**LATITUDECOMMUNICATIONS, INC.**

 

**2001 EMPLOYEE STOCK OPTION PLAN**

 

1.             **Purposes of the Plan**.  The purposes of this 2001 Employee StockOption Plan are to attract and retain the best available personnel forpositions of substantial responsibility, to provide additional incentive to theEmployees and Consultants of the Company and to promote the success of theCompany’s business. Options granted hereunder shall be Nonstatutory StockOptions.

 

2.             **Definitions**.  As used herein, the following definitionsshall apply:

 

(a)           “**Administrator**” shall mean the Board orany of its Committees appointed pursuant to Section 4 of the Plan.

 

(b)           “**Affiliate**” means an entity other than aSubsidiary (as defined below) in which the Company owns an equity interest orwhich, together with the Company, is under common control of a third person orentity.

 

(c)           “**Applicable Laws**” means the legalrequirements relating to the administration of stock option plans underapplicable U.S. state corporate laws, U.S. federal and applicable state securitieslaws, the Code, any Stock Exchange rules and regulations and the applicablelaws of any other country or jurisdiction where Options are granted under thePlan, as such laws, rules, regulations and requirements shall be in place fromtime to time.

 

(d)           “**Board**” shall mean the Board ofDirectors of the Company.

 

(e)           **“Change of Control”** means a sale ofall or substantially all of the Company’s assets, or any merger orconsolidation of the Company with or into another corporation other than amerger or consolidation in which the holders of more than 50% of the shares ofcapital stock of the Company outstanding immediately prior to such transactioncontinue to hold (either by the voting securities remaining outstanding or bytheir being converted into voting securities of the surviving entity) more than50% of the total voting power represented by the voting securities of theCompany, or such surviving entity, outstanding immediately after suchtransaction.

 

(f)            “**Code**” shall mean theInternal Revenue Code of 1986, as amended.

 

(g)           “**Committee**” shall mean the Committeeappointed by the Board of Directors in accordance with paragraph (a) ofSection 4 of the Plan, if one is appointed.

 

(h)           “**Common Stock**” shall mean the CommonStock of the Company.

 

(i)            “**Company**” shall meanLatitude Communications, Inc., a Delaware corporation.

 

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(j)            “**Consultant**” shall meanany person who is engaged by the Company or any Parent, Subsidiary or Affiliateto render consulting services and is compensated for such consulting services,excluding any Officers and Directors.

 

(k)           **“Continuous Service Status”** meansthe absence of any interruption or termination of service as an Employee orConsultant to the Company or a Parent, Subsidiary or Affiliate.  Continuous Service Status shall not beconsidered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any otherleave of absence approved by the Administrator, provided that such leave is fora period of not more than 90 days, unless reemployment upon the expiration ofsuch leave is guaranteed by contract or statute, or unless provided otherwisepursuant to Company policy adopted from time to time; or (iv) in the caseof transfers between locations of the Company or between the Company, itsParents, Subsidiaries or Affiliates or their respective successors. A change instatus from an Employee to a Consultant or from a Consultant to an Employeewill not constitute an interruption of Continuous Service Status.

 

(l)            **“Corporate Transaction”** means a saleof all or substantially all of the Company’s assets, or a merger, consolidationor other capital reorganization of the Company with or into anothercorporation.

 

(m)          “**Director**” shall mean a member of theBoard.

 

(n)           “**Employee**” shall mean any person who isemployed by the Company or any Parent, Subsidiary or Affiliate of the Company,excluding any Officer and Director.

 

(o)           “**Exchange Act**” shall mean the SecuritiesExchange Act of 1934, as amended.

 

(p)           “**Fair Market Value**” shall mean, as ofany date, the value of Common Stock determined as follows:

 

(i)            If the Common Stock is listed on anyestablished stock exchange or a national market system including withoutlimitation the National Market of the National Association of SecuritiesDealers, Inc. Automated Quotation (“Nasdaq”) System, its Fair Market Valueshall be the closing sales price for such stock as quoted on such system on thedate of determination (if for a given day no sales were reported, the closingbid on that day shall be used), as such price is reported in The Wall StreetJournal or such other source as the Administrator deems reliable;

 

(ii)           If the Common Stock is quoted on theNasdaq System (but not on the National Market thereof) or regularly quoted by arecognized securities dealer but selling prices are not reported, its FairMarket Value shall be the mean between the bid and asked prices for the CommonStock or;

 

(iii)          In the absence of an establishedmarket for the Common Stock, the Fair Market Value thereof shall be determinedin good faith by the Administrator.

 

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(q)           “**Nonstatutory Stock Option**” shall meanan Option not intended to qualify as an Incentive Stock Option, as designatedin the applicable Option Agreement. “Incentive Stock Option” shall meanan Option intended to qualify as an incentive stock option within the meaningof Section 422 of the Code, as designated in the applicable OptionAgreement.

 

(r)            “**Officer**” shall mean aperson who is appointed or elected by the Board of Directors as an officer ofthe Company and who is an “officer” within the meaning of Section 16 of theExchange Act and the rules and regulations promulgated thereunder.

 

(s)           “**Option**” shall mean a stock optiongranted pursuant to the Plan.

 

(t)            **“Option Agreement**” means a writtendocument, the form(s) of which shall be approved from time to time by theAdministrator, reflecting the terms of an Option granted under the Plan andincludes any documents attached to or incorporated into such Option Agreement,including, but not limited to, a notice of stock option grant and a form ofexercise notice.

 

(u)           “**Optioned Stock**” shall mean the CommonStock subject to an Option.

 

(v)**           “Option Exchange Program”**means a program approved by the Administrator whereby outstanding Options areexchanged for Options with a lower exercise price or are amended to decreasethe exercise price as a result of a decline in the Fair Market Value of theCommon Stock.

 

(w)          “**Optionee**” shall mean an Employee orConsultant who receives an Option.

 

(x)            “**Parent**” shall mean a “parentcorporation,” whether now or hereafter existing, as defined inSection 424(e) of the Code.

 

(y)           “**Plan**” shall mean this 2001 EmployeeStock Option Plan.

 

(z)            “**Rule 16b-3**” shall meanRule 16b-3 promulgated under the Exchange Act as the same may be amended fromtime to time, or any successor provision.

 

(aa)         “**Share**” shall mean a share of the CommonStock, as adjusted in accordance with Section 12 of the Plan.

 

(bb)         “**Subsidiary**” shall mean a “subsidiarycorporation,” whether now or hereafter existing, as defined inSection 424(f) of the Code.

 

3.             **Stock Subject to the Plan**.  Subject to the provisions of Section 12of the Plan, the maximum aggregate number of shares which may be sold under thePlan is 800,000****shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.

 

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If anaward should expire or become unexercisable for any reason without having beenexercised in full, or is surrendered pursuant to an Option Exchange Program,the unpurchased Shares that were subject thereto shall, unless the Plan shallhave been terminated, become available for future grant under the Plan.  In addition, any Shares of Common Stockwhich are retained by the Company upon exercise of an Option in order tosatisfy any withholding taxes due with respect to such exercise or purchaseshall be treated as not issued and shall continue to be available under thePlan.  Shares issued under the Plan andlater repurchased by the Company pursuant to any repurchase right which theCompany may have shall not be available for future grant under the Plan.

 

4.             **Administration of the Plan**.

 

(a)           **Composition of Administrator**.  The Plan shall be administered by (A) theBoard or (B) a Committee designated by the Board, which Committee shall beconstituted in such a manner as to satisfy the Applicable Laws.  If a Committee has been appointed pursuantto this Section 4(a), such Committee shall continue to serve in its designatedcapacity until otherwise directed by the Board.  From time to time the Board may increase the size of anyCommittee and appoint additional members thereof, remove members (with orwithout cause) and appoint new members in substitution therefor, fill vacancies(however caused) and remove all members of a Committee and thereafter directlyadminister the Plan, all to the extent permitted by the Applicable Laws.

 

(b)           **Powers of the Administrator**.  Subject to the provisions of the Plan, andin the case of a Committee, the specific duties delegated by, or limitations ofauthority imposed by, the Board to or on such Committee, the Administratorshall have the authority, in its discretion:

 

(i) to grant Options under the Plan;

 

(ii) to determine, upon review of relevantinformation and in accordance with Section 2(p) of the Plan, the FairMarket Value of the Common Stock;

 

(iii) to determine the exercise price per shareof Options to be granted, which exercise price shall be determined inaccordance with Section 8(a) of the Plan;

 

(iv) to determine the Employees or Consultants towhom, and the time or times at which, Options shall be granted and the numberof shares to be represented by each Option;

 

(v) to interpret the Plan;

 

(vi) to approve forms of agreement for use underthe Plan;

 

(vii) to determine the terms and provisions ofeach Option granted (which need not be identical) and, with the consent of theholder thereof, modify or amend each Option;

 

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(viii) to accelerate or defer (with the consentof the Optionee) the exercise date of any Option;

 

(ix) to authorize any person to execute on behalfof the Company any instrument required to effectuate the grant of an Optionpreviously granted by the Administrator;

 

(x)  toimplement an Option Exchange Program on such terms and conditions as theAdministrator in its discretion deems appropriate, provided that no amendmentor adjustment to an Option that would materially and adversely affect therights of any Optionee shall be made without the prior written consent of theOptionee;

 

(xi) to adjust the vesting of an Option held by anEmployee or Consultant as a result of a change in the terms or conditions underwhich such person is providing services to the Company;

 

(xii) to determine whether and under what circumstancesan Option may be settled in cash under Section 9(f) instead of Common Stock;

 

(xiii)  inorder to fulfil the purposes of the Plan and without amending the Plan, tomodify grants of Options to Employees or Consultants who are foreign nationalsor employed outside the United States in order to recognize differences inlocal law, tax policies or customs; and

 

(xiv) to make all other determinations deemednecessary or advisable for the administration of the Plan.

 

(c)           **Effect of Administrator’s Decision**.  All decisions, determinations andinterpretations of the Administrator shall be final and binding on allOptionees and any other holders of any Options granted under the Plan.

 

5.             **Eligibility**.

 

(a)           **Recipients of Grants**.  Options may be granted only to Employees andConsultants. An Employee or Consultant who has been granted an Option may, ifhe is otherwise eligible, be granted an additional Option or Options.

 

(b)           **Type of Option**.  Each Option shall be designated in theOption Agreement as a Nonstatutory Stock Option.

 

(c)           **At-Will Relationship**.  The Plan shall not confer upon any Optioneeany right with respect to continuation of employment or consulting relationshipwith the Company, nor shall it interfere in any way with his right or theCompany’s right to terminate his or her employment or consulting relationshipat any time, with or without cause.

 

6.             **Term of Plan**.  The Plan shall become effective upon itsadoption by the Board of Directors.  Itshall continue in effect for a term of ten (10) years unless sooner terminatedunder Section 14 of the Plan.

 

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7.             **Term of Option**. Theterm of each Option shall be ten (10) years from the date of grant thereof orsuch shorter term as may be provided in the Option Agreement.

 

8.             **Exercise Price and Consideration**.

 

(a)           The per Share exercise price for theShares to be issued pursuant to exercise of an Option shall be such price as isdetermined by the Administrator.

 

(b)           The consideration to be paid for theShares to be issued upon exercise of an Option, including the method ofpayment, shall be determined by the Administrator and may consist entirely of(1) cash, (2) check, (3) promissory note with a fair market value interest ratespecific to the optionee at the date of exercise, (4) other Shares of CommonStock which (i) either have been owned by the Optionee for more than six(6) months on the date of surrender or were not acquired, directly orindirectly, from the Company, and (ii) have a fair market value on thedate of surrender equal to the aggregate exercise price of the Shares as towhich said Option shall be exercised, (5) delivery of a properly executedexercise notice together with irrevocable instructions to a broker to deliverpromptly to the Company the amount of sale or loan proceeds required to pay theexercise price, (6) any combination of such methods of payment, or (7) suchother consideration and method of payment for the issuance of Shares to theextent permitted under the Applicable Laws. In making its determination as to the type of consideration to accept,the Administrator shall consider if acceptance of such consideration may bereasonably expected to benefit the Company, and the Administrator may refuse toaccept a particular form of consideration at the time of any Option exerciseif, in its sole discretion, acceptance of such form of consideration is not inthe best interests of the Company at such time.

 

9.             **Exercise of Option**.

 

(a)           **Procedure for Exercise; Rights as a Stockholder**.  Any Option granted hereunder shall beexercisable at such times and under such conditions as determined by theAdministrator, consistent with the terms of the Plan and reflected in theOption Agreement, including vesting requirements and/or performance criteriawith respect to the Company and/or the Optionee.  Unless otherwise determined by the Administrator, the vesting ofOptions shall be tolled during any unpaid leave of absence.

 

An Option may notbe exercised for a fraction of a Share.

 

An Option shall bedeemed to be exercised when written notice of such exercise has been given tothe Company in accordance with the terms of the Option by the per­son entitledto exercise the Option and full payment for the Shares with respect to whichthe Option is exercised has been received by the Company.  Full payment may, as authorized by theAdministrator, consist of any consideration and method of payment allowableunder Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books ofthe Company or of a duly authorized transfer agent of the Company) of the stockcertificate evidencing such Shares, no right to vote or receive dividends orany other rights as a stockholder shall exist with respect to the OptionedStock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such stockcertificate promptly upon exercise of the 

 

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Option.  Noadjustment will be made for a dividend or other right for which the record dateis prior to the date the stock certificate is issued, except as provided inSection 12 of the Plan.

 

Exercise of anOption in any manner shall result in a decrease in the number of Shares whichthereafter may be avail­able, both for purposes of the Plan and for sale underthe Option, by the number of Shares as to which the Option is exercised.

 

(b)           **Termination of Employment or Consulting Relationship**.  In the event of termination of an Optionee’sContinuous Service Status with the Company, such Optionee may, but only withinthree (3) months (or such other period of time, not less than 30 days, as isdetermined by the Administrator) after the date of such termination (but in noevent later than the date of expiration of the term of such Option as set forthin the Option Agreement), exercise his Option to the extent that he wasentitled to exercise it at the date of such termination.  To the extent that the Optionee was notentitled to exercise the Option at the date of such termination, or if theOptionee does not exercise the Option to the extent so entitled within the timespecified above, the Option shall terminate and the Optioned Stock underlyingthe unexercised portion of the Option shall revert to the Plan.  No termination shall be deemed to occur andthis Section 9(b) shall not apply if (i) the Optionee is a Consultant whobecomes an Employee, or (ii) the Optionee is an Employee who becomes aConsultant.

 

(c)           **Disability of Optionee**.  Notwithstanding the provisions ofSection 9(b) above, in the event of termination of an Optionee’sContinuous Service Status as a result of Optionee’s total and permanentdisability (as defined in Section 22(e)(3) of the Code), Optionee may, but onlywithin twelve (12) months (or such other period of time as is determined by theAdministrator) from the date of such termination (but in no event later thanthe date of expiration of the term of such Option as set forth in the OptionAgreement), exercise the Option to the extent otherwise entitled to exercise itat the date of such termination.  To theextent that Optionee was not entitled to exercise the Option at the date oftermination, or if Optionee does not exercise such Option (to the extent soentitled) within the time specified above, the Option shall terminate, and theOptioned Stock underlying the unexercised portion of the Option shall revert tothe Plan.

 

(d)           **Death of Optionee**. Notwithstanding theprovisions of Section 9(b) above, in the event of the death of an Optioneeduring the period of Continuous Service Status since the date of grant of theOption, or within 30 days following termination of the Optionee’s ContinuousService Status, the Option may be exercised, at any time within twelve (12)months following the date of death (but in no event later than the expirationdate of the term of such Option as set forth in the Option Agreement), by suchOptionee’s estate or by a person who acquired the right to exercise the Optionby bequest or inheritance, but only to the extent of the right to exercise thathad accrued at the date of death or, if earlier, the date of termination of theOptionee’s Continuous Service Status. To the extent that the Optionee was not entitled to exercise the Optionat the date of death or termination, as the case may be, or if the Optioneedoes not exercise such Option to the extent so entitled within the timespecified above, the Option shall terminate and the Optioned Stock underlyingthe unexercised portion of the Option shall revert to the Plan.

 

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(e)           **Extension of Exercise Period.**  The Administrator shall have full power andauthority to extend the period of time for which an Option is to remainexercisable following termination of an Optionee’s Continuous Service Statusfrom the periods set forth in Sections 9(b), 9(c) and 9(d) above or in theOption Agreement to such greater time as the Board shall deem appropriate,provided, that in no event shall such Option be exercisable later than the dateof expiration of the term of such Option as set forth in the Option Agreement.

 

(f)            **Buy-Out Provisions.**  The Administrator may at any time offer tobuy out for a payment in cash or Shares an Option previously granted under thePlan, based on such terms and conditions as the Administrator shall establishand communicate to the Optionee at the time such offer is made.

 

10.           **Taxes.**

 

(a)           As a condition of the exercise of anOption granted under the Plan, the Optionee (or in the case of the Optionee’sdeath, the person exercising the Option) shall make such arrangements as theAdministrator may require for the satisfaction of any applicable federal,state, local or foreign withholding tax obligations that may arise inconnection with the exercise of an Option and the issuance of Shares.  The Company shall not be required to issueany Shares under the Plan until such obligations are satisfied.  If the Administrator allows the withholdingor surrender of Shares to satisfy a Participant’s tax withholding obligationsunder this Section 10 (whether pursuant to Section 10(c), (d) or (e), orotherwise), the Administrator shall not allow Shares to be withheld in anamount that exceeds the minimum statutory withholding rates for federal andstate tax purposes, including payroll taxes.

 

(b)           In the case of an Employee and in theabsence of any other arrangement, the Employee shall be deemed to have directedthe Company to withhold or collect from his or her compensation an amountsufficient to satisfy such tax obligations from the next payroll paymentotherwise payable after the date of an exercise of the Option.

 

(c)           In the case of a Optionee other thanan Employee (or in the case of an Employee where the next payroll payment isnot sufficient to satisfy such tax obligations, with respect to any remainingtax obligations), in the absence of any other arrangement and to the extentpermitted under the Applicable Laws, the Optionee shall be deemed to haveelected to have the Company withhold from the Shares to be issued upon exerciseof the Option that number of Shares having a Fair Market Value determined as ofthe applicable Tax Date (as defined below) equal to the minimum statutoryamount required to be withheld.  Forpurposes of this Section 10, the Fair Market Value of the Shares to be withheldshall be determined on the date that the amount of tax to be withheld is to bedetermined under the Applicable Laws (the “Tax Date”).

 

(d)           If permitted by the Administrator, inits discretion, a Optionee may satisfy his or her tax withholding obligationsupon exercise of an Option by surrendering to the Company Shares that(i) in the case of Shares previously acquired from the Company, have beenowned by the Optionee for more than six months on the date of surrender, and(ii) have a Fair 

 

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Market Value determined as of the applicable Tax Dateequal to the minimum statutory amount required to be withheld.

 

(e)           Any election or deemed election by aOptionee to have Shares withheld to satisfy tax withholding obligations underSection 10(c) or (d) above shall be irrevocable as to the particular Shares asto which the election is made and shall be subject to the consent ordisapproval of the Administrator.  Anyelection by an Optionee under Section 10(d) above must be made on or prior tothe applicable Tax Date.

 

(f)            In the event an election to haveShares withheld is made by a Optionee and the Tax Date is deferred underSection 83 of the Code because no election is filed under Section 83(b) of theCode, the Optionee shall receive the full number of Shares with respect towhich the Option is exercised but such Optionee shall be unconditionallyobligated to tender back to the Company the proper number of Shares on the TaxDate.

 

11.           **Non-Transferability of Options**.  The Option may not be sold, pledged,assigned, hypothecated, transferred, or disposed of in any manner other than bywill or by the laws of descent or distribution; provided, that theAdministrator may in its discretion grant transferable Options pursuant to optionagreements specifying (i) the manner in which such Options are transferable and(ii) that any such transfer shall be subject to the Applicable Laws.  The designation of a beneficiary by anOptionee will not constitute a transfer. An Option may be exercised, during the lifetime of the Optionee, only bythe Optionee or a transferee permitted by this Section 11.

 

12.           **Adjustments Upon Changes in Capitalization, Merger orCertain Other Transactions.**

 

(a)           **Changes in Capitalization.**  Subject to any required action by thestockholders of the Company, the number of Shares of Common Stock covered byeach outstanding Option, and the number of Shares of Common Stock that havebeen authorized for issuance under the Plan but as to which no Options have yetbeen granted or that have been returned to the Plan upon cancellation orexpiration of an Option, as well as the price per Share of Common Stock coveredby each such outstanding Option, shall be proportionately adjusted for anyincrease or decrease in the number of issued Shares of Common Stock resultingfrom a stock split, reverse stock split, stock dividend, combination,recapitalization or reclassification of the Common Stock, or any other increaseor decrease in the number of issued Shares of Common Stock effected withoutreceipt of consideration by the Company; provided, however, that conversion ofany convertible securities of the Company shall not be deemed to have been“effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determinationin that respect shall be final, binding and conclusive.  Except as expressly provided herein, noissuance by the Company of shares of stock of any class, or securitiesconvertible into shares of stock of any class, shall affect, and no adjustmentby reason thereof shall be made with respect to, the number or price of Sharesof Common Stock subject to an Option.

 

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(b)           **Dissolution or Liquidation.**  In the event of the dissolution or liquidationof the Company, each Option will terminate immediately prior to theconsummation of such action, unless otherwise determined by the Administrator.

 

(c)           **Change of Control.** In the event of aChange of Control or Corporate Transaction, each outstanding Option shall beassumed or an equivalent option or right shall be substituted by the successorcorporation or a parent or subsidiary of such successor corporation (suchentity, the “Successor Corporation”). For purposes of this Section 12(c), an Option shall be consideredassumed, without limitation, if, at the time of issuance of the stock or otherconsideration upon such Change of Control, each holder of an Option would beentitled to receive upon exercise of the Option the same number and kind of sharesof stock or the same amount of property, cash or securities as such holderwould have been entitled to receive upon the occurrence of such Change ofControl if the holder had been, immediately prior to such Change of Control,the holder of the number of Shares of Common Stock covered by the Option atsuch time (after giving effect to any adjustments in the number of Sharescovered by the Option as provided for in this Section 12).

 

In the event that, following a Change of Control, theSuccessor Corporation does not agree to assume the Option or to substitute anequivalent option, then the unvested shares under such Option shallautomatically be accelerated such that an additional 50% of the total number ofunvested shares as of the effective date of the Change of Control shallautomatically become vested, and the Company shall provide written notice tothe holder of the Option of the termination of such vesting provisions.  The holder of an Option shall be entitled toexercise such Option for a period of 15 business days following the date thatsuch notice is given.

 

(d)           **Termination Following A Change of Control**.  If the holder of an Option is an Employeeand such holder’s employment terminates as a result of Involuntary Terminationother than for Cause (as such terms are defined below) at any time within 24months following a Change of Control, then, subject to Subsection (e) below,the unvested shares under such Option shall automatically be accelerated suchthat an additional 50% of the total number of unvested shares as of theeffective date of such Involuntary Termination shall automatically becomevested.

 

(e)           **Limitation on Payments**.  In the event that the vesting accelerationprovided for in Subsection (c) above (i) constitutes “parachute payments” withinthe meaning of Section 280G of the Internal Revenue Code of 1986, as amended(the “Code”), and (ii) but for this Subsection (e), would be subject to theexcise tax imposed by Section 4999 of the Code (or any corresponding provisionsof state income tax law), then the vesting acceleration pursuant to Subsection(c) above shall be either

 

(i)            delivered in full, or

 

(ii)           delivered as to such lesser extentwhich would result in no portion of such severance benefits being subject toexcise tax under Section 4999 of the Code, whichever of the foregoing amounts,taking into account the applicable federal, state and local income taxes andthe excise tax imposed by Section 4999, results in the receipt by the holder ofan Option or 

 

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Stock Purchase Right onan after-tax-basis, of the greater amount of severance benefits,notwithstanding that all or some portion of such severance benefits may betaxable under Section 4999 of the Code. Any determination required under this Subsection (e) shall be made inwriting by the Company’s independent accountants, whose determination shall beconclusive and binding on the Company and all holders of Options and StockPurchase Rights for all purposes. In the event that subdivision (i) aboveapplies, then the holder of the Option or Stock Purchase Rights shall beresponsible for any excise taxes imposed with respect to such severance andother benefits.  In the event thatsubdivision (ii) above applies, then each benefit provided hereunder shall beproportionately reduced to the extent necessary to avoid imposition of suchexcise taxes.

 

(f)            **Definition of Terms**.  The following terms used in Subsections (c)through (d) shall have the following meanings:

 

(i)**            Cause**.  “Cause” shall mean (i) gross negligence orwillful misconduct in the performance of an employee’s duties to the Company;(ii) repeated unexplained or unjustified absence from the Company; (iii) amaterial and willful violation of any federal or state law; (iv) refusal orfailure to act in accordance with any specific direction or order of theCompany; (v) commission of any act of fraud with respect to the Company; or(vi) conviction of or plea of no contest to a felony or a crime involvingmoral turpitude causing material harm to the standing and reputation of theCompany, in each case as determined by the Board of Directors of the Company.

 

(ii)**           InvoluntaryTermination**. “Involuntary Termination” shall mean (i) without an employee’sexpress written consent, the significant reduction of such employee’s duties,authority or responsibilities, relative to the such employee’s duties,authority or responsibilities as in effect immediately prior to such reduction,or the assignment to the employee of such reduced duties, authority orresponsibilities, provided, however, that the assignment of the employee to aposition with the same title as the employee then holds, or substantiallysimilar title, in a business unit, division or subsidiary of the Companyfollowing a Change of Control or a company into which the Company is merged ina Change of Control or otherwise acquiring assets or voting shares of theCompany in connection with a Change of Control, or a parent of such a company,shall not constitute a significant reduction of duties, authority orresponsibilities; (ii) a material reduction by the Company in the base salaryof the employee as in effect immediately prior to such reduction; (iii) amaterial reduction by the Company in the kind or level of employee benefits,including bonuses, to which the employee was entitled immediately prior to suchreduction with the result that the employee’s overall benefits package issignificantly reduced; (iv) the relocation of the employee to a facility or alocation more than fifty miles from the employee’s then present location,without the employee’s express written consent; or (v) any act or set of factsor circumstances which would, under California case law or statute, constitutea constructive termination of the employee.

 

(g)           **Certain Distributions.**  In the event of any distribution to theCompany’s stockholders of securities of any other entity or other assets (otherthan dividends payable in cash or stock of the Company) without receipt ofconsideration by the Company, the Administrator may, in its discretion,appropriately adjust the price per Share of Common Stock covered by eachoutstanding Option to reflect the effect of such distribution.

 

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13.           **Time of Granting Options**.  The date of grant of an Option shall, forall purposes, be the date on which the Administrator makes the determinationgranting such Option.  Notice of thedetermination shall be given to each Employee or Consultant to whom an Optionis so granted within a reasonable time after the date of such grant.

 

14.           **Amendment and Termination of the Plan**.

 

(a)           **Authority to Amend or Terminate.**  The Board may at any time amend, alter,suspend or discontinue the Plan, but no amendment, alteration, suspension ordiscontinuation (other than an adjustment pursuant to Section 12 above) shallbe made that would materially and adversely affect the rights of any Optioneeunder any outstanding grant, without his or her consent.

 

(b)           **Effect of Amendment or Termination.**  No amendment or termination of the Planshall materially and adversely affect Options already granted, unless mutuallyagreed otherwise between the Optionee and the Administrator, which agreementmust be in writing and signed by the Optionee and the Company.

 

15.           **ConditionsUpon Issuance of Shares**. Notwithstanding any other provision ofthe Plan or any agreement entered into by the Company pursuant to the Plan, theCompany shall not be obligated, and shall have no liability for failure, toissue or deliver any Shares under the Plan unless such issuance or deliverywould comply with the Applicable Laws, with such compliance determined by theCompany in consultation with its legal counsel.  As a condition to the exercise of an Option, the Company mayrequire the person exercising the award to represent and warrant at the time ofany such exercise that the Shares are being purchased only for investment andwithout any present intention to sell or distribute such Shares if, in theopinion of counsel for the Company, such a representation is required by law.

 

16.           **Reservation of Shares**.  The Company, during the term of this Plan,will at all times reserve and keep available such number of Shares as shall besufficient to satisfy the requirements of the Plan.  The inability of the Company to obtain authority from anyregulatory body having jurisdiction, which authority is deemed by the Company’scounsel to be necessary to the lawful issuance and sale of any Shareshereunder, shall relieve the Company of any liability in respect of the failureto issue or sell such Shares as to which such requisite authority shall nothave been obtained.

 

17.           **Option Agreements**.  Options shall be evidenced by OptionAgreements in such forms as the Administrator shall from time to time approve.

 

18.           **Information to Optionees**.  The Company shall provide to each Optioneeupon request, during the period for which such Optionee has one or more Optionsoutstanding, copies of all annual reports and other information which areprovided to all stockholders of the Company.

 

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