be outstanding, except to the extent assumed by thesuccessor corporation (or Affiliate thereof).

### (b)           In the event of a Change in Controlwhile the Awardee remains a Non-Employee Director, the Shares at the timesubject to each outstanding Option held by such Awardee pursuant to Section 11,but not otherwise vested, shall automatically vest in full so that each suchOption shall, immediately prior to the effective date of the Change in Control,become exercisable for all the Shares as fully vested Shares and may beexercised for any or all of those vested Shares. Each such Option shall remainexercisable for such fully vested Shares until the expiration or soonertermination of the Option term in connection with a Change in Control.

### (c)           Each Option which isassumed in connection with a Fundamental Transaction shall be appropriatelyadjusted, immediately after such Fundamental Transaction, to apply to thenumber and class of securities which would have been issuable to the Awardee inconsummation of such Fundamental Transaction had the Option been exercisedimmediately prior to such Fundamental Transaction. Appropriate adjustmentsshall also be made to the Option Price payable per share under each outstandingOption, provided the aggregate Option Price payable for such securities shallremain the same.

### (d)           The grant of Optionspursuant to Section 11 shall in no way affect the right of the Company toadjust, reclassify, reorganize or otherwise change its capital or businessstructure or to merge, consolidate, dissolve, liquidate or sell or transfer allor any part of its business or assets.

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### (e)           The remaining termsof each Option granted pursuant to Section 11 shall, as applicable, be the sameas terms in effect for Awards granted under this Plan.  Notwithstanding the foregoing, the provisionsof Section 9.4 and Section 10 shall not apply to Options granted pursuant toSection 11.

**11.3        LimitedTransferability of Options.** Each Option granted pursuant to Section 11 may be assigned in whole orin part during the Awardee’s lifetime to one or more members of the Awardee’sfamily or to a trust established exclusively for one or more such familymembers or to an entity in which the Awardee is majority owner or to theAwardee’s former spouse, to the extent such assignment is in connection withthe Awardee’s estate or financial plan or pursuant to a Domestic RelationsOrder. The assigned portion may only be exercised by the person or persons whoacquire a proprietary interest in the Option pursuant to the assignment. Theterms applicable to the assigned portion shall be the same as those in effectfor the Option immediately prior to such assignment and shall be set forth insuch documents issued to the assignee as the Administrator may deemappropriate. The Awardee may also designate one or more persons as thebeneficiary or beneficiaries of his or her outstanding Options under Section11, and those Options shall, in accordance with such designation, automaticallybe transferred to such beneficiary or beneficiaries upon the Awardee’s deathwhile holding those Options. Such beneficiary or beneficiaries shall take thetransferred Options subject to all the terms and conditions of the applicableAward Agreement evidencing each such transferred Option, including withoutlimitation, the limited time period during which the Option may be exercisedfollowing the Awardee’s death.

# **12.          Withholding and Tax Reporting**

## **12.1        Tax Withholding Alternatives.**

### (a)           **General.** Whenever Award Shares are issued or become free of restrictions, theCompany may require the Awardee to remit to the Company an amount sufficient tosatisfy any applicable tax withholding requirement, whether the related tax isimposed on the Awardee or the Company. The Company shall have no obligation to deliver Award Shares or releaseAward Shares from an escrow or permit a transfer of Award Shares until the Awardeehas satisfied those tax withholding obligations.

### (b)           **Method of Payment.**  TheAwardee shall pay any required withholding using the forms of considerationdescribed in Section 6.4(b), except that, in the discretion of theAdministrator, the Company may also permit the Awardee to use any of the formsof payment described in Section 6.4(c). The Administrator, in its sole discretion, may also permit Award Sharesto be withheld to pay required withholding. If the Administrator permits Award Shares to be withheld, the FairMarket Value of the Award Shares withheld, as determined as of the date ofwithholding, shall not exceed the amount determined by the applicable minimumstatutory withholding rates.

**12.2        Reportingof Dispositions.**  Anyholder of Option Shares acquired under an Incentive Stock Option shall promptlynotify the Administrator, following such procedures as the Administrator mayrequire, of the sale or other disposition of any of those Option Shares if thedisposition occurs during:  (a) thelonger of two years after the Grant Date of the Incentive Stock Option and oneyear after the date the Incentive Stock Option was exercised, or (b) suchother period as the Administrator has established.

# **13.****                               Compliancewith Law**

Thegrant of Awards and the issuance and subsequent transfer of Award Shares shallbe subject to compliance with all Applicable Law, including all applicablesecurities laws.  Awards may not beexercised, and Award Shares may not be transferred, in violation of ApplicableLaw.  Thus, for example, Awards may notbe exercised unless:  (a) aregistration statement under the Securities Act is then in effect with respectto the related Award Shares, or (b) in the opinion of legal counsel to theCompany, those Award Shares may be issued in accordance with an applicableexemption from the registration 

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requirements ofthe Securities Act and any other applicable securities laws.  The failure or inability of the Company toobtain from any regulatory body the authority considered by the Company’s legalcounsel to be necessary or useful for the lawful issuance of any Award Sharesor their subsequent transfer shall relieve the Company of any liability forfailing to issue those Award Shares or permitting their transfer.  As a condition to the exercise of any Awardor the transfer of any Award Shares, the Company may require the Awardee tosatisfy any requirements or qualifications that may be necessary or appropriateto comply with or evidence compliance with any Applicable Law.

# **14.          Amendment or Termination of this Planor Outstanding Awards**

**14.1        Amendmentand Termination.** Subject to Section 14.2 and 14.3, the Board may at any time amend,suspend, or terminate this Plan.

**14.2        ShareholderApproval.**  The Companyshall obtain the approval of the Company’s shareholders for any amendment tothis Plan if shareholder approval is necessary or desirable to comply with anyApplicable Law or with the requirements applicable to the grant of Awardsintended to be Incentive Stock Options. The Board may also, but need not, require that the Company’sshareholders approve any other amendments to this Plan.

**14.3        Effect.**  No amendment, suspension, or termination ofthis Plan, and no modification of any Award even in the absence of anamendment, suspension, or termination of this Plan, shall impair any existingcontractual rights of any Awardee unless the affected Awardee consents to theamendment, suspension, termination, or modification.  However, no such consent shall be required ifthe Board determines, in its sole and absolute discretion, that the amendment,suspension, termination, or modification: (a) is required or advisable in order for the Company, this Plan or theAward to satisfy Applicable Law, to meet the requirements of any accountingstandard or to avoid any adverse accounting treatment, or (b) in connectionwith any transaction or event described in Section 10, is in the best interestsof the Company or its shareholders.  TheBoard may, but need not, take the tax or accounting consequences to affectedAwardees into consideration in acting under the preceding sentence.  Those decisions shall be final, binding andconclusive.  Termination of this Planshall not affect the Administrator’s ability to exercise the powers granted toit under this Plan with respect to (i) Awards granted before the termination ofthis Plan or (ii) Award Shares issued under such Awards even if those AwardShares are issued after the termination of this Plan.

# **15.          Reserved Rights**

**15.1        Nonexclusivityof this Plan.**  ThisPlan shall not limit the power of the Company or any Affiliate to adopt otherincentive arrangements including, for example, the grant or issuance of stockoptions, stock, or other equity-based rights under other plans.

**15.2        UnfundedPlan.**  This Plan shallbe unfunded.  Although bookkeepingaccounts may be established with respect to Awardees, any such accounts will beused merely as a convenience.  TheCompany shall not be required to segregate any assets on account of this Plan,the grant of Awards, or the issuance of Award Shares.  The Company and the Administrator shall notbe deemed to be a trustee of stock or cash to be awarded under this Plan.  Any obligations of the Company to any Awardeeshall be based solely upon contracts entered into under this Plan, such asAward Agreements.  No such obligationsshall be deemed to be secured by any pledge or other encumbrance on any assetsof the Company.  Neither the Company northe Administrator shall be required to give any security or bond for theperformance of any such obligations.

# **16.          Special Arrangements Regarding AwardShares**

**16.1        Escrow ofStock Certificates.**  Toenforce any restrictions on Award Shares, the Administrator may require theirholder to deposit the certificates representing Award Shares, with stock powersor other transfer instruments approved by the Administrator endorsed in blank,with the Company or an agent of the Company to hold in escrow until therestrictions have lapsed or terminated. The 

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Administrator mayalso cause a legend or legends referencing the restrictions to be placed on thecertificates.  Any Awardee who delivers apromissory note as partial or full consideration for the purchase of AwardShares will be required to pledge and deposit with the Company some or all ofthe Award Shares as collateral to secure the payment of the note.  However, the Administrator may require oraccept other or additional forms of collateral to secure the note and, in anyevent, the Company will have full recourse against the maker of the note,notwithstanding any pledge or other collateral.

## **16.2        Repurchase Rights.**

### (a)**           General.**  If anOption is subject to Reverse Vesting or a Stock Award is subject to vestingconditions, the Company shall have the right, during the seven months after theAwardee’s Termination, to repurchase any or all of the Award Shares that wereunvested as of the date of that Termination. If the Award Shares were purchased with a promissory note, therepurchase price shall be the lower of: (a) the Purchase Price for the Award Shares (minus the amount of anycash dividends paid or payable with respect to the Award Shares for which therecord date precedes the repurchase) and (b) the Fair Market Value at the dateof Termination.  In all other cases, therepurchase price shall be determined by the Administrator in accordance withthis Section 16.2 which shall be either (i) the Purchase Price for theAward Shares (minus the amount of any cash dividends paid or payable withrespect to the Award Shares for which the record date precedes the repurchase) or(ii) the lower of (A) the Option Price or Purchase Price for theAward Shares or (B) the Fair Market Value of those Award Shares as of thedate of the Termination.  The repurchaseprice shall be paid in cash or if the Award Shares were purchased in whole orin part with a promissory note, cancellation in whole or in part ofindebtedness under that note, or a combination of those means.  The Company may assign this right ofrepurchase.

### (b)**           Procedure.**  TheCompany or its assignee may choose to give the Awardee a written notice ofexercise of its repurchase rights under this Section 16.2.  However, the Company’s failure to give such anotice shall not affect its rights to repurchase Award Shares.  The Company must, however, tender therepurchase price during the period specified in this Section 16.2 forexercising its repurchase rights in order to exercise such rights.

**16.3**        **Market Standoff.**  If requested by the Company or arepresentative of its underwriters in connection with a registration of anysecurities of the Company under the Securities Act, Awardees or certainAwardees shall be prohibited from selling some or all of their Award Sharesduring a period not to exceed 180 days after the effective date of the Company’sregistration statement.  This restrictionshall not apply to any registration statement on Form S-8, Form S-4 or anequivalent registration statement.

# **17.          Beneficiaries**

AnAwardee may file a written designation of one or more beneficiaries who are toreceive the Awardee’s rights under the Awardee’s Awards after the Awardee’sdeath.  Such designation shall beaccompanied by a signed acknowledgment from the Awardee’s spouse, if any,consenting to such designation.  AnAwardee may change such a designation at any time by written notice.  If an Awardee designates a beneficiary, thebeneficiary may exercise the Awardee’s Awards after the Awardee’s death.  If an Awardee dies when the Awardee has noliving beneficiary designated under this Plan, the Company shall allow theexecutor or administrator of the Awardee’s estate to exercise the Award or, ifthere is none, the person entitled to exercise the Option under the Awardee’swill or the laws of descent and distribution. In any case, no Award may be exercised after its Expiration Date.

**18.****                               Miscellaneous**

**18.1        GoverningLaw.**  This Plan, theAward Agreements and all other agreements entered into under this Plan, and allactions taken under this Plan or in connection with Awards or Award Shares,shall be governed by the laws of the State of California.

**18.2        Determinationof Value.**  Fair MarketValue shall be determined as follows:

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### (a)**           Listed Stock.**  Ifthe Shares are traded on any established stock exchange or quoted on a nationalmarket system, Fair Market Value shall be the closing sales price for the Sharesas quoted on that stock exchange or system for the date the value is to bedetermined (the “*Value Date*”) asreported by such stock exchange or national market system, or, if not reportedby such stock exchange or national market system, as reported in *The**WallStreet Journal* or a similar publication.  If no sales are reported as having occurredon the Value Date, Fair Market Value shall be that closing sales price for thelast preceding trading day on which sales of Shares are reported as having occurred.  If no sales are reported as having occurredduring the five trading days before the Value Date, Fair Market Value shall bethe closing bid for Shares on the Value Date. If Shares are listed on multiple exchanges or systems, Fair Market Valueshall be based on sales or bid prices on the primary exchange or system onwhich Shares are traded or quoted.

### (b)**           Stock Quoted by Securities Dealer.**  IfShares are regularly quoted by a recognized securities dealer but sellingprices are not reported on any established stock exchange or quoted on anational market system, Fair Market Value shall be the mean between the highbid and low asked prices on the Value Date. If no prices are quoted for the Value Date, Fair Market Value shall bethe mean between the high bid and low asked prices on the last precedingtrading day on which any bid and asked prices were quoted.

### (c)**           No Established Market.**  IfShares are not traded on any established stock exchange or quoted on a nationalmarket system and are not quoted by a recognized securities dealer, the Boardor Committee will determine Fair Market Value in good faith.  The Board or Committee will consider thefollowing factors, and any others it considers significant, in determining FairMarket Value: (i) the price at which other securities of the Company havebeen issued to purchasers other than Employees, Directors, or Consultants,(ii) the Company’s shareholder’s equity, prospective earning power,dividend-paying capacity, and non-operating assets, if any, and (iii) anyother relevant factors, including the economic outlook for the Company and theCompany’s industry, the Company’s position in that industry, the Company’sgoodwill and other intellectual property, and the values of securities of otherbusinesses in the same industry.

**18.3        Reservationof Shares.**  During theterm of this Plan, the Company shall at all times reserve and keep availablesuch number of Shares as are still issuable under this Plan.

**18.4        ElectronicCommunications.**  AnyAward Agreement, notice of exercise of an Award, or other document required orpermitted by this Plan may be delivered in writing or, to the extent determinedby the Administrator, electronically. Signatures may also be electronic if permitted by the Administrator.

**18.5        Notices.**  Unless the Administrator specifies otherwise,any notice to the Company under any Award Agreement or with respect to anyAwards or Award Shares shall be in writing (or, if so authorized bySection 18.4, communicated electronically), shall be addressed to theCompany, and shall only be effective when received by the Company.

Adopted by the Boardon:  March 19, 2004

Approved by theshareholders on:  May 27, 2004

Effective date of thisPlan:  May 27, 2004

Amended by the Board on:  March23, 2006 and March 22, 2007

Amendment approvedby the shareholders on:  May 31, 2007

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