**EXHIBIT 10.1**

 

 

**COMMUNICATIONS CORPORATION**

 

**AMENDED 1998 STOCK OPTION PLAN**

 

**SECTION 1.         PURPOSE**

 

The purpose of theCenterSpan Communications Corporation Amended 1998 Stock Option Plan (the“Plan”) is to enhance the long-term shareholder value of CenterSpan CommunicationsCorporation, an Oregon corporation (the “Company”), by offering opportunitiesto employees (and persons offered employment), directors, officers,consultants, agents, advisors and independent contractors of the Company andits Subsidiaries (as defined in Section 2) to participate in the Company’sgrowth and success, and to encourage them to remain in the service of theCompany and its Subsidiaries and to acquire and maintain stock ownership in theCompany.

 

**SECTION 2.         DEFINITIONS**

 

For purposes of the Plan,the following terms shall be defined as set forth below:

 

**2.1          Board**

 

“Board” means the Boardof Directors of the Company.

 

**2.2          Cause**

 

“Cause” means dishonesty,fraud, misconduct, unauthorized use or disclosure of confidential informationor trade secrets, or conviction or confession of a crime punishable by law(except minor violations), in each case as determined by the PlanAdministrator, and its determination shall be conclusive and binding.

 

**2.3          Code**

 

“Code” means the InternalRevenue Code of 1986, as amended from time to time.

 

**2.4          Common Stock**

 

“Common Stock” means thecommon stock of the Company.

 

**2.5          Corporate Transaction**

 

“Corporate Transaction”means any of the following events:

 

(a)         Consummation of any merger orconsolidation of the Company in which the Company is not the continuing orsurviving corporation, or pursuant to which shares

 

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of the CommonStock are converted into cash, securities or other property, if following suchmerger or consolidation the holders of the Company’s outstanding votingsecurities immediately prior to such merger or consolidation own less than66-2/3% of the outstanding voting securities of the surviving corporation;

 

(b)         Consummation of any sale, lease, exchangeor other transfer in one transaction or a series of related transactions of allor substantially all of the Company’s assets other than a transfer of theCompany’s assets to a majority-owned subsidiary corporation (as the term“subsidiary corporation” is defined in Section 8.3) of the Company; or

 

(c)         Approval by the holders of the CommonStock of any plan or proposal for the liquidation or dissolution of theCompany.

 

Ownership of votingsecurities shall take into account and shall include ownership as determined byapplying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of thePlan) under the Exchange Act.

 

**2.6          Disability**

 

“Disability” means“disability” as that term is defined for purposes of Section 22(e)(3) ofthe Code.

 

**2.7          Early Retirement**

 

“Early Retirement” meansearly retirement as that term is defined by the Plan Administrator from time totime for purposes of the Plan.

 

**2.8          Exchange Act**

 

“Exchange Act” means theSecurities Exchange Act of 1934, as amended.

 

**2.9          Fair Market Value**

 

The “Fair Market Value”shall be as established in good faith by the Plan Administrator or (a) ifthe Common Stock is listed on the Nasdaq National Market, the closing per sharesales price for the Common Stock as reported by the Nasdaq National Market fora single trading day or (b) if the Common Stock is listed on the New YorkStock Exchange or the American Stock Exchange, the closing per share salesprice for the Common Stock as such price is officially quoted in the compositetape of transactions on such exchange for a single trading day.  If there is no such reported price for theCommon Stock for the date in question, then such price on the last precedingdate for which such price exists shall be determinative of the Fair MarketValue.

 

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**2.10        Good Reason**

 

“Good Reason” means theoccurrence of any of the following events or conditions and the failure of theSuccessor Corporation to cure such event or condition within 30 days afterreceipt of written notice by the Optionee:

 

(a)          a change in theOptionee’s status, title, position or responsibilities (including reportingresponsibilities) that, in the Optionee’s reasonable judgment, represents asubstantial reduction in the status, title, position or responsibilities as ineffect immediately prior thereto; the assignment to the Optionee of any dutiesor responsibilities that, in the Optionee’s reasonable judgment, are materiallyinconsistent with such status, title, position or responsibilities; or any removalof the Optionee from or failure to reappoint or reelect the Optionee to any ofsuch positions, except in connection with the termination of the Optionee’semployment for Cause, for Disability or as a result of his or her death, or bythe Optionee other than for Good Reason;

 

(b)          a reduction in theOptionee’s annual base salary;

 

(c)          the SuccessorCorporation’s requiring the Optionee (without the Optionee’s consent) to bebased at any place outside a 35-mile radius of his or her place of employmentprior to a Corporate Transaction, except for reasonably required travel on theSuccessor Corporation’s business that is not materially greater than suchtravel requirements prior to the Corporate Transaction;

 

(d)          the SuccessorCorporation’s failure to (i) continue in effect any material compensationor benefit plan (or the substantial equivalent thereof) in which the Optioneewas participating at the time of a Corporate Transaction, including, but notlimited to, the Plan, or (ii) provide the Optionee with compensation andbenefits substantially equivalent (in terms of benefit levels and/or rewardopportunities) to those provided for under each material employee benefit plan,program and practice as in effect immediately prior to the CorporateTransaction;

 

(e)          any material breachby the Successor Corporation of its obligations to the Optionee under the Planor any substantially equivalent plan of the Successor Corporation; or

 

(f)           any purportedtermination of the Optionee’s employment or services for Cause by the SuccessorCorporation that does not comply with the terms of the Plan or anysubstantially equivalent plan of the Successor Corporation.

 

**2.11        Grant Date**

 

“Grant Date” means thedate the Plan Administrator adopted the granting resolution or a later datedesignated in a resolution of the Plan Administrator as the date an Option isto be granted.

 

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**2.12        Incentive Stock Option**

 

“Incentive Stock Option”means an Option to purchase Common Stock granted under Section 7 with theintention that it qualify as an “incentive stock option” as that term isdefined in Section 422 of the Code.

 

**2.13        Nonqualified Stock Option**

 

“Nonqualified StockOption” means an Option to purchase Common Stock granted under Section 7other than an Incentive Stock Option.

 

**2.14        Option**

 

“Option” means the rightto purchase Common Stock granted under Section 7.

 

**2.15        Optionee**

 

“Optionee” means(i) the person to whom an Option is granted; (ii) for an Optionee whohas died, the personal representative of the Optionee’s estate, the person(s)to whom the Optionee’s rights under the Option have passed by will or by theapplicable laws of descent and distribution, or the beneficiary designated inaccordance with Section 9; or (iii) person(s) to whom an Option hasbeen transferred in accordance with Section 9.

 

**2.16        Plan Administrator**

 

“Plan Administrator”means the Board or any committee of the Board designated to administer the Planunder Section 3.1.

 

**2.17        Retirement**

 

“Retirement” meansretirement as of the individual’s normal retirement date as that term isdefined by the Plan Administrator from time to time for purposes of the Plan.

 

**2.18        Securities Act**

 

“Securities Act” meansthe Securities Act of 1933, as amended.

 

**2.19        Subsidiary**

 

“Subsidiary,” except asprovided in Section 8.3 in connection with Incentive Stock Options, meansany entity that is directly or indirectly controlled by the Company or in whichthe Company has a significant ownership interest, as determined by the PlanAdministrator, and any entity that may become a direct or indirect parent ofthe Company.

 

**2.20        Successor Corporation**

 

“Successor Corporation”has the meaning set forth under Section 10.2.

 

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**SECTION 3.         ADMINISTRATION**

 

**3.1          Plan Administrator**

 

The Plan shall beadministered by the Board or a committee or committees (which term includessubcommittees) appointed by, and consisting of****two or more members of, theBoard.  If and so long as the CommonStock is registered under Section 12(b) or 12(g) of the Exchange Act, theBoard shall consider in selecting the Plan Administrator and the membership ofany committee acting as Plan Administrator, with respect to any persons subjector likely to become subject to Section 16 of the Exchange Act, theprovisions regarding (a) ”outside directors” as contemplated bySection 162(m) of the Code and (b) ”nonemployee directors” ascontemplated by Rule 16b–3 under the Exchange Act.  The Board may delegate the responsibilityfor administering the Plan with respect to designated classes of eligiblepersons to different committees consisting of two****or more members of theBoard, subject to such limitations as the Board deems appropriate.  Committee members shall serve for such termas the Board may determine, subject to removal by the Board at any time.

 

**3.2          Administration and Interpretation bythe Plan Administrator**

 

Except for the terms andconditions explicitly set forth in the Plan, the Plan Administrator shall haveexclusive authority, in its discretion, to determine all matters relating toOptions under the Plan, including the selection of individuals to be grantedOptions, the type of Options, the number of shares of Common Stock subject toan Option, all terms, conditions, restrictions and limitations, if any, of anOption and the terms of any instrument that evidences the Option.  The Plan Administrator shall also haveexclusive authority to interpret the Plan and may from time to time adopt, andchange, rules and regulations of general application for the Plan’sadministration.  The PlanAdministrator’s interpretation of the Plan and its rules and regulations, andall actions taken and determinations made by the Plan Administrator pursuant tothe Plan, shall be conclusive and binding on all parties involved oraffected.  The Plan Administrator maydelegate administrative duties to such of the Company’s officers as it sodetermines.

 

**SECTION 4.         STOCK SUBJECT TO THE PLAN**

 

**4.1          Authorized Number of Shares**

 

(a)           Subject to the following provisions ofthis subsection 4.1, the maximum number of shares of Stock that may bedelivered to Participants and their beneficiaries under the Plan shall be equalto the sum of: (i) 2,500,000 shares of Common Stock; (ii) any shares ofCommon Stock available for future awards under the 1994 Stock Option Plan (the“1994 Plan”) or the Directors’ Non-Qualified Stock Option Plan (the “Directors’Plan”) as of the Effective Date (as defined in Section 14); and (iii) anyshares of Common Stock that are represented by awards granted under the 1994Plan or the Directors’ Plan, which are forfeited, expire or are canceledwithout delivery of shares of Common Stock or which result in the forfeiture ofshares of Common Stock back to the Company.

 

(b)           If the Exercise Price of any stockoption granted under the Plan or the 1994 Plan is satisfied by tendering sharesof Common Stock to the Company (by either actual delivery or by attestation),only the number of shares of Common Stock issued net of the shares of CommonStock tendered shall be deemed delivered for purposes of determining themaximum number of shares of Common Stock available for delivery under the Plan.

 

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(c)           Shares of Common Stock deliveredunder the Plan in settlement, assumption or substitution of outstanding awards(or obligations to grant future awards) under the plans or arrangements ofanother entity shall not reduce the maximum number of shares of Common Stockavailable for delivery under the Plan, to the extent that such settlement,assumption or substitution is a result of the Company or a Subsidiary acquiringanother entity (or an interest in another entity).

 

(d)           Shares issued under the Plan shall bedrawn from authorized and unissued shares or shares.

 

**4.2          Limitations**

 

Subject to adjustmentfrom time to time as provided in Section 10.1, not more than 200,000** **sharesof Common Stock may be made subject to Options under the Plan to any individualin the aggregate in any one fiscal year of the Company, except that the Companymay make additional one-time grants of up to 250,000 shares to newly hiredindividuals or newly promoted individuals, such limitation to be applied in amanner consistent with the requirements of, and only to the extent required forcompliance with, the exclusion from the limitation on deductibility ofcompensation under Section 162(m) of the Code.

 

**4.3          Reuse of Shares**

 

Any shares of CommonStock that have been made subject to an Option that cease to be subject to theOption (other than by reason of exercise of the Option to the extent it isexercised for shares) shall again be available for issuance in connection withfuture grants of Options under the Plan; provided, however, that for purposesof Section 4.2, any such shares shall be counted in accordance with therequirements of Section 162(m) of the Code**.**

 

**SECTION 5.         ELIGIBILITY**

 

Options may be grantedunder the Plan to those officers, directors and employees of the Company andits Subsidiaries as the Plan Administrator from time to time selects.  Options may also be made to consultants,agents, advisors and independent contractors who provide services to theCompany and its Subsidiaries.

 

**SECTION 6.         AWARDS**

 

**6.1          Form and Grant of Options**

 

The Plan Administratorshall have the authority, in its sole discretion, to determine the type ortypes of awards to be made under the Plan. Such awards may consist of Incentive Stock Options and/or NonqualifiedStock Options.  Options may be grantedsingly or in combination.

 

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**6.2          Acquired Company Option Awards**

 

Notwithstanding anythingin the Plan to the contrary, the Plan Administrator may grant Options under thePlan in substitution for awards issued under other plans, or assume under thePlan awards issued under other plans, if the other plans are or were plans ofother acquired entities (“Acquired Entities”) (or the parent of the AcquiredEntity) and the new Option is substituted, or the old award is assumed, byreason of a merger, consolidation, acquisition of property or of stock,reorganization or liquidation (the “Acquisition Transaction”).  In the event that a written agreementpursuant to which the Acquisition Transaction is completed is approved by theBoard and said agreement sets forth the terms and conditions of thesubstitution for or assumption of outstanding awards of the Acquired Entity,said terms and conditions shall be deemed to be the action of the PlanAdministrator without any further action by the Plan Administrator, except asmay be required for compliance with Rule 16b-3 under the Exchange Act, andthe persons holding such awards shall be deemed to be Optionees.

 

**SECTION 7.         TERMS AND CONDITIONS OF OPTIONS**

 

**7.1          Grant of Options**

 

The Plan Administrator isauthorized under the Plan, in its sole discretion, to issue Options asIncentive Stock Options or as Nonqualified Stock Options, which shall beappropriately designated.

 

**7.2          Option Exercise Price**

 

The exercise price forshares purchased under an Option shall be as determined by the PlanAdministrator, but shall not be less than 100% of the Fair Market Value of theCommon Stock on the Grant Date with respect to Incentive Stock Options.

 

**7.3          Term of Options**

 

The term of each Optionshall be as established by the Plan Administrator or, if not so established,shall be 10 years from the Grant Date.

 

 

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**7.4          Exercise of Options**

 

The Plan Administratorshall establish and set forth in each instrument that evidences an Option thetime at which or the installments in which the Option shall vest and becomeexercisable, which provisions may be waived or modified by the PlanAdministrator at any time.  If not soestablished in the instrument evidencing the Option, the Option will vest andbecome exercisable according to the following schedule, which may be waived ormodified by the Plan Administrator at any time:

 
| **Period of  Optionee’s Continuous Employment or   Service With the Company or Its Subsidiaries   From the Grant Date** |   | **Percent of  Total Option   That Is Vested and Exercisable** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| After 1 year                                                                                                                 |   | 25                                                            | %      |
| After 2 years                                                                                                                |   | 50                                                            | %      |
| After 3 years                                                                                                                |   | 75                                                            | %      |
| After 4 years                                                                                                                |   | 100                                                           | %      |

 

To the extent that theright to purchase shares has accrued thereunder, an Option may be exercisedfrom time to time by written notice to the Company, in accordance withprocedures established by the Plan Administrator, setting forth the number ofshares with respect to which the Option is being exercised and accompanied bypayment in full as described in Section 7.5.  The Plan Administrator may determine at any time that an Optionmay not be exercised as to less than 100 shares at any one time (or thelesser number of remaining shares covered by the Option).

 

**7.5          Payment of Exercise Price**

 

The exercise price forshares purchased under an Option shall be paid in full to the Company bydelivery of consideration equal to the product of the Option exercise price andthe number of shares purchased.  Suchconsideration must be paid in cash or by check or, unless the PlanAdministrator in its sole discretion determines otherwise, either at the timethe Option is granted or at any time before it is exercised, a combination ofcash and/or check (if any) and one or both of the following alternativeforms:  (a) tendering (eitheractually or, if and so long as the Common Stock is registered underSection 12(b) or 12(g) of the Exchange Act, by attestation) Common Stockalready owned by the Optionee for at least six months (or any shorter periodnecessary to avoid a charge to the Company’s earnings for financial reportingpurposes) having a Fair Market Value on the day prior to the exercise dateequal to the aggregate Option exercise price or (b) if and so long as theCommon Stock is registered under Section 12(b) or 12(g) of the ExchangeAct, delivery of a properly executed exercise notice, together with irrevocableinstructions, to (i) a brokerage firm designated by the Company to deliverpromptly to the Company the aggregate amount of sale or loan proceeds to paythe Option exercise price and any withholding tax obligations that may arise inconnection with the exercise and (ii) the Company to deliver thecertificates for such purchased shares directly to such brokerage firm, all inaccordance with the regulations of the Federal Reserve Board.  In addition, the exercise price for sharespurchased under an Option may be paid, either singly or in combination with oneor more of the alternative forms of payment authorized by thisSection 7.5, by such other consideration as the Plan Administrator maypermit.

 

**7.6          Post-Termination Exercises**

 

The Plan Administratorshall establish and set forth in each instrument that evidences an Optionwhether the Option will continue to be exercisable, and the terms andconditions of such exercise, if a Optionee ceases to be employed by, or toprovide services to, the Company or its Subsidiaries, which provisions may bewaived or modified by the Plan Administrator at any time.  If not so established in the instrumentevidencing the Option, the Option will be exercisable according to thefollowing terms and conditions, which may be waived or modified by the PlanAdministrator at any time.

 

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In case of termination ofthe Optionee’s employment or services other than by reason of death or Cause,the Option shall be exercisable, to the extent of the number of sharespurchasable by the Optionee at the date of such termination, only(a) within one year if the termination of the Optionee’s employment orservices is coincident with Retirement, Early Retirement at the Company’srequest or Disability or (b) within three months****after the date the Optioneeceases to be an employee, director, officer, consultant, agent, advisor orindependent contractor of the Company or a Subsidiary if termination of theOptionee’s employment or services is for any reason other than Retirement,Early Retirement at the Company’s request or Disability, but in no event laterthan the remaining term of the Option. Any Option exercisable at the time of the Optionee’s death may beexercised, to the extent of the number of shares purchasable by the Optionee atthe date of the Optionee’s death, by the personal representative of theOptionee’s estate, the person(s) to whom the Optionee’s rights under the Optionhave passed by will or the applicable laws of descent and distribution or thebeneficiary designated pursuant to Section 9 at any time or from time totime within one year after the date of death, but in no event later than theremaining term of the Option.  Anyportion of an Option that is not exercisable on the date of termination of theOptionee’s employment or services shall terminate on such date, unless the PlanAdministrator determines otherwise.  Incase of termination of the Optionee’s employment or services for Cause, theOption shall automatically terminate upon first notification to the Optionee ofsuch termination, unless the Plan Administrator determines otherwise.  If a Optionee’s employment or services withthe Company are suspended pending an investigation of whether the Optioneeshall be terminated for Cause, all the Optionee’s rights under any Optionlikewise shall be suspended during the period of investigation.

 

A transfer of employmentor services between or among the Company and its Subsidiaries shall not beconsidered a termination of employment or services.  The effect of a Company-approved leave of absence on the termsand conditions of an Option shall be determined by the Plan Administrator, inits sole discretion.

 

**SECTION 8.         INCENTIVE STOCK OPTION LIMITATIONS**

 

To the extent required bySection 422 of the Code, Incentive Stock Options shall be subject to thefollowing additional terms and conditions:

 

**8.1          Dollar Limitation**

 

To the extent theaggregate Fair Market Value (determined as of the Grant Date) of Common Stockwith respect to which Incentive Stock Options are exercisable for the firsttime during any calendar year (under the Plan and all other stock option plansof the Company) exceeds $100,000, such portion in excess of $100,000 shall be treatedas a Nonqualified Stock Option.  In theevent the Optionee holds two or more such Options that become exercisable forthe first time in the same calendar year, such limitation shall be applied onthe basis of the order in which such Options are granted.

 

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**8.2          10% Shareholders**

 

If an individual ownsmore than 10% of the total voting power of all classes of the Company’s stock,then the exercise price per share of an Incentive Stock Option shall not beless than 110% of the Fair Market Value of the Common Stock on the Grant Dateand the Option term shall not exceed five years.  The determination of 10% ownership shall be made in accordancewith Section 422 of the Code.

 

**8.3          Eligible Employees**

 

Individuals who are notemployees of the Company or one of its parent corporations or subsidiarycorporations may not be granted Incentive Stock Options.  For purposes of this Section 8.3,“parent corporation” and “subsidiary corporation” shall have the meanings attributedto those terms for purposes of Section 422 of the Code.

 

**8.4          Term**

 

The term of an IncentiveStock Option shall not exceed 10 years.

 

**8.5          Exercisability**

 

To qualify for IncentiveStock Option tax treatment, an Option designated as an Incentive Stock Optionmust be exercised within three months after termination of employment forreasons other than death, except that, in the case of termination of employmentdue to total disability, such Option must be exercised within one year aftersuch termination.  Employment shall notbe deemed to continue beyond the first 90 days of a leave of absenceunless the Optionee’s reemployment rights are guaranteed by statute orcontract.  For purposes of thisSection 8.5, “total disability” shall mean a mental or physical impairmentof the Optionee that is expected to result in death or that has lasted or isexpected to last for a continuous period of 12 months or more and thatcauses the Optionee to be unable, in the opinion of the Company and twoindependent physicians, to perform his or her duties for the Company and to beengaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day afterthe Company and the two independent physicians have furnished their opinion of totaldisability to the Plan Administrator.

 

**SECTION 9.         ASSIGNABILITY**

 

No Option granted underthe Plan may be assigned, pledged or transferred by the Optionee other than bywill or by the applicable laws of descent and distribution, and, during theOptionee’s lifetime, such Option may be exercised only by the Optionee or apermitted assignee or transferee of the Optionee (as provided below).  Notwithstanding the foregoing, and to theextent permitted by Section 422 of the Code, the Plan Administrator, in itssole discretion, may permit such assignment, transfer and exercisability andmay permit an Optionee to designate a beneficiary who may exercise the Optionafter the Optionee’s death; provided, however, that any Option so assigned ortransferred shall be subject to all the same terms and conditions contained inthe instrument evidencing the Option.

 

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**SECTION 10.       ADJUSTMENTS**

 

**10.1        Adjustment of Shares**

 

In the event that, at anytime or from time to time, a stock dividend, stock split, spin–off,combination or exchange of shares, recapitalization, merger, consolidation,distribution to shareholders other than a normal cash dividend, or other changein the Company’s corporate or capital structure results in (a) theoutstanding shares, or any securities exchanged therefor or received in theirplace, being exchanged for a different number or class of securities of theCompany or of any other corporation or (b) new, different or additionalsecurities of the Company or of any other corporation being received by theholders of shares of Common Stock of the Company, then the Plan Administratorshall make proportional adjustments in (i) the maximum number and kind ofsecurities subject to the Plan as set forth in Section 4.1, (ii) themaximum number and kind of securities that may be made subject to Options toany individual as set forth in Section 4.2, and (iii) the number andkind of securities that are subject to any outstanding Option and the per shareprice of such securities, without any change in the aggregate price to be paidtherefor.  The determination by the PlanAdministrator as to the terms of any of the foregoing adjustments shall beconclusive and binding.  Notwithstandingthe foregoing, a Corporate Transaction shall not be governed by thisSection 10.1 but shall be governed by Section 10.2.

 

**10.2        Corporate Transaction**

 

(a)       Except as otherwise provided in theinstrument that evidences the Option, in the event of any CorporateTransaction, each Option that is at the time outstanding shall automaticallyaccelerate so that each such Option shall, immediately prior to the specifiedeffective date for the Corporate Transaction, become 100% vested andexercisable.

 

(b)       Such Option shall not so accelerate,however, if and to the extent that such Option is, in connection with theCorporate Transaction, either to be assumed by the successor corporation orparent thereof (the “Successor Corporation”) or to be replaced with acomparable award for the purchase of shares of the capital stock of theSuccessor Corporation.  Thedetermination of Option comparability shall be made by the Plan Administrator,and its determination shall be conclusive and binding.  Any such Options granted to an “executiveofficer” (as that term is defined for purposes of Section 16 of theExchange Act) of the Company that are assumed or replaced in the CorporateTransaction and do not otherwise accelerate at that time shall be acceleratedin the event that the Optionee’s employment or services should subsequentlyterminate within two years following such Corporate Transaction, unless suchemployment or services are terminated by the Successor Corporation for Cause orby the Optionee voluntarily without Good Reason.

 

(c)       All such Options shall terminate andcease to remain outstanding immediately following the consummation of theCorporate Transaction, except to the extent assumed by the SuccessorCorporation.

 

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(d)       The acceleration will not occur if, inthe opinion of the Company’s outside accountants, it would render unavailable“pooling of interest” accounting for a Corporate Transaction that wouldotherwise qualify for such accounting treatment.

 

**10.3        Further Adjustment of Options**

 

Subject to Section 10.2,the Plan Administrator shall have the discretion, exercisable at any timebefore a sale, merger, consolidation, reorganization, liquidation or change incontrol of the Company, as defined by the Plan Administrator, to take suchfurther action as it determines to be necessary or advisable, and fair andequitable to Optionees, with respect to Options.  Such authorized action may include (but shall not be limited to)establishing, amending or waiving the type, terms, conditions or duration of,or restrictions on, Options so as to provide for earlier, later, extended oradditional time for exercise and other modifications, and the PlanAdministrator may take such actions with respect to all Optionees, to certaincategories of Optionees or only to individual Optionees.  The Plan Administrator may take such actionbefore or after granting Options to which the action relates and before orafter any public announcement with respect to such sale, merger, consolidation,reorganization, liquidation or change in control that is the reason for suchaction.

 

**10.4        Limitations**

 

The grant of  Options will in no way affect the Company’sright to adjust, reclassify, reorganize or otherwise change its capital orbusiness structure or to merge, consolidate, dissolve, liquidate or sell ortransfer all or any part of its business or assets.

 

**SECTION 11.       WITHHOLDING**

 

The Company may requirethe Optionee to pay to the Company the amount of any withholding taxes that theCompany is required to withhold with respect to the grant or exercise of anyOption.  Subject to the Plan andapplicable law, the Plan Administrator may, in its sole discretion, permit theOptionee to satisfy withholding obligations, in whole or in part, by paying cash,by electing to have the Company withhold shares of Common Stock or bytransferring shares of Common Stock to the Company, in such amounts as areequivalent to the Fair Market Value of the withholding obligation.  The Company shall have the right to withholdfrom any shares of Common Stock issuable pursuant to an Option or from any cashamounts otherwise due or to become due from the Company to the Optionee anamount equal to such taxes.  The Companymay also deduct from any Option any other amounts due from the Optionee to theCompany or a Subsidiary.

 

**SECTION 12.       AMENDMENT AND TERMINATION OF PLAN**

 

**12.1        Amendment of Plan**

 

The Plan may be amendedonly by the Board in such respects as it shall deem advisable; however, to theextent required for compliance with Section 422 of the Code or any applicablelaw or regulation, shareholder approval will be required for any amendment thatwill (a) increase the total number of shares as to which Options may begranted under the Plan, (b) modify the class of persons eligible toreceive Options, or (c) otherwise require shareholder approval under anyapplicable law or regulation.

 

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**12.2        Termination of Plan**

 

The Board may suspend orterminate the Plan at any time.  ThePlan will have no fixed expiration date; provided, however, that no IncentiveStock Options may be granted more than 10 years after the earlier of thePlan’s adoption by the Board and approval by the shareholders.

 

**12.3        Consent of Optionee**

 

The amendment ortermination of the Plan shall not, without the consent of the Optionee, impairor diminish any rights or obligations under any Option theretofore grantedunder the Plan.

 

Any change or adjustmentto an outstanding Incentive Stock Option shall not, without the consent of theOptionee, be made in a manner so as to constitute a “modification” that wouldcause such Incentive Stock Option to fail to continue to qualify as anIncentive Stock Option.

 

**SECTION 13.       GENERAL**

 

**13.1        Option Agreements**

 

Options granted under thePlan shall be evidenced by a written agreement that shall contain such terms,conditions, limitations and restrictions as the Plan Administrator shall deemadvisable and that are not inconsistent with the Plan.

 

**13.2        Continued Employment or Services; Rightsin Options**

 

None of the Plan,participation in the Plan or any action of the Plan Administrator taken underthe Plan shall be construed as giving any person any right to be retained inthe employ of the Company or limit the Company’s right to terminate theemployment or services of any person.

 

**13.3        Registration**

 

The Company shall beunder no obligation to any Optionee to register for offering or resale or toqualify for exemption under the Securities Act, or to register or qualify understate securities laws, any shares of Common Stock, security or interest in asecurity paid or issued under, or created by, the Plan, or to continue ineffect any such registrations or qualifications if made.  The Company may issue certificates forshares with such legends and subject to such restrictions on transfer andstop-transfer instructions as counsel for the Company deems necessary ordesirable for compliance by the Company with federal and state securities laws.

 

Inability of the Companyto obtain, from any regulatory body having jurisdiction, the authority deemedby the Company’s counsel to be necessary for the lawful issuance and sale ofany shares hereunder or the unavailability of an exemption from registrationfor the issuance and sale of any shares hereunder shall relieve the Company ofany liability in respect of the nonissuance or sale of such shares as to whichsuch requisite authority shall not have been obtained.

 

 

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**13.4        No Rights as a Shareholder**

 

No Option shall entitlethe Optionee to any dividend, voting or other right of a shareholder unless anduntil the date of issuance under the Plan of the shares that are the subject ofsuch Option, free of all applicable restrictions.

 

**13.5        Compliance With Laws and Regulations**

 

Notwithstanding anythingin the Plan to the contrary, the Board, in its sole discretion, may bifurcatethe Plan so as to restrict, limit or condition the use of any provision of thePlan to Optionees who are officers or directors subject to Section 16 ofthe Exchange Act without so restricting, limiting or conditioning the Plan withrespect to other Optionees. Additionally, in interpreting and applying the provisions of the Plan,any Option granted as an Incentive Stock Option pursuant to the Plan shall, tothe extent permitted by law, be construed as an “incentive stock option” withinthe meaning of Section 422 of the Code.

 

**13.6        No Trust or Fund**

 

The Plan is intended toconstitute an “unfunded” plan.  Nothingcontained herein shall require the Company to segregate any monies or otherproperty, or shares of Common Stock, or to create any trusts, or to make anyspecial deposits for any immediate or deferred amounts payable to any Optionee,and no Optionee shall have any rights that are greater than those of a generalunsecured creditor of the Company.

 

**13.7        Severability**

 

If any provision of thePlan or any Option is determined to be invalid, illegal or unenforceable in anyjurisdiction, or as to any person, or would disqualify the Plan or any Optionunder any law deemed applicable by the Plan Administrator, such provision shallbe construed or deemed amended to conform to applicable laws, or, if it cannotbe so construed or deemed amended without, in the Plan Administrator’sdetermination, materially altering the intent of the Plan or the Option, suchprovision shall be stricken as to such jurisdiction, person or Option, and theremainder of the Plan and any such Option shall remain in full force andeffect.

 

**SECTION 14.       EFFECTIVE DATE**

 

The Plan’s effective dateis the date on which it is adopted by the Board, so long as it is approved bythe Company’s shareholders at any time within 12 months of such adoption.

* *

*Adopted by the Board on*January23*, 1998and approved by the Company’s shareholders on*May 21*, 1998.*

 

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**CENTERSPAN COMMUNICATIONS CORPORATIONPLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS**

 
| **Date of    Adoption/   Amendment/   Adjustment** |   | **Section**                           |   | **Effect of  Amendment**                                                                                                                                                                                            |   | **Date of  Shareholder   Approval** |
|---------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|
| 02/11/00                                                |   | 4.1(a)  Authorized   Number of Shares |   | Authorized  Number of Shares   increased from 1,000,000   shares to 1,500,000 shares                                                                                                                                |   | 05/16/00                            |
|                                                    |   |                                  |   |                                                                                                                                                                                                                |   |                                |
|                                                    |   | 4.2 Limitations                       |   | Limit on grants  that may be   made to any individual   increased from 50,000 to   100,000 shares; limit on   additional one-time grants to   newly hired individuals   increased from 100,000 to   150,000 shares  |   |                                |
|                                                    |   |                                  |   |                                                                                                                                                                                                                |   |                                |
| 01/5/01                                                 |   | 4.1(a)  Authorized   Number of Shares |   | Authorized  Number of Shares   increased by 1,000,000 to   2,500,000 shares                                                                                                                                         |   | 02/22/01                            |
|                                                    |   |                                  |   |                                                                                                                                                                                                                |   |                                |
|                                                    |   | 4.2 Limitations                       |   | Limit on grants  that may be   made to any individual   increased from 100,000 to   200,000 shares; limit on   additional one-time grants to   newly hired individuals   increased from 150,000 to   250,000 shares |   |                                |

 

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