EXHIBIT
4.1


 


2004
EQUITY INCENTIVE PLAN


of


ACTIVIDENTITY
CORPORATION


 


1.
Purpose of this Plan


 


The purpose of this 2004 Equity Incentive Plan is to
enhance the long-term stockholder value of ActivIdentity Corporation by
offering opportunities to eligible individuals to participate in the growth in
value of the equity of ActivIdentity Corporation


 


2.
Definitions and Rules of Interpretation


 


2.1 Definitions.


 


This Plan uses the following defined terms:


 


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


 


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


 


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


 


(d) “Award” means a Stock Award (e.g. restricted
stock unit award), SAR, Cash Award, or Option granted in accordance with the
terms of this Plan.


 


(e) “Award Agreement” means
the document evidencing the grant of an Award.


 


(f) “Award Shares” means
Shares covered by an outstanding Award or purchased under an Award.


 


(g) “Awardee” means: (i) a
person to whom an Award has been granted, including a holder of a Substitute
Award, (ii) a person to whom an Award has been transferred in accordance
with all applicable requirements of Sections 6.5, 7(h), and 17.


 


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


 


(i) “Cash Award” means
the right to receive cash as described in Section 8.3.


 


(j) “Change in Control”
means any transaction or event that the Board specifies as a Change in Control
under Section 10.4.


 


(k) “Code” means the
Internal Revenue Code of 1986.


 


(l) “Committee” means a
committee composed of Company Directors appointed in accordance with the
Company’s charter documents and Section 4.


 


(m) “Company” means
ActivIdentity Corporation, a Delaware corporation.


 


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


 

















 


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


 


(p) “Director” means a
member of the Board of Directors of the Company or an Affiliate.


 


(q) “Divestiture” means
any transaction or event that the Board specifies as a Divestiture under Section 10.5.


 


(r) “Domestic Relations Order” means a “domestic relations order” as
defined in, and otherwise meeting the requirements of, Section 414(p) of
the Code, except that reference to a “plan” in that definition shall be to this
Plan.


 


(s) “Effective Date” means the later of the date on which
this Plan is approved by the Company’s stockholders and the date on which this
Plan is approved by the Board.


 


(t) “Employee” means a
regular employee of the Company or an Affiliate, including an officer or Director,
who is 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) leased from or otherwise employed by a third party, (ii) independent
contractors, or (iii) intermittent or temporary workers. The Company’s or
an Affiliate’s classification of an individual as an “Employee” (or as not an “Employee”)
for purposes of this Plan shall not be altered retroactively even if that
classification is changed retroactively for another purpose as a result of an
audit, litigation or otherwise. An Awardee shall not cease to be an Employee
due to transfers between locations of the Company, or between the Company and
an Affiliate, or to any successor to the Company or an Affiliate that assumes
the Awardee’s Options under Section 10. Neither service as a Director nor
receipt of a director’s fee shall be sufficient to make a Director an “Employee.”


 


(u) “Exchange Act” means
the Securities Exchange Act of 1934.


 


(v) “Executive” means, if
the Company has any class of any equity security registered under Section 12
of the Exchange Act, an individual who is subject to Section 16 of the
Exchange Act 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 an Affiliate. If the Company does not have any class of any equity
security registered under Section 12 of the Exchange Act, “Executive”
means any (i) Director, (ii) officer elected or appointed by the
Board, or (iii) beneficial owner of more than 10% of any class of the
Company’s equity securities.


 


(w) “Expiration Date” means,
with respect to an Award, the date stated in the Award Agreement as the
expiration date of the Award or, if no such date is stated in the Award
Agreement, then the last day of the maximum exercise period for the Award,
disregarding the effect of an Awardee’s Termination or any other event that
would shorten that period.


 


(x) “Fair Market Value” means
the value of Shares as determined under Section 18.2.


 


(y) “Fundamental Transaction”
means any transaction or event described in Section 10.3.


 


(z) “Grant Date” means
the date the Administrator approves the grant of an Award. However, if the
Administrator specifies that an Award’s Grant Date is a future date or the date
on which a condition is satisfied, the Grant Date for such Award is that future
date or the date that the condition is satisfied.


 


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


 


(bb)
“Nonstatutory Option”
means any Option other than an Incentive Stock Option.


 

















 


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


 


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


 


(ee)
“Officer” means
an officer of the Company as defined in Rule 16a-1 adopted under the
Exchange Act.


 


(ff)
“Option” means
a right to purchase Shares of the Company granted under this Plan.


 


(gg)
“Option Price” means
the price payable under an Option for Shares, not including any amount payable
in respect of withholding or other taxes.


 


(hh)
“Option Shares” means
Shares covered by an outstanding Option or purchased under an Option.


 


(ii) “Plan” means this
2004 Equity Incentive Plan of ActivIdentity Corporation.


 


(jj)
“Purchase Price”
means the price payable under a Stock Award for Shares, not including any
amount payable in respect of withholding or other taxes.


 


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


 


(ll)
“SAR” or “Stock
Appreciation Right” means a right to receive cash based on a
change in the Fair Market Value of a specific number of Shares pursuant to an
Award Agreement, as described in Section 8.1.


 


(mm)
“Securities Act” means
the Securities Act of 1933.


 


(nn)
“Share” means
a share of the common stock of the Company or other securities substituted for
the common stock under Section 10.


 


(oo)
“Stock Award”
means an offer by the Company to sell shares subject to certain restrictions
pursuant to the Award Agreement as described in Section 8.2 or, as
determined by the Committee, a notional account representing the right to be
paid an amount based on Shares.


 


(pp)
“Substitute Award” means
a Substitute Option, Substitute SAR or Substitute Stock Award granted in
accordance with the terms of this Plan.


 


(qq)
“Substitute Option” means
an Option granted in substitution for, or upon the conversion of, an option
granted by another entity to purchase equity securities in the granting entity.


 


(rr)
“Substitute SAR” means
a SAR granted in substitution for, or upon the conversion of, a stock
appreciation right granted by another entity with respect to equity securities
in the granting entity.


 


(ss)
“Substitute Stock Award”
means a Stock Award granted in substitution for, or upon the
conversion of, a stock award granted by another entity to purchase equity
securities in the granting entity.


 

















 


(tt)
“Termination” means
that the Awardee has ceased to be, with or without any cause or reason, an
Employee, Director or Consultant. However, unless so determined by the
Administrator, or otherwise provided in this Plan, “Termination” shall not
include a change in status from an Employee, Consultant or Director to another
such status. An event that causes an Affiliate to cease being an Affiliate
shall be treated as the “Termination” of that Affiliate’s Employees, Directors,
and Consultants.


 


2.2 Rules of
Interpretation. Any reference to a “Section,” without more, is to a Section of
this Plan. Captions and titles are used for convenience in this Plan and shall
not, by themselves, determine the meaning of this Plan. Except when otherwise
indicated by the context, the singular includes the plural and vice versa. Any
reference to a statute is also a reference to the applicable rules and
regulations adopted under that statute. Any reference to a statute, rule or
regulation, or to a section of a statute, rule or regulation, is a
reference to that statute, rule, regulation, or section as amended from time to
time, both before and after the Effective Date and including any successor
provisions.


 


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


 


3.1 Number of
Award Shares. The Shares issuable under this Plan shall only be
those Shares available for grant under the Company’s 2002 Stock Option Plan
(including Shares which were subject to previous awards under the 2002 Stock
Option Plan but which become available for subsequent grant under the terms of
the 2002 Stock Option Plan) plus 4,000,000 additional Shares reserved for
issuance by the Board of Directors on December 28, 2006 and approved by
the Company’s stockholders on February 12, 2007. The number of Shares
initially reserved for issuance over the term of this Plan shall be increased
by those Shares that are restored pursuant to the decision of the Board or
Committee pursuant to Section 6.4(a) to deliver only such Shares as
are necessary to award the net Share appreciation. Except as required by
applicable law, Shares shall not reduce the number of Shares reserved for
issuance under this Plan until the earlier of the date such Shares are vested
pursuant to the terms of the applicable Award or the actual date of delivery of
the Shares to the Awardee. Also, if an Award later terminates or expires
without having been exercised in full, the maximum number of shares that may be
issued under this Plan shall be increased by the number of Shares that were
covered by, but not purchased under, that Award. By contrast, the repurchase of
Shares by the Company shall not increase the maximum number of Shares that may
be issued under this Plan.


 


3.2 Source of
Shares. Award Shares may be: (a) Shares that have never been
issued, (b) Shares that have been issued but are no longer outstanding, or
(c) Shares that are outstanding and are acquired to discharge the Company’s
obligation to deliver Award Shares.


 


3.3 Term of this
Plan


 


(a) This
Plan shall be effective on, and Awards may be granted under this Plan on and
after the Effective Date.


 


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


 


4.
Administration


 


4.1 General


 


(a) The
Board shall have ultimate responsibility for administering this Plan. The Board
may delegate certain of its responsibilities to a Committee, which shall
consist of at least two members of the Board. The Board or the Committee may
further delegate its responsibilities to any Employee of the Company or any
Affiliate. Where this Plan specifies that an action is to be taken or a
determination made by the Board, only the Board may take that action or make
that determination. Where this Plan specifies that an action is to be taken or
a determination made by the Committee, only the Committee may take that action
or make that determination. Where this Plan references the 


 

















 


“Administrator,” the action
may be taken or determination made by the Board, the Committee, or other
Administrator. However, only the Board or the Committee may approve grants of
Awards to Executives, and an Administrator other than the Board or the
Committee may grant Awards only within the guidelines established by the Board
or Committee. Moreover, all actions and determinations by any Administrator are
subject to the provisions of this Plan.


 


(b) So
long as the Company has registered and outstanding a class of equity securities
under Section 12 of the Exchange Act, the Committee shall consist of
Company Directors who are “Non-Employee Directors” as defined in Rule 16b-3
and, after the expiration of any transition period permitted by Treasury
Regulations Section 1.162-27(h)(3), who are “outside directors” as defined
in Section 162(m) of the Code.


 


4.2 Authority of
the Board or the Committee. Subject to the other provisions of this
Plan, the Board or the Committee shall have the authority to:


 


(a) grant
Awards, including Substitute Awards;


 


(b) determine
the Fair Market Value of Shares;


 


(c) determine
the Option Price and the Purchase Price of Awards;


 


(d) select
the Awardees;


 


(e) determine
the times Awards are granted;


 


(f) determine
the number of Shares subject to each Award;


 


(g) determine
the methods of payment that may be used to purchase Award Shares;


 


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


 


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


 


(j) modify
or amend any Award;


 


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


 


(l) determine
the form of any Award Agreement or other document related to this Plan, and
whether that document, including signatures, may be in electronic form;


 


(m) interpret
this Plan and any Award Agreement or document related to this Plan;


 


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


 


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


 


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


 


(q) determine
whether a transaction or event should be treated as a Change in Control, a
Divestiture or neither;


 

















 


(r) determine
the effect of a Fundamental Transaction and, if the Board determines that a
transaction or event should be treated as a Change in Control or a Divestiture,
then the effect of that Change in Control or Divestiture; and


 


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


 


4.3 Scope of
Discretion. Subject to the provisions of this Section 4.3, on
all matters for which this Plan confers the authority, right or power on the
Board, the Committee, or other Administrator to make decisions, that body may
make those decisions in its sole and absolute discretion. Those decisions will
be final, binding and conclusive. In making its decisions, the Board, Committee
or other Administrator need not treat all persons eligible to receive Awards,
all Awardees, all Awards or all Award Shares the same way. Notwithstanding
anything herein to the contrary, and except as provided in Section 14.3,
the discretion of the Board, Committee or other Administrator is subject to the
specific provisions and specific limitations of this Plan, as well as all
rights conferred on specific Awardees by Award Agreements and other agreements.


 


5.
Persons Eligible to Receive Awards


 


5.1 Eligible
Individuals. 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 the Company or an Affiliate. However, Incentive Stock Options may
only be granted to Employees, as provided in Section 7(g).


 


5.2 Section 162(m) Limitation.


 


(a) Options and SARs. Subject to the provisions
of this Section 5.2, for so long as the Company is a “publicly held
corporation” within the meaning of Section 162(m) of the Code: (i) no
Employee may be granted one or more SARs and Options within any fiscal year of
the Company under this Plan to purchase more than 700,000 Shares under Options
or to receive compensation calculated with reference to more than that number
of Shares under SARs, subject to adjustment pursuant to Section 10, (ii) Options
and SARs may be granted to an Executive only by the Committee (and,
notwithstanding anything to the contrary in Section 4.1(a), not by the
Board). If an Option or SAR is cancelled without being exercised or of the
Option Price of an Option is reduced, that cancelled or repriced Option or SAR
shall continue to be counted against the limit on Awards that my be granted to
any individual under this Section 5.2. Notwithstanding anything herein to
the contrary, a new Employee of the Company or an Affiliate shall be eligible
to receive up to a maximum of 1,200,000 Shares under Options in the calendar
year which they commence employment, or such compensation calculated with
reference to such number of Shares under SARs, subject to adjustment pursuant
to Section 10.


 


(b) Cash Awards and Stock Awards. Any Cash
Award or Stock Award intended as “qualified performance-based compensation”
within the meaning of Section 162(m) of the Code must vest or become
exercisable contingent on the achievement of one or more Objectively
Determinable Performance Conditions. The Committee shall have the discretion to
determine the time and manner of compliance with Section 162(m) of
the Code.


 


6. Terms and Conditions of Options


 


The following rules apply to all Options:


 


6.1 Price.
Except as specifically provided herein, no nonstatutory Option may have an
Option Price less than the par value of the Shares on the Grant Date. No Option
intended as “qualified incentive-based compensation” within the meaning of Section 162(m) of
the Code may have an Option Price less than 100% of the Fair Market Value of
the Shares on the Grant Date. In no event will the Option Price of any Option
be less than the par value of the Shares issuable under the Option if that is
required by Applicable Law. The Option Price of an Incentive Stock Option shall
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 is more than ten years after its Grant Date. Additional
provisions regarding the term of Incentive Stock Options are provided in
Sections 7(a) and 7(e).


 


6.3 Vesting.
Options shall be exercisable: (a) on the Grant Date, or (b) in
accordance with a schedule related to the Grant Date, the date the Optionee’s
directorship, employment or consultancy begins, or a different date specified
in the Option Agreement. Additional provisions regarding the vesting of
Incentive Stock Options are provided in Section 7(c). No Option granted to
an individual who is subject to the overtime pay provisions of the Fair Labor
Standards Act may be exercised before the expiration of six months after the
Grant Date.


 


6.4 Form and
Method of Payment.


 


(a) The
Board or Committee shall determine the acceptable form and method of payment
for exercising an Option. So long as variable accounting pursuant to “APB 25”
does not apply and the Board or Committee otherwise determines there is no
material adverse accounting consequence at the time of exercise, the Board or
Committee may require the delivery in Shares for the value of the net
appreciation of the Shares at the time of exercise over the exercise price. The
difference between full number of Shares covered by the exercised portion of
the Award and the number of Shares actually delivered shall be restored to the
amount of Shares reserved for issuance under Section 3.1.


 


(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 Administrator for
non-U.S. Employees or non-U.S. sub-plans.


 


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


 


(i) other
Shares, or the designation of other Shares, which (A) are “mature” shares
for purposes of avoiding variable accounting treatment under generally accepted
accounting principles (generally mature shares are those that have been owned
by the Optionee for more than six months on the date of surrender), and (B) have
a Fair Market Value on the date of surrender equal to the Option Price of the
Shares as to which the Option is being exercised;


 


(ii) provided
that a public market exists for the Shares, consideration received by the Company
under a procedure under which a licensed broker-dealer advances funds on behalf
of an Optionee or sells Option Shares on behalf of an Optionee (a “Cashless Exercise Procedure”),
provided that if the Company extends or arranges for the extension of credit to
an Optionee under any Cashless Exercise Procedure, no Officer or Director may
participate in that Cashless Exercise Procedure;


 


(iii) cancellation
of any debt owed by the Company or any Affiliate to the Optionee by the Company
including without limitation waiver of compensation due or accrued for services
previously rendered to the Company; and


 


(iv) any
combination of the methods of payment permitted by any paragraph of this Section 6.4.


 


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


 


6.5 Nonassignability
of Options. Except as determined by the Administrator, no Option
shall be assignable or otherwise transferable by the Optionee except by will or
by the laws of descent and distribution. However, Options may be transferred
and exercised in accordance with a Domestic Relations Order and may be
exercised by a guardian or conservator appointed to act for the Optionee.
Incentive Stock Options may only be assigned in compliance with Section 7(h).


 


6.6 Substitute
Options. The Board may cause the Company to grant Substitute Options
in connection with the acquisition by the Company or an Affiliate of equity
securities of any entity (including 


 

















 


by
merger, tender offer, or other similar transaction) or of all or a portion of
the assets of any entity. Any such substitution shall be effective on the
effective date of the acquisition. Substitute Options may be Nonstatutory
Options or Incentive Stock Options. Unless and to the extent specified
otherwise by the Board, Substitute Options shall have the same terms and
conditions as the options they replace, except that (subject to the provisions
of Section 10) Substitute Options shall be Options to purchase Shares
rather than equity securities of the granting entity and shall have an Option
Price determined by the Board.


 


6.7 Repricings.
Options may not be repriced, replaced or regranted through cancellation or
modification without stockholder approval.


 


7. Incentive Stock Options.


 


The following rules apply only to Incentive
Stock Options and only to the extent these rules are more restrictive than
the rules that would otherwise apply under this Plan. With the consent of
the Optionee, or where this Plan provides that an action may be taken notwithstanding
any other provision of this Plan, the Administrator may deviate from the
requirements of this Section, notwithstanding that any Incentive Stock Option
modified by the Administrator will thereafter be treated as a Nonstatutory
Option.


 


(a) The
Expiration Date of an Incentive Stock Option shall not be later than ten years
from its Grant Date, with the result that no Incentive Stock Option may be
exercised after the expiration of ten years from its Grant Date.


 


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


 


(c) Options
intended to be incentive stock options under Section 422 of the Code that
are granted to any single Optionee under all incentive stock option plans of
the Company and its Affiliates, including incentive stock options granted under
this Plan, may not vest at a rate of more than $100,000 in Fair Market Value of
stock (measured on the grant dates of the options) during any calendar year.
For this purpose, an option vests with respect to a given share of stock the
first time its holder may purchase that share, notwithstanding any right of the
Company to repurchase that share. Unless the administrator of that option plan
specifies otherwise in the related agreement governing the option, this vesting
limitation shall be applied by, to the extent necessary to satisfy this
$100,000 rule, treating certain stock options that were intended to be
incentive stock options under Section 422 of the Code as Nonstatutory
Options. The stock options or portions of stock options to be reclassified as
Nonstatutory Options are those with the highest option prices, whether granted
under this Plan or any other equity compensation plan of the Company or any
Affiliate that permits that treatment. This Section 7(c) shall not
cause an Incentive Stock Option to vest before its original vesting date or
cause an Incentive Stock Option that has already vested to cease to be vested.


 


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


 


(e) Any
Incentive Stock Option granted to a Ten Percent Stockholder, must have an Expiration
Date that is not later than five years from its Grant Date, with the result
that no such Option may be exercised after the expiration of five years from
the Grant Date. A “Ten
Percent Stockholder” is any person who, directly or by
attribution under Section 424(d) of the Code, owns stock possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company or of any Affiliate on the Grant Date.


 


(f) The
Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. The Option Price for the Shares
covered by an Incentive Stock Option granted to a Ten Percent Stockholder shall
never be less than 110% of the Fair Market Value of the Shares at the Grant
Date.


 


(g) Incentive
Stock Options may be granted only to Employees. If an Optionee changes status
from an Employee to a Consultant, that Optionee’s Incentive Stock Options
become Nonstatutory 


 

















 


Options if not exercised
within the time period described in Section 7(i) (determined by
treating that change in status as a Termination solely for purposes of this Section 7(g)).


 


(h) No
rights under an Incentive Stock Option may be transferred by the Optionee,
other than by will or the laws of descent and distribution. During the life of
the Optionee, an Incentive Stock Option may be exercised only by the Optionee.
The Company’s compliance with a Domestic Relations Order, or the exercise of an
Incentive Stock Option by a guardian or conservator appointed to act for the Optionee,
shall not violate this Section 7(h).


 


(i) An
Incentive Stock Option shall be treated as a Nonstatutory Option if it remains
exercisable after, and is not exercised within, the three-month period
beginning with the Optionee’s Termination for any reason other than the
Optionee’s death or disability (as defined in Section 22(e) of the
Code). In the case of Termination due to death, an Incentive Stock Option shall
continue to be treated as an Incentive Stock Option if it remains exercisable
after, and is not exercised within, the three month period after the Optionee’s
Termination provided it is exercised before the Expiration Date. In the case of
Termination due to disability, an Incentive Stock Option shall be treated as a
Nonstatutory Option if it remains exercisable after, and is not exercised
within, one year after the Optionee’s Termination.


 


(j) An
Incentive Stock Option may only be modified by the Board.


 


8.
Stock Appreciation Rights, Stock Awards and
Cash Awards


 


8.1 Stock
Appreciation Rights. The following rules apply to SARs:


 


(a) General. SARs may be
granted either alone, in addition to, or in tandem with other Awards granted
under this Plan. The Administrator may grant SARs to eligible participants
subject to terms and conditions not inconsistent with this Plan and determined
by the Administrator. The specific terms and conditions applicable to the
Awardee shall be provided for in the Award Agreement. SARs shall be
exercisable, in whole or in part, at such times as the Administrator shall specify
in the Award Agreement. The grant or vesting of a SAR may be made contingent on
the achievement of Objectively Determinable Performance Conditions.


 


(b) Exercise of SARs.
Upon the exercise of an SAR, in whole or in part, an Awardee shall be entitled
to a payment in an amount equal to the excess of the Fair Market Value of a
fixed number of Shares covered by the exercised portion of the SAR on the date
of exercise, over the Fair Market Value of the Shares covered by the exercised
portion of the SAR on the Grant Date. The amount due to the Awardee upon the
exercise of a SAR shall be paid in cash, Shares or a combination thereof, over
the period or periods specified in the Award Agreement. An Award Agreement may
place limits on the amount that may be paid over any specified period or
periods upon the exercise of a SAR, on an aggregate basis or as to any Awardee.
A SAR shall be considered exercised when the Company receives written notice of
exercise in accordance with the terms of the Award Agreement from the person
entitled to exercise the SAR. If a SAR has been granted in tandem with an
Option, upon the exercise of the SAR, the number of shares that may be
purchased pursuant to the Option shall be reduced by the number of shares with
respect to which the SAR is exercised.


 


(c) Nonassignability of SARs.
Except as determined by the Administrator, no SAR shall be assignable or
otherwise transferable by the Awardee except by will or by the laws of descent
and distribution. Notwithstanding anything herein to the contrary, SARs may be
transferred and exercised in accordance with a Domestic Relations Order.


 


(d) Substitute SARs. The
Board may cause the Company to grant Substitute SARs in connection with the
acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity. Any such
substitution shall be effective on the effective date of the acquisition.
Unless and to the extent specified otherwise by the Board, Substitute SARs
shall have the same terms and conditions as the options they replace, except
that (subject to the provisions of Section 9) Substitute SARs shall be
exercisable with respect to the 


 

















 


Fair Market Value of Shares
rather than equity securities of the granting entity and shall be on terms
that, as determined by the Board in its sole and absolute discretion, properly
reflects the substitution.


 


(e) Repricings. A SAR may
not be repriced, replaced or regranted, through cancellation or modification
without stockholder approval.


 


8.2 Stock Awards.
The following rules apply to all Stock Awards:


 


(a) General. The specific
terms and conditions of a Stock Award applicable to the Awardee shall be
provided for in the Award Agreement. The Award Agreement shall state the number
of Shares that the Awardee shall be entitled to receive or purchase, the terms
and conditions on which the Shares shall vest, the price to be paid, whether
Shares are to be delivered at the time of grant or at some deferred date
specified in the Award Agreement (e.g. a restricted stock unit award
agreement), whether the Award is payable solely in Shares, cash or either and,
if applicable, the time within which the Awardee must accept such offer. The
offer shall be accepted by execution of the Award Agreement. The Administrator
may require that all Shares subject to a right of repurchase or risk of
forfeiture be held in escrow until such repurchase right or risk of forfeiture
lapses. The grant or vesting of a Stock Award may be made contingent on the
achievement of Objectively Determinable Performance Conditions.


 


(b) Right of Repurchase.
If so provided in the Award Agreement, Award Shares acquired pursuant to a
Stock Award may be subject to repurchase by the Company or an Affiliate if not
vested in accordance with the Award Agreement.


 


(c) Form of Payment.
The Administrator shall determine the acceptable form and method of payment for
exercising a Stock Award. Acceptable forms of payment for all Award Shares are
cash, check or wire transfer, denominated in U.S. dollars except as specified
by the Administrator for non-U.S. sub-plans. In addition, the Administrator may
permit payment to be made by any of the methods permitted with respect to the
exercise of Options pursuant to Section 6.4.


 


(d) Nonassignability of Stock Awards.
Except as determined by the Administrator, no Stock Award shall be assignable
or otherwise transferable by the Awardee except by will or by the laws of
descent and distribution. Notwithstanding anything to the contrary herein,
Stock Awards may be transferred and exercised in accordance with a Domestic
Relations Order.


 


(e) Substitute Stock Award.
The Board may cause the Company to grant Substitute Stock Awards in connection
with the acquisition by the Company or an Affiliate of equity securities of any
entity (including by merger) or all or a portion of the assets of any entity.


 


Unless and to the extent specified otherwise by the
Board, Substitute Stock Awards shall have the same terms and conditions as 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 than
equity securities of the granting entity and shall have a Purchase Price that,
as determined by the Board in its sole and absolute discretion, properly
reflects the substitution. Any such Substituted Stock Award shall be effective
on the effective date of the acquisition.


 


8.3 Cash Awards.
The following rules apply to all Cash
Awards:


 


Cash Awards may be granted either alone, in addition
to, or in tandem with other Awards granted under this Plan. After the
Administrator determines that it will offer a Cash Award, it shall advise the
Awardee, by means of an Award Agreement, of the terms, conditions and
restrictions related to the Cash Award.


 


9. Exercise of Awards


 


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


 
















 


9.2 Time of
Exercise. Options and Stock Awards shall be considered exercised
when the Company receives: (a) written notice of exercise from the person
entitled to exercise the Option or Stock Award, (b) full payment, or
provision for payment, in a form and method approved by the Administrator, for
the Shares for which the Option or Stock Award is being exercised, and (c) with
respect to Nonstatutory Options, payment, or provision for payment, in a form
approved by the Administrator, of all applicable withholding taxes due upon
exercise. An Award may not be exercised for a fraction of a Share. SARs shall
be considered exercised when the Company receives written notice of the
exercise from the person entitled to exercise the SAR.


 


9.3 Issuance of
Award Shares. The Company shall issue Award Shares in the name of
the person properly exercising the Award. If the Awardee is that person and so
requests, the Award Shares shall be issued in the name of the Awardee and the
Awardee’s spouse. The Company shall endeavor to issue Award Shares promptly
after an Award is exercised or after the Grant Date of a Stock Award, as
applicable. Until Award Shares are actually issued, as evidenced by the
appropriate entry on the stock register of the Company or its transfer agent, the
Awardee will not have the rights of a stockholder with respect to those Award
Shares, even though the Awardee has completed 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 the Award Shares are
issued, except as provided in Section 10.


 


9.4 Termination


 


(a) In General. Except as
provided in an Award Agreement or in writing by the Administrator, including in
an Award Agreement, and as otherwise provided in Sections 9.4(b), (c), (d) and
(e) after an Awardee’s Termination, the Awardee’s Awards shall be
exercisable to the extent (but only to the extent) they are vested on the date
of that Termination and only during the ninety (90) days after the Termination,
but in no event after the Expiration Date. To the extent the Awardee does not
exercise an Award within the time specified for exercise, the Award shall
automatically terminate.


 


(b) Leaves of Absence.
Unless otherwise provided in the Award Agreement, no Award may be exercised
more than three months after the beginning of a leave of absence, other than a
personal or medical leave approved by an authorized representative of the
Company with employment guaranteed upon return. Awards shall not continue to
vest during a leave of absence, unless otherwise determined by the
Administrator with respect to an approved personal or medical leave with
employment guaranteed upon return.


 


(c) Death or Disability.
Unless otherwise provided by the Administrator, if an Awardee’s Termination is
due to death or disability (as determined by the Administrator with respect to
all Awards other than Incentive Stock Options and as defined by Section 22(e) of
the Code with respect to Incentive Stock Options), all Awards of that Awardee
to the extent exercisable at the date of that Termination may be exercised for
one year after that Termination, but in no event after the Expiration Date. In
the case 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 been granted this authority as part
of that appointment, that guardian or conservator may exercise the Award on
behalf of the Awardee. Death or disability occurring after an Awardee’s
Termination shall not cause the Termination to be treated as having occurred
due to death or disability. To the extent an Award is not so exercised within
the time specified for its exercise, the Award shall automatically terminate.


 


(d) Divestiture. If an
Awardee’s Termination is due to a Divestiture, the Board may take any one or
more of the actions described in Section 10.3 or 10.4 with respect to the
Awardee’s Awards.


 


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


 


(i) Extend
the period of time for which the Award is to remain exercisable, following the
Awardee’s Termination, from the limited exercise period otherwise in effect for
that Award to 


 

















 


such greater period of time
as the Administrator shall deem appropriate, but in no event beyond the Expiration
Date; and/or


 


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


 


(f) Consulting or Employment
Relationship. Nothing in this Plan or in any Award Agreement,
and no Award or the fact that Award Shares remain subject to repurchase rights,
shall: (A) interfere with or limit the right of the Company or any
Affiliate to terminate the employment or consultancy of any Awardee at any
time, whether with or without cause or reason, and with or without the payment
of severance or any other compensation or payment, or (B) interfere with
the application of any provision in any of the Company’s or any Affiliate’s
charter documents or Applicable Law relating to the election, appointment, term
of office, or removal of a Director.


 


10. Certain Transactions and Events


 


10.1 In General.
Except as provided in this Section 10, no change in the capital structure
of the Company, merger, sale or other disposition of assets or a subsidiary,
change in control, issuance by the Company of shares of any class of securities
or securities convertible into shares of any class of securities, exchange or
conversion of securities, or other transaction or event shall require or be the
occasion for any adjustments of the type described in this Section 10.
Additional provisions with respect to the foregoing transactions are set forth
in Section 14.3.


 


10.2 Changes in
Capital Structure. In the event of any stock split, reverse stock
split, recapitalization, combination or reclassification of stock, stock
dividend, spin-off, extraordinary cash or other property dividend or similar
change to the capital structure of the Company (not including a Fundamental
Transaction or Change in Control), the Board shall make whatever adjustments it
concludes are appropriate to: (a) the number and type of Awards that may
be granted under this Plan, (b) the number and type of Options that may be
granted to any individual under this Plan, (c) the terms of any SAR, (d) the
Purchase Price of any Stock Award, (e) the Option Price and number and
class of securities issuable under each outstanding Option, and (f) the
repurchase price of any securities substituted for Award Shares that are
subject to repurchase rights. The specific adjustments shall be determined by
the Board. Unless the Board specifies otherwise, any securities issuable as a
result of any such adjustment shall be rounded down to the next lower whole
security. The Board need not adopt the same rules for each Award or each
Awardee.


 


10.3 Fundamental
Transactions. Except for grants to Non-Employee Directors pursuant
to Section 11 herein, in the event of (a) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption shall be binding on all
Participants), (b) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior
to such merger (other than any stockholder that merges, or which owns or
controls another corporation that merges, with the Company in such merger)
cease to own their shares or other equity interest in the Company, (c) the
sale of all or substantially all of the assets of the Company, or (d) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of
the Company by tender offer or similar transaction (each, a “Fundamental Transaction”),
any or all outstanding Awards may be assumed, converted or replaced by the
successor corporation (if any), which assumption, conversion or replacement
shall be binding on all participants under this Plan. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares held by the
participants, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the participant. In the event such
successor corporation (if any) does not assume or substitute 


 

















 


Awards,
as provided above, pursuant to a transaction described in this Subsection 10.3,
the vesting with respect to such Awards shall fully and immediately accelerate
or the repurchase rights of the Company shall fully and immediately terminate,
as the case may be, so that the Awards may be exercised or the repurchase
rights shall terminate before, or otherwise in connection with the closing or
completion of the Fundamental Transaction or event, but then terminate.
Notwithstanding anything in this Plan to the contrary, the Committee may, in
its sole discretion, provide that the vesting of any or all Award Shares
subject to vesting or right of repurchase shall accelerate or lapse, as the
case may be, upon a transaction described in this Section 10.3. If the
Committee exercises such discretion with respect to Options, such Options shall
become exercisable in full prior to the consummation of such event at such time
and on such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the Fundamental Transaction, they shall
terminate at such time as determined by the Committee. Subject to any greater
rights granted to participants under the foregoing provisions of this Section 10.3,
in the event of the occurrence of any Fundamental Transaction, any outstanding
Awards shall be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, or sale of assets.


 


10.4 Changes of
Control. The Board may also, but need not, specify that other
transactions or events constitute a “Change in Control”. The Board may do that
either before or after the transaction or event occurs. Examples of
transactions or events that the Board may treat as Changes of Control are: (a) any
person or entity, including a “group” as contemplated by Section 13(d)(3) of
the Exchange Act, acquires securities holding 30% or more of the total combined
voting power or value of the Company, or (b) as a result of or in
connection with a contested election of Company Directors, the persons who were
Company Directors immediately before the election cease to constitute a
majority of the Board. In connection with a Change in Control, notwithstanding
any other provision of this Plan, the Board may, but need not, take any one or
more of the actions described in Section 10.3. In addition, the Board may
extend the date for the exercise of Awards (but not beyond their original
Expiration Date). The Board need not adopt the same rules for each Award
or each Awardee. Notwithstanding anything in this Plan to the contrary, in the
event of an involuntary Termination of services for any reason other than
death, disability or Cause, within 18 months following the consummation of a
Fundamental Transaction or Change in Control, any Awards, assumed or
substituted in a Fundamental Transaction or Change in Control, which are
subject to vesting conditions and/or the right of repurchase in favor of the
Company or a successor entity, shall accelerate fully so that such Award Shares
are immediately exercisable upon Termination or, if subject to the right of
repurchase in favor of the Company, such repurchase rights shall lapse as of
the date of Termination. Such Awards shall be exercisable for a period of three
(3) months following termination.


 


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


 


10.6 Dissolution.
If the Company adopts a plan of dissolution, the Board may cause Awards to be
fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the
Company’s repurchase rights on Award Shares to lapse upon completion of the
dissolution. The Board need not adopt the same rules for each Award or
each Awardee. Notwithstanding anything herein to the contrary, in the event of
a dissolution of the Company, to the extent not exercised before the earlier of
the completion of the dissolution or their Expiration Date, Awards shall
terminate immediately prior to the dissolution.


 


10.7 Cut-Back to
Preserve Benefits. If the Administrator determines that the net
after-tax amount to be realized by any Awardee, taking into account any
accelerated vesting, termination of repurchase rights, or cash payments to that
Awardee in connection with any transaction or event set forth in this Section 10
would be greater if one or more of those steps were not taken or payments were
not made with respect to that Awardee’s Awards or Award Shares, then, at the
election of the Awardee, to such extent, one or more of those steps shall not
be taken and payments shall not be made.


 

















 


11. Non-Employee Director Awards and Non-Employee
Director Fee Option Grants


 


11.1 Non-Employee Director Awards.


 


(a) General. Awards may be granted pursuant to
this Section 11.1 to: (i) each Non-Employee Director who is first
elected or appointed to the Board at any time after the Effective Date, and, (ii) commencing
in 2004, on the date of each annual meeting of stockholders, each individual
who is to continue serving as a Non-Employee Director, provided, however, that
such individual has served as a Non-Employee Director for at least six (6) months.
Subject to this Section 11.1, the Committee shall determine the terms of
each such Award, including, without limitation, the type of Award, the number
of Shares subject to such Award, the Option Price and Purchase Price, as
applicable, of any such Awards, and the time or times at which any such Awards may
be exercised.


 


(b) Termination of Service. The following
provisions shall govern the exercise of any Awards granted pursuant to Section 11.1
held by the Awardee at the time the Awardee ceases to serve as a Non-Employee
Director, Employee or Consultant:


 


(i) In General. Except as otherwise provided in
Section 10.3, after cessation of service (the “Cessation Date”), the
Awardee’s Awards shall be exercisable to the extent (but only to the extent)
they are vested on the Cessation Date and only during the three years after
such Cessation Date, but in no event after the Expiration Date. To the extent
the Awardee does not exercise an Award within the time specified for exercise,
the Award shall automatically terminate.


 


(ii) Death or Disability. If an Awardee’s
cessation of service is due to death or disability (as determined by the
Board), all Awards of that Awardee, to the extent exercisable upon such
Cessation Date, may be exercised for three years after the Cessation Date, but
in no event after the Expiration Date. In the case of a cessation of service
due to death, an Award may be exercised as provided in Section 16. In the
case of a cessation of service due to disability, if a guardian or conservator
has been appointed to act for the Awardee and been granted this authority as
part of that appointment, that guardian or conservator may exercise the Award
on behalf of the Awardee. Death or disability occurring after an Awardee’s
cessation of service shall not cause the cessation of service to be treated as
having occurred due to death or disability. To the extent an Award is not so
exercised within the time specified for its exercise, the Award shall
automatically terminate.


 


(c) Board Discretion. The Awards under this Section 11.1
are not intended as the exclusive Awards that may be made to Non-Employee
Directors under this Plan. The Board may, in its discretion, amend the Plan
with respect to the terms of the Awards herein, may add or substitute other
Awards or may temporarily or permanently suspend Awards hereunder, all without
approval of the Company’s stockholders.


 


11.2 Director Fee
Option Grants


 


(a) Option Grants. The Board shall have the
sole and exclusive authority to determine the calendar year or years for which
the Director fee option grant program (the “Director Fee Option Program”) is to be
in effect. For each such calendar year the program is in effect, each
Non-Employee Director may elect to apply all or any portion of the retainer,
meeting or other fees otherwise payable in cash, for his or her service on the
Board for that year, to the acquisition of a special Option grant under this
Director Fee Option Program. Such election must be filed with the Company’s
Chief Financial Officer prior to first day of the calendar year for which the
annual retainer fee which is the subject of that election is otherwise payable.
Each Non-Employee Director who files such a timely election shall automatically
be granted an Option under this Director Fee Option Program on the first
trading day in January in the calendar year for which the annual retainer
fee which is the subject of that election would otherwise be payable in cash.


 

















 


(b) Option Terms. Each Option shall be a
Nonstatutory Option governed by the terms and conditions specified below.


 


(i) Exercise Price.


 


A.
The Purchase Price shall be thirty-three and one-third percent (33 1/3%) of the Fair Market Value per Share on the Option grant date or such
other amount as determined by the Board.


 


B.
The Purchase Price shall become immediately due upon exercise of the Option and
shall be payable in one or more of the alternative forms authorized pursuant to
Section 6.4 of this Plan. Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the Purchase Price must
be made on the date that the Option is exercised.


 


(ii) Number of Option Shares.
The number of Shares subject to the Option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):


 


X
= A ÷ (B x 66 2/3%), where


 


X
is the number of Option Shares,


 


A
is the portion of the annual retainer fee subject to the Non-Employee Director’s
election, and


 


B
is the Fair Market Value of a Share on the option grant date.


 


(iii) Exercise and Term of Options.
The Option shall be immediately exercisable.


 


(iv) Termination of Board Service.
Should the Awardee cease Board service for any reason (other than death or
permanent disability) while holding one or more Options under this Director Fee
Option Program, then each such Option shall remain exercisable, for any or all
of the Shares for which the Option is exercisable at the time of such cessation
of Board service, until the earlier of (x) the expiration of the ten
(10)-year Option term or (y) the expiration of the three (3)-year period
measured from the date of such cessation of Board service.


 


(v) Death or Permanent Disability.
Should the Awardee’s service as a Board member cease by reason of death or
permanent disability, then each Option held by such Awardee under this Director
Fee Option Program may be exercised until the earlier of (x) the
expiration of the ten (10)-year option term or (y) the expiration of the
three (3)-year period measured from the date of such cessation of Board
service.


 


Should the Awardee die after cessation of his or her
Board service but while holding one or more Options under this Director Fee
Option Program, then each such Option may be exercised, for any or all of the
shares for which the Option is exercisable at the time of the Awardee’s
cessation of Board service (less any Shares subsequently purchased by the
Awardee prior to death), by the personal representative of the Awardee’s estate
or by the person or persons to whom the Option is transferred pursuant to the
Awardee’s will or in accordance with the laws of descent and distribution or by
the designated beneficiary or beneficiaries of such option. Such right of
exercise shall lapse, and the Option shall terminate, upon the earlier of (xx)
the expiration of the ten (10)-year Option term or (yy) the three (3)-year period
measured from the date of the Awardee’s cessation of Board service.


 


11.3 Certain
Transactions and Events


 


(a) In
the event of a Fundamental Transaction while the Awardee remains a Non-Employee
Director, the Shares at the time subject to each outstanding Option held by
such Awardee pursuant to Section 11, but not otherwise vested, shall
automatically vest in full so that each such Option shall, immediately prior to
the effective date of the Fundamental Transaction, become exercisable for all
the Shares as fully vested Shares and may be exercised for any or all of those
vested Shares. 


 

















 


Immediately following the
consummation of the Fundamental Transaction, each Option shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or Affiliate thereof).


 


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


 


(c) Each
Option which is assumed in connection with a Fundamental Transaction shall be
appropriately adjusted, immediately after such Fundamental Transaction, to
apply to the number and class of securities which would have been issuable to
the Awardee in consummation of such Fundamental Transaction had the Option been
exercised immediately prior to such Fundamental Transaction. Appropriate
adjustments shall also be made to the Option Price payable per share under each
outstanding Option, provided the aggregate Option Price payable for such
securities shall remain the same. To the extent the actual holders of the
Company’s outstanding Common Stock receive cash consideration for their Common
Stock in consummation of the Fundamental Transaction, the successor corporation
may, in connection with the assumption of the outstanding Options granted
pursuant to Section 11, substitute one or more shares of its own common
stock with a fair market value equivalent to the cash consideration paid per
share of Common Stock in such Fundamental Transaction.


 


(d) The
grant of Options pursuant to Section 11 shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.


 


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


 


11.4 Limited
Transferability of Options. Each Option granted pursuant to Section 11
may be assigned in whole or in part during the Awardee’s lifetime to one or
more members of the Awardee’s family or to a trust established exclusively for
one or more such family members or to an entity in which the Awardee is
majority owner or to the Awardee’s former spouse, to the extent such assignment
is in connection with the Awardee’s estate or financial plan or pursuant to a
Domestic Relations Order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the Option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the Option immediately prior to such assignment and
shall be set forth in such documents issued to the assignee as the
Administrator may deem appropriate. The Awardee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding Options
under Section 11, and those Options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Awardee’s death while holding those Options. Such beneficiary or
beneficiaries shall take the transferred Options subject to all the terms and
conditions of the applicable Award Agreement evidencing each such transferred
Option, including (without limitation) the limited time period during which the
Option may be exercised following the Awardee ‘s death.


 


12. Withholding and Tax Reporting


 


12.1 Tax
Withholding Alternatives


 


(a) General. Whenever
Award Shares are issued or become free of restrictions, the Company may require
the Awardee to remit to the Company an amount sufficient to satisfy any applicable
tax withholding requirement, whether the related tax is imposed on the Awardee
or the Company. The Company shall have no obligation to deliver Award Shares or
release Award Shares from an escrow or permit a transfer of Award Shares until
the Awardee has satisfied those tax withholding 


 

















 


obligations. Whenever
payment in satisfaction of Awards is made in cash, the payment will be reduced
by an amount sufficient to satisfy all tax withholding requirements.


 


(b) Method of Payment.
The Awardee shall pay any required withholding using the forms of consideration
described in 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 payment described in Section 6.4(c). The Administrator, in its sole
discretion, may also permit Award Shares to be withheld to pay required
withholding. If the Administrator permits Award Shares to be withheld, the Fair
Market Value of the Award Shares withheld, as determined as of the date of withholding,
shall not exceed the amount determined by the applicable minimum statutory
withholding rates.


 


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


 


13.
Compliance with Law


 


The grant of Awards and the issuance and subsequent
transfer of Award Shares shall be subject to compliance with all Applicable
Law, including all applicable securities laws. Awards may not be exercised, and
Award Shares may not be transferred, in violation of Applicable Law. Thus, for
example, Awards may not be exercised unless: (a) a registration statement
under the Securities Act is then in effect with respect to the related Award
Shares, or (b) in the opinion of legal counsel to the Company, those Award
Shares may be issued in accordance with an applicable exemption from the
registration requirements of the Securities Act and any other applicable
securities laws. The failure or inability of the Company to obtain from any
regulatory body the authority considered by the Company’s legal counsel to be
necessary or useful for the lawful issuance of any Award Shares or their
subsequent transfer shall relieve the Company of any liability for failing to
issue those Award Shares or permitting their transfer. As a condition to the
exercise of any Award or the transfer of any Award Shares, the Company may
require the Awardee to satisfy any requirements or qualifications that may be
necessary or appropriate to comply with or evidence compliance with any
Applicable Law.


 


14. Amendment or Termination of this Plan or Outstanding
Awards


 


14.1 Amendment and
Termination. The Board may at any time amend, suspend, or terminate
this Plan.


 


14.2 Stockholder
Approval. The Company shall obtain the approval of the Company’s
stockholders for any amendment to this Plan if stockholder approval is
necessary or desirable to comply with any Applicable Law or with the
requirements applicable to the grant of Awards intended to be Incentive Stock
Options. The Board may also, but need not, require that the Company’s
stockholders approve any other amendments to this Plan.


 


14.3 Effect.
No amendment, suspension, or termination of this Plan, and no modification of
any Award even in the absence of an amendment, suspension, or termination of
this Plan, shall impair any existing contractual rights of any Awardee unless
the affected Awardee consents to the amendment, suspension, termination, or
modification. Notwithstanding anything herein to the contrary, no such consent
shall 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 order for the Company, this Plan or the Award to
satisfy Applicable Law, to meet the requirements of any accounting standard or
to avoid any adverse accounting treatment, or (b) in connection with any
transaction or event described in Section 10, is in the best interests of
the Company or its stockholders. The Board may, but need not, take the tax or
accounting consequences to affected Awardees into consideration in acting under
the preceding sentence. Those decisions shall be final, binding and conclusive.
Termination of this Plan shall not affect the Administrator’s ability to
exercise the powers granted to it under this Plan with respect to Awards
granted before the termination of Award Shares issued under such Awards even if
those Award Shares are issued after the termination.


 

















 


15. Reserved Rights


 


15.1 Nonexclusivity
of this Plan. This Plan shall not limit the power of the Company or
any Affiliate to adopt other incentive arrangements including, for example, the
grant or issuance of stock options, stock, or other equity-based rights under
other plans.


 


15.2 Unfunded
Plan. This Plan shall be unfunded. Although bookkeeping accounts may
be established with respect to Awardees, any such accounts will be used merely
as a convenience. The Company shall not be required to segregate any assets on
account of this Plan, the grant of Awards, or the issuance of Award Shares. The
Company and the Administrator shall not be deemed to be a trustee of stock or
cash to be awarded under this Plan. Any obligations of the Company to any
Awardee shall be based solely upon contracts entered into under this Plan, such
as Award Agreements. No such obligations shall be deemed to be secured by any
pledge or other encumbrance on any assets of the Company. Neither the Company
nor the Administrator shall be required to give any security or bond for the
performance of any such obligations.


 


16.
Special Arrangements Regarding Award Shares


 


16.1 Escrow of
Stock Certificates. To enforce any restrictions on Award Shares, the
Administrator may require their holder to deposit the certificates representing
Award Shares, with stock powers or other transfer instruments approved by the
Administrator endorsed in blank, with the Company or an agent of the Company to
hold in escrow until the restrictions have lapsed or terminated. The
Administrator may also cause a legend or legends referencing the restrictions
to be placed on the certificates.


 


16.2 Repurchase
Rights


 


(a) General.  If a Stock Award is subject to vesting
conditions, the Company shall have the right, during the seven months after the
Awardee’s Termination, to repurchase any or all of the Award Shares that were
unvested as of the date of that Termination. The repurchase price shall be
determined by the Administrator in accordance with this Section 16.2 which
shall be either (i) the Purchase Price for the Award Shares (minus the
amount of any cash dividends paid or payable with respect to the Award Shares
for which the record date precedes the repurchase) or (ii) the lower of (A) the
Purchase Price for the Shares or (B) the Fair Market Value of those Award
Shares as of the date of the Termination. The repurchase price shall be paid in
cash. The Company may assign this right of repurchase.


 


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


 


17.
Beneficiaries


 


An Awardee may file a written designation of one or
more beneficiaries who are to receive the Awardee’s rights under the Awardee’s
Awards after the Awardee’s death. An Awardee may change such a designation at
any time by written notice. If an Awardee designates a beneficiary, the
beneficiary may exercise the Awardee’s Awards after the Awardee’s death. If an
Awardee dies when the Awardee has no living beneficiary designated under this
Plan, the Company shall allow the executor or administrator of the Awardee’s
estate to exercise the Award or, if there is none, the person entitled to
exercise the Option under the Awardee’s will or the laws of descent and
distribution. In any case, no Award may be exercised after its Expiration Date.


 


18. Miscellaneous


 


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


 

















 


18.2 Determination
of Value. Fair Market Value shall be determined as follows:


 


(a) Listed Stock. If the
Shares are traded on any established stock exchange or quoted on a national
market system, Fair Market Value shall be the closing sales price for the
Shares as quoted on that stock exchange or system for the date the value is to
be determined (the “Value
Date”) as reported in The
Wall Street Journal or a similar publication. If no sales are
reported as having occurred on the Value Date, Fair Market Value shall be that
closing sales price for the last preceding trading day on which sales of Shares
are reported as having occurred. If no sales are reported as having occurred
during the five trading days before the Value Date, Fair Market Value shall be
the closing bid for Shares on the Value Date. If Shares are listed on multiple
exchanges or systems, Fair Market Value shall be based on sales or bid prices
on the primary exchange or system on which Shares are traded or quoted.


 


(b) Stock Quoted by Securities Dealer.
If Shares are regularly quoted by a recognized securities dealer but selling
prices are not reported on any established stock exchange or quoted on a
national market system, Fair Market Value shall be the mean between the high
bid and low asked prices on the Value Date. If no prices are quoted for the
Value Date, Fair Market Value shall be the mean between the high bid and low
asked prices on the last preceding trading day on which any bid and asked
prices were quoted.


 


(c) No Established Market.
If Shares are not traded on any established stock exchange or quoted on a
national market system and are not quoted by a recognized securities dealer,
the Administrator (following guidelines established by the Board or Committee)
will determine Fair Market Value in good faith. The Administrator will consider
the following factors, and any others it considers significant, in determining
Fair Market Value: (i) the price at which other securities of the Company
have been issued to purchasers other than Employees, Directors, or Consultants,
(ii) the Company’s stockholder’s equity, prospective earning power, dividend-paying
capacity, and non-operating assets, if any, and (iii) any other relevant
factors, including the economic outlook for the Company and the Company’s
industry, the Company’s position in that industry, the Company’s goodwill and
other intellectual property, and the values of securities of other businesses
in the same industry.


 


18.3 Reservation
of Shares. During the term of this Plan, the Company shall at all
times reserve and keep available such number of Shares as are still issuable
under this Plan.


 


18.4 Electronic
Communications. Any Award Agreement, notice of exercise of an Award,
or other document required or permitted by this Plan may be delivered in
writing or, to the extent determined by the Administrator, electronically.
Signatures may also be electronic if permitted by the Administrator.


 


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