ex4_3.htm


    
      

    

    EXHIBIT
      4.3

    


    1ST
      CENTURY BANCSHARES, Inc.

    
      
         

        DIRECTOR
          AND EMPLOYEE STOCK OPTION PLAN

         

         

        
          	
                  1.

                	
                  PURPOSES.

                


        

         

        The
          purpose of the Plan is to promote the interests of 1st Century Bancshares,
          N.A.
          (the “Company”) and its Affiliates and shareholders by
          enabling the Company to offer eligible recipients an opportunity to acquire
          an
          equity interest in the Company so as to better attract, retain and reward
          employees, directors and other persons providing services to the Company
          and,
          accordingly, to strengthen the mutuality of interests between such recipients
          and the Company’s shareholders by providing the recipients with a proprietary
          interest in pursuing the Company’s long-term growth and financial
          success.

         

        
          	
                  2.

                	
                  DEFINITIONS.

                


        

         

        For
          purposes of this Plan, the following terms shall have the meanings set
          forth
          below.

         

        (a)           “Affiliate”
          means any parent corporation or subsidiary corporation of the Company,
          whether
          now or hereafter existing, as those terms are defined in Sections 424(e)
          and
          (f), respectively, of the Code.

         

        (b)           “Company”
          is defined in Section 1 above.

         

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

         

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

         

        (e)           “Committee”
          means a committee consisting of one or more members of the Board that is
          appointed by the Board (as described in Section 3) to
          administer the Plan.

         

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

         

        (g)           “Comptroller”
          means the United States Comptroller of the Currency.

         

        (h)           “Continuous
          Service” means that the Participant’s service with the Company or
          an Affiliate, whether as an Employee or Director, is not interrupted or
          terminated.  The Participant’s Continuous Service shall not be deemed
          to have terminated merely because of a change in the capacity in which
          the
          Participant renders service to the Company or an Affiliate as an Employee
          or
          Director or a change in the entity for which the Participant renders such
          service, provided that there is no interruption or termination of the
          Participant’s Continuous Service.  The Committee or the chief
          executive officer of the Company, in that party’s sole discretion, may determine
          whether Continuous Service shall be considered interrupted in the case
          of any
          leave of absence approved by that party, including sick leave, military
          leave or
          any other personal leave.


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        (i)           “Covered
          Employee” means the chief executive officer and the four (4) other
          highest compensated officers of the Company for whom total compensation
          is
          required to be reported to shareholders under the
Exchange Act, as determined for purposes of Section
          162(m) of the Code.

         

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

         

        (k)           “Disability”
          means such individual’s total and permanent disability within the meaning of
          Section 22(e)(3) of the Code.  However, in no event will a participant
          be considered to be disabled for purposes of this Plan
          if the individual’s incapacity is a result of an intentionally self-inflicted
          injury (while sane or insane), alcohol or drug abuse, or a criminal act
          for
          which the individual is convicted or to which the individual pleads guilty
          or
          nolo contendre.

         

        (l)           “Employee”
          means any person employed by the Company or an Affiliate.  Mere
          service as a Director or payment of a director’s fee by the Company or an
          Affiliate shall not be sufficient to constitute “employment” by the Company or
          an Affiliate.

         

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

         

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

         

        (i)           If
          the Common Stock is listed on any established national securities exchange
          or
          traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the
          Fair
          Market Value of a share of Common Stock shall be the closing sales price
          for
          such stock (or the average of the closing bid and ask prices, if no sales
          were
          reported) as quoted on such exchange or market (or the exchange or market
          with
          the greatest volume of trading in the Common Stock) on
          the last market trading day prior to the day of determination for which
          such
          quotation exists, as reported in The Wall Street Journal or such other
          source as the Board deems reliable.

         

        (ii)           In
          the absence of such markets for the Common Stock described in subsection
          (i) above, Fair Market Value shall be the average of the closing bid and
          ask prices of the Common Stock reported by the Nasdaq Electronic Bulletin
          Board
          for the last market trading day prior to the day of determination for which
          such
          quotation exists, or any comparable system on that day.

         

        (iii)           In
          the absence of such markets for the Common Stock described in subsections
          (i) and (ii) above, the Fair Market Value shall be determined in good faith
          by the Board using any reasonable valuation method, including the valuation
          methods described in Treasury Regulations Section 20.2031-2.

         

        (o)           “Incentive
          Stock Option” means an Option intended to qualify as an incentive
          stock option within the meaning of Section 422 of the Code and the regulations
          promulgated thereunder.

         

        (p)           “Listing
          Date” means the first date upon which any class of common equity
          securities of the Company is required to be registered under section 12
          of the
          Exchange Act.


        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        


        (q)           “Non-Employee
          Director” means a Director of the Company who either (i) is not a
          current Employee or Officer of the Company or its parent or a subsidiary,
          does
          not receive compensation (directly or indirectly) from the Company or its
          parent
          or a subsidiary for services rendered as a consultant or in any capacity
          other
          than as a Director (except for an amount as to which disclosure would not
          be
          required by the Company under Item 404(a) of Regulation S-K promulgated
          pursuant
          to the Securities Act (“Regulation S-K”)), does not
          possess an interest in any other transaction as to which disclosure would
          be
          required by the Company under Item 404(a) of Regulation S-K and is not
          engaged
          in a business relationship as to which disclosure would be required under
          Item
          404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee
          director” for purposes of Rule 16b-3.

         

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

         

        (s)           “Officer”
          means (i) before the Listing Date, any person designated by the Company
          as an
          officer and (ii) on and after the Listing Date, a person who is an officer
          of
          the Company within the meaning of Section 16 of the Exchange Act and the
          rules
          and regulations promulgated thereunder.

         

        (t)           “Option”
          means an Incentive Stock Option or a Nonstatutory Stock Option granted
          pursuant
          to the Plan.

         

        (u)           “Option
          Agreement” means a written agreement between the Company and a
          Participant (as defined below) evidencing the terms and conditions of an
          individual Option grant.  Each Option Agreement shall be subject to
          the terms and conditions of the Plan.

         

        (v)           “Outside
          Director” means a Director of the Company who either (i) is not a
          current employee of the Company or an “affiliated corporation” (within the
          meaning of Treasury Regulations promulgated under Section 162(m) of the
          Code),
          is not a former employee of the Company or an “affiliated corporation” receiving
          compensation for prior services (other than, benefits under a tax qualified
          pension plan), was not an officer of the Company or an “affiliated corporation”
at any time and is not currently receiving direct or indirect remuneration
          from
          the Company or an “affiliated corporation” for services in any capacity other
          than as a Director or (ii) is otherwise considered an “outside director” for
          purposes of Section 162(m) of the Code.

         

        (w)           “Participant”
          means a person to whom an Option is granted pursuant to the
          Plan
          or, if applicable, such other person who holds an outstanding
          Option.

         

        (x)           “Plan”
          means this 1st Century Bancshares, Inc. 2004 Director and Employee Stock
          Option
          Plan.

         

        (y)           “Rule
          16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
          successor to Rule 16b-3, as in effect from time to time.

         

        (z)           “Securities
          Act” means the Securities Act of 1933, as amended, as made
          applicable (including the regulations promulgated thereunder) to national
          Companys by the Comptroller.


        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        


        (aa)           “Ten
          Percent Shareholder” means a person who owns (or is deemed to own
          pursuant to Section 424(d) of the Code) stock possessing more than ten
          percent
          (10%) of the total combined voting power of all classes of stock of the
          Company
          or of any of its Affiliates.

         

        
          	
                  3.

                	
                  ADMINISTRATION.

                


        

         

        (a)           Administration
          by Committee.  One or more Committees appointed by the Board
          shall administer the Plan.  The Board shall designate one of the
          members of each Committee as the chairperson of such Committee.  The
          term “Committee” shall apply to any person or persons to who such authority has
          been delegated.  If no Committee has been appointed, the entire Board
          shall constitute the Committee.  Members of each Committee shall serve
          for such period of time as the Board may determine and shall be subject
          to
          removal by the Board at any time.  The Board also may at any time
          terminate the functions of any Committee and reassume all powers and authority
          previously delegated to such Committee.  After the Listing Date, a
          Committee may consist of (i) solely of two or more Outside Directors in
          accordance with Section 162(m) of the Code and (ii) solely of two or more
          Non-Employee Directors in accordance with Rule 16b-3.

         

        (b)           Authority
          of Committee.  Subject to the provisions of the Plan, the
          Committee shall have full authority and discretion to take any actions
          it deems
          necessary or advisable for the administration of the Plan.  Such
          actions shall include:  (i) selecting persons who are to receive
          Options under the Plan; (ii) determining the type, number, vesting and
          exercise
          requirements and other features and conditions of such awards; (iii)
          interpreting the Plan; and (iv) making all other decisions relating to the
          operation of the Plan.  The Committee may adopt such rules and
          guidelines as it deems appropriate to implement the Plan.  The
          Committee’s determinations under the Plan shall be final and binding on all
          persons.

         

        (c)           Indemnification.  Each
          member of a Committee, or of the Board, shall be indemnified and held harmless
          by the Company against and from (i) any loss, cost, liability or expense
          that
          may be imposed upon or reasonably incurred by him or her in connection
          with or
          resulting from any claim, action, suit or proceeding to which he or she
          may be a
          party or in which he or she may be involved by reason of any action taken
          or
          failure to act under the Plan or any Option Agreement or stock purchase
          agreement entered into in connection with the Plan and (ii) from any and
          all amounts paid by him or her in settlement thereof, with the Company’s
          approval, or paid by him or her in satisfaction of any judgment in any
          such
          claim, action, suit or proceeding against him or her, provided he or she
          shall
          give the Company an opportunity, at its own expense, to handle and defend
          the
          same before he or she undertakes to handle and defend it on his or her
          own
          behalf.  The foregoing right of indemnification shall not be exclusive
          of any other rights of indemnification to which such persons may be entitled
          under the Company’s Articles of Association or Bylaws, by contract, as a matter
          of law, or otherwise, or under any power that the Company may have to indemnify
          them or hold them harmless and shall be subject to any applicable limitations
          under law.

         

        
          	
                  4.

                	
                  SHARES
                    SUBJECT TO THE PLAN.

                


        

         

        (a)           Share
          Reserve.  Subject to the provisions of Section 10 relating to
          adjustments upon changes in stock, the stock that may be issued under this
          Plan
          shall not exceed in the aggregate the sum of (A) thirty percent (30%) of
          the
          issued and outstanding shares of Common Stock of the Company less (B)
          Seventy-Five Thousand (75,000) shares of Common Stock; provided, however,
          that
          in no event shall the number of shares of Common Stock which may be issued
          under
          this Plan exceed Seven Hundred Seventeen Thousand (717,000) shares of Common
          Stock.

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        (b)           Reversion
          of Shares to the Share Reserve.  If any Option shall for any
          reason expire or otherwise terminate, in whole or in part, without having
          been
          exercised in full, the shares of Common Stock not acquired under such Option
          shall revert to and again become available for issuance under the
          Plan.  Notwithstanding the foregoing sentence, if any shares of Common
          Stock acquired pursuant to the exercise of an Option shall for any reason
          be
          repurchased by the Company under an unvested share repurchase option provided
          under the Plan, the stock repurchased by the Company under such unvested
          share
          repurchase option shall not revert to and again become available for issuance
          under the Plan.

         

        (c)           Source
          of Shares.  The stock subject to the Plan may be unissued
          shares or reacquired shares bought on the market or otherwise.

         

        
          	
                  5.

                	
                  ELIGIBILITY.

                


        

         

        (a)           Eligibility
          for Options.  Incentive Stock Options may be granted only to
          Employees.  Options other than Incentive Stock Options may be granted
          to Employees and Directors.

         

        (b)           Section
          162(m) Limitation.  Subject to the provisions of Section 10
          relating to adjustments upon changes in stock, no employee shall be eligible
          to
          be granted Options covering more than Two Hundred Thousand (200,000) shares
          of
          the Common Stock during any calendar year.  This subsection 5(b) shall
          not apply prior to the Listing Date and, following the Listing Date, this
          subsection 5(b) shall not apply until (i) the earliest of:  (1) the
          first material modification of the Plan (including any increase in the
          number of
          shares reserved for issuance under the Plan in accordance with Section
          4); (2)
          the issuance of all of the shares of Common Stock reserved for issuance
          under
          the Plan; (3) the expiration of the Plan; or (4) the first meeting of
          shareholders at which Directors of the Company are to be elected that occurs
          after the close of the third calendar year following the calendar year
          in which
          occurred the first registration of an equity security under Section 12
          of the
          Exchange Act; or (ii) such other date required by Section 162(m) of the
          Code and
          the rules and regulations promulgated thereunder.

         

        
          	
                  6.

                	
                  OPTION
                    PROVISIONS.

                


        

         

        Each
          Option shall be in such form and shall contain such terms and conditions
          as the
          Committee shall deem appropriate.  All Options shall be separately
          designated Incentive Stock Options or Nonstatutory Stock Options at the
          time of
          grant, and a separate certificate or certificates will be issued for shares
          purchased on exercise of each type of Option.  The provisions of
          separate Options need not be identical, but each Option shall include (through
          incorporation of provisions hereof by reference in the Option or otherwise)
          the
          substance of each of the following provisions:


        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        


        (a)           Term.  No
          Option shall be exercisable after the expiration of ten (10) years (five
          (5)
          years for Ten Percent Shareholders) from the date it was granted.

         

        (b)           Exercise
          Price of an Incentive Stock Option.  The exercise price of
          each Incentive Stock Option shall be not less than one hundred percent
          (100%) of
          the Fair Market Value (one hundred ten percent (110%) for Ten Percent
          Shareholders) of the stock subject to the Option on the date the Option
          is
          granted.  Notwithstanding the foregoing, an Incentive Stock Option may
          be granted with an exercise price lower than that set forth in the preceding
          sentence if such Option is granted pursuant to an assumption or substitution
          for
          another option in a manner satisfying the provisions of Section 424(a)
          of the
          Code.

         

        (c)           Exercise
          Price of a Nonstatutory Stock Option.  The exercise price of
          each Nonstatutory Stock Option granted shall be not less than one hundred
          percent (100%) of the Fair Market Value of the stock subject to the Option
          on
          the date the Option is granted.

         

        (d)           Consideration.  The
          purchase price of stock acquired pursuant to an Option shall be paid, to
          the
          extent permitted by applicable statutes and regulations, either (i) in
          cash at
          the time the Option is exercised or (ii) at the discretion of the Committee
          at
          the time of the grant of the Option (or subsequently in the case of a
          Nonstatutory Stock Option) by (A) delivery to the Company of other Common
          Stock,
          (B) according to a deferred payment or other arrangement (which may include,
          without limiting the generality of the foregoing, the use of other Common
          Stock)
          with the Participant or (C) in any other form of legal consideration that
          may be
          acceptable to the Committee, including, without limitation, a net issue
          exercise
          in which the Options are exchanged for the underlying Common Stock with
          no other
          form of consideration involved and the Company delivers to the Participant
          that
          number of shares of Common Stock equal to the quotient obtained by dividing
          (y)
          the Fair Market Value of the Option (or the specified portion thereof)
          on the
          exercise date, which value shall be equal to (1) the aggregate Fair Market
          Value
          of the shares of Common Stock issuable upon exercise of the Option (or
          the
          specified portion thereof) on the exercise date less (2) the aggregate
          of the
          exercise price applicable to the shares of Common Stock immediately prior
          to
          exercise of the Option (or the specified portion thereof) by (z) the Fair
          Market
          Value of one share of Common Stock on the exercise date.  No
          fractional shares shall be issuable upon exercise of this right, but, in
          lieu
          thereof, the Company shall pay to the Participant an amount in cash equal
          to the
          fair market value of the resulting fractional share on the exercise
          date.

         

        In
          the
          case of any deferred payment arrangement, interest shall be compounded
          at least
          annually and shall be charged at the minimum rate of interest necessary
          to avoid
          the treatment as interest, under any applicable provisions of the Code,
          of any
          amounts other than amounts stated to be interest under the deferred payment
          arrangement.

         

        (e)           Cashless
          Exercise.  With the consent of the Committee and subject to
          applicable holding periods after grant of an Option, a Participant may
          engage
          through a broker in a “cashless exercise,” pursuant to which the Participant
          sells all or some of the shares acquired substantially simultaneously with
          the
          exercise of the Option and remits to the Company net proceeds of the sale
          equal
          to the exercise price and any applicable withholding taxes, and in such
          case the
          Company shall cooperate with the Participant in this process; provided,
          however,
          that the Participant shall bear any costs of such process.


        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        


        (f)           Transferability
          of Option.  An Option shall not be transferable except by
          will or by the laws of descent and distribution and shall be exercisable
          during
          the lifetime of the Participant only by the Participant; provided, however,
          that, in the sole discretion of the Committee, any Nonstatutory Stock Option
          may
          be transferred by a Participant to any member of the Participant’s immediate
          family, to a partnership the partners of which are all members of the
          Participant’s immediate family, or to a family trust the beneficiaries of which
          are all members of the Participant’s immediate
          family.  Notwithstanding the foregoing provisions of this subsection
          6(f), the Participant may, by delivering written notice to the Company,
          in a
          form satisfactory to the Company, designate a third party who, in the event
          of
          the death of the Participant, shall thereafter be entitled to exercise
          the
          Option.

         

        (g)           Vesting.  The
          total number of shares of Common Stock subject to an Option may, but need
          not,
          vest and therefore become exercisable in periodic installments which may,
          but
          need not, be equal.  The Option may be subject to such other terms and
          conditions on the time or times when it may be exercised (which may be
          based on
          performance or other criteria) as the Committee may deem
          appropriate.  The vesting provisions of individual Options may
          vary.  The provisions of this subsection 6(g) are subject to any
          Option Agreement provisions governing the minimum number of shares as to
          which
          an Option may be exercised.

         

        (h)           Termination
          of Continuous Service.  In the event a Participant’s
          Continuous Service terminates (other than upon the Participant’s death or
          Disability), the Participant may exercise his or her Option (to the extent
          that
          the Participant was entitled to exercise it as of the date of termination)
          but
          only within such period of time ending on the earlier of (i) the date three
          (3)
          months following the termination of the Participant’s Continuous Service (or
          such longer or shorter period specified in the Option Agreement), or (ii)
          the
          expiration of the term of the Option as set forth in the Option
          Agreement.  If, after termination, the Participant does not exercise
          his or her Option within the time specified in the Option Agreement, the
          Option
          shall terminate.

         

        (i)           Extension
          of Termination Date.  A Participant’s Option Agreement may
          also provide that if the exercise of the Option following the termination
          of the
          Participant’s Continuous Service (other than upon the Participant’s death or
          Disability) would be prohibited at any time solely because the issuance
          of
          shares would violate the registration requirements under the Securities
          Act,
          then the Option shall terminate on the earlier of (i) the expiration of
          the term
          of the Option set forth in subsection 6(a) or (ii) the expiration of a
          period of
          three (3) months after the termination of the Participant’s Continuous Service
          during which the exercise of the Option would not be in violation of such
          registration requirements.

         

        (j)           Disability
          of Participant.  In the event a Participant’s Continuous
          Service terminates as a result of the Participant’s Disability, the Participant
          may exercise his or her Option (to the extent that the Participant was
          entitled
          to exercise it as of the date of termination), but only within such period
          of
          time ending on the earlier of (i) the date twelve (12) months following
          such
          termination (or such longer or shorter period specified in the Option Agreement)
          or (ii) the expiration of the term of the Option as set forth in the Option
          Agreement.  If, after termination, the Participant does not exercise
          his or her Option within the time specified herein, the Option shall
          terminate.


        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        


        (k)           Death
          of Participant.  In the event (i) a Participant’s Continuous
          Service terminates as a result of the Participant’s death or (ii) the
          Participant dies within the period (if any) specified in the Option Agreement
          after the termination of the Participant’s Continuous Service for a reason other
          than death, then the Option may be exercised (to the extent the Participant
          was
          entitled to exercise the Option as of the date of death) by the Participant’s
          estate, by a person who acquired the right to exercise the Option by bequest
          or
          inheritance or by a person designated to exercise the Option upon the
          Participant’s death pursuant to subsection 6(f), but only within the period
          ending on the earlier of (A) the date twelve (12) months following the
          date of
          death (or such longer or shorter period specified in the Option Agreement)
          or
          (B) the expiration of the term of such Option as set forth in the Option
          Agreement.  If, after death, the Option is not exercised within the
          time specified herein, the Option shall terminate.

         

        
          	
                  7.

                	
                  COVENANTS
                    OF THE COMPANY.

                


        

         

        (a)           Availability
          of Shares.  During the terms of the Options, the Company
          shall keep available at all times the number of shares of Common Stock
          required
          to satisfy such Options.

         

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

         

        8.           USE
          OF PROCEEDS FROM STOCK.

         

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

         

        9.           EXERCISE
          OR FORFEITURE.

         

        In
          the
          event that Company’s capital falls below the minimum requirements contained in
          12 C.F.R. 3 or below a higher requirement as determined by the Comptroller,
          the Comptroller may direct the Company to require Participants who have
          outstanding Options pursuant to this Plan to either exercise such Options
          or to
          forfeit all such Options.  Company will notify Participants who have
          outstanding Options pursuant to this Plan within forty-five (45) days from
          the
          date the Comptroller notifies the Company in writing that such Participants
          must
          exercise or forfeit their Options.  Notwithstanding anything in this
          Plan or an applicable Option Agreement to the contrary, the Company will
          cancel
          outstanding Options not exercised within twenty-one (21) days of the Company’s
          notification.  The Company has agreed to comply with any request by
          the Comptroller that the Company invoke its right to require Participants
          who
          have outstanding Options pursuant to this Plan to exercise or forfeit their
          options under the previous circumstances.


        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        


        10.           ADJUSTMENTS
          UPON CHANGES IN COMMON STOCK.

         

        (a)           Capitalization
          Adjustments.  If any change is made in the stock subject to
          the Plan, or subject to any Option, without the receipt of consideration
          by the
          Company (through merger, consolidation, reorganization, recapitalization,
          reincorporation, stock dividend, dividend in property other than cash,
          stock
          split, liquidating dividend, combination of shares, exchange of shares,
          change
          in corporate structure or other transaction not involving the receipt of
          consideration by the Company), the Plan will be appropriately adjusted
          in the
          class(es) and maximum number of securities subject to the Plan pursuant
          to
          subsection 4(a) and the maximum number of securities subject to award to
          any
          person pursuant to subsection 5(b), and the outstanding Options will be
          appropriately adjusted in the class(es) and number of securities and price
          per
          share of stock subject to such outstanding Options.  The Board, the
          determination of which shall be final, binding and conclusive, shall make
          such
          adjustments.  For this purpose, the conversion of any convertible
          securities of the Company shall not be treated as a transaction “without receipt
          of consideration” by the Company.

         

        (b)           Change
          in Control–Dissolution or Liquidation.  In the event of a
          dissolution or liquidation of the Company, then such Options shall be terminated
          if not exercised (if applicable) prior to such event.

         

        (c)           Change
          in Control–Asset Sale, Merger, Consolidation or Reverse
          Merger.  In the event of (i) a sale of all or substantially
          all of the assets of the Company, (ii) a merger or consolidation in which
          the
          Company is not the surviving corporation or (iii) a reverse merger in which
          the
          Company is the surviving corporation but (A) the shares of Common Stock
          outstanding immediately preceding the merger are converted by virtue of
          the
          merger into other property (whether in the form of securities, cash or
          otherwise) or (B) the voting securities of the Company outstanding immediately
          preceding the merger represent less than fifty percent (50%) of the total
          voting
          power represented by the voting securities of the Company surviving such
          merger
          (other than, with respect to events otherwise described in items (i) through
          (iii) above, the formation of a holding company by the Company, a merger
          or
          consolidation with a wholly-owned subsidiary, a reincorporation of the
          Company
          in a different jurisdiction, or other transaction in which there is no
          substantial change in the shareholders of the Company or their relative
          stock
          holdings and the Options granted under this Plan are assumed, converted
          or
          replaced by the successor corporation, which assumption will be binding
          on all
          Participants), then any surviving corporation or acquiring corporation
          shall
          assume any Options outstanding under the Plan or shall substitute similar
          Options (including an award to acquire the same consideration paid to the
          shareholders in the transaction described in this subsection 10(c) for
          those
          outstanding under the Plan).  In the event any surviving corporation
          or acquiring corporation refuses to assume such Options or to substitute
          similar
          options for those outstanding under the Plan, then with respect to Options
          held
          by Participants whose Continuous Service has not terminated, the Board
          shall
          accelerate the vesting or termination of restriction, limitation or repurchase
          rights applicable to such Options (and, if applicable, the time during
          which
          such Options may be exercised), and the Options shall terminate if not
          exercised
          (if applicable) at or prior to such event.  With respect to any other
          Options outstanding under the Plan, such Options shall terminate if not
          exercised (if applicable) prior to such event and the Plan shall
          terminate.


        
          
            
            

          

          
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        11.           DURATION
          AND AMENDMENTS.

         

        (a)           Term
          of Plan.  The Plan, as set forth herein, shall become
          effective on the date of its adoption by the Board, subject to the approval
          of
          the Company’s shareholders.  In the event that the shareholders fail
          to approve the Plan within twelve (12) months after its adoption by the
          Board,
          any Options already made shall be null and void, and no additional Options
          shall
          be made after such date.  The Plan shall terminate automatically ten
          (10) years after its adoption by the Board and may be terminated on any
          earlier
          date pursuant to subsection (b) below.

         

        (b)           Right
          to Amend or Terminate Plan.  The Board may amend or terminate
          the Plan at any time.  Rights under any Option granted before
          amendment of the Plan shall not be materially altered, or impaired adversely,
          by
          such amendment without the Participant’s consent.

         

        (c)           Effect
          of Amendment or Termination.  No Common Stock shall be issued
          or sold under the Plan after the termination thereof, except upon the exercise
          of an Option granted prior to such termination.  The termination of
          the Plan, or any amendment thereof, shall not affect any Common Stock previously
          issued or Option previously granted under the Plan.

         

        12.           MISCELLANEOUS.

         

        (a)           Acceleration
          of Exercisability and Vesting.  The Committee shall have the
          power to accelerate the time at which an Option may first be exercised
          or the
          time during which an Option or any part thereof will vest in accordance
          with the
          Plan, notwithstanding the provisions in the Option stating the time at
          which it
          may first be exercised or the time during which it will vest.

         

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

         

        (c)           No
          Employment or other Service Rights.  Nothing in the Plan or
          any instrument executed or Option granted pursuant thereto shall confer
          upon any
          Participant or other holder of Options any right to continue to serve the
          Company or an Affiliate in the capacity in effect at the time the Option
          was
          granted or shall affect the right of the Company or an Affiliate to terminate
          (i) the employment of an Employee with or without notice and with or without
          cause or (ii) the service of a Director pursuant to the Bylaws of the Company
          or
          an Affiliate, and any applicable provisions of the corporate law of the
          state in
          which the Company or the Affiliate is incorporated, as the case may
          be.

         

        (d)           Incentive
          Stock Option $100,000 Limitation.  To the extent that the
          aggregate Fair Market Value (determined at the time of grant) of stock
          with
          respect to which Incentive Stock Options are exercisable for the first
          time by
          any Participant during any calendar year (under all plans of the Company
          and its
          Affiliates) exceeds one hundred thousand dollars ($100,000), the Options
          or
          portions thereof which exceed such limit (according to the order in which
          they
          were granted) shall be treated as Nonstatutory Stock Options.


        
          
            
            

          

          
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        (i)           Investment
          Assurances.  The Company may require a Participant, as a
          condition of exercising or acquiring any Option or stock under any Option,
          (i)
          to give written assurances satisfactory to the Company as to the Participant’s
“accredited investor” status as such term is defined in the Securities Act,
          knowledge and experience in financial and business matters and/or to employ
          a
          purchaser representative reasonably satisfactory to the Company who is
          knowledgeable and experienced in financial and business matters and that
          he or
          she is capable of evaluating, alone or together with the purchaser
          representative, the merits and risks of exercising the Option; and (ii)
          to give
          written assurances satisfactory to the Company stating that the Participant
          is
          acquiring the Option or the stock subject to the Option for the Participant’s
          own account and not with any present intention of selling or otherwise
          distributing the stock.  The foregoing requirements, and any
          assurances given pursuant to such requirements, shall be inoperative if
          a
          determination is made by counsel for the Company that such requirement
          need not
          be met in the circumstances under the then applicable securities
          laws.  The Company may, upon advice of counsel to the Company, place
          legends on stock certificates issued under the Plan as such counsel deems
          necessary or appropriate in order to comply with applicable securities
          laws,
          including, but not limited to, legends restricting the transfer of the
          Options
          or the stock.

         

        (e)           Withholding
          Obligations.  To the extent provided by the terms of an
          Option Agreement, the Participant may satisfy any federal, state or local
          tax
          withholding obligation relating to the exercise or acquisition of stock
          under a
          Option by any of the following means (in addition to the Company’s right to
          withhold from any compensation paid to the Participant by the Company)
          or by a
          combination of such means:  (i) tendering a cash payment; (ii)
          authorizing the Company to withhold shares from the shares of the Common
          Stock
          otherwise issuable to the participant as a result of the exercise or acquisition
          of stock under the Option; of (iii) delivering to the Company owned and
          unencumbered shares of the Common Stock.

         

        (f)           Governing
          Law.  This Plan and all actions taken thereunder shall be
          governed by and construed in accordance with the laws of the State of
          California, except in the event the provisions of federal law are mandatorily
          applicable.

         

         

      

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