exv10w38



 








EXHIBIT 10.38




CATENA NETWORKS, INC.




1998 EQUITY INCENTIVE PLAN




Adopted December 16, 1998

Amended November 1, 1999, December 9, 1999, December 5, 2000, December 13, 2001, January 16, 2003

and July 23, 2003

Approved By Stockholders February 2, 1999, December 9, 1999, December 5, 2000, January 17, 2002 and

August 7, 2003

Termination Date: December 15, 2008




1. PURPOSES.





	(a)	 	Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
	 
	(b)	 	Available Stock Awards. The purpose of the Plan is to provide a means by
which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting
of the following Stock Awards: (1) Incentive Stock Options, (2)
Nonstatutory Stock Options, (3) stock bonuses and (4) rights to acquire
restricted stock.
	 
	(c)	 	General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.





2. Definitions.





	(a)	 	“Affiliate” means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
	 
	(b)	 	“Board” means the Board of Directors of the Company.
	 
	(c)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	(d)	 	“Committee” means a Committee appointed by the Board in accordance with
subsection 3(c).
	 
	(e)	 	“Common Stock” means the common stock of the Company.
	 
	(f)	 	“Company” means Catena Networks, Inc., a Delaware corporation.
	 
	(g)	 	“Consultant” means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (2) who is a member of the Board of
Directors of an Affiliate. However, the term “Consultant” shall not
include either Directors of the Company who are not compensated by the
Company




 









 






	 	 	for their services as Directors or Directors of the Company who are merely
paid a director’s fee by the Company for their services as Directors.
	 
	(h)	 	“Continuous Service” means that the Participant’s service with the
Company or an Affiliate, whether as an Employee, Director or Consultant,
is not interrupted or terminated. The Participant’s Continuous Service
shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or an
Affiliate as an Employee, Consultant or Director or a change in the entity
for which the Participant renders such service, provided that there is no
interruption or termination of the Participant’s Continuous Service. For
example, a change in status from an Employee of the Company to a
Consultant of an Affiliate or a Director of the Company will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service shall be considered interrupted in
the case of any leave of absence approved by that party, including sick
leave, military leave or any other personal leave.
	 
	(i)	 	“Covered Employee” means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
	 
	(j)	 	“Director” means a member of the Board of Directors of the Company.
	 
	(k)	 	“Disability” means (1) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company,
to perform the major duties of that person’s position with the Company or
an Affiliate of the Company because of the sickness or injury of the
person and (2) after the Listing Date, the permanent and total disability
of a person within the meaning of Section 22(e)(3) of the Code.
	 
	(l)	 	“Employee” means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director’s fee by the Company
or an Affiliate shall not be sufficient to constitute “employment” by the
Company or an Affiliate.
	 
	(m)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended.
	 
	(n)	 	“Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:
	 
	(i)	 	If the Common Stock is listed on any established stock exchange or traded
on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day
prior to the day of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable.
	 
	(ii)	 	In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.




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	(iii)	 	Prior to the Listing Date, the value of the Common Stock shall be
determined in a manner consistent with Section 260.140.50 of Title 10 of
the California Code of Regulations.
	 
	(o)	 	“Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
	 
	(p)	 	“Listing Date” means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon
notice of issuance as a national market security on an interdealer
quotation system if such securities exchange or interdealer quotation
system has been certified in accordance with the provisions of Section
25100(o) of the California Corporate Securities Law of 1968.
	 
	(q)	 	“Non-Employee Director” means a Director of the Company who either (1) is
not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from
the Company or its parent or a subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except for an
amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction as to which
disclosure would be required under Item 404(a) of Regulation S-K and is
not engaged in a business relationship as to which disclosure would be
required under Item 404(b) of Regulation S-K; or (2) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.
	 
	(r)	 	“Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
	 
	(s)	 	“Officer” means (1) before the Listing Date, any person designated by the
Company as an officer and (2) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
	 
	(t)	 	“Option” means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
	 
	(u)	 	“Option Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
	 
	(v)	 	“Optionholder” means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding
Option.
	 
	(w)	 	“Outside Director” means a Director of the Company who either (1) is not
a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the
Company or an “affiliated corporation” at any time and is not currently
receiving direct or indirect remuneration from the Company or




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	 	 	an “affiliated corporation” for services in any capacity other than as a
Director or (2) is otherwise considered an “outside director” for purposes
of Section 162(m) of the Code.
	 
	(x)	 	“Participant” means a person to whom a Stock Award is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding
Stock Award.
	 
	(y)	 	“Plan” means this Catena Networks, Inc. 1998 Equity Incentive Plan.
	 
	(z)	 	“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
	 
	(aa)	 	“Securities Act” means the Securities Act of 1933, as amended.
	 
	(bb)	 	“Stock Award” means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
	 
	(cc)	 	“Stock Award Agreement” means a written agreement between the Company and
a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
	 
	(dd)	 	“Ten Percent Stockholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or of any of its Affiliates.





3. Administration.





	(a)	 	Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
	 
	(b)	 	Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
	 
	(i)	 	To determine from time to time which of the persons eligible under the
Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted
to receive stock pursuant to a Stock Award; and the number of shares with
respect to which a Stock Award shall be granted to each such person.
	 
	(ii)	 	To construe and interpret the Plan and Stock Awards granted under it, and
to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
	 
	(iii)	 	To amend the Plan or a Stock Award as provided in Section 12.
	 
	(iv)	 	Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Company
which are not in conflict with the provisions of the Plan.




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	(c)	 	Delegation to Committee.
	 
	(i)	 	General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
“Committee” shall apply to any person or persons to whom such authority
has been delegated. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee any of the administrative powers the Committee
is authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the
Plan.
	 
	(ii)	 	Committee Composition when Common Stock is Publicly Traded. At such time
as the Common Stock is publicly traded, in the discretion of the Board, a
Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope
of such authority, the Board or the Committee may (A) delegate to a
committee of one or more members of the Board who are not Outside
Directors the authority to grant Stock Awards to eligible persons who are
either (1) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock
Award or (2) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code and/or (B) delegate to a committee of one
or more members of the Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act.





4. Shares Subject to the Plan.





	(a)	 	Share Reserve. Subject to the provisions of Section 11 in the case of
increases in shares merely reflecting a change in capitalization such as a
stock dividend or stock split, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate twenty million four hundred
seventy-four thousand one hundred sixty-five (20,474,165) shares of Common
Stock.
	 
	(b)	 	Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of restricted stock),
the stock not acquired under such Stock Award shall revert to and again
become available for issuance under the Plan. If any Common Stock
acquired pursuant to the exercise of an Option shall for any reason be
repurchased by the Company under an unvested share repurchase option
provided under the Plan, the stock repurchased by the Company under such
repurchase option shall not revert to and again become available for
issuance under the Plan.
	 
	(c)	 	Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
	 
	(d)	 	Share Reserve Limitation. Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock bonus
or similar plan of the Company exceed the applicable




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	 	 	percentage as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of Title 10 of the California Code of Regulations, based
on the shares of the Company which are outstanding at the time the
calculation is made.





5. Eligibility.





	(a)	 	Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
	 
	(b)	 	Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.




               Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for the grant of a Nonstatutory Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant.



               Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for a restricted stock award unless the purchase price of the restricted stock
is at least one hundred percent (100%) of the Fair Market Value of the Common
Stock at the date of grant.





	(c)	 	Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be
eligible to be granted Options covering more than seven hundred fifty
thousand (750,000) shares of the Common Stock during any calendar year.
This subsection 5(c) shall not apply prior to the Listing Date and,
following the Listing Date, this subsection 5(c) shall not apply until (1)
the earliest of: (A) the first material modification of the Plan
(including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 4); (B) the issuance of all of
the shares of Common Stock reserved for issuance under the Plan; (C) the
expiration of the Plan; or (D) the first meeting of stockholders at which
Directors of the Company are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the
first registration of an equity security under Section 12 of the Exchange
Act; or (2) such other date required by Section 162(m) of the Code and the
rules and regulations promulgated thereunder.





6. Option Provisions.




     Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and a separate certificate or certificates will be issued
for shares purchased on exercise of each type of Option. The provisions of
separate Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:




	(a)	 	Term. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
	 
	(b)	 	Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price
of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive
Stock




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	 	 	Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption
or substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
	 
	(c)	 	Exercise Price of a Nonstatutory Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price
of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the
Listing Date shall be not less than eighty-five percent (85%) of the Fair
Market Value of the stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may
be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
	 
	(d)	 	Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (1) in cash at the time the Option is exercised or (2)
at the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (A) delivery
to the Company of other Common Stock, (B) according to a deferred payment
or other arrangement (which may include, without limiting the generality
of the foregoing, the use of other Common Stock) with the Participant or
(C) in any other form of legal consideration that may be acceptable to the
Board; provided, however, that at any time that the Company is
incorporated in Delaware, payment of the Common Stock’s “par value,” as
defined in the Delaware General Corporation Law, shall not be made by
deferred payment.





               In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.




	(e)	 	Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(e), the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
	 
	(f)	 	Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the
Optionholder. A Nonstatutory Stock Option granted on or after the Listing
Date shall be transferable to the extent provided in the Option Agreement.
If the Nonstatutory Stock Option does not provide for transferability,
then the Nonstatutory Stock Option shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise
the Option.




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	(g)	 	Vesting Generally. The total number of shares of Common Stock subject to
an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may
be subject to such other terms and conditions on the time or times when it
may be exercised (which may be based on performance or other criteria) as
the Board may deem appropriate. The vesting provisions of individual
Options may vary. The provisions of this subsection 6(g) are subject to
any Option provisions governing the minimum number of shares as to which
an Option may be exercised.
	 
	(h)	 	Minimum Vesting Prior to the Listing Date. Notwithstanding the foregoing
subsection 6(g), Options granted prior to the Listing Date shall provide
for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was
granted, subject to reasonable conditions such as continued employment.
However, in the case of such Options granted to Officers, Directors or
Consultants, the Option may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during
any period established by the Company; for example, the vesting provision
of the Option may provide for vesting of less than twenty percent (20%)
per year of the total number of shares subject to the Option.
	 
	(i)	 	Termination of Continuous Service. In the event an Optionholder’s
Continuous Service terminates (other than upon the Optionholder’s death or
Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the date three
months following the termination of the Optionholder’s Continuous Service
(or such longer or shorter period specified in the Option Agreement,
which, for Options granted prior to the Listing Date, shall not be less
than 30 days, unless such termination is for cause), or the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
	 
	(j)	 	Extension of Termination Date. An Optionholder’s Option Agreement may
also provide that if the exercise of the Option following the termination
of the Optionholder’s Continuous Service (other than upon the
Optionholder’s death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier
of (1) the expiration of the term of the Option set forth in subsection
6(a) or (2) the expiration of a period of three months after the
termination of the Optionholder’s Continuous Service (or such longer or
shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than 30 days, unless
such termination is for cause), during which the exercise of the Option
would not be in violation of such registration requirements.
	 
	(k)	 	Disability of Optionholder. In the event an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of termination),
but only within such period of time ending on the earlier of (1) the date
12 months following such termination (or such longer or shorter period
specified in the Option Agreement, which, for Options granted prior to the
Listing Date, shall not be less than six months) or (2) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination,




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	 	 	the Optionholder does not exercise his or her Option within the time
specified herein, the Option shall terminate.
	 
	(l)	 	Death of Optionholder. In the event (1) an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s death or (2) the
Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder’s Continuous Service
for a reason other than death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise the Option as of the date
of death) by the Optionholder’s estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionholder’s death pursuant to
subsection 6(e) or 6(f), but only within the period ending on the earlier
of (A) the date 18 months following the date of death (or such longer or
shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than six months) or
(B) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
	 
	(m)	 	Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder’s
Continuous Service terminates to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Subject to the “Repurchase Limitation” in subsection 10(h), any
unvested shares so purchased may be subject to an unvested share
repurchase option in favor of the Company or to any other restriction the
Board determines to be appropriate.
	 
	(n)	 	Right of Repurchase. Subject to the “Repurchase Limitation” in
subsection 10(h), the Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase
all or any part of the vested shares acquired by the Optionholder pursuant
to the exercise of the Option.
	 
	(o)	 	Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal pursuant to the Investor Rights
Agreement dated December 16, 1998 by and between the Company and certain
stockholders and investors therein, following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares
exercised pursuant to the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply with
any applicable provisions of the Bylaws of the Company, as amended from
time to time.
	 
	(p)	 	Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a
“Re-Load Option”) in the event the Optionholder exercises the Option
evidenced by the Option Agreement, in whole or in part, by surrendering
other shares of Common Stock in accordance with this Plan and the terms
and conditions of the Option Agreement. Any such Re-Load Option shall (1)
provide for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of such Option; (2) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (3) have an
exercise price which is equal to 100% of the Fair Market Value of the
Common Stock subject to the Re-Load Option on the date of exercise of the




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	 	 	original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described
for Options under the Plan.




               Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the “Section 162(m) Limitation” on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.




7. Provisions of Stock Awards other than Options.





	(a)	 	Stock Bonus Awards. Each stock bonus agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may
change from time to time, and the terms and conditions of separate stock
bonus agreements need not be identical, but each stock bonus agreement
shall include (through incorporation of provisions hereof by reference in
the agreement or otherwise) the substance of each of the following
provisions:
	 
	(i)	 	Consideration. A stock bonus shall be awarded in consideration for past
services actually rendered to the Company for its benefit.
	 
	(ii)	 	Vesting. Subject to the “Repurchase Limitation” in subsection 10(h),
shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board.
	 
	(iii)	 	Termination of Participant’s Continuous Service. Subject to the
“Repurchase Limitation” in subsection 10(h), in the event a Participant’s
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of
the date of termination under the terms of the stock bonus agreement.
	 
	(iv)	 	Transferability. For a stock bonus award made before the Listing Date,
rights to acquire shares under the stock bonus agreement shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date,
rights to acquire shares under the stock bonus agreement shall be
transferable by the Participant only upon such terms and conditions as are
set forth in the stock bonus agreement, as the Board shall determine in
its discretion, so long as stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
	 
	(b)	 	Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include
(through incorporation of provisions




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	 	 	hereof by reference in the agreement or otherwise) the substance of each of
the following provisions:
	 
	(i)	 	Purchase Price. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, the purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted
stock awards made prior to the Listing Date, the purchase price shall not
be less than eighty-five percent (85%) of the stock’s Fair Market Value on
the date such award is made or at the time the purchase is consummated.
For restricted stock awards made on or after the Listing Date, the
purchase price shall not be less than eighty-five percent (85%) of the
stock’s Fair Market Value on the date such award is made or at the time
the purchase is consummated.
	 
	(ii)	 	Consideration. The purchase price of stock acquired pursuant to the
restricted stock purchase agreement shall be paid either: (A) in cash at
the time of purchase; (B) at the discretion of the Board, according to a
deferred payment or other arrangement with the Participant; or (C) in any
other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock’s “par value,”
as defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
	 
	(iii)	 	Vesting. Subject to the “Repurchase Limitation” in subsection 10(h),
shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be
determined by the Board.
	 
	(iv)	 	Termination of Participant’s Continuous Service. Subject to the
“Repurchase Limitation” in subsection 10(h), in the event a Participant’s
Continuous Service terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the
restricted stock purchase agreement.
	 
	(v)	 	Transferability. For a restricted stock award made before the Listing
Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of
the Participant only by the Participant. For a restricted stock award
made on or after the Listing Date, rights to acquire shares under the
restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.





8. Covenants of the Company.





	(a)	 	Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards.
	 
	(b)	 	Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to




11









 






	 	 	grant Stock Awards and to issue and sell shares of Common Stock upon
exercise of the Stock Awards; provided, however, that this undertaking shall
not require the Company to register under the Securities Act the Plan, any
Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Stock Awards unless and until such
authority is obtained.





9. Use of Proceeds from Stock.




     Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.



10. Miscellaneous.





	(a)	 	Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised
or the time during which a 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 it may first be exercised or the time
during which it will vest.
	 
	(b)	 	Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
	 
	(c)	 	No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant or other holder of Stock Awards any right to continue
to serve the Company or an Affiliate in the capacity in effect at the time
the Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (1) the employment of an Employee with or without
notice and with or without cause, (2) the service of a Consultant pursuant
to the terms of such Consultant’s agreement with the Company or an
Affiliate or (3) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate
law of the state in which the Company or the Affiliate is incorporated, as
the case may be.
	 
	(d)	 	Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock
with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans
of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
	 
	(e)	 	Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to the
Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business
matters and that he or she is capable of evaluating, alone or together
with the purchaser representative, the merits and risks of exercising the
Stock Award; and (2) to give written assurances satisfactory to the
Company




12









 






	 	 	stating that the Participant is acquiring the stock subject to the Stock
Award for the Participant’s own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative
if (iii) the issuance of the shares upon the exercise or acquisition of
stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the stock.
	 
	(f)	 	Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means (in addition to
the Company’s right to withhold from any compensation paid to the
Participant by the Company) or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares
from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award;
or (3) delivering to the Company owned and unencumbered shares of the
Common Stock.
	 
	(g)	 	Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to
Participants at least annually. This subsection 10(g) shall not apply to
key Employees whose duties in connection with the Company assure them
access to equivalent information.
	 
	(h)	 	Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the
time of repurchase or at not less than the original purchase price. To
the extent required by Section 260.140.41 and Section 260.140.42 of Title
10 of the California Code of Regulations, any repurchase option contained
in a Stock Award granted prior to the Listing Date to a person who is not
an Officer, Director or Consultant shall be upon the terms described
below:
	 
	(i)	 	Fair Market Value. If the repurchase option gives the Company the right
to repurchase the shares upon termination of employment at not less than
the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (1) the right to repurchase shall
be exercised for cash or cancellation of purchase money indebtedness for
the shares within 90 days of termination of Continuous Service (or in the
case of shares issued upon exercise of Stock Awards after such date of
termination, within 90 days after the date of the exercise) or such longer
period as may be agreed to by the Company and the Participant (for
example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Code regarding “qualified small business stock”) and (2) the right
terminates when the shares become publicly traded.
	 
	(ii)	 	Original Purchase Price. If the repurchase option gives the Company the
right to repurchase the shares upon termination of Continuous Service at
the original purchase price, then (A) the right to repurchase at the
original purchase price shall lapse at the rate of at least 20% of the




13









 






	 	 	shares per year over five years from the date the Stock Award is granted
(without respect to the date the Stock Award was exercised or became
exercisable) and (B) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within 90 days of
termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within 90 days after the
date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding “qualified small
business stock”).





11. Adjustments upon Changes in Stock.





	(a)	 	Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure
or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and
maximum number of securities subject to the Plan pursuant to subsection
4(a) and the maximum number of securities subject to award to any person
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price
per share of stock subject to such outstanding Stock Awards. The Board,
the determination of which shall be final, binding and conclusive, shall
make such adjustments. (The conversion of any convertible securities of
the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)
	 
	(b)	 	Dissolution or Liquidation. In the event of a dissolution or liquidation
of the Company, then such Stock Awards shall be terminated if not
exercised (if applicable) prior to such event.
	 
	(c)	 	Asset Sale, Merger, Consolidation or Reverse Merger. In the event of (1)
a sale of substantially all of the assets of the Company, (2) a merger or
consolidation in which the Company is not the surviving corporation or (3)
a reverse merger in which the Company is the surviving corporation but the
            shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the
Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(c)) for those outstanding under the Plan.
In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock
Awards may be exercised) shall be accelerated in full, and the Stock
Awards shall terminate if not exercised (if applicable) at or prior to
such event. With respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.




14









 











12. Amendment of the Plan and Stock Awards.





	(a)	 	Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy the requirements of Section 422 of the
Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.
	 
	(b)	 	Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
	 
	(c)	 	Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.
	 
	(d)	 	No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (1) the Company requests the consent of the Participant and (2) the
Participant consents in writing.
	 
	(e)	 	Amendment of Stock Awards. The Board at any time, and from time to time,
may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (1) the Company requests the consent of the Participant
and (2) the Participant consents in writing.





13. Termination or Suspension of the Plan.





	(a)	 	Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the
tenth anniversary of the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards
may be granted under the Plan while the Plan is suspended or after it is
terminated.
	 
	(b)	 	No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.





14. Effective Date of Plan.




               The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve months before or after the date the Plan
is adopted by the Board.



15