**Exhibit 10.2**

 

**2004 EQUITY INCENTIVE PLAN**

**OF**

**DEPOMED, INC.**

 

**(AsAmended through May 23, 2008)**

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**1.**             Purposeof this Plan

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Thepurpose of this 2004 Equity Incentive Plan is to enhance the long-termshareholder value of Depomed, Inc. by offering opportunities to eligibleparticipants to share in the growth in value of the equity of Depomed, Inc.and to provide incentives to eligible Employees, Company Directors andConsultants to contribute to the success of the Company.

 

**2.****            ****Definitions and Rules ofInterpretation**

 

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

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### **(a)**   *“Administrator”* means the Board, theCommittee, or any officer or employee of the Company to whom the Board or theCommittee delegates authority to administer this Plan.

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### **(b)**   *“Affiliate”* means a “parent” or “subsidiary”(as each is defined in Section 424 of the Code) of the Company and anyother entity that the Board or Committee designates as an “Affiliate” forpurposes of this Plan.

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### **(c)**   *“ApplicableLaw”*means any and all lawsof whatever jurisdiction, within or without the United States, and the rules ofany stock exchange or quotation system on which Shares are listed or quoted,applicable to the taking or refraining from taking of any action under thisPlan, including the administration of this Plan and the issuance or transfer ofAwards or Award Shares.

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

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### **(e)**   *“AwardAgreement”***means the document evidencing the grant of an Award.

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### **(f)**    *“Award Shares”***means Shares coveredby an outstanding Award or purchased under an Award.

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

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

 

### **(i)**    *“Changein Control”* means any transaction or event that the Board specifies asa Change in Control under Section 10.4.

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### **(j)**    *“Code”***means the InternalRevenue Code of 1986.

 

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### **(k)**   *“Committee*” means a committee composed ofCompany Directors appointed in accordance with the Company’s charter documentsand Section 4.

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

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

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### **(n)**   *“Consultant”*means an individual who, or anentity or employee of any entity that, provides bona fide services to theCompany or an Affiliate not in connection with the offer or sale of securitiesin a capital-raising transaction, but who is not an Employee.

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### **(o)**   *“Director”* means a member of theboard of directors of the Company or an Affiliate.

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

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### **(q)**   “*DomesticRelations Order**”* means a “domestic relations order” as defined in, andotherwise meeting the requirements of, Section 414(p) of the Code,except that reference to a “plan” in that definition shall be to this Plan.

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### **(r)**    *“Employee”* means a regularemployee of the Company or an Affiliate, including an Officer or Director, whois treated as an employee in the personnel records of the Company or an Affiliate,but not individuals who are classified by the Company or an Affiliate as: (i) leasedfrom or otherwise employed by a third party, (ii) independent contractors,or (iii) intermittent or temporary workers.  The Company’s or an Affiliate’s classificationof an individual as an “Employee” (or as not an “Employee”) for purposes ofthis Plan shall not be altered retroactively even if that classification ischanged retroactively for another purpose as a result of an audit, litigationor otherwise.  An Awardee shall not ceaseto be an Employee due to transfers between locations of the Company, or betweenthe Company and an Affiliate, or to any successor to the Company or anAffiliate that assumes the Awardee’s Options under Section 10.  Neither service as a Director nor receipt ofa director’s fee shall be sufficient to make a Director an “Employee.”

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

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### **(t)**    *“Executive”***means, if the Companyhas any class of any equity security registered under Section 12 of theExchange 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,in either 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 theExchange Act, “Executive” means any (i) Director or (ii) officerelected or appointed by the Board.

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### **(u)**   *“ExpirationDate”***means, with respect to an Award, the date stated in theAward Agreement as the expiration date of the Award or, if no such date isstated in the Award Agreement, then the last day of the maximum exercise periodfor the Award, disregarding the effect of an Awardee’s Termination or any otherevent that would shorten that period.

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### **(v)**   *“FairMarket Value”***means the value of Shares asdetermined under Section 18.2.

 

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### **(w)**  *“FundamentalTransaction”* means any transaction or event described in Section 10.3.

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### **(x)**    *“GrantDate”***means the date the Administrator approves the grant of anAward.  However, if the Administratorspecifies that an Award’s Grant Date is a future date or the date on which acondition is satisfied, the Grant Date for such Award is that future date orthe date that the condition is satisfied.

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### **(y)**   *“IncentiveStock Option**”* means an Option intended toqualify as an incentive stock option under Section 422 of the Code anddesignated as an Incentive Stock Option in the Award Agreement for that Option.

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### **(z)**    *“Nonstatutory Option”* means any Option other than anIncentive Stock Option.

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

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### **(bb)***“ObjectivelyDeterminable 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 of the periodof service to which it relates, or (2) before the elapse of 25% of theperiod 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.

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### **(cc)***“Officer”***means an officer ofthe Company as defined in Rule 16a-1 adopted under the Exchange Act.

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### **(dd)***“Option”***means a right topurchase Shares of the Company granted under this Plan.

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### **(ee)***“OptionPrice”***means the price payable under an Option for Shares, notincluding any amount payable in respect of withholding or other taxes.

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### **(ff)**   *“OptionShares”*means Shares covered by an outstanding Option or purchasedunder an Option.

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### **(gg)***“Plan”***means this 2004 EquityIncentive Plan of Depomed, Inc.

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### **(hh)***“PurchasePrice”* means the price payable under a Stock Award for Shares, not includingany amount payable in respect of withholding or other taxes.

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### **(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 as specified in Section 16.2(a),with the Company’s right of repurchase expiring in accordance with a “forward”vesting schedule that would otherwise have applied to the Option under whichthe Option Shares were purchased or in accordance with some other vestingschedule described in the Award Agreement.

 

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

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

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### **(ll)**   *“Share”***means a share of thecommon stock of the Company or other securities substituted for the commonstock under Section 10.

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### **(mm)**   *“StockAward”* means an offer by the Company to sell shares subject to certainrestrictions pursuant to the Award Agreement as described in Section 8.  A Stock Award does not include an option.

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### **(nn)***“SubstituteAward”***means a Substitute Option or Substitute Stock Award grantedin accordance with the terms of this Plan.

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### **(oo)***“SubstituteOption”***means an Option granted in substitution for, or upon theconversion of, an option granted by another entity to purchase equitysecurities in the granting entity.

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### **(pp)***“SubstituteStock Award”*means a Stock Award granted in substitution for, or uponthe conversion of, a stock award granted by another entity to purchase equitysecurities in the granting entity.

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### **(qq)**“*Ten Percent Shareholder*” means any person who, directly orby attribution under Section 424(d) of the Code, owns stockpossessing more than ten percent of the total combined voting power of allclasses of stock of the Company or of any Affiliate on the Grant Date.

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### **(rr)**   *“Termination”***means that the Awardeehas ceased to be, with or without any cause or reason, an Employee, Director orConsultant.  However, unless sodetermined by the Administrator, or otherwise provided in this Plan, “Termination”shall not include a change in status from an Employee, Consultant or Directorto another such status.  An event thatcauses an Affiliate to cease being an Affiliate shall be treated as the “Termination”of that Affiliate’s Employees, Directors, and Consultants.

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## **2.2**          Rules ofInterpretation.  Anyreference to a “Section,” without more, is to a Section of this Plan.  Captions and titles are used for conveniencein this Plan and shall not, by themselves, determine the meaning of thisPlan.  Except when otherwise indicated bythe context, the singular includes the plural and vice versa.  Any reference to a statute is also areference to the applicable rules and regulations adopted under thatstatute.  Any reference to a statute, rule orregulation, or to a section of a statute, rule or regulation, is areference to that statute, rule, regulation, or section as amended from time totime, both before and after the effective date of this Plan and including anysuccessor provisions.

 

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

 

**3.1****          Numberof Award Shares. **The Shares issuableunder this Plan shall be authorized but unissued or reacquired Shares,including but not limited to Shares repurchased by the Company on the openmarket.  Subject to adjustment underSection 10, the maximum number of Shares that may be issued under this Plan is6,750,000.  When an Award is granted, themaximum number of Shares that may be issued under this Plan shall be reduced bythe number of Shares covered by that Award. However, if an Award later terminates or expires without having beenexercised in full, the maximum number of shares that may be issued under thisPlan shall be increased by the number of Shares that were covered by, but notpurchased under, that Award.  Bycontrast, the repurchase of Shares by the Company shall not increase themaximum number of Shares that may be issued under this Plan.

 

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## **3.2**          Term of thisPlan.

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### **(a)**           This Plan shall beeffective on, and Awards may be granted under this Plan after, the date it hasbeen both adopted by the Board and approved by the Company’s shareholders (the “*Effective Date*”).

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### **(b)**           Subject to theprovisions of Section 14, Awards may be granted under this Plan for aperiod of ten years from the earlier of the date on which the Board approvesthis Plan and the date the Company’s shareholders approve this Plan.  Accordingly, Awards may not be granted underthis Plan after ten years from the earlier of those dates.

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# **4.**             Administration

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## **4.1**          General.

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### **(a)**           The Board shall haveultimate responsibility for administering this Plan.  The Board may delegate certain of itsresponsibilities to a Committee, which shall consist of at least two members ofthe Board.  The Board or the Committeemay further delegate its responsibilities to any Employee of the Company or anyAffiliate.  Where this Plan specifiesthat an action is to be taken or a determination made by the Board, only theBoard may take that action or make that determination.  Where this Plan specifies that an action isto be taken or a determination made by the Committee, only the Committee maytake that action or make that determination. Where this Plan references the “Administrator,” the action may be takenor determination made by 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.

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### **(b)**           So long as the Companyhas registered and outstanding a class of equity securities under Section 12of the Exchange Act, 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 Regulations Section 1.162-27(h)(3),who are “outside directors” as defined in Section 162(m) of the Code.

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## **4.2**          Authority of the Administrator.  Subjectto the other provisions of this Plan, the Administrator shall have theauthority to:

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

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### **(b)**           determine the FairMarket Value of Shares;

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### **(c)**           determine the OptionPrice and the Purchase Price of Awards;

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### **(d)**           select the Awardees;

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### **(e)**           determine the timesAwards are granted;

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### **(f)**            determine the numberof Shares subject to each Award;

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### **(g)**           determine the methodsof payment that may be used to purchase Award Shares;

 

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### **(h)**           determine the methodsof payment that may be used to satisfy withholding tax obligations;

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### **(i)**            determine the otherterms of each Award, including but not limited to the time or times at whichAwards may be exercised, whether and under what conditions an Award isassignable, and whether an Option is a Nonstatutory Option or an IncentiveStock Option;

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### **(j)**            modify or amend anyAward;

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### **(k)**           authorize any personto sign any Award Agreement or other document related to this Plan on behalf ofthe Company;

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### **(l)**            determine the form ofany Award Agreement or other document related to this Plan, and whether thatdocument, including signatures, may be in electronic form;

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### **(m)**          interpret this Planand any Award Agreement or document related to this Plan;

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### **(n)**           correct any defect,remedy any omission, or reconcile any inconsistency in this Plan, any AwardAgreement or any other document related to this Plan;

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### **(o)**           adopt, amend, andrevoke rules and regulations under this Plan, including rules andregulations relating to sub-plans and Plan addenda;

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### **(p)**           adopt, amend, andrevoke special rules and procedures which may be inconsistent with theterms of this Plan, set forth (if the Administrator so chooses) in sub-plansregarding (for example) the operation and administration of this Plan and theterms of Awards, if and to the extent necessary or useful to accommodatenon-U.S. Applicable Laws and practices as they apply to Awards and Award Sharesheld by, or granted or issued to, persons working or resident outside of theUnited States or employed by Affiliates incorporated outside the United States;

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### **(q)**           in the case of theBoard, determine whether a transaction or event should be treated as a Changein Control, a Divestiture or neither;

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### **(r)**            determine the effectof a Fundamental Transaction and, if the Board determines that a transaction orevent should be treated as a Change in Control or a Divestiture, then theeffect of that Change in Control or Divestiture; and

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### **(s)**           make all otherdeterminations the Administrator deems necessary or advisable for theadministration of this Plan.

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## **4.3**          Scope of Discretion.  Subject to the last sentence of this Section 4.3,on all matters for which this Plan confers the authority, right or power on theBoard, the Committee, or other Administrator to make decisions, that body maymake those decisions.  Those decisionswill be final, binding and conclusive. Moreover, but again subject to the last sentence of this Section 4.3,in making those decisions, the Board, Committee or other Administrator need nottreat all persons eligible to receive Awards, all Awardees, all Awards or allAward Shares the same way.  However,except as provided in Section 14.3, the discretion of the Board, Committeeor other Administrator is subject to the specific provisions and specificlimitations of this Plan, as well as all rights conferred on specific Awardeesby Award Agreements and other agreements.

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# **5.**             Participants Eligible to Receive Awards

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## **5.1**          EligibleParticipants.  Awards (including Substitute Awards) may be granted to, and only to,Employees, Directors and Consultants, including to prospective Employees,Directors and Consultants conditioned on the beginning of their service for theCompany or an Affiliate.  However,Incentive Stock Options may only be granted to Employees, as provided in Section 7(g).

 

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

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### **(a)**           Options. So long as the Company is a “publicly heldcorporation” within the meaning of Section 162(m) of the Code: (i) noEmployee may be granted one or more Options within any fiscal year of theCompany under this Plan to purchase more than 500,000 Shares under Options,subject to adjustment pursuant to Section 10, (ii) Options may begranted to an Executive only by the Committee (and, notwithstanding Section 4.1(a),not by the Board).  If an Option iscancelled without being exercised or if the Option Price of an Option isreduced, that cancelled or repriced Option shall continue to be counted againstthe limit on Awards that may 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 the500,000 limitation set forth in this Section 5.2(a).

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### **(b)**           Stock Awards.  Any Stock Award intended as “qualifiedperformance-based compensation” within the meaning of Section 162(m) ofthe Code must vest or become exercisable contingent on the achievement of oneor more Objectively Determinable Performance Conditions.  The Committee shall have the discretion todetermine the time and manner of compliance with Section 162(m) ofthe Code.

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# **6.**             Termsand Conditions of Options

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The following rules apply to all Options:

 

## **6.1**          Price.  No Option intended as “qualifiedincentive-based compensation” within the meaning of Section 162(m) ofthe Code may have an Option Price less than 100% of the Fair Market Value ofthe Shares on the Grant Date.  In noevent will the Option Price of any Option be less than the par value of theShares issuable under the Option if that is required by Applicable Law.  The Option Price of an Incentive Stock Optionshall be subject to Section 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).

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## **6.3**          Vesting.  Optionsshall be exercisable: (a) on the Grant Date, or (b) in accordancewith a schedule related to the Grant Date, the date the Awardee’s directorship,employment or consultancy begins, or a different date specified in the AwardAgreement.  If so provided in the AwardAgreement, an Option may be exercisable subject to the application of ReverseVesting to the Option Shares.  Additionalprovisions regarding the vesting of Incentive Stock Options are provided in Section 7(c).  No Option granted to an individual who issubject to the overtime pay provisions of the Fair Labor Standards Act may beexercised before the expiration of six months after the Grant Date.

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## **6.4**          Form andMethod of Payment.

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### **(a)**           The Administrator shall determine the acceptable form andmethod of payment for exercising an Option.

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### **(b)**           Acceptable forms of payment for all Option Shares are cash,check or wire transfer, denominated in U.S. dollars except as specified by the Administratorfor non-U.S. Employees or non-U.S. sub-plans.

 

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### **(c)**           In addition, the Administrator may permit payment to bemade by any of the following methods:

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#### **(i)**            other Shares, or the designation ofother Shares, which (A) are “mature” shares for purposes of avoidingvariable accounting treatment under generally accepted accounting principles(generally mature shares are those that have been owned by the Awardee for morethan six months on the date of surrender), and (B) have a Fair MarketValue on the date of surrender equal to the Option Price of the Shares as towhich the Option is being exercised;

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#### **(ii)**           provided that a public marketexists for the Shares, consideration received by the Company under a procedureunder which a licensed broker-dealer advances funds on behalf of an Awardee orsells Option Shares on behalf of an Awardee (a “*Cashless Exercise Procedure*”), provided that if the Companyextends or arranges for the extension of credit to an Awardee under anyCashless Exercise Procedure, no Officer or Director may participate in thatCashless Exercise Procedure;

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#### **(iii)**          subject to Section 6.4(e), one or more promissory notes meeting therequirements of Section 6.4(e) provided, however, that promissorynotes may not be used for any portion of an Award which is not vested at thetime of exercise;

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#### **(iv)**          cancellation of any debt owed by the Company or anyAffiliate to the Awardee including without limitation waiver of compensationdue or accrued for services previously rendered to the Company or an Affiliate;and

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#### **(v)**           any combination of the methods of payment permitted by anyparagraph of this Section 6.4.

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### **(d)**           The Administrator may also permit any other form or methodof payment for Option Shares permitted by Applicable Law.

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### **(e)**           The promissory notes referred to in Section 6.4(c)(iii) shallbe full recourse.  Unless theAdministrator specifies otherwise after taking into account any relevantaccounting issues, the promissory notes shall bear interest at a fair marketvalue rate when the Option is exercised. Interest on the promissory notes shall also be at least sufficient toavoid imputation of interest under Sections 483, 1274, and 7872 of theCode.  The promissory notes and theiradministration shall at all times comply with any applicable margin rules ofthe Federal Reserve.  The promissorynotes may also include such other terms as the Administrator specifies.  Payment may not be made by promissory note byOfficers or Directors if Shares are registered under Section 12 of theExchange 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).

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## **6.6**          SubstituteOptions.  The Board may cause the Company to grant Substitute Options inconnection with the acquisition by the Company or an Affiliate of equitysecurities of any entity (including by merger, tender offer, or other similartransaction) or of all or a 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 extent specifiedotherwise by the Board, Substitute Options shall have the same terms andconditions as the options they replace, except that (subject to the provisionsof Section 10) Substitute Options shall be Options to purchase Sharesrather than equity securities of the granting entity and shall have an OptionPrice determined by the Board.

 

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# **7.**             IncentiveStock Options

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The following rules apply only to Incentive StockOptions and only to the extent these rules are more restrictive than the rules thatwould otherwise apply under this Plan. With the consent of the Awardee, or where this Plan provides that anaction may be taken notwithstanding any other provision of this Plan, theAdministrator may deviate from the requirements of this Section,notwithstanding that any Incentive Stock Option modified by the Administratorwill thereafter be treated as a Nonstatutory 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.

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

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### **(c)**           Options intended to be incentive stock options under Section 422of the Code that are granted to any single Awardee under all incentive stockoption plans of the Company and its Affiliates, including incentive stockoptions granted under this Plan, may not vest at a rate of more than $100,000(or such other amount that may be hereafter specified in the applicable sectionof the Code) in Fair Market Value of stock (measured on the grant dates of theoptions) during any calendar year.  Forthis purpose, an option vests with respect to a given share of stock the firsttime its holder may purchase that share, notwithstanding any right of theCompany to repurchase that share.  Unlessthe administrator of that option plan specifies otherwise in the relatedagreement governing the option, this vesting limitation shall be applied by, tothe extent necessary to satisfy this $100,000 (or other amount) rule, bytreating certain stock options that were intended to be incentive stock optionsunder Section 422 of the Code as Nonstatutory Options.  The stock options or portions of stockoptions to be reclassified as Nonstatutory Options are those with the highestoption prices, whether granted under this Plan or any other equity compensationplan of the Company or any Affiliate that permits that treatment.  This Section 7(c) shall not causean Incentive Stock Option to vest before its original vesting date or cause anIncentive Stock Option that has already vested to cease to be vested.

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

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### **(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.

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### **(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 Option granted to a Ten Percent Shareholder shall never be lessthan 110% of the Fair Market Value of the Shares at the Grant Date.

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### **(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 in Section 7(i) (determinedby treating that change in status as a Termination solely for purposes of this Section 7(g)).

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### **(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 Section 7(h).

 

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### **(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.

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

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# **8.**             StockAwards

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## **8.1**          General.  The specific terms andconditions of a Stock Award applicable to the Awardee shall be provided for inthe Award Agreement. The Award Agreement shall state the number of Shares thatthe Awardee shall be entitled to receive or purchase, the terms and conditionson which the Shares shall vest, the price to be paid and, if applicable, thetime within which the Awardee must accept such offer. The offer shall beaccepted by execution of the Award Agreement. The Administrator may require that all Shares subject to a right ofrepurchase or risk of forfeiture be held in escrow until such repurchase rightor risk of forfeiture lapses.  The grantor vesting of a Stock Award may be made contingent on the achievement ofObjectively Determinable Performance Conditions.

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## **8.2**          Right of Repurchase.  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.

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## **8.3**          Form of Payment for Stock Awards.  TheAdministrator shall determine the acceptable form and method of payment forexercising a Stock Award.  Acceptableforms of payment for all Award Shares are cash, check or wire transfer,denominated in U.S. dollars except as specified by the Administrator fornon-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 to Section 6.4.

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## **8.4**          Nonassignability of Stock Awards.  Except asdetermined by the Administrator, no Stock Award shall be assignable orotherwise transferable by the Awardee except by will or by the laws of descentand distribution (including without limitation Section 17).  Notwithstanding anything to the contraryherein, Stock Awards may be transferred and exercised in accordance with aDomestic Relations Order.

## ** **

## **8.5**          Substitute Stock Award.  The Board may cause the Companyto grant Substitute Stock Awards in connection with the acquisition by theCompany or an Affiliate of equity securities of any entity (including bymerger, tender offer, or other similar transaction) or of all or a portion ofthe assets of any entity.  Any suchsubstitution shall be effective on the effective date of the acquisition.  Unless and to the extent specified otherwiseby the Board, Substitute Stock Awards shall have the same terms and conditionsas the stock awards they replace, except that (subject to the provisions of Section 10)Substitute Stock Awards shall be Stock Awards to purchase Shares rather thanequity securities of the granting entity and shall have a Purchase Price that,as determined by the Board in its sole and absolute discretion, properlyreflects the substitution.

## ** **

## **8.6**          Maximum Numberof 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 ofAwards

# ** **

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

 

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## **9.2**          Time of Exercise.  Options and Stock Awards shall be considered exercised when the Companyreceives: (a) written notice of exercise from the person entitled toexercise the Option or Stock Award, (b) full payment, or provision forpayment, in a form and method approved by the Administrator, for the Shares forwhich the Option or Stock Award is being exercised, and (c) with respectto Nonstatutory Options, payment, or provision for payment, in a form approvedby the Administrator, of all applicable withholding taxes due uponexercise.  An Award may not be exercisedfor a fraction of a Share.

## ** **

## **9.3**          Issuance of Award Shares.  The Company shall issue Award Shares in the name of the person properlyexercising the Award.  If the Awardee isthat person and so requests, the Award Shares shall be issued in the name ofthe Awardee and the Awardee’s spouse. The Company shall endeavor to issue Award Shares promptly after an Awardis exercised.  Until Award Shares areactually issued, as evidenced by the appropriate entry on the stock register ofthe Company or its transfer agent, the Awardee will not have the rights of ashareholder with respect to those Award Shares, even though the Awardee hascompleted all the steps necessary to exercise the Award.  No adjustment shall be made for any dividend,distribution, or other right for which the record date precedes the date theAward 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 beexercisable to the extent (but only to the extent) they are vested on the dateof that Termination and only during the three months after the Termination, butin no event after the Expiration Date. To the extent the Awardee does not exercise an Award within the timespecified for exercise, the Award shall automatically terminate.

### ** **

### **(b)**           Leaves ofAbsence.  Unless otherwise provided in the Award Agreementor in writing by the Administrator, no Award may be exercised more than threemonths after the beginning of a leave of absence, other than a personal ormedical leave approved by an authorized representative of the Company withemployment guaranteed upon return. Awards shall not continue to vest during a leave of absence, unlessotherwise determined in writing by the Administrator with respect to anapproved personal or medical leave with employment guaranteed upon return.

### ** **

### **(c)**           Death orDisability.  Unless otherwise provided inthe Award Agreement or in writing by the Administrator, if an Awardee’sTermination is due to death or disability (as determined by the Administratorwith respect to all Awards other than Incentive Stock Options and as defined bySection 22(e) of the Code with respect to Incentive Stock Options),all Awards of that Awardee to the extent exercisable at the date of thatTermination may be exercised for one year after that Termination, but in noevent after the Expiration Date.  In thecase of Termination due to 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 an Awardee’s Termination is due to a Divestiture, the Board may takeany one or more of the actions described in Section 10.3 or 10.4 withrespect to the Awardee’s Awards.

 

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### **(e)**           Terminationfor Cause.  In the discretion of the Administrator, whichmay be exercised on the date of grant, or at a date later in time, if anAwardee’s Termination is due to Cause, all of the Awardee’s Awards shallautomatically terminate and cease to be exercisable at the time ofTermination.  “*Cause*”means employment-related dishonesty, fraud, misconduct or disclosure or misuseof confidential information, or other employment-related conduct that is likelyto cause significant injury to the Company, an Affiliate, or any of theirrespective employees, officers or directors (including, without limitation,commission of a felony or similar offense whether or not employment-related),in each case as determined by the Administrator.  “Cause” shall not require that a civiljudgment or criminal conviction have been entered against or guilty plea shallhave been made by the Awardee regarding any of the matters referred to in theprevious sentence.  Accordingly, theAdministrator shall be entitled to determine “Cause” based on the Administrator’sgood faith belief.  If the Awardee iscriminally charged with a felony or similar offense, that shall be asufficient, but not a necessary, basis for such a belief.

### ** **

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

### ** **

#### **(i)**            Extend the period of time for which the Award is to remainexercisable, following the Awardee’s Termination, from the limited exerciseperiod otherwise in effect for that Award to such greater period of time as theAdministrator shall deem appropriate, but in no event beyond the ExpirationDate; and/or

#### ** **

#### **(ii)**           Permit the Award to be exercised, during the applicablepost-Termination exercise period, not only with respect to the number of vestedShares for which such Award may be exercisable at the time of the Awardee’sTermination but also with respect to one or more additional installments inwhich the Awardee would have vested had the Awardee not been subject toTermination.

#### ** **

### **(g)**           Consulting orEmployment Relationship. Nothing in this Planor in any Award Agreement, and no Award or the fact that Award Shares remainsubject to repurchase rights, shall:  (A) interferewith or limit the right of the Company or any Affiliate to terminate theemployment or consultancy of any Awardee at any time, whether with or withoutcause or reason, and with or without the payment of severance or any othercompensation or payment, (B) interfere with the application of anyprovision in any of the Company’s or any Affiliate’s charter documents orApplicable Law relating to the election, appointment, term of office, orremoval of a Director or (C) interfere with the Company’s right toterminate any consultancy.

### ** **

### **10.**          Certain Transactions and Events

### ** **

## **10.1**        In General.  Except asprovided in this Section 10, no change in the capital structure of theCompany, merger, sale or other disposition of assets or a subsidiary, change incontrol, issuance by the Company of shares of any class of securities orsecurities convertible into shares of any class of securities, exchange orconversion of securities, or other transaction or event shall require or be theoccasion for any adjustments of the type described in this Section 10.  Additional provisions with respect to theforegoing transactions are set forth in Section 14.3.

## ** **

## **10.2**        Changes in Capital Structure.  In theevent of any stock split, reverse stock split, recapitalization, combination orreclassification of stock, stock dividend, spin-off, or similar change to thecapital structure of the Company (not including a Fundamental Transaction or Changein Control), the Board shall make whatever adjustments it concludes areappropriate to: (a) the number and type of Awards that may be grantedunder this Plan, (b) the number and type of Options that may be granted toany participant under this Plan, (c) the Purchase Price and number andclass of securities issuable under each outstanding Stock Award, (d) theOption Price and number and class of securities issuable under each outstandingOption, and (e) the repurchase price of any securities substituted forAward Shares that are subject to repurchase rights.  The specific adjustments shall be determinedby the Board.  Unless the Board specifiesotherwise, any securities issuable as a result of any such adjustment shall berounded down to the next lower whole security. The Board need not adopt the same rules for each Award or eachAwardee.

 

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## **10.3**        Fundamental Transactions.  Exceptfor grants to Non-Employee Directors pursuant to Section 11, in the eventof (a) a merger or consolidation in which the Company is not the survivingcorporation (other than a merger or consolidation with a wholly-ownedsubsidiary, a reincorporation of the Company in a different jurisdiction, orother transaction in which there is no substantial change in the shareholdersof the Company or their relative stock holdings and the Awards granted underthis Plan are assumed, converted or replaced by the successor corporation,which assumption shall be binding on all participants under this Plan), (b) amerger in 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 allof the assets of the Company, or (d) the acquisition, sale, or transfer ofmore than 50% of the outstanding shares of the Company by tender offer orsimilar transaction (each, a “*Fundamental Transaction*”), anyor all outstanding Awards may be assumed, converted or replaced by thesuccessor corporation (if any), which assumption, conversion or replacementshall be binding on all participants under this Plan.  In the alternative, the successor corporationmay substitute equivalent Awards or provide substantially similar considerationto participants as was provided to the Company’s shareholders (after takinginto 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 discretionwith respect to Options, such Options shall become exercisable in full prior tothe consummation 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 occurrenceof any 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 in Control.  The Boardmay also, 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, acquiressecurities holding 50% or more of the total combined voting power or value ofthe Company, or (b) as a result of or in connection with a contestedelection of Company Directors, the persons who were 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 Affiliatesells or otherwise transfers equity securities of an Affiliate to a person orentity other than the Company or an Affiliate, or leases, exchanges ortransfers all or any portion of its assets to such a person or entity, then theBoard may specify that such transaction or event constitutes a “*Divestiture*”.  Inconnection with a Divestiture, notwithstanding any other provision of thisPlan, the Board may, but need not, take one or more of the actions described inSection 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.

 

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## **10.6**        Dissolution.  If theCompany adopts a plan of dissolution, the Board may cause Awards to be fullyvested and exercisable (but not after their Expiration Date) before thedissolution is completed but contingent on its completion and may cause theCompany’s repurchase rights on Award Shares to lapse upon completion of thedissolution.  The Board need not adoptthe same rules for each Award or each Awardee.  However, to the extent not exercised beforethe earlier of the completion of the dissolution, Awards shall terminateimmediately prior to the dissolution.

 

## **11.**          AutomaticOption Grants to Non-Employee Directors.

## ** **

## **11.1**        Automatic Option Grants toNon-Employee Directors.

## ** **

### **(a)**           Annual Grant. On the date of the last regular meeting of directors during eachcalendar year each individual who is serving as a Non-Employee Director shallautomatically be granted a Nonstatutory Option to purchase 15,000 Shares (the “*Annual Grant*”), provided, however, that suchindividual has served as a Non-Employee Director for at least six months.

### ** **

### **(b)**           Initial Grant. Upon the first appointment or election of an individual as aNon-Employee Director, such individual shall automatically be granted aNonstatutory Option to purchase 25,000 Shares (the “*Initial Grant*”).

### ** **

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

### ** **

#### **(i)**            The Option Price shall be equal to one hundred percent(100%) of the Fair Market Value of the Shares on the Option grant date.

#### ** **

#### **(ii)**           The Option Price shall be payable in one or more of thealternative forms authorized pursuant to Section 6.4.  Except to the extent the sale and remittanceprocedure specified thereunder is utilized, payment of the Option Price must bemade on the date of exercise.

### ** **

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

### ** **

### **(e)**           Exercise and Vesting ofOptions.  The Shares underlying each Option issuedpursuant to each Initial Grant shall vest and be exercisable in a series offorty-eight (48) successive equal monthly installments at the end of each fullmonth from the date of grant, for so long as the Non-Employee Directorcontinuously remains a Director. The Shares underlying each Option issuedpursuant to each Annual Grant shall vest and be exercisable in a series oftwelve (12) successive equal monthly installments at the end of each full monthfrom the date of grant, for so long as the Non-Employee Director continuouslyremains a Director.

 

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### **(f)**            Termination ofBoard Service.  The following provisions shall govern theexercise of any Options held by the Awardee at the time the Awardee ceases toserve as a Non-Employee Director:

### ** **

#### **(i)**            *In General*.  Except as otherwise provided in Section 11.3,after cessation of service as a Director (the “*Cessation Date*”), the Awardee’s Options shall beexercisable to the extent (but only to the extent) they are vested on theCessation Date and only during the three months after such Cessation Date, butin no event after the Expiration Date. To the extent the Awardee does not exercise an Option within the timespecified for exercise, the Option 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 may exercisethe 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 Transactions andEvents.

## ** **

### **(a)**           In the event of a Fundamental Transaction while the Awardeeremains a Non-Employee Director, the Shares at the time subject to eachoutstanding Option held by such Awardee pursuant to Section 11, but nototherwise vested, shall automatically vest in full so that each such Optionshall, immediately prior to the effective date of the Fundamental Transaction,become exercisable for all the Shares as fully vested Shares and may beexercised for any or all of those vested Shares. Immediately following theconsummation of the Fundamental Transaction, each Option shall terminate andcease to be outstanding, except to the extent assumed by the successorcorporation (or Affiliate thereof).

### ** **

### **(b)**           In the event of a Change in Control while the Awardeeremains a Non-Employee Director, the Shares at the time subject to eachoutstanding Option held by such Awardee pursuant to Section 11, but nototherwise vested, shall automatically vest in full so that each such Optionshall, immediately prior to the effective date of the Change in Control, becomeexercisable for all the Shares as fully vested Shares and may be exercised forany or all of those vested Shares. Each such Option shall remain exercisablefor such fully vested Shares until the expiration or sooner termination of theOption term in connection with a Change in Control.

### ** **

### **(c)**           Each Option which is assumed in connection with aFundamental Transaction shall be appropriately adjusted, immediately after suchFundamental Transaction, to apply to the number and class of securities whichwould have been issuable to the Awardee in consummation of such FundamentalTransaction had the Option been exercised immediately prior to such FundamentalTransaction. Appropriate adjustments shall also be made to the Option Pricepayable per share under each outstanding Option, provided the aggregate OptionPrice payable for such securities shall remain the same.

### ** **

### **(d)**           The grant of Options pursuant to Section 11 shall inno way affect the right of the Company to adjust, reclassify, reorganize orotherwise change its capital or business structure or to merge, consolidate,dissolve, liquidate or sell or transfer all or any part of its business orassets.

 

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### **(e)**           The remaining terms of each Option granted pursuant to Section 11shall, as applicable, be the same as terms in effect for Awards granted underthis Plan.  Notwithstanding theforegoing, the provisions of Section 9.4 and Section 10 shall notapply to Options granted pursuant to Section 11.

### ** **

## **11.3**        Limited Transferability of Options.  EachOption granted pursuant to Section 11 may be assigned in whole or in partduring the Awardee’s lifetime to one or more members of the Awardee’s family orto a trust established exclusively for one or more such family members or to anentity in which the Awardee is majority owner or to the Awardee’s formerspouse, to the extent such assignment is in connection with the Awardee’sestate or financial plan or pursuant to a Domestic Relations Order. Theassigned portion may only be exercised by the person or persons who acquire aproprietary interest in the Option pursuant to the assignment. The termsapplicable to the assigned portion shall be the same as those in effect for theOption immediately prior to such assignment and shall be set forth in suchdocuments issued to the assignee as the Administrator may deem appropriate. TheAwardee may also designate one or more persons as the beneficiary orbeneficiaries of his or her outstanding Options under Section 11, andthose Options shall, in accordance with such designation, automatically betransferred to such beneficiary or beneficiaries upon the Awardee’s death whileholding 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.**          Withholdingand Tax Reporting

# ** **

## **12.1**        Tax Withholding Alternatives.

## ** **

### **(a)**           General.  WheneverAward Shares are issued or become free of restrictions, the Company may requirethe Awardee to remit to the Company an amount sufficient to satisfy anyapplicable tax withholding requirement, whether the related tax is imposed onthe Awardee or the Company.  The Companyshall have no obligation to deliver Award Shares or release Award Shares froman escrow or permit a transfer of Award Shares until the Awardee has satisfiedthose tax withholding obligations.

### ** **

### **(b)**           Method of Payment.  The Awardeeshall pay any required withholding using the forms of consideration describedin Section 6.4(b), except that, in the discretion of the Administrator,the Company may also permit the Awardee to use any of the forms of paymentdescribed in Section 6.4(c).  TheAdministrator, in its sole discretion, may also permit Award Shares to bewithheld to pay required withholding.  Ifthe Administrator permits Award Shares to be withheld, the Fair Market Value ofthe Award Shares withheld, as determined as of the date of withholding, shallnot exceed the amount determined by the applicable minimum statutorywithholding rates.

### ** **

## **12.2**        Reporting of Dispositions.  Any holder of Option Shares acquired under an Incentive Stock Optionshall promptly notify the Administrator, following such procedures as theAdministrator may require, of the sale or other disposition of any of thoseOption Shares if the disposition occurs during: (a) the longer of two years after the Grant Date of the IncentiveStock Option and one year after the date the Incentive Stock Option wasexercised, or (b) such other period as the Administrator has established.

## ** **

# **13.**                               Compliance with Law

# ** **

The grant of Awards and the issuance and subsequenttransfer of Award Shares shall be subject to compliance with all ApplicableLaw, including all applicable securities laws. Awards may not be exercised, and Award Shares may not be transferred, inviolation of Applicable Law.  Thus, forexample, Awards may not be exercised unless: (a) a registration statement under the Securities Act is then ineffect with respect to the related Award Shares, or (b) in the opinion oflegal counsel to the Company, those Award Shares may be issued in accordancewith an applicable exemption from the registration

 

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requirementsof the 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.**          Amendmentor Termination of this Plan or Outstanding Awards

# ** **

## **14.1**        Amendment and Termination.  Subjectto Section 14.2 and 14.3, the Board may at any time amend, suspend, orterminate this Plan.

## ** **

## **14.2**        Shareholder Approval.  TheCompany shall obtain the approval of the Company’s shareholders for anyamendment to this Plan if shareholder approval is necessary or desirable tocomply with any Applicable Law or with the requirements applicable to the grantof Awards intended to be Incentive Stock Options.  The Board may also, but need not, requirethat the Company’s shareholders approve any other amendments to this Plan.

## ** **

## **14.3**        Effect.  Noamendment, suspension, or termination of this Plan, and no modification of anyAward even in the absence of an amendment, suspension, or termination of thisPlan, shall impair any existing contractual rights of any Awardee unless theaffected Awardee consents to the amendment, suspension, termination, ormodification.  However, no such consentshall be required if the Board determines, in its sole and absolute discretion,that the amendment, suspension, termination, or modification:  (a) is required or advisable in orderfor the Company, this Plan or the Award to satisfy Applicable Law, to meet therequirements of any accounting standard or to avoid any adverse accountingtreatment, or (b) in connection with any transaction or event described inSection 10, is in the best interests of the Company or itsshareholders.  The Board may, but neednot, take the tax or accounting consequences to affected Awardees intoconsideration 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 thetermination of this Plan or (ii) Award Shares issued under such Awardseven if those Award Shares are issued after the termination of this Plan.

## ** **

# **15.**          ReservedRights

# ** **

## **15.1**        Nonexclusivity of this Plan.  This Plan shall not limit the power of the Company or any Affiliate toadopt other incentive arrangements including, for example, the grant orissuance of stock options, stock, or other equity-based rights under otherplans.

## ** **

## **15.2**        Unfunded Plan.  This Plan shall be unfunded. Although bookkeeping accounts may be established with respect toAwardees, any such accounts will be used merely as a convenience.  The Company shall not be required tosegregate any assets on account of this Plan, the grant of Awards, or theissuance of Award Shares.  The Companyand the Administrator shall not be deemed to be a trustee of stock or cash tobe awarded under this Plan.  Anyobligations of the Company to any Awardee shall be based solely upon contractsentered into under this Plan, such as Award Agreements.  No such obligations shall be deemed to besecured by any pledge or other encumbrance on any assets of the Company.  Neither the Company nor the Administratorshall be required to give any security or bond for the performance of any suchobligations.

## ** **

# **16.**          SpecialArrangements Regarding Award Shares

# ** **

## **16.1**        Escrow of Stock Certificates.  To enforce any restrictions onAward Shares, the Administrator may require their holder to deposit thecertificates representing Award Shares, with stock powers or other transferinstruments approved by the Administrator endorsed in blank, with the Companyor an agent of the Company to hold in escrow until the restrictions have lapsedor terminated.  The

 

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## **Administrator may also cause a legend or legendsreferencing the restrictions to be placed on the certificates.  Any Awardee who delivers a promissory note aspartial or full consideration for the purchase of Award Shares will be requiredto pledge and deposit with the Company some or all of the Award Shares ascollateral to secure the payment of the note. However, the Administrator may require or accept other or additionalforms of collateral to secure the note and, in any event, the Company will havefull recourse against the maker of the note, notwithstanding any pledge orother collateral.**

## ** **

## **16.2**        Repurchase Rights.

## ** **

### **(a)**           General. If an Option is subject to Reverse Vesting or a Stock Award is subjectto vesting conditions, the Company shall have the right, during the sevenmonths after the Awardee’s Termination, to repurchase any or all of the AwardShares that were unvested as of the date of that Termination.  If the Award Shares were purchased with apromissory note, the repurchase price shall be the lower of:  (a) the Purchase Price for the AwardShares (minus the amount of any cash dividends paid or payable with respect tothe Award Shares for which the record date precedes the repurchase) and (b) theFair Market Value at the date of Termination. In all other cases, the repurchase price shall be determined by theAdministrator in accordance with this Section 16.2 which shall be either (i) thePurchase Price for the Award Shares (minus the amount of any cash dividendspaid or payable with respect to the Award Shares for which the record dateprecedes the repurchase) or (ii) the lower of (A) the Option Price orPurchase Price for the Award Shares or (B) the Fair Market Value of thoseAward Shares as of the date of the Termination. The repurchase price shall be paid in cash or if the Award Shares werepurchased in whole or in part with a promissory note, cancellation in whole orin part of indebtedness under that note, or a combination of those means.  The Company may assign this right of repurchase.

### ** **

### **(b)**           Procedure. The Company or its assignee may choose to give the Awardee a writtennotice of exercise 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.  Ifrequested by the Company or a representative of its underwriters in connectionwith a registration of any securities of the Company under the Securities Act,Awardees or certain Awardees shall be prohibited from selling some or all oftheir Award Shares during a period not to exceed 180 days after the effectivedate of the Company’s registration statement. This restriction shall not apply to any registration statement on Form S-8,Form S-4 or an equivalent registration statement.

# ** **

# **17.**          Beneficiaries

# ** **

An Awardee may file a written designation of one ormore beneficiaries who are to receive the Awardee’s rights under the Awardee’sAwards after the Awardee’s death.  Suchdesignation shall be accompanied by a signed acknowledgment from the Awardee’sspouse, if any, consenting to such designation. An Awardee may change such a designation at any time by writtennotice.  If an Awardee designates abeneficiary, the beneficiary may exercise the Awardee’s Awards after theAwardee’s death.  If an Awardee dies whenthe Awardee has no living beneficiary designated under this Plan, the Companyshall allow the executor or administrator of the Awardee’s estate to exercisethe Award or, if there is none, the person entitled to exercise the Optionunder the Awardee’s will or the laws of descent and distribution.  In any case, no Award may be exercised afterits Expiration Date.

 

**18.****                              ****Miscellaneous**

 

## **18.1**        Governing Law.  ThisPlan, the Award Agreements and all other agreements entered into under thisPlan, and all actions taken under this Plan or in connection with Awards orAward Shares, shall be governed by the laws of the State of California.

 

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## **18.2**        Determination of Value.  Fair Market Value shall be determined asfollows:

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### **(a)**           Listed Stock. If the Shares are traded on any established stock exchange or quoted ona national market system, Fair Market Value shall be the closing sales pricefor the Shares as quoted on that stock exchange or system for the date thevalue is to be determined (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**Wall Street Journal*or a similar publication.  If no salesare reported as having occurred on the Value Date, Fair Market Value shall bethat closing sales price for the last preceding trading day on which sales ofShares are reported as having occurred. If no sales are reported as having occurred during the five trading daysbefore the Value Date, Fair Market Value shall be the closing bid for Shares onthe Value Date.  If Shares are listed onmultiple exchanges or systems, Fair Market Value shall be based on sales or bidprices on the primary exchange or system on which Shares are traded or quoted.

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### **(b)**           Stock Quotedby Securities Dealer.  If Shares are 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.

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### **(c)**           No EstablishedMarket.  If Shares are not traded on any establishedstock exchange or quoted on a national market system and are not quoted by arecognized securities dealer, the Board or Committee will determine Fair MarketValue in good faith.  The Board orCommittee will consider the following factors, and any others it considerssignificant, in determining Fair Market Value: (i) the price at whichother 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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## **18.3**        Reservation of Shares.  Duringthe term of this Plan, the Company shall at all times reserve and keepavailable such number of Shares as are still issuable under this Plan.

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## **18.4**        Electronic Communications.  Any AwardAgreement, 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 permittedby the Administrator.

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## **18.5**        Notices.  Unless the Administrator specifies otherwise, any notice to the Companyunder any Award Agreement or with respect to any Awards or Award Shares shallbe in writing (or, if so authorized by Section 18.4, communicatedelectronically), shall be addressed to the Company, and shall only be effectivewhen received by the Company.

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Adopted by the Board on:  March 19, 2004

Approved by the shareholders on:  May 27, 2004, May 31, 2007 and May 23,2008

Effective date of this Plan:  May 27, 2004

Amended by the Board on:  March 23, 2006, March 22, 2007 and March 7,2008

 

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