2001 Employee Stock Option Plan









LATITUDE

COMMUNICATIONS, INC.




 




2001 EMPLOYEE STOCK OPTION PLAN




 




1.             Purposes of the Plan.  The purposes of this 2001 Employee Stock

Option Plan are to attract and retain the best available personnel for

positions of substantial responsibility, to provide additional incentive to the

Employees and Consultants of the Company and to promote the success of the

Company’s business. Options granted hereunder shall be Nonstatutory Stock

Options.




 




2.             Definitions.  As used herein, the following definitions

shall apply:




 




(a)           “Administrator” shall mean the Board or

any of its Committees appointed pursuant to Section 4 of the Plan.




 




(b)           “Affiliate” means an entity other than a

Subsidiary (as defined below) in which the Company owns an equity interest or

which, together with the Company, is under common control of a third person or

entity.




 




(c)           “Applicable Laws” means the legal

requirements relating to the administration of stock option plans under

applicable U.S. state corporate laws, U.S. federal and applicable state securities

laws, the Code, any Stock Exchange rules and regulations and the applicable

laws of any other country or jurisdiction where Options are granted under the

Plan, as such laws, rules, regulations and requirements shall be in place from

time to time.




 




(d)           “Board” shall mean the Board of

Directors of the Company.




 




(e)           “Change of Control” means a sale of

all or substantially all of the Company’s assets, or any merger or

consolidation of the Company with or into another corporation other than a

merger or consolidation in which the holders of more than 50% of the shares of

capital stock of the Company outstanding immediately prior to such transaction

continue to hold (either by the voting securities remaining outstanding or by

their being converted into voting securities of the surviving entity) more than

50% of the total voting power represented by the voting securities of the

Company, or such surviving entity, outstanding immediately after such

transaction.




 




(f)            “Code” shall mean the

Internal Revenue Code of 1986, as amended.




 




(g)           “Committee” shall mean the Committee

appointed by the Board of Directors in accordance with paragraph (a) of

Section 4 of the Plan, if one is appointed.




 




(h)           “Common Stock” shall mean the Common

Stock of the Company.




 




(i)            “Company” shall mean

Latitude Communications, Inc., a Delaware corporation.




 





























 




(j)            “Consultant” shall mean

any person who is engaged by the Company or any Parent, Subsidiary or Affiliate

to render consulting services and is compensated for such consulting services,

excluding any Officers and Directors.




 




(k)           “Continuous Service Status” means

the absence of any interruption or termination of service as an Employee or

Consultant to the Company or a Parent, Subsidiary or Affiliate.  Continuous Service Status shall not be

considered interrupted in the case of: 

(i) sick leave; (ii) military leave; (iii) any other

leave of absence approved by the Administrator, provided that such leave is for

a period of not more than 90 days, unless reemployment upon the expiration of

such leave is guaranteed by contract or statute, or unless provided otherwise

pursuant to Company policy adopted from time to time; or (iv) in the case

of transfers between locations of the Company or between the Company, its

Parents, Subsidiaries or Affiliates or their respective successors. A change in

status from an Employee to a Consultant or from a Consultant to an Employee

will not constitute an interruption of Continuous Service Status.




 




(l)            “Corporate Transaction” means a sale

of all or substantially all of the Company’s assets, or a merger, consolidation

or other capital reorganization of the Company with or into another

corporation.




 




(m)          “Director” shall mean a member of the

Board.




 




(n)           “Employee” shall mean any person who is

employed by the Company or any Parent, Subsidiary or Affiliate of the Company,

excluding any Officer and Director.




 




(o)           “Exchange Act” shall mean the Securities

Exchange Act of 1934, as amended.




 




(p)           “Fair Market Value” shall mean, as of

any date, the value of Common Stock determined as follows:




 




(i)            If the Common Stock is listed on any

established stock exchange or a national market system including without

limitation the National Market of the National Association of Securities

Dealers, Inc. Automated Quotation (“Nasdaq”) System, its Fair Market Value

shall be the closing sales price for such stock as quoted on such system on the

date of determination (if for a given day no sales were reported, the closing

bid on that day shall be used), as such price is reported in The Wall Street

Journal or such other source as the Administrator deems reliable;




 




(ii)           If the Common Stock is quoted on the

Nasdaq System (but not on the National Market thereof) or regularly quoted by a

recognized securities dealer but selling prices are not reported, its Fair

Market Value shall be the mean between the bid and asked prices for the Common

Stock or;




 




(iii)          In the absence of an established

market for the Common Stock, the Fair Market Value thereof shall be determined

in good faith by the Administrator.




 




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(q)           “Nonstatutory Stock Option” shall mean

an Option not intended to qualify as an Incentive Stock Option, as designated

in the applicable Option Agreement. “Incentive Stock Option” shall mean

an Option intended to qualify as an incentive stock option within the meaning

of Section 422 of the Code, as designated in the applicable Option

Agreement.




 




(r)            “Officer” shall mean a

person who is appointed or elected by the Board of Directors as an officer of

the Company and who is an “officer” within the meaning of Section 16 of the

Exchange Act and the rules and regulations promulgated thereunder.




 




(s)           “Option” shall mean a stock option

granted pursuant to the Plan.




 




(t)            “Option Agreement” means a written

document, the form(s) of which shall be approved from time to time by the

Administrator, reflecting the terms of an Option granted under the Plan and

includes any documents attached to or incorporated into such Option Agreement,

including, but not limited to, a notice of stock option grant and a form of

exercise notice.




 




(u)           “Optioned Stock” shall mean the Common

Stock subject to an Option.




 




(v)           “Option Exchange Program”

means a program approved by the Administrator whereby outstanding Options are

exchanged for Options with a lower exercise price or are amended to decrease

the exercise price as a result of a decline in the Fair Market Value of the

Common Stock.




 




(w)          “Optionee” shall mean an Employee or

Consultant who receives an Option.




 




(x)            “Parent” shall mean a “parent

corporation,” whether now or hereafter existing, as defined in

Section 424(e) of the Code.




 




(y)           “Plan” shall mean this 2001 Employee

Stock Option Plan.




 




(z)            “Rule 16b-3” shall mean

Rule 16b-3 promulgated under the Exchange Act as the same may be amended from

time to time, or any successor provision.




 




(aa)         “Share” shall mean a share of the Common

Stock, as adjusted in accordance with Section 12 of the Plan.




 




(bb)         “Subsidiary” shall mean a “subsidiary

corporation,” whether now or hereafter existing, as defined in

Section 424(f) of the Code.




 




3.             Stock Subject to the Plan.  Subject to the provisions of Section 12

of the Plan, the maximum aggregate number of shares which may be sold under the

Plan is 800,000  shares of Common Stock. 

The Shares may be authorized, but unissued, or reacquired Common Stock.




 




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If an

award should expire or become unexercisable for any reason without having been

exercised in full, or is surrendered pursuant to an Option Exchange Program,

the unpurchased Shares that were subject thereto shall, unless the Plan shall

have been terminated, become available for future grant under the Plan.  In addition, any Shares of Common Stock

which are retained by the Company upon exercise of an Option in order to

satisfy any withholding taxes due with respect to such exercise or purchase

shall be treated as not issued and shall continue to be available under the

Plan.  Shares issued under the Plan and

later repurchased by the Company pursuant to any repurchase right which the

Company 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) the

Board or (B) a Committee designated by the Board, which Committee shall be

constituted in such a manner as to satisfy the Applicable Laws.  If a Committee has been appointed pursuant

to this Section 4(a), such Committee shall continue to serve in its designated

capacity until otherwise directed by the Board.  From time to time the Board may increase the size of any

Committee and appoint additional members thereof, remove members (with or

without cause) and appoint new members in substitution therefor, fill vacancies

(however caused) and remove all members of a Committee and thereafter directly

administer the Plan, all to the extent permitted by the Applicable Laws.




 




(b)           Powers of the Administrator.  Subject to the provisions of the Plan, and

in the case of a Committee, the specific duties delegated by, or limitations of

authority imposed by, the Board to or on such Committee, the Administrator

shall have the authority, in its discretion:




 




(i) to grant Options under the Plan;




 




(ii) to determine, upon review of relevant

information and in accordance with Section 2(p) of the Plan, the Fair

Market Value of the Common Stock;




 




(iii) to determine the exercise price per share

of Options to be granted, which exercise price shall be determined in

accordance with Section 8(a) of the Plan;




 




(iv) to determine the Employees or Consultants to

whom, and the time or times at which, Options shall be granted and the number

of shares to be represented by each Option;




 




(v) to interpret the Plan;




 




(vi) to approve forms of agreement for use under

the Plan;




 




(vii) to determine the terms and provisions of

each Option granted (which need not be identical) and, with the consent of the

holder thereof, modify or amend each Option;




 




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(viii) to accelerate or defer (with the consent

of the Optionee) the exercise date of any Option;




 




(ix) to authorize any person to execute on behalf

of the Company any instrument required to effectuate the grant of an Option

previously granted by the Administrator;




 




(x)  to

implement an Option Exchange Program on such terms and conditions as the

Administrator in its discretion deems appropriate, provided that no amendment

or adjustment to an Option that would materially and adversely affect the

rights of any Optionee shall be made without the prior written consent of the

Optionee;




 




(xi) to adjust the vesting of an Option held by an

Employee or Consultant as a result of a change in the terms or conditions under

which such person is providing services to the Company;




 




(xii) to determine whether and under what circumstances

an Option may be settled in cash under Section 9(f) instead of Common Stock;




 




(xiii)  in

order to fulfil the purposes of the Plan and without amending the Plan, to

modify grants of Options to Employees or Consultants who are foreign nationals

or employed outside the United States in order to recognize differences in

local law, tax policies or customs; and




 




(xiv) to make all other determinations deemed

necessary or advisable for the administration of the Plan.




 




(c)           Effect of Administrator’s Decision.  All decisions, determinations and

interpretations of the Administrator shall be final and binding on all

Optionees and any other holders of any Options granted under the Plan.




 




5.             Eligibility.




 




(a)           Recipients of Grants.  Options may be granted only to Employees and

Consultants. An Employee or Consultant who has been granted an Option may, if

he is otherwise eligible, be granted an additional Option or Options.




 




(b)           Type of Option.  Each Option shall be designated in the

Option Agreement as a Nonstatutory Stock Option.




 




(c)           At-Will Relationship.  The Plan shall not confer upon any Optionee

any right with respect to continuation of employment or consulting relationship

with the Company, nor shall it interfere in any way with his right or the

Company’s right to terminate his or her employment or consulting relationship

at any time, with or without cause.




 




6.             Term of Plan.  The Plan shall become effective upon its

adoption by the Board of Directors.  It

shall continue in effect for a term of ten (10) years unless sooner terminated

under Section 14 of the Plan.




 




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7.             Term of Option. The

term of each Option shall be ten (10) years from the date of grant thereof or

such shorter term as may be provided in the Option Agreement.




 




8.             Exercise Price and Consideration.




 




(a)           The per Share exercise price for the

Shares to be issued pursuant to exercise of an Option shall be such price as is

determined by the Administrator.




 




(b)           The consideration to be paid for the

Shares to be issued upon exercise of an Option, including the method of

payment, shall be determined by the Administrator and may consist entirely of

(1) cash, (2) check, (3) promissory note with a fair market value interest rate

specific to the optionee at the date of exercise, (4) other Shares of Common

Stock 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 or

indirectly, from the Company, and (ii) have a fair market value on the

date of surrender equal to the aggregate exercise price of the Shares as to

which said Option shall be exercised, (5) delivery of a properly executed

exercise notice together with irrevocable instructions to a broker to deliver

promptly to the Company the amount of sale or loan proceeds required to pay the

exercise price, (6) any combination of such methods of payment, or (7) such

other consideration and method of payment for the issuance of Shares to the

extent 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 be

reasonably expected to benefit the Company, and the Administrator may refuse to

accept a particular form of consideration at the time of any Option exercise

if, in its sole discretion, acceptance of such form of consideration is not in

the 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 be

exercisable at such times and under such conditions as determined by the

Administrator, consistent with the terms of the Plan and reflected in the

Option Agreement, including vesting requirements and/or performance criteria

with respect to the Company and/or the Optionee.  Unless otherwise determined by the Administrator, the vesting of

Options shall be tolled during any unpaid leave of absence.




 




An Option may not

be exercised for a fraction of a Share.




 




An Option shall be

deemed to be exercised when written notice of such exercise has been given to

the Company in accordance with the terms of the Option by the per­son entitled

to exercise the Option and full payment for the Shares with respect to which

the Option is exercised has been received by the Company.  Full payment may, as authorized by the

Administrator, consist of any consideration and method of payment allowable

under Section 8(b) of the Plan. 

Until the issuance (as evidenced by the appropriate entry on the books of

the Company or of a duly authorized transfer agent of the Company) of the stock

certificate evidencing such Shares, no right to vote or receive dividends or

any other rights as a stockholder shall exist with respect to the Optioned

Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such stock

certificate promptly upon exercise of the 




 




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Option.  No

adjustment will be made for a dividend or other right for which the record date

is prior to the date the stock certificate is issued, except as provided in

Section 12 of the Plan.




 




Exercise of an

Option in any manner shall result in a decrease in the number of Shares which

thereafter may be avail­able, both for purposes of the Plan and for sale under

the 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’s

Continuous Service Status with the Company, such Optionee may, but only within

three (3) months (or such other period of time, not less than 30 days, as is

determined by the Administrator) after the date of such termination (but in no

event later than the date of expiration of the term of such Option as set forth

in the Option Agreement), exercise his Option to the extent that he was

entitled to exercise it at the date of such termination.  To the extent that the Optionee was not

entitled to exercise the Option at the date of such termination, or if the

Optionee does not exercise the Option to the extent so entitled within the time

specified above, the Option shall terminate and the Optioned Stock underlying

the unexercised portion of the Option shall revert to the Plan.  No termination shall be deemed to occur and

this Section 9(b) shall not apply if (i) the Optionee is a Consultant who

becomes an Employee, or (ii) the Optionee is an Employee who becomes a

Consultant.




 




(c)           Disability of Optionee.  Notwithstanding the provisions of

Section 9(b) above, in the event of termination of an Optionee’s

Continuous Service Status as a result of Optionee’s total and permanent

disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only

within twelve (12) months (or such other period of time as is determined by the

Administrator) from the date of such termination (but in no event later than

the date of expiration of the term of such Option as set forth in the Option

Agreement), exercise the Option to the extent otherwise entitled to exercise it

at the date of such termination.  To the

extent that Optionee was not entitled to exercise the Option at the date of

termination, or if Optionee does not exercise such Option (to the extent so

entitled) within the time specified above, the Option shall terminate, and the

Optioned Stock underlying the unexercised portion of the Option shall revert to

the Plan.




 




(d)           Death of Optionee. Notwithstanding the

provisions of Section 9(b) above, in the event of the death of an Optionee

during the period of Continuous Service Status since the date of grant of the

Option, or within 30 days following termination of the Optionee’s Continuous

Service 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 expiration

date of the term of such Option as set forth in the Option Agreement), by such

Optionee’s estate or by a person who acquired the right to exercise the Option

by bequest or inheritance, but only to the extent of the right to exercise that

had accrued at the date of death or, if earlier, the date of termination of the

Optionee’s Continuous Service Status. 

To the extent that the Optionee was not entitled to exercise the Option

at the date of death or termination, as the case may be, or if the Optionee

does not exercise such Option to the extent so entitled within the time

specified above, the Option shall terminate and the Optioned Stock underlying

the 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 and

authority to extend the period of time for which an Option is to remain

exercisable following termination of an Optionee’s Continuous Service Status

from the periods set forth in Sections 9(b), 9(c) and 9(d) above or in the

Option Agreement to such greater time as the Board shall deem appropriate,

provided, that in no event shall such Option be exercisable later than the date

of 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 to

buy out for a payment in cash or Shares an Option previously granted under the

Plan, based on such terms and conditions as the Administrator shall establish

and communicate to the Optionee at the time such offer is made.




 




10.           Taxes.




 




(a)           As a condition of the exercise of an

Option granted under the Plan, the Optionee (or in the case of the Optionee’s

death, the person exercising the Option) shall make such arrangements as the

Administrator may require for the satisfaction of any applicable federal,

state, local or foreign withholding tax obligations that may arise in

connection with the exercise of an Option and the issuance of Shares.  The Company shall not be required to issue

any Shares under the Plan until such obligations are satisfied.  If the Administrator allows the withholding

or surrender of Shares to satisfy a Participant’s tax withholding obligations

under this Section 10 (whether pursuant to Section 10(c), (d) or (e), or

otherwise), the Administrator shall not allow Shares to be withheld in an

amount that exceeds the minimum statutory withholding rates for federal and

state tax purposes, including payroll taxes.




 




(b)           In the case of an Employee and in the

absence of any other arrangement, the Employee shall be deemed to have directed

the Company to withhold or collect from his or her compensation an amount

sufficient to satisfy such tax obligations from the next payroll payment

otherwise payable after the date of an exercise of the Option.




 




(c)           In the case of a Optionee other than

an Employee (or in the case of an Employee where the next payroll payment is

not sufficient to satisfy such tax obligations, with respect to any remaining

tax obligations), in the absence of any other arrangement and to the extent

permitted under the Applicable Laws, the Optionee shall be deemed to have

elected to have the Company withhold from the Shares to be issued upon exercise

of the Option that number of Shares having a Fair Market Value determined as of

the applicable Tax Date (as defined below) equal to the minimum statutory

amount required to be withheld.  For

purposes of this Section 10, the Fair Market Value of the Shares to be withheld

shall be determined on the date that the amount of tax to be withheld is to be

determined under the Applicable Laws (the “Tax Date”).




 




(d)           If permitted by the Administrator, in

its discretion, a Optionee may satisfy his or her tax withholding obligations

upon exercise of an Option by surrendering to the Company Shares that

(i) in the case of Shares previously acquired from the Company, have been

owned 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 Date

equal to the minimum statutory amount required to be withheld.




 




(e)           Any election or deemed election by a

Optionee to have Shares withheld to satisfy tax withholding obligations under

Section 10(c) or (d) above shall be irrevocable as to the particular Shares as

to which the election is made and shall be subject to the consent or

disapproval of the Administrator.  Any

election by an Optionee under Section 10(d) above must be made on or prior to

the applicable Tax Date.




 




(f)            In the event an election to have

Shares withheld is made by a Optionee and the Tax Date is deferred under

Section 83 of the Code because no election is filed under Section 83(b) of the

Code, the Optionee shall receive the full number of Shares with respect to

which the Option is exercised but such Optionee shall be unconditionally

obligated to tender back to the Company the proper number of Shares on the Tax

Date.




 




11.           Non-Transferability of Options.  The Option may not be sold, pledged,

assigned, hypothecated, transferred, or disposed of in any manner other than by

will or by the laws of descent or distribution; provided, that the

Administrator may in its discretion grant transferable Options pursuant to option

agreements 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 an

Optionee will not constitute a transfer. 

An Option may be exercised, during the lifetime of the Optionee, only by

the Optionee or a transferee permitted by this Section 11.




 




12.           Adjustments Upon Changes in Capitalization, Merger or

Certain Other Transactions.




 




(a)           Changes in Capitalization.  Subject to any required action by the

stockholders of the Company, the number of Shares of Common Stock covered by

each outstanding Option, and the number of Shares of Common Stock that have

been authorized for issuance under the Plan but as to which no Options have yet

been granted or that have been returned to the Plan upon cancellation or

expiration of an Option, as well as the price per Share of Common Stock covered

by each such outstanding Option, shall be proportionately adjusted for any

increase or decrease in the number of issued Shares of Common Stock resulting

from a stock split, reverse stock split, stock dividend, combination,

recapitalization or reclassification of the Common Stock, or any other increase

or decrease in the number of issued Shares of Common Stock effected without

receipt of consideration by the Company; provided, however, that conversion of

any 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 determination

in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no

issuance by the Company of shares of stock of any class, or securities

convertible into shares of stock of any class, shall affect, and no adjustment

by reason thereof shall be made with respect to, the number or price of Shares

of Common Stock subject to an Option.




 




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(b)           Dissolution or Liquidation.  In the event of the dissolution or liquidation

of the Company, each Option will terminate immediately prior to the

consummation of such action, unless otherwise determined by the Administrator.




 




(c)           Change of Control. In the event of a

Change of Control or Corporate Transaction, each outstanding Option shall be

assumed or an equivalent option or right shall be substituted by the successor

corporation or a parent or subsidiary of such successor corporation (such

entity, the “Successor Corporation”). 

For purposes of this Section 12(c), an Option shall be considered

assumed, without limitation, if, at the time of issuance of the stock or other

consideration upon such Change of Control, each holder of an Option would be

entitled to receive upon exercise of the Option the same number and kind of shares

of stock or the same amount of property, cash or securities as such holder

would have been entitled to receive upon the occurrence of such Change of

Control 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 at

such time (after giving effect to any adjustments in the number of Shares

covered by the Option as provided for in this Section 12).




 




In the event that, following a Change of Control, the

Successor Corporation does not agree to assume the Option or to substitute an

equivalent option, then the unvested shares under such Option shall

automatically be accelerated such that an additional 50% of the total number of

unvested shares as of the effective date of the Change of Control shall

automatically become vested, and the Company shall provide written notice to

the holder of the Option of the termination of such vesting provisions.  The holder of an Option shall be entitled to

exercise such Option for a period of 15 business days following the date that

such notice is given.




 




(d)           Termination Following A Change of Control.  If the holder of an Option is an Employee

and such holder’s employment terminates as a result of Involuntary Termination

other than for Cause (as such terms are defined below) at any time within 24

months following a Change of Control, then, subject to Subsection (e) below,

the unvested shares under such Option shall automatically be accelerated such

that an additional 50% of the total number of unvested shares as of the

effective date of such Involuntary Termination shall automatically become

vested.




 




(e)           Limitation on Payments.  In the event that the vesting acceleration

provided for in Subsection (c) above (i) constitutes “parachute payments” within

the 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 the

excise tax imposed by Section 4999 of the Code (or any corresponding provisions

of 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 extent

which would result in no portion of such severance benefits being subject to

excise tax under Section 4999 of the Code, whichever of the foregoing amounts,

taking into account the applicable federal, state and local income taxes and

the excise tax imposed by Section 4999, results in the receipt by the holder of

an Option or 




 




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Stock Purchase Right on

an after-tax-basis, of the greater amount of severance benefits,

notwithstanding that all or some portion of such severance benefits may be

taxable under Section 4999 of the Code. 

Any determination required under this Subsection (e) shall be made in

writing by the Company’s independent accountants, whose determination shall be

conclusive and binding on the Company and all holders of Options and Stock

Purchase Rights for all purposes. In the event that subdivision (i) above

applies, then the holder of the Option or Stock Purchase Rights shall be

responsible for any excise taxes imposed with respect to such severance and

other benefits.  In the event that

subdivision (ii) above applies, then each benefit provided hereunder shall be

proportionately reduced to the extent necessary to avoid imposition of such

excise 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 or

willful misconduct in the performance of an employee’s duties to the Company;

(ii) repeated unexplained or unjustified absence from the Company; (iii) a

material and willful violation of any federal or state law; (iv) refusal or

failure to act in accordance with any specific direction or order of the

Company; (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 involving

moral turpitude causing material harm to the standing and reputation of the

Company, in each case as determined by the Board of Directors of the Company.




 




(ii)           Involuntary

Termination. 

“Involuntary Termination” shall mean (i) without an employee’s

express 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 or

responsibilities, provided, however, that the assignment of the employee to a

position with the same title as the employee then holds, or substantially

similar title, in a business unit, division or subsidiary of the Company

following a Change of Control or a company into which the Company is merged in

a Change of Control or otherwise acquiring assets or voting shares of the

Company in connection with a Change of Control, or a parent of such a company,

shall not constitute a significant reduction of duties, authority or

responsibilities; (ii) a material reduction by the Company in the base salary

of the employee as in effect immediately prior to such reduction; (iii) a

material reduction by the Company in the kind or level of employee benefits,

including bonuses, to which the employee was entitled immediately prior to such

reduction with the result that the employee’s overall benefits package is

significantly reduced; (iv) the relocation of the employee to a facility or a

location 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 facts

or circumstances which would, under California case law or statute, constitute

a constructive termination of the employee.




 




(g)           Certain Distributions.  In the event of any distribution to the

Company’s stockholders of securities of any other entity or other assets (other

than dividends payable in cash or stock of the Company) without receipt of

consideration by the Company, the Administrator may, in its discretion,

appropriately adjust the price per Share of Common Stock covered by each

outstanding 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, for

all purposes, be the date on which the Administrator makes the determination

granting such Option.  Notice of the

determination shall be given to each Employee or Consultant to whom an Option

is 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 or

discontinuation (other than an adjustment pursuant to Section 12 above) shall

be made that would materially and adversely affect the rights of any Optionee

under any outstanding grant, without his or her consent.




 




(b)           Effect of Amendment or Termination.  No amendment or termination of the Plan

shall materially and adversely affect Options already granted, unless mutually

agreed otherwise between the Optionee and the Administrator, which agreement

must be in writing and signed by the Optionee and the Company.




 




15.           Conditions

Upon Issuance of Shares. Notwithstanding any other provision of

the Plan or any agreement entered into by the Company pursuant to the Plan, the

Company shall not be obligated, and shall have no liability for failure, to

issue or deliver any Shares under the Plan unless such issuance or delivery

would comply with the Applicable Laws, with such compliance determined by the

Company in consultation with its legal counsel.  As a condition to the exercise of an Option, the Company may

require the person exercising the award to represent and warrant at the time of

any such exercise that the Shares are being purchased only for investment and

without any present intention to sell or distribute such Shares if, in the

opinion 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 be

sufficient to satisfy the requirements of the Plan.  The inability of the Company to obtain authority from any

regulatory body having jurisdiction, which authority is deemed by the Company’s

counsel to be necessary to the lawful issuance and sale of any Shares

hereunder, shall relieve the Company of any liability in respect of the failure

to issue or sell such Shares as to which such requisite authority shall not

have been obtained.




 




17.           Option Agreements.  Options shall be evidenced by Option

Agreements in such forms as the Administrator shall from time to time approve.




 




18.           Information to Optionees.  The Company shall provide to each Optionee

upon request, during the period for which such Optionee has one or more Options

outstanding, copies of all annual reports and other information which are

provided to all stockholders of the Company.




 




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