**Exhibit 10.5**

 

**FAVRILLE, INC.2001 EQUITY INCENTIVE PLAN**

 

**INITIALLYADOPTED BY THE BOARD OF DIRECTORS AND APPROVED BY STOCKHOLDERS ONJUNE 6, 2001AMENDMENT AND RESTATEMENT ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 31, 2004****, AND APPROVED BYSTOCKHOLDERS ON DECEMBER 31, 2004**

 

**TERMINATIONDATE: JUNE 5, 2011**

 

**1.****            ****PURPOSES.**

 

**(a)****          ****Amendment andRestatement.**  ThePlan amends and restates the Favrille, Inc. 2001 Equity Incentive Plan(the ***“Prior Plan”***).All outstanding awards granted under the Prior Plan shall remain subject to theterms of the Prior Plan. All options granted subsequent to the effective dateof this Plan shall be subject to the terms of this Plan.

 

**(b)****          ****Eligible StockAward Recipients.**  Thepersons eligible to receive Stock Awards are Employees, Directors andConsultants.

 

**(c)****          ****Available StockAwards.  **Thepurpose of the Plan is to provide a means by which eligible recipients of StockAwards may be given an opportunity to benefit from increases in the value ofthe Common Stock through the granting of the following Stock Awards: (i) IncentiveStock Options, (ii) Nonstatutory Stock Options, (iii) Stock PurchaseAwards, (iv) Stock Bonus Awards, (v) Stock Appreciation Rights, (vi) StockUnit Awards and (vii) Other Stock Awards.

 

**(d)****          ****General Purpose.  **The Company, by means of the Plan,seeks to retain the services of the group of persons eligible to receive StockAwards, to secure and retain the services of new members of this group and toprovide incentives for such persons to exert maximum efforts for the success ofthe Company and its Affiliates.

 

**2.****            ****DEFINITIONS.**

 

**(a)****          **“***Affiliate”*** means any parent corporation orsubsidiary corporation of the Company, whether now or hereafter existing, asthose terms are defined in Sections 424(e) and (f), respectively, of theCode.

 

**(b)****          **“***Board”*** means the Board of Directors of theCompany.

 

**(c)****          ****“*Capitalization Adjustment”*** has the meaning ascribed to thatterm in Section 11(a).

 

**(d)****          ****“*Cause”*** means, with respect to a Participant, theoccurrence of any of the following: (i) such Participant’s commission ofany felony or any crime involving fraud, dishonesty or moral turpitude underthe laws of the United States or any state therof; (ii) such Participant’sattempted commission of, or participation in, a fraud or act of dishonesty againstthe Company; (iii) such Participant’s intentional, material violation ofany contract or agreement between the Participant and the Company or anystatutory duty owed to the Company; (iv) such Participant’s unauthorizeduse or disclosure of the Company’s confidential information or trade secrets; (v) suchParticipant’s gross misconduct; or (vi) such Participant’s conduct thatconstitutes gross insubordination, incompetence or habitual neglect of dutiesand that results in (or might reasonably result in) material harm to thebusiness of the Company. The determination that a termination is for Causeshall be made by the Company in its sole and exclusive judgment and discretion.Any determination by the Company that the Continuous Service of a Participantwas terminated by reason of dismissal without Cause for the purposes ofoutstanding Stock Awards held by such Participant shall have no effect upon anydetermination of the rights or obligations of the Company or such Participantfor any other purpose.

 

**(e)****          ****“*Change in Control”*** means the occurrence, in a singletransaction or in a series of related transactions, of any one or more of thefollowing events:

 

**(i) ** any Exchange Act Person becomes theOwner, directly or indirectly, of securities of the Company representing morethan fifty percent (50%) of the combined voting power of the Company’s then

 

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outstandingsecurities other than by virtue of a merger, consolidation or similartransaction. Notwithstanding the foregoing, a Change in Control shall not bedeemed to occur (A) on account of the acquisition of securities of theCompany by an investor, any affiliate thereof or any other Exchange Act Personfrom the Company in a transaction or series of related transactions the primarypurpose of which is to obtain financing for the Company through the issuance ofequity securities or (B) solely because the level of Ownership held by anyExchange Act Person (the “***SubjectPerson***”) exceeds the designated percentage threshold of theoutstanding voting securities as a result of a repurchase or other acquisitionof voting securities by the Company reducing the number of shares outstanding,provided that if a Change in Control would occur (but for the operation of thissentence) as a result of the acquisition of voting securities by the Company,and after such share acquisition, the Subject Person becomes the Owner of anyadditional voting securities that, assuming the repurchase or other acquisitionhad not occurred, increases the percentage of the then outstanding votingsecurities Owned by the Subject Person over the designated percentagethreshold, then a Change in Control shall be deemed to occur;

 

**(ii) ** there is consummated a merger,consolidation or similar transaction involving (directly or indirectly) theCompany and, immediately after the consummation of such merger, consolidationor similar transaction, the stockholders of the Company immediately priorthereto do not Own, directly or indirectly, either (A) outstanding votingsecurities representing more than fifty percent (50%) of the combinedoutstanding voting power of the surviving Entity in such merger, consolidationor similar transaction or (B) more than fifty percent (50%) of thecombined outstanding voting power of the parent of the surviving Entity in suchmerger, consolidation or similar transaction, in each case in substantially thesame proportions as their Ownership of the outstanding voting securities of theCompany immediately prior to such transaction;

 

**(iii) ** the stockholders of the Company approveor the Board approves a plan of complete dissolution or liquidation of theCompany, or a complete dissolution or liquidation of the Company shallotherwise occur;

 

**(iv) ** there is consummated a sale, lease,license or other disposition of all or substantially all of the consolidatedassets of the Company and its Subsidiaries, other than a sale, lease, licenseor other disposition of all or substantially all of the consolidated assets ofthe Company and its Subsidiaries to an Entity, more than fifty percent (50%) ofthe combined voting power of the voting securities of which are Owned bystockholders of the Company in substantially the same proportions as theirOwnership of the outstanding voting securities of the Company immediately priorto such sale, lease, license or other disposition; or

 

**(v) ** individuals who, on the date this Planis adopted by the Board, are members of the Board (the ***“Incumbent Board”***)cease for any reason to constitute at least a majority of the members of theBoard; *provided, however,* that ifthe appointment or election (or nomination for election) of any new Boardmember was approved or recommended by a majority vote of the members of theIncumbent Board then still in office, such new member shall, for purposes ofthis Plan, be considered as a member of the Incumbent Board.

 

Notwithstanding the foregoing or any other provision of this Plan, thedefinition of Change in Control (or any analogous term) in an individualwritten agreement between the Company or any Affiliate and the Participantshall supersede the foregoing definition with respect to Stock Awards subjectto such agreement (it being understood, however, that if no definition ofChange in Control or any analogous term is set forth in such an individualwritten agreement, the foregoing definition shall apply).

 

**(f)****           ****“*Code”*** means the Internal Revenue Code of 1986, asamended.

 

**(g)****          ****“*Committee”*** means a committee of one (1) or moremembers of the Board appointed by the Board in accordance with Section 3(c).

 

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

 

**(i)****           ****“*Company”*** means Favrille, Inc., a Delawarecorporation.

 

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**(j)**            “***Consultant”*** means any person, includingan advisor, who (i) is engaged by the Company or an Affiliate to renderconsulting or advisory services and is compensated for such services or (ii) isserving as a member of the Board of Directors of an Affiliate and iscompensated for such services. However, service solely as a Director, orpayment of a fee for such services, shall not cause a Director to be considereda “Consultant” for purposes of the Plan.

 

**(k)****          ****“*Continuous Service”*** means that the Participant’sservice with the Company or an Affiliate, whether as an Employee, Director orConsultant, is not interrupted or terminated. A change in the capacity in whichthe Participant renders service to the Company or an Affiliate as an Employee,Consultant or Director or a change in the entity for which the Participantrenders such service, provided that there is no interruption or termination ofthe Participant’s service with the Company or an Affiliate, shall not terminatea Participant’s Continuous Service. For example, a change in status from anEmployee of the Company to a Consultant of an Affiliate or to a Director shallnot constitute an interruption of Continuous Service. The Board or the chiefexecutive officer of the Company, in that party’s sole discretion, maydetermine whether Continuous Service shall be considered interrupted in thecase of any leave of absence approved by that party, including sick leave,military leave or any other personal leave. Notwithstanding the foregoing, aleave of absence shall be treated as Continuous Service for purposes of vestingin a Stock Award only to such extent as may be provided in the Company’s leaveof absence policy or in the written terms of the Participant’s leave ofabsence.

 

**(l)**            “***Corporate Transaction”*** means theoccurrence, in a single transaction or in a series of related transactions, ofany one or more of the following events:

 

**(i) ** a sale or other disposition of all orsubstantially all, as determined by the Board in its discretion, of theconsolidated assets of the Company and its Subsidiaries;

 

**(ii) ** a sale or other disposition of at leastninety percent (90%) of the outstanding securities of the Company;

 

**(iii) ** a merger, consolidation or similartransaction following which the Company is not the surviving corporation; or

 

**(iv) ** a merger, consolidation or similartransaction following which the Company is the surviving corporation but theshares of Common Stock outstanding immediately preceding the merger,consolidation or similar transaction are converted or exchanged by virtue ofthe merger, consolidation or similar transaction into other property, whetherin the form of securities, cash or otherwise.

 

**(m)****         ****“*Covered Employee”*** means the chief executive officerand the four (4) other highest compensated officers of the Company forwhom total compensation is required to be reported to stockholders under theExchange Act, as determined for purposes of Section 162(m) of the Code.

 

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

 

**(o)****          ****“*Disability”*** means the permanent and total disability ofa person within the meaning of Section 22(e)(3) of the Code.

 

**(p)****          ****“*Employee”*** means any person employed by the Company oran Affiliate. However, service solely as a Director, or payment of a fee forsuch services, shall not cause a Director to be considered an “Employee” forpurposes of the Plan.

 

**(q)****          ****“*Entity”*** means a corporation, partnership or otherentity.

 

**(r)****          ****“*Exchange Act”*** means the Securities Exchange Act of 1934,as amended.

 

**(s)****          ****“*Exchange Act Person”*** means any natural person, Entityor “group” (within the meaning of Section 13(d) or 14(d) of theExchange Act), except that “Exchange Act Person” shall not include (A) theCompany or any Subsidiary of the Company, (B) any employee benefit plan ofthe Company or any Subsidiary of the Company or any trustee or other fiduciaryholding securities under an employee benefit plan of the Company or anySubsidiary of the Company, (C) an underwriter temporarily holdingsecurities pursuant to an offering of such securities, (D) an

 

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Entity Owned, directly or indirectly, by the stockholders of theCompany in substantially the same proportions as their Ownership of stock ofthe Company.

 

**(t)**            “***Fair Market Value”*** means, as of anydate, the value of the Common Stock determined as follows:

 

**(i) ** If the Common Stock is listed on anyestablished stock exchange or traded on the Nasdaq National Market or theNasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shallbe the closing sales price for such stock (or the closing bid, if no sales werereported) as quoted on such exchange or market (or the exchange or market withthe greatest volume of trading in the Common Stock) on the last market tradingday prior to the day of determination, as reported in *The Wall Street Journal* or such othersource as the Board deems reliable.

 

**(ii) ** In the absence of such markets for theCommon Stock, the Fair Market Value shall be determined by the Board in goodfaith.

 

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

 

**(v)****           ****“*IPO Date”*** means the effective date of the initialpublic offering of the Common Stock.

 

**(w)****          ****“*Non-Employee Director”*** means a Director who either (i) isnot a current Employee or Officer of the Company or an Affiliate, does notreceive compensation, either directly or indirectly, from the Company or an Affiliatefor services rendered as a consultant or in any capacity other than as aDirector (except for an amount as to which disclosure would not be requiredunder Item 404(a) of Regulation S-K promulgated pursuant to theSecurities Act (***“Regulation S-K”***)),does not possess an interest in any other transaction for which disclosurewould be required under Item 404(a) of Regulation S-K, and is notengaged in a business relationship for which disclosure would be requiredpursuant to Item 404(b) of Regulation S-K; or (ii) is otherwiseconsidered a “non-employee director” for purposes of Rule 16b-3.

 

**(x)****          ****“*Nonstatutory Stock Option”*** means an Option not intended toqualify as an Incentive Stock Option.

 

**(y)****          ****“*Officer”*** means a person who is an officer of theCompany within the meaning of Section 16 of the Exchange Act and the rules andregulations promulgated thereunder.

 

**(z)****          ****“*Option”*** means an Incentive Stock Option or aNonstatutory Stock Option to purchase shares of Common Stock granted pursuantto the Plan.

 

**(aa)****        ****“*Option Agreement”*** means a written agreement betweenthe Company and an Optionholder evidencing the terms and conditions of anOption grant. Each Option Agreement shall be subject to the terms andconditions of the Plan.

 

**(bb)****        ****“*Optionholder”*** means a person to whom an Optionis granted pursuant to the Plan or, if applicable, such other person who holdsan outstanding Option.

 

**(cc)****        ****“*Other Stock Award”*** means an award based in whole orin part by reference to the Common Stock which is granted pursuant to the termsand conditions of Section 7(e).

 

**(dd)****        ****“*Other Stock AwardAgreement”*** means a written agreement between the Company and a holder of an OtherStock Award evidencing the terms and conditions of an Other Stock Award grant.Each Other Stock Award Agreement shall be subject to the terms and conditionsof the Plan.

 

**(ee)****        ****“*Outside Director”*** means a Director who either (i) isnot a current employee of the Company or an “affiliated corporation” (withinthe meaning of Treasury Regulations promulgated under Section 162(m) ofthe Code), is not a former employee of the Company or an “affiliatedcorporation” who receives compensation for prior services (other than benefitsunder a tax-qualified retirement plan) during the taxable year, has not been anofficer of the Company or an “affiliated corporation”, and does not receiveremuneration from the Company or an “affiliated corporation,” either directlyor indirectly, in any capacity other than as a Director or (ii) isotherwise considered an “outside director” for purposes of Section 162(m)of the Code.

 

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**(ff)****          ****“*Own,” “Owned,” “Owner,”“Ownership”*** A person or Entity shall be deemed to “Own,” to have “Owned,” to bethe “Owner” of, or to have acquired “Ownership” of securities if such person orEntity, directly or indirectly, through any contract, arrangement,understanding, relationship or otherwise, has or shares voting power, whichincludes the power to vote or to direct the voting, with respect to suchsecurities.

 

**(gg)****        ****“*Participant”*** means a person to whom a StockAward is granted pursuant to the Plan or, if applicable, such other person whoholds an outstanding Stock Award.

 

**(hh)****        ****“*Plan”*** means this Favrille, Inc.2001 Equity Incentive Plan, as amended and restated.

 

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

 

**(jj)****          ****“*Securities Act”*** means the Securities Act of 1933,as amended.

 

**(kk)****       ****“*Stock AppreciationRight”***means a right to receive the appreciation of Common Stock that is granted pursuantto the terms and conditions of Section 7(d).

 

**(ll)****          ****“*Stock AppreciationRight Agreement”*** means a written agreement between the Company and a holder of a StockAppreciation Right evidencing the terms and conditions of a Stock AppreciationRight grant. Each Stock Appreciation Right Agreement shall be subject to theterms and conditions of the Plan.

 

**(mm)****      ****“*Stock Award”*** means any right granted under thePlan, including an Option, a Stock Purchase Award, Stock Bonus Award, a StockAppreciation Right, a Stock Unit Award or any Other Stock Award.

 

**(nn)****        ****“*Stock AwardAgreement”*** means a written agreement between the Company and a Participantevidencing the terms and conditions of a Stock Award grant. Each Stock AwardAgreement shall be subject to the terms and conditions of the Plan.

 

**(oo)****        ****“*Stock Bonus Award”*** means an award of shares ofCommon Stock which is granted pursuant to the terms and conditions of Section 7(b).

 

**(pp)****        ****“*Stock Bonus AwardAgreement”*** means a written agreement between the Company and a holder of a StockBonus Award evidencing the terms and conditions of a Stock Bonus Award grant.Each Stock Bonus Award Agreement shall be subject to the terms and conditionsof the Plan.

 

**(qq)****        ****“*Stock PurchaseAward”***means an award of shares of Common Stock which is granted pursuant to the termsand conditions of Section 7(a).

 

**(rr)****        ****“*Stock PurchaseAward Agreement”*** means a written agreement between the Company and a holder of a StockPurchase Award evidencing the terms and conditions of a Stock Purchase Awardgrant. Each Stock Purchase Award Agreement shall be subject to the terms andconditions of the Plan.

 

**(ss)****        ****“*Stock Unit Award”*** means a right to receive sharesof Common Stock which is granted pursuant to the terms and conditions of Section 7(c).

 

**(tt)****          ****“*Stock Unit AwardAgreement”*** means a written agreement between the Company and a holder of a StockUnit Award evidencing the terms and conditions of a Stock Unit Award grant.Each Stock Unit Award Agreement shall be subject to the terms and conditions ofthe Plan.

 

**(uu)****        ****“*Subsidiary”*** means, with respect to theCompany, (i) any corporation of which more than fifty percent (50%) of theoutstanding capital stock having ordinary voting power to elect a majority ofthe board of directors of such corporation (irrespective of whether, at thetime, stock of any other class or classes of such corporation shall have ormight have voting power by reason of the happening of any contingency) is atthe time, directly or indirectly, Owned by the Company, and (ii) anypartnership in which the Company has a direct or indirect interest (whether inthe form of voting or participation in profits or capital contribution) of morethan fifty percent (50%).

 

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**(vv)****         ****“*Ten PercentStockholder”*** means a person who Owns (or is deemed to Own pursuant to Section 424(d) ofthe Code) stock possessing more than ten percent (10%) of the total combinedvoting power of all classes of stock of the Company or of any of itsAffiliates.

 

**3.****            ****ADMINISTRATION.**

 

**(a)****          ****Administration byBoard.**  TheBoard shall administer the Plan unless and until the Board delegatesadministration of the Plan to a Committee, as provided in Section 3(c).

 

**(b)****          ****Powers of Board.**  The Board shall havethe power, subject to, and within the limitations of, the express provisions ofthe Plan:

 

**(i) ** To determine from time to time which ofthe persons eligible under the Plan shall be granted Stock Awards; when and howeach Stock Award shall be granted; what type or combination of types of StockAward shall be granted; the provisions of each Stock Award granted (which neednot be identical), including the time or times when a person shall be permittedto receive Common Stock pursuant to a Stock Award; and the number of shares ofCommon Stock with respect to which a Stock Award shall be granted to each suchperson.

 

**(ii) ** To construe and interpret the Plan andStock Awards granted under it, and to establish, amend and revoke rules andregulations for its administration. The Board, in the exercise of this power,may correct any defect, omission or inconsistency in the Plan or in any StockAward Agreement, in a manner and to the extent it shall deem necessary orexpedient to make the Plan fully effective.

 

**(iii) ** To effect, at any time and from time totime, with the consent of any adversely affected Optionholder, (1) thereduction of the exercise price of any outstanding Option under the Plan, (2) thecancellation of any outstanding Option under the Plan and the grant insubstitution therefor of (A) a new Option under the Plan or another equityplan of the Company covering the same or a different number of shares of CommonStock, (B) a Stock Purchase Award, (C) a Stock Bonus Award, (D) aStock Appreciation Right, (E) a Stock Unit Award (F) an Other StockAward, (G) cash and/or (H) other valuable consideration (asdetermined by the Board, in its sole discretion), or (3) any other actionthat is treated as a repricing under generally accepted accounting principles.

 

**(iv) ** To amend the Plan or a Stock Award asprovided in Section 12.

 

**(v) ** To terminate or suspend the Plan asprovided in Section 13.

 

**(vi) ** Generally, to exercise such powers andto perform such acts as the Board deems necessary or expedient to promote thebest interests of the Company and that are not in conflict with the provisionsof the Plan.

 

**(vii) ** To adopt such procedures and sub-plansas are necessary or appropriate to permit participation in the Plan byEmployees who are foreign nationals or employed outside the United States.

 

**(c)****          ****Delegation toCommittee.**

 

**(i)****           ****General.**  The Board may delegatesome or all of the administration of the Plan to a Committee or Committees ofone (1) or more members of the Board, and the term ***“Committee”*** shallapply to any person or persons to whom such authority has been delegated. Ifadministration is delegated to a Committee, the Committee shall have, inconnection with the administration of the Plan, the powers theretoforepossessed by the Board that have been delegated to the Committee, including thepower to delegate to a subcommittee any of the administrative powers theCommittee is authorized to exercise (and references in this Plan to the Boardshall thereafter be to the Committee or subcommittee), subject, however, tosuch resolutions, not inconsistent with the provisions of the Plan, as may beadopted from time to time by the Board. The Board may retain the authority toconcurrently administer the Plan with the Committee and may, at any time,revest in the Board some or all of the powers previously delegated.

 

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**(ii)****          ****Section 162(m) and Rule 16b-3 Compliance.**  In the discretion ofthe Board, the Committee may consist solely of two or more Outside Directors,in accordance with Section 162(m) of the Code, and/or solely of two ormore Non-Employee Directors, in accordance with Rule 16b-3. Inaddition, the Board or the Committee, in its discretion, may (1) delegateto a committee of one or more members of the Board who need not be OutsideDirectors the authority to grant Stock Awards to eligible persons who areeither (a) not then Covered Employees and are not expected to be CoveredEmployees at the time of recognition of income resulting from such Stock Award,or (b) not persons with respect to whom the Company wishes to comply with Section 162(m)of the Code, and/or (2) delegate to a committee of one or more members ofthe Board who need not be Non-Employee Directors the authority to grant StockAwards to eligible persons who are not then subject to Section 16 of theExchange Act.

 

**(d)****          ****Delegation to anOfficer. **The Board may delegate to one or moreOfficers of the Company the authority to do one or both of the following (i) designateOfficers and Employees of the Company or any of its Subsidiaries to berecipients of Stock Awards and (ii) determine the number of shares ofCommon Stock to be subject to such Stock Awards granted to such Officers andEmployees of the Company; *provided, however,*that the Board resolutions regarding such delegation shall specify the totalnumber of shares of Common Stock that may be subject to the Stock Awardsgranted by such Officer and that such Officer may not grant a Stock Award tohimself or herself. Notwithstanding anything to the contrary in this Section 3(d),the Board may not delegate to an Officer authority to determine the Fair MarketValue of the Common Stock pursuant to Section 2(t)(ii) above.

 

**(e)****          ****Effect of Board’sDecision.**  Alldeterminations, interpretations and constructions made by the Board in goodfaith shall not be subject to review by any person and shall be final, bindingand conclusive on all persons.

 

**4.****            ****SHARES SUBJECT TOTHE PLAN.**

 

**(a)****          ****Share Reserve.**  Subject to theprovisions of Section 11(a) relating to Capitalization Adjustments,the shares of Common Stock that may be issued pursuant to Stock Awards shallnot exceed in the aggregate two million seven hundredseventy-three thousand eight hundred ninety-nine (2,773,899) shares of Common Stock plus anannual increase to be added on the first day of each Company fiscal year,beginning in 2006 and ending in (and including) 2014, equal to the least of thefollowing amounts: (i) five percent (5%) of the Company’s outstandingshares of Common Stock on the day preceding the first day of such fiscal year(rounded to the nearest whole share), (ii) one million three hundredthousand (1,300,000) shares of Common Stock, or (iii) an amount determinedby the Board.

 

**(b)****          ****Reversion ofShares to the Share Reserve.  **If any Stock Award shall for any reasonexpire or otherwise terminate, in whole or in part, without having beenexercised in full, or if any shares of Common Stock issued to a Participantpursuant to a Stock Award are forfeited to or repurchased by the Company,including, but not limited to, any repurchase or forfeiture caused by thefailure to meet a contingency or condition required for the vesting of suchshares, then the shares of Common Stock not issued under such Stock Award, orforfeited to or repurchased by the Company, shall revert to and again becomeavailable for issuance under the Plan. If any shares subject to a Stock Awardare not delivered to a Participant because such shares are withheld for thepayment of taxes or the Stock Award is exercised through a reduction of sharessubject to the Stock Award (*i.e.*,“net exercised”), the number of shares that are not delivered to theParticipant shall remain available for issuance under the Plan. If the exerciseprice of any Stock Award is satisfied by tendering shares of Common Stock heldby the Participant (either by actual delivery or attestation), then the numberof shares so tendered shall remain available for issuance under the Plan.Notwithstanding anything to the contrary in this Section 4(b), subject tothe provisions of Section 11(a) relating to CapitalizationAdjustments the aggregate maximum number of shares of Common Stock that may beissued as Incentive Stock Options shall be twenty-three million six hundredseventy-nine thousand two hundred (23,679,200) shares of Common Stock.

 

**(c)****          ****Source of Shares.  **The shares of Common Stock subjectto the Plan may be unissued shares or reacquired shares, bought on the marketor otherwise.

 

**5.****            ****ELIGIBILITY.**

 

**(a)****          ****Eligibility forSpecific Stock Awards.  **Incentive Stock Options may be granted only to Employees. Stock Awardsother than Incentive Stock Options may be granted to Employees, Directors andConsultants.

 

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**(b)****          ****Ten PercentStockholders.  **A Ten Percent Stockholder shall not be granted an Incentive StockOption unless the exercise price of such Option is at least one hundred tenpercent (110%) of the Fair Market Value of the Common Stock on the date ofgrant and the Option is not exercisable after the expiration of five (5) yearsfrom the date of grant.

 

**(c)****          ****Section 162(m)Limitation on Annual Grants.  **Subject to the provisions of Section 11(a) relatingto Capitalization Adjustments, at such time as the Company may be subject tothe applicable provisions of Section 162(m) of the Code, no Employee shallbe eligible to be granted Options or Stock Appreciation Rights covering morethan one million (1,000,000) shares of Common Stock during any calendar year.

 

**(d)****          ****Consultants.  **A Consultant shall not be eligiblefor the grant of a Stock Award if, at the time of grant, a Form S-8Registration Statement under the Securities Act (***“Form S-8”***) is not availableto register either the offer or the sale of the Company’s securities to suchConsultant because of the nature of the services that the Consultant isproviding to the Company, because the Consultant is not a natural person, orbecause of any other rule governing the use of Form S-8.

 

**6.****            ****OPTIONPROVISIONS.**

 

Each Option shall be in such form and shall contain such terms andconditions as the Board shall deem appropriate. All Options shall be separatelydesignated Incentive Stock Options or Nonstatutory Stock Options at the time ofgrant, and, if certificates are issued, a separate certificate or certificatesshall be issued for shares of Common Stock purchased on exercise of each typeof Option. The provisions of separate Options need not be identical, but eachOption shall include (through incorporation of provisions hereof by referencein the Option or otherwise) the substance of each of the following provisions:

 

**(a)****          ****Term.  **The Board shall determine the termof an Option; *provided however that,*subject to the provisions of Section 5(b) regarding Ten PercentStockholders, no Incentive Stock Option shall be exercisable after theexpiration of ten (10) years from the date on which it was granted.

 

**(b)****          ****Exercise Price ofan Incentive Stock Option.**  Subject to the provisions of Section 5(b) regardingTen Percent Stockholders, the exercise price of each Incentive Stock Optionshall be not less than one hundred percent (100%) of the Fair Market Value ofthe Common Stock subject to the Option on the date the Option is granted.Notwithstanding the foregoing, an Incentive Stock Option may be granted with anexercise price lower than that set forth in the preceding sentence if suchOption is granted pursuant to an assumption or substitution for another optionin a manner satisfying the provisions of Section 424(a) of the Code.

 

**(c)****          ****Exercise Price ofa Nonstatutory Stock Option.  **The Board, in its discretion, shall determinethe exercise price of each Nonstatutory Stock Option.

 

**(d)****          ****Consideration.  **The purchase price of Common Stockacquired pursuant to an Option shall be paid, to the extent permitted byapplicable law, either (i) in cash at the time the Option is exercised or (ii) atthe discretion of the Board at the time of the grant of the Option (orsubsequently in the case of a Nonstatutory Stock Option) (1) by deliveryto the Company (either by actual delivery or attestation) of other Common Stockat the time the Option is exercised, (2) according to a deferred paymentor other similar arrangement with the Optionholder, (3) by a “net exercise”of the Option (as further described below), (4) pursuant to a programdeveloped under Regulation T as promulgated by the Federal Reserve Boardthat, prior to the issuance of Common Stock, results in either the receipt ofcash (or check) by the Company or the receipt of irrevocable instructions to paythe aggregate exercise price to the Company from the sales proceeds or (5) inany other form of legal consideration that may be acceptable to the Board.Unless otherwise specifically provided in the Option, the purchase price ofCommon Stock acquired pursuant to an Option that is paid by delivery to theCompany of other Common Stock acquired, directly or indirectly from theCompany, shall be paid only by shares of the Common Stock of the Company thathave been held for more than six (6) months (or such longer or shorterperiod of time required to avoid a charge to earnings for financial accountingpurposes). At any time that the Company is incorporated in Delaware, payment ofthe Common Stock’s “par value,” as defined in the Delaware General CorporationLaw, shall not be made by deferred payment.

 

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In the case of any deferred payment arrangement, interest shall becompounded at least annually and shall be charged at the minimum rate ofinterest necessary to avoid (1) the treatment as interest, under any applicableprovisions of the Code, of any amounts other than amounts stated to be interestunder the deferred payment arrangement and (2) the treatment of the Optionas a variable award for financial accounting purposes.

 

In the case of a “net exercise” of an Option, the Company will notrequire a payment of the exercise price of the Option from the Participant butwill reduce the number of shares of Common Stock issued upon the exercise bythe largest number of whole shares that has a Fair Market Value that does notexceed the aggregate exercise price. With respect to any remaining balance ofthe aggregate exercise price, the Company shall accept a cash payment from theParticipant. Shares of Common Stock will no longer be outstanding under anOption (and will therefore not thereafter be exercisable) following theexercise of such Option to the extent of (i) shares used to pay theexercise price of an Option under the “net exercise”, (ii) shares actuallydelivered to the Participant as a result of such exercise and (iii) shareswithheld for purposes of tax withholding.

 

**(e)****          ****Transferabilityof an Incentive Stock Option.  **An Incentive Stock Option shall not betransferable except by will or by the laws of descent and distribution andshall be exercisable during the lifetime of the Optionholder only by theOptionholder. Notwithstanding the foregoing, the Optionholder may, bydelivering written notice to the Company, in a form provided by or otherwisesatisfactory to the Company, designate a third party who, in the event of thedeath of the Optionholder, shall thereafter be entitled to exercise the Option.

 

**(f)****           ****Transferabilityof a Nonstatutory Stock Option.  **A Nonstatutory Stock Option shall betransferable to the extent provided in the Option Agreement. If the NonstatutoryStock Option does not provide for transferability, then the Nonstatutory StockOption shall not be transferable except by will or by the laws of descent anddistribution and shall be exercisable during the lifetime of the Optionholderonly by the Optionholder. Notwithstanding the foregoing, the Optionholder may,by delivering written notice to the Company, in a form provided by or otherwisesatisfactory to the Company, designate a third party who, in the event of thedeath of the Optionholder, shall thereafter be entitled to exercise the Option.

 

**(g)****          ****VestingGenerally.  **The total number of shares of Common Stock subject to an Option mayvest and therefore become exercisable in periodic installments that may beequal. The Option may be subject to such other terms and conditions on the timeor times when it may be exercised (which may be based on performance or othercriteria) as the Board may deem appropriate. The vesting provisions ofindividual Options may vary. The provisions of this Section 6(g) aresubject to any Option provisions governing the minimum number of shares ofCommon Stock as to which an Option may be exercised.

 

**(h)****          ****Termination ofContinuous Service.  **In the event that an Optionholder’s Continuous Service terminates (forreasons other than Cause or upon the Optionholder’s death or Disability), theOptionholder may exercise his or her Option (to the extent that theOptionholder was entitled to exercise such Option as of the date of terminationof Continuous Service) but only within such period of time ending on theearlier of (i) the expiration of the term of the Option as set forth inthe Option Agreement or (ii) the date three (3) months following thetermination of the Optionholder’s Continuous Service (or such longer or shorterperiod specified in the Option Agreement). If, after termination of ContinuousService, the Optionholder does not exercise his or her Option within the timespecified herein or in the Option Agreement (as applicable), the Option shallterminate.

 

**(i)****           ****Extension ofTermination Date.  **An Optionholder’s Option Agreement may provide that if the exercise ofthe Option following the termination of the Optionholder’s Continuous Service(for reasons other than Cause or upon the Optionholder’s death or Disability)would be prohibited at any time solely because the issuance of shares of CommonStock would violate the registration requirements under the Securities Act,then the Option shall terminate on the earlier of (i) the expiration ofthe term of the Option set forth in the Option Agreement or (ii) theexpiration of a period of three (3) months after the termination of theOptionholder’s Continuous Service during which the exercise of the Option wouldnot be in violation of such registration requirements.

 

**(j)****           ****Disability ofOptionholder.  **In the event that an Optionholder’s Continuous Service terminates as aresult of the Optionholder’s Disability, the Optionholder may exercise his orher Option (to the extent that the Optionholder was entitled to exercise suchOption as of the date of termination of Continuous Service), but only

 

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within suchperiod of time ending on the earlier of (i) the expiration of the term ofthe Option as set forth in the Option Agreement or (ii) the date twelve(12) months following such termination of Continuous Service (or suchlonger or shorter period specified in the Option Agreement). If, aftertermination of Continuous Service, the Optionholder does not exercise his orher Option within the time specified herein or in the Option Agreement (asapplicable), the Option shall terminate.

 

**(k)****          ****Death ofOptionholder.  **In the event that (i) an Optionholder’s Continuous Serviceterminates as a result of the Optionholder’s death or (ii) theOptionholder dies within the period (if any) specified in the Option Agreementafter the termination of the Optionholder’s Continuous Service for a reasonother than death, then the Option may be exercised (to the extent theOptionholder was entitled to exercise such Option as of the date of death) bythe Optionholder’s estate, by a person who acquired the right to exercise theOption by bequest or inheritance or by a person designated to exercise theoption upon the Optionholder’s death pursuant to Section 6(e) or6(f), but only within the period ending on the earlier of (i) theexpiration of the term of such Option as set forth in the Option Agreement or (ii) thedate eighteen (18) months following the date of death (or such longer orshorter period specified in the Option Agreement). If, after the Optionholder’sdeath, the Option is not exercised within the time specified herein or in theOption Agreement (as applicable), the Option shall terminate.

 

**(l)****           ****Termination forCause.**  Inthe event that an Optionholder’s Continuous Service is terminated for Cause,the Option shall terminate upon the termination date of such Optionholder’sContinuous Service, and the Optionholder shall be prohibited from exercisinghis or her Option from and after the time of such termination of ContinuousService.

 

**(m)****         ****Early Exercise.**  The Option may includea provision whereby the Optionholder may elect at any time before theOptionholder’s Continuous Service terminates to exercise the Option as to anypart or all of the shares of Common Stock subject to the Option prior to thefull vesting of the Option. Any unvested shares of Common Stock so purchasedmay be subject to a repurchase option in favor of the Company or to any otherrestriction the Board determines to be appropriate. The Company shall not berequired to exercise its repurchase option until at least six (6) months(or such longer or shorter period of time required to avoid a charge toearnings for financial accounting purposes) have elapsed following exercise ofthe Option unless the Board otherwise specifically provides in the Option.

 

**7.****            ****PROVISIONS OFSTOCK AWARDS OTHER THAN OPTIONS.**

 

**(a)****          ****Stock PurchaseAwards.  **EachStock Purchase Award Agreement shall be in such form and shall contain suchterms and conditions as the Board shall deem appropriate. At the Board’selection, shares of Common Stock may be (i) held in book entry formsubject to the Company’s instructions until any restrictions relating to theStock Purchase Award lapse; or (ii) evidenced by a certificate, whichcertificate shall be held in such form and manner as determined by the Board.The terms and conditions of Stock Purchase Award Agreements may change fromtime to time, and the terms and conditions of separate Stock Purchase AwardAgreements need not be identical, *provided,however,* that each Stock Purchase Award Agreement shall include(through incorporation of the provisions hereof by reference in the agreementor otherwise) the substance of each of the following provisions:

 

**(i)****           ****Purchase Price.  **At the time of the grant of aStock Purchase Award, the Board will determine the price to be paid by theParticipant for each share subject to the Stock Purchase Award. To the extentrequired by applicable law, the price to be paid by the Participant for eachshare of the Stock Purchase Award will not be less than the par value of ashare of Common Stock.

 

**(ii)****          ****Consideration.  **At the time of the grant of a Stock PurchaseAward, the Board will determine the consideration permissible for the paymentof the purchase price of the Stock Purchase Award. The purchase price of CommonStock acquired pursuant to the Stock Purchase Award shall be paid either: (i) incash at the time of purchase or (ii) in any other form of legalconsideration that may be acceptable to the Board and permissible under theDelaware General Corporation Law.

 

**(iii)****        ****Vesting.  **Shares of Common Stock acquired under a StockPurchase Award may be subject to a share repurchase right or option in favor ofthe Company in accordance with a vesting schedule to be determined by theBoard.

 

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**(iv)****         ****Termination of Participant’s Continuous Service.**  In the event that aParticipant’s Continuous Service terminates, the Company shall have the right,but not the obligation, to repurchase or otherwise reacquire, any or all of theshares of Common Stock held by the Participant that have not vested as of thedate of termination under the terms of the Stock Purchase Award Agreement. Atthe Board’s election, the repurchase right may be at the least of: (i) theFair Market Value on the relevant date or (ii) the Participant’s originalcost. The Company shall not be required to exercise its repurchase option untilat least six (6) months (or such longer or shorter period of time requiredto avoid a charge to earnings for financial accounting purposes) have elapsedfollowing the purchase of the restricted stock unless otherwise determined bythe Board or provided in the Stock Purchase Award Agreement.

 

**(v)****           ****Transferability.**  Rights to purchase orreceive shares of Common Stock granted under a Stock Purchase Award shall betransferable by the Participant only upon such terms and conditions as are setforth in the Stock Purchase Award Agreement, as the Board shall determine inits discretion, and so long as Common Stock awarded under the Stock PurchaseAward remains subject to the terms of the Stock Purchase Award Agreement.

 

**(b)****          ****Stock BonusAwards.  **EachStock Bonus Award Agreement shall be in such form and shall contain such termsand conditions as the Board shall deem appropriate. At the Board’s election,shares of Common Stock may be (i) held in book entry form subject to theCompany’s instructions until any restrictions relating to the Stock Bonus Awardlapse; or (ii) evidenced by a certificate, which certificate shall be heldin such form and manner as determined by the Board. The terms and conditions ofStock Bonus Award Agreements may change from time to time, and the terms andconditions of separate Stock Bonus Award Agreements need not be identical, buteach Stock Bonus Award Agreement shall include (through incorporation of provisionshereof by reference in the agreement or otherwise) the substance of each of thefollowing provisions:

 

**(i)****           ****Consideration.  **A Stock Bonus Award may be awardedin consideration for past services actually rendered to the Company or anAffiliate.

 

**(ii)****          ****Vesting.  **Shares of Common Stock awarded under theStock Bonus Award Agreement may be subject to forfeiture to the Company inaccordance with a vesting schedule to be determined by the Board.

 

**(iii)****        ****Termination of Participant’s Continuous Service.  **In the event a Participant’sContinuous Service terminates, the Company may receive via a forfeiturecondition, any or all of the shares of Common Stock held by the Participantwhich have not vested as of the date of termination of Continuous Service underthe terms of the Stock Bonus Award Agreement.

 

**(iv)****         ****Transferability.  **Rights to acquire shares of CommonStock under the Stock Bonus Award Agreement shall be transferable by theParticipant only upon such terms and conditions as are set forth in the StockBonus Award Agreement, as the Board shall determine in its discretion, so longas Common Stock awarded under the Stock Bonus Award Agreement remains subjectto the terms of the Stock Bonus Award Agreement.

 

**(c)****          ****Stock UnitAwards.  **EachStock Unit Award Agreement shall be in such form and shall contain such termsand conditions as the Board shall deem appropriate. The terms and conditions ofStock Unit Award Agreements may change from time to time, and the terms andconditions of separate Stock Unit Award Agreements need not be identical, *provided, however,* that each Stock UnitAward Agreement shall include (through incorporation of the provisions hereofby reference in the agreement or otherwise) the substance of each of thefollowing provisions:

 

**(i)****           ****Consideration.  **At the time of grant of a StockUnit Award, the Board will determine the consideration, if any, to be paid bythe Participant upon delivery of each share of Common Stock subject to theStock Unit Award. To the extent required by applicable law, the considerationto be paid by the Participant for each share of Common Stock subject to a StockUnit Award will not be less than the par value of a share of Common Stock. Theconsideration may be paid in any form permitted under applicable law.

 

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**(ii)****          ****Vesting.  **At the time of the grant of a Stock UnitAward, the Board may impose such restrictions or conditions to the vesting ofthe Stock Unit Award as it, in its absolute discretion, deems appropriate.

 

**(iii)****        ****Payment.**  A Stock Unit Award may be settled by the delivery of sharesof Common Stock, their cash equivalent, any combination thereof or in any otherform of consideration as determined by the Board and contained in the StockUnit Award Agreement.

 

**(iv)****         ****Additional Restrictions.  **At the time of the grant of a StockUnit Award, the Board, as it deems appropriate, may impose such restrictions orconditions that delay the delivery of the shares of Common Stock (or their cashequivalent) subject to a Stock Unit Award after the vesting of such Stock UnitAward.

 

**(v)****           ****DividendEquivalents.**  Dividendequivalents may be credited in respect of shares of Common Stock covered by aStock Unit Award, as determined by the Board and contained in the Stock UnitAward Agreement. At the discretion of the Board, such dividend equivalents maybe converted into additional shares of Common Stock covered by the Stock UnitAward in such manner as determined by the Board. Any additional shares coveredby the Stock Unit Award credited by reason of such dividend equivalents will besubject to all the terms and conditions of the underlying Stock Unit AwardAgreement to which they relate.

 

**(vi)****         ****Termination of Participant’s Continuous Service.  **Except as otherwise provided inthe applicable Stock Unit Award Agreement, such portion of the Stock Unit Awardthat has not vested will be forfeited upon the Participant’s termination ofContinuous Service for any reason.

 

**(d)****          ****StockAppreciation Rights.  **Each Stock Appreciation Right Agreement shall be in such form and shallcontain such terms and conditions as the Board shall deem appropriate. Theterms and conditions of Stock Appreciation Right Agreements may change fromtime to time, and the terms and conditions of separate Stock Appreciation RightAgreements need not be identical, *provided,however*, that each Stock Appreciation Right Agreement shall include(through incorporation of the provisions hereof by reference in the agreementor otherwise) the substance of each of the following provisions:

 

**(i)****           ****Strike Price andCalculation of Appreciation.  **Each Stock Appreciation Right will bedenominated in share of Common Stock equivalents. The appreciation distributionpayable on the exercise of a Stock Appreciation Right will be not greater thanan amount equal to the excess of (A) the aggregate Fair Market Value (onthe date of the exercise of the Stock Appreciation Right) of a number of sharesof Common Stock equal to the number of share of Common Stock equivalents inwhich the Participant is vested under such Stock Appreciation Right, and withrespect to which the Participant is exercising the Stock Appreciation Right onsuch date, over (B) an amount (the strike price) that will be determinedby the Board at the time of grant of the Stock Appreciation Right.

 

**(ii)****          ****Vesting.  **At the time of the grant of a StockAppreciation Right, the Board may impose such restrictions or conditions to thevesting of such Stock Appreciation Right as it, in its absolute discretion,deems appropriate.

 

**(iii)****        ****Exercise.  **To exercise any outstanding StockAppreciation Right, the Participant must provide written notice of exercise tothe Company in compliance with the provisions of the Stock Appreciation RightAgreement evidencing such Stock Appreciation Right.

 

**(iv)****         ****Payment.  **The appreciation distribution in respect to aStock Appreciation Right may be paid in Common Stock, in cash, in anycombination of the two or in any other form of consideration as determined bythe Board and contained in the Stock Appreciation Right Agreement evidencingsuch Stock Appreciation Right.

 

**(v)****           ****Termination ofContinuous Service.**  Inthe event that a Participant’s Continuous Service terminates, the Participantmay exercise his or her Stock Appreciation Right (to the extent that theParticipant was entitled to exercise such Stock Appreciation Right as of thedate of termination) but only

 

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within suchperiod of time ending on the earlier of (i) the date three (3) monthsfollowing the termination of the Participant’s Continuous Service (or suchlonger or shorter period specified in the Stock Appreciation Right Agreement)or (ii) the expiration of the term of the Stock Appreciation Right as setforth in the Stock Appreciation Right Agreement. If, after termination, theParticipant does not exercise his or her Stock Appreciation Right within thetime specified herein or in the Stock Appreciation Right Agreement (asapplicable), the Stock Appreciation Right shall terminate.

 

**(e)****          ****Other StockAwards.**  Otherforms of Stock Awards valued in whole or in part by reference to, or otherwisebased on, Common Stock may be granted either alone or in addition to StockAwards provided for under Section 6 and the preceding provisions of this Section 7.Subject to the provisions of the Plan, the Board shall have sole and completeauthority to determine the persons to whom and the time or times at which suchOther Stock Awards will be granted, the number of shares of Common Stock (orthe cash equivalent thereof) to be granted pursuant to such Awards and allother terms and conditions of such Awards.

 

**8.****            ****COVENANTS OF THECOMPANY.**

 

**(a)****          ****Availability ofShares.**  Duringthe terms of the Stock Awards, the Company shall keep available at all timesthe number of shares of Common Stock required to satisfy such Stock Awards.

 

**(b)****          ****Securities LawCompliance.**  TheCompany shall seek to obtain from each regulatory commission or agency havingjurisdiction over the Plan such authority as may be required to grant StockAwards and to issue and sell shares of Common Stock upon exercise of the StockAwards; *provided, however,* thatthis undertaking shall not require the Company to register under the SecuritiesAct the Plan, any Stock Award or any Common Stock issued or issuable pursuantto any such Stock Award. If, after reasonable efforts, the Company is unable toobtain from any such regulatory commission or agency the authority whichcounsel for the Company deems necessary for the lawful issuance and sale ofCommon Stock under the Plan, the Company shall be relieved from any liabilityfor failure to issue and sell Common Stock upon exercise of such Stock Awardsunless and until such authority is obtained.

 

**9.****            ****USE OF PROCEEDSFROM STOCK.**

 

Proceeds from the sale of Common Stock pursuant to Stock Awards shallconstitute general funds of the Company.

 

**10.****         ****MISCELLANEOUS.**

 

**(a)****          ****Acceleration ofExercisability and Vesting.  **The Board shall have the power to acceleratethe time at which a Stock Award may first be exercised or the time during whicha Stock Award or any part thereof will vest in accordance with the Plan,notwithstanding the provisions in the Stock Award stating the time at which itmay first be exercised or the time during which it will vest.

 

**(b)****          ****StockholderRights.**  NoParticipant shall be deemed to be the holder of, or to have any of the rightsof a holder with respect to, any shares of Common Stock subject to such StockAward unless and until such Participant has satisfied all requirements forexercise of the Stock Award pursuant to its terms.

 

**(c)****          ****No Employment orother Service Rights.**  Nothing in the Plan, any Stock Award Agreement or otherinstrument executed thereunder or any Stock Award granted pursuant theretoshall confer upon any Participant any right to continue to serve the Company oran Affiliate in the capacity in effect at the time the Stock Award was grantedor shall affect the right of the Company or an Affiliate to terminate (i) theemployment of an Employee with or without notice and with or without cause, (ii) theservice of a Consultant pursuant to the terms of such Consultant’s agreementwith the Company or an Affiliate or (iii) the service of a Directorpursuant to the Bylaws of the Company or an Affiliate, and any applicableprovisions of the corporate law of the state in which the Company or theAffiliate is incorporated, as the case may be.

 

**(d)****          ****Incentive StockOption $100,000 Limitation.  **To the extent that the aggregate Fair MarketValue (determined at the time of grant) of Common Stock with respect to whichIncentive Stock Options are exercisable for the first time by any Optionholderduring any calendar year (under all plans of the Company and its Affiliates)exceeds one hundred thousand dollars ($100,000), the Options or portionsthereof that exceed such limit (according

 

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to the order inwhich they were granted) shall be treated as Nonstatutory Stock Options, notwithstandingany contrary provision of the applicable Option Agreement(s).

 

**(e)****          ****InvestmentAssurances.  **The Company may require a Participant, as a condition of exercising oracquiring Common Stock under any Stock Award, (i) to give writtenassurances satisfactory to the Company as to the Participant’s knowledge andexperience in financial and business matters and/or to employ a purchaserrepresentative reasonably satisfactory to the Company who is knowledgeable andexperienced in financial and business matters and that he or she is capable ofevaluating, alone or together with the purchaser representative, the merits andrisks of exercising the Stock Award; and (ii) to give written assurancessatisfactory to the Company stating that the Participant is acquiring CommonStock subject to the Stock Award for the Participant’s own account and not withany present intention of selling or otherwise distributing the Common Stock.The foregoing requirements, and any assurances given pursuant to suchrequirements, shall be inoperative if (1) the issuance of the shares ofCommon Stock upon the exercise or acquisition of Common Stock under the StockAward has been registered under a then currently effective registrationstatement under the Securities Act or (2) as to any particularrequirement, a determination is made by counsel for the Company that suchrequirement need not be met in the circumstances under the then applicablesecurities laws. The Company may, upon advice of counsel to the Company, placelegends on stock certificates issued under the Plan as such counsel deemsnecessary or appropriate in order to comply with applicable securities laws,including, but not limited to, legends restricting the transfer of the CommonStock.

 

**(f)****           ****WithholdingObligations.  **To the extent provided by the terms of a Stock Award Agreement, theCompany may in its sole discretion, satisfy any federal, state or local taxwithholding obligation relating to a Stock Award by any of the following means(in addition to the Company’s right to withhold from any compensation paid tothe Participant by the Company) or by a combination of such means: (i) causingthe Participant to tender a cash payment; (ii) withholding shares ofCommon Stock from the shares of Common Stock issued or otherwise issuable tothe Participant in connection with the Stock Award; or (iii) by such othermethod as may be set forth in the Stock Award Agreement.

 

**11.****         ****ADJUSTMENTS UPON CHANGES INSTOCK.**

 

**(a)****          ****CapitalizationAdjustments.**  Ifany change is made in, or other event occurs with respect to, the Common Stocksubject to the Plan or subject to any Stock Award without the receipt ofconsideration by the Company (through merger, consolidation, reorganization,recapitalization, reincorporation, stock dividend, dividend in property otherthan cash, stock split, liquidating dividend, combination of shares, exchangeof shares, change in corporate structure or other transaction not involving thereceipt of consideration by the Company (each a ***“Capitalization Adjustment”***), the Plan willbe appropriately adjusted in the class(es) and maximum number of securitiessubject to the Plan pursuant to Sections 4(a) and 4(b) and themaximum number of securities subject to award to any person pursuant to Section 5(c),and the outstanding Stock Awards will be appropriately adjusted in theclass(es) and number of securities and price per share of Common Stock subjectto such outstanding Stock Awards. The Board shall make such adjustments, andits determination shall be final, binding and conclusive. (Notwithstanding theforegoing, the conversion of any convertible securities of the Company shallnot be treated as a transaction “without receipt of consideration” by theCompany.)

 

**(b)****          ****Dissolution orLiquidation.**  Inthe event of a dissolution or liquidation of the Company, then all outstandingStock Awards shall terminate immediately prior to the completion of suchdissolution or liquidation.

 

**(c)****          ****CorporateTransaction.**  Inthe event of a Corporate Transaction, any surviving corporation or acquiring corporationmay assume or continue any or all Stock Awards outstanding under the Plan ormay substitute similar stock awards for Stock Awards outstanding under the Plan(including but not limited to, awards to acquire the same consideration paid tothe stockholders of the Company, as the case may be, pursuant to the CorporateTransaction), and any reacquisition or repurchase rights held by the Company inrespect of Common Stock issued pursuant to Stock Awards may be assigned by theCompany to the successor of the Company (or the successor’s parent company), ifany, in connection with such Corporate Transaction. In the event that anysurviving corporation or acquiring corporation does not assume or continue allsuch outstanding Stock Awards or substitute similar stock awards for all suchoutstanding Stock Awards, then with respect to Stock Awards that have been notassumed, continued or substituted and that are held by Participants whoseContinuous Service has not terminated prior to the effective time of the CorporateTransaction, the vesting of such Stock Awards (and, if applicable, the time atwhich

 

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such Stock Awardsmay be exercised) shall (contingent upon the effectiveness of the CorporateTransaction) be accelerated in full to a date prior to the effective time ofsuch Corporate Transaction as the Board shall determine (or, if the Board shallnot determine such a date, to the date that is five (5) days prior to theeffective time of the Corporate Transaction), and such Stock Awards shallterminate if not exercised (if applicable) at or prior to such effective time,and any reacquisition or repurchase rights held by the Company with respect tosuch Stock Awards shall (contingent upon the effectiveness of the CorporateTransaction) lapse. With respect to any other Stock Awards outstanding underthe Plan that have not been assumed, continued or substituted, the vesting ofsuch Stock Awards (and, if applicable, the time at which such Stock Award maybe exercised) shall not be accelerated, unless otherwise provided in a writtenagreement between the Company or any Affiliate and the holder of such StockAward, and such Stock Awards shall terminate if not exercised (if applicable)prior to the effective time of the Corporate Transaction.

 

**(d)****          ****Change inControl.**  AStock Award may be subject to additional acceleration of vesting andexercisability upon or after a Change in Control as may be provided in theStock Award Agreement for such Stock Award or as may be provided in any otherwritten agreement between the Company or any Affiliate and the Participant, butin the absence of such provision, no such acceleration shall occur.

 

**12.****         ****AMENDMENT OF THE PLAN ANDSTOCK AWARDS.**

 

**(a)****          ****Amendment ofPlan.**  Subjectto the limitations, if any, of applicable law, the Board at any time, and fromtime to time, may amend the Plan. However, except as provided in Section 11(a) relatingto Capitalization Adjustments, no amendment shall be effective unless approvedby the stockholders of the Company to the extent stockholder approval is necessaryto satisfy applicable law.

 

**(b)****          ****StockholderApproval.**  TheBoard, in its sole discretion, may submit any other amendment to the Plan forstockholder approval, including, but not limited to, amendments to the Planintended to satisfy the requirements of Section 162(m) of the Code and theregulations thereunder regarding the exclusion of performance-basedcompensation from the limit on corporate deductibility of compensation paid toCovered Employees.

 

**(c)****          ****ContemplatedAmendments.**  Itis expressly contemplated that the Board may amend the Plan in any respect theBoard deems necessary or advisable to provide eligible Employees with themaximum benefits provided or to be provided under the provisions of the Codeand the regulations promulgated thereunder relating to Incentive Stock Optionsand/or to bring the Plan and/or Incentive Stock Options granted under it intocompliance therewith.

 

**(d)****          ****No Impairment ofRights.  **Rightsunder any Stock Award granted before amendment of the Plan shall not be impairedby any amendment of the Plan unless (i) the Company requests the consentof the Participant and (ii) the Participant consents in writing.

 

**(e)****          ****Amendment ofStock Awards.  **The Board at any time, and from time to time, may amend the terms ofany one or more Stock Awards, including, but not limited to, amendments toprovide terms more favorable than previously provided in the agreementevidencing a Stock Award, subject to any specified limits in the Plan that arenot subject to Board discretion; *provided,however,* that the rights under any Stock Award shall not be impairedby any such amendment unless (i) the Company requests the consent of theParticipant and (ii) the Participant consents in writing.

 

**13.****         ****TERMINATION OR SUSPENSION OFTHE PLAN.**

 

**(a)****          ****Plan Term.  **The Board may suspend or terminatethe Plan at any time. Unless sooner terminated, the Plan shall terminate on theday before the tenth (10th) anniversary of the date the Plan is adopted by theBoard or approved by the stockholders of the Company, whichever is earlier. NoStock Awards may be granted under the Plan while the Plan is suspended or afterit is terminated.

 

**(b)****          ****No Impairment ofRights.  **Suspensionor termination of the Plan shall not impair rights and obligations under anyStock Award granted while the Plan is in effect except with the written consentof the Participant.

 

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**14.****         ****EFFECTIVE DATE OF PLAN.**

 

The Plan shall become effective on the IPO Date, but no Stock Awardshall be exercised (or, in the case of a stock bonus, shall be granted) unlessand until the Plan has been approved by the stockholders of the Company, whichapproval shall be within twelve (12) months before or after the date thePlan is adopted by the Board.

 

**15.****         ****CHOICE OF LAW.**

 

The law of the State of California shall govern all questionsconcerning the construction, validity and interpretation of this Plan, withoutregard to such state’s conflict of laws rules.

 

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