Exhibit 10.1


 


FAVRILLE, INC.


 


2005 NON-EMPLOYEE DIRECTORS’
STOCK OPTION PLAN


 


ADOPTED BY BOARD OF DIRECTORS
DECEMBER 31, 2004

APPROVED BY STOCKHOLDERS DECEMBER 31, 2004

EFFECTIVE DATE: FEBRUARY 7, 2005


 


 


1.             PURPOSES.


 


(a)           Eligible Option Recipients.  The persons
eligible to receive Options are the Non-Employee Directors of the Company.


 


(b)           Available Options.  The purpose
of the Plan is to provide a means by which Non-Employee Directors may be given
an opportunity to benefit from increases in value of the Common Stock through
the granting of Nonstatutory Stock Options.


 


(c)           General Purpose.  The Company,
by means of the Plan, seeks to retain the services of its current Non-Employee
Directors, to secure and retain the services of new Non-Employee Directors 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)           “Annual Grant” means an Option granted annually to all
Non-Employee Directors who meet the specified criteria pursuant to Section
6(b).


 


(c)           “Annual Meeting” means the annual meeting of the
stockholders of the Company.


 


(d)           “Board” means the Board of Directors of the
Company.


 


(e)           “Capitalization
Adjustment”
has the meaning ascribed to that term in Section 11(a).


 


(f)            “Change in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:


 


(i)            any Exchange Act Person becomes the Owner, directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities
other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in
Control shall 


 


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not be deemed to occur (A) on account of the
acquisition of securities of the Company by an investor, any affiliate thereof
or any other Exchange Act Person from the Company in a transaction or series of
related transactions the primary purpose of which is to obtain financing for
the Company through the issuance of equity securities or (B) solely because the
level of Ownership held by any Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding voting
securities as a result of a repurchase or other acquisition of 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 this
sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other acquisition
had not occurred, increases the percentage of the then outstanding voting securities
Owned by the Subject Person over the designated percentage threshold, then a
Change in Control shall be deemed to occur;


 


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


 


(iii)         the
stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or
liquidation of the Company shall otherwise occur;


 


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


 


(v)            individuals who, on the date this Plan is 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 the Board; provided, however, that if the appointment
or election (or nomination for election) of any new Board member was approved
or recommended by a majority vote of the members of the Incumbent Board then
still in office, such new member shall, for purposes of this Plan, be
considered as a member of the Incumbent Board.


 


Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual
written agreement between the Company or any Affiliate and the Participant
shall supersede the foregoing definition with respect to Stock 


 


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Awards subject to such agreement (it being understood, however, that if
no definition of Change in Control or any analogous term is set forth in such
an individual written agreement, the foregoing definition shall apply).


 


(g)           “Code” means the Internal Revenue Code of 1986,
as amended.


 


(h)           “Committee” means a committee of one (1) or more
members of the Board appointed by the Board in accordance with
Section 3(c).


 


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


 


(j)            “Company” means Favrille, Inc., a Delaware
corporation.


 


(k)           “Consultant” means any person, including an advisor,
who (i) is engaged by the Company or an Affiliate to render consulting or
advisory services and is compensated for such services or (ii) is serving as a
member of the Board of Directors of an Affiliate and is compensated for such
services.  However, service solely as a
Director, or payment of a fee for such services, shall not cause a Director to
be considered a “Consultant” for purposes of the Plan.


 


(l)            “Continuous Service” means that the Optionholder’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated.   
A change in the capacity in which the Optionholder renders service to
the Company or an Affiliate as an Employee, Consultant or Director or a change
in the entity for which the Optionholder renders such service, provided that
there is no interruption or termination of the Optionholder’s service with the
Company or an Affiliate, shall not terminate a Participant’s Continuous
Service.  For example, a change in status
from a Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee 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.  
Notwithstanding the foregoing, a leave of absence shall be treated as
Continuous Service for purposes of vesting in an Option only to such extent as
may be provided in the Company’s leave of absence policy or in the written
terms of the Optionholder’s leave of absence.


 


(m)          “Corporate
Transaction”
means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:


 


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


 


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


 


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


 


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


 


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


 


(o)           “Disability” means 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.


 


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


 


(q)           “Entity” means a corporation, partnership or
other entity.


 


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


 


(s)           “Exchange Act
Person” means
any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary of the Company, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (D) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their Ownership of stock of the Company.


 


(t)            “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 by the Board in good faith.


 


(u)           “Initial Grant” means an Option granted to a
Non-Employee Director who meets the specified criteria pursuant to Section
6(a).


 


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


 


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(w)           “Non-Employee Director” means a Director who is not an Employee.


 


(x)           “Nonstatutory Stock Option” means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.


 


(y)           “Officer” means 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.


 


(z)           “Option” means a Nonstatutory Stock Option granted
pursuant to the Plan.


 


(aa)         “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.


 


(bb)         “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.


 


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


 


(dd)         “Plan” means this Favrille, Inc. 2005
Non-Employee Directors’ Stock Option Plan.


 


(ee)         “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.


 


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


 


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


 


3.             ADMINISTRATION.


 


(a)           Administration by Board.  The Board
shall administer the Plan unless and until the Board delegates administration
of the Plan to a Committee, as provided in Section 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:


 


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(i)            To determine the provisions of each Option to the extent not specified
in the Plan.


 


(ii)           To construe and interpret the Plan and Options 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 Option
Agreement, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.


 


(iii)         To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan, (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (A) a new
Option under the Plan or another equity plan of the Company covering the same
or a different number of shares of Common Stock, (B) cash and/or (C) other
valuable consideration (as determined by the Board, in its sole discretion), or
(3) any other action that is treated as a repricing under generally accepted
accounting principles.


 


(iv)          To
amend the Plan or an Option as provided in Section 12.


 


(v)            To terminate or suspend the Plan as provided in Section 13.


 


(vi)          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 and that are not in
conflict with the provisions of the Plan.


 


(c)           Delegation to Committee. 
The Board
may delegate some or all of the administration of the Plan to a Committee or
Committees of one (1) 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 that have been
delegated to the Committee, 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 retain the authority to
concurrently administer the Plan with the Committee and may, at any time, revest
in the Board some or all of the powers previously delegated.


 


(d)           Effect of Board’s
Decision. 
All determinations, interpretations and constructions made by the Board
in good faith shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.


 


4.             SHARES SUBJECT TO THE PLAN.


 


(a)           Share Reserve.  Subject to
the provisions of Section 11(a) relating to Capitalization Adjustments, the
shares of Common Stock that may be issued pursuant to Options shall not exceed
in the aggregate four hundred twenty thousand (420,000) shares of Common Stock
plus an annual increase to be added on the first day of each Company fiscal
year, 


 


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beginning in 2006 and ending in (and including) 2014,
equal to the lesser of the following amounts: (i) ninety thousand (90,000)
shares of Common Stock, or (ii) an amount determined by the Board.


 


(b)           Reversion of Shares to the Share Reserve. 
If any Option shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full, the shares of Common
Stock not acquired under such Option shall revert to and again become available
for issuance under the Plan.  If any
shares subject to an Option are not delivered to an Optionholder because such
shares are withheld for the payment of taxes or the Option is exercised through
a reduction of shares subject to the Option (i.e.,
“net exercised”), the number of shares that are not delivered to the
Optionholder as a result thereof shall remain available for issuance under the
Plan.  If the exercise price of an Option
is satisfied by tendering shares of Common Stock held by the Optionholder
(either by actual delivery or attestation), then the number of shares so
tendered shall remain available for issuance under the Plan.


 


(c)           Source of Shares.  The shares of
Common Stock subject to the Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.


 


5.             ELIGIBILITY.


 


The Options, as set forth in Section 6, automatically
shall be granted under the Plan to all Non-Employee Directors who meet the
criteria specified in Section 6.


 


6.             NON-DISCRETIONARY GRANTS.


 


(a)           Initial Grants.  Without any further action of the Board,
each person who after the IPO Date is elected or appointed for the first time
to be a Non-Employee Director automatically shall, upon the date of his or her
initial election or appointment to be a Non-Employee Director, be granted an
Initial Grant to purchase thirty-five thousand (35,000) shares of Common Stock
on the terms and conditions set forth herein.


 


(b)           Annual Grants. Without any further action of the Board,
on the date of each Annual Meeting, commencing with the Annual Meeting in 2006,
each person who is then a Non-Employee Director automatically shall be granted
an Annual Grant to purchase eight thousand (8,000) shares of Common Stock on
the terms and conditions set forth herein; provided,
however, that if the person has not been serving as a Non-Employee
Director for the entire period since the preceding Annual Meeting, then the
number of shares subject to such Annual Grant shall be reduced pro rata for
each full quarter prior to the date of grant during such period for which such
person did not serve as a Non- Employee Director.


 


7.             OPTION PROVISIONS.


 


Each Option shall be in such form and shall contain
such terms and conditions as required by the Plan.  Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate.  Each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:


 


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(a)           Term.  No Option shall be exercisable
after the expiration of ten (10) years from the date on which it was granted.


 


(b)           Exercise Price.  The exercise
price of each Option shall be one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted.


 


(c)           Consideration.  The purchase
price of Common Stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable law, either (i) in cash at the time the Option
is exercised or (ii) at the discretion of the Board either at the time of the
grant of the Option or subsequent thereto (1) by delivery to the Company of
other Common Stock at the time the Option is exercised, (2) by a “net exercise”
of the Option (as further described below), (3) pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds or (4) in any other form
of legal consideration that may be acceptable to the Board.  Unless otherwise specifically provided in the
Option, the purchase price of Common Stock acquired pursuant to an Option that
is paid by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such longer
or shorter period of time required to avoid a charge to earnings for financial
accounting purposes).


 


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


 


(d)           Transferability.  An Option is transferable by will or by the
laws of descent and distribution.  An
Option also may be transferable upon written consent of the Company if, at the
time of transfer, a Form S-8 registration statement under the Securities Act is
available for the exercise of the Option and the subsequent resale of the underlying
securities.  In addition, an
Optionholder may, by delivering written notice to the Company, in a form
provided by or otherwise 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.


 


(e)           Vesting.  Options shall
vest as follows:


 


(i)            Initial Grants:  1/36th of the
shares of Common Stock subject to an Initial Grant shall vest monthly over
three (3) years.


 


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(ii)           Annual Grants:  1/12th of the
shares of Common Stock subject to an Annual Grant shall vest monthly over one
(1) year.


 


(f)            Termination of Continuous Service. 
In the event that an Optionholder’s Continuous Service terminates for
any reason, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination of Continuous Service) but only within such period of time ending
on the expiration of the term of the Option as set forth in the Option
Agreement.  If, after termination of
Continuous Service, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.


 


8.             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 grant Options and to issue and sell shares of Common Stock upon
exercise of the Options; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act the Plan, any Option or any Common Stock issued or issuable pursuant to any
such Option.  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 Common Stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell Common Stock upon
exercise of such Options unless and until such authority is obtained.


 


9.             USE OF PROCEEDS FROM STOCK.


 


Proceeds from the sale of Common Stock pursuant to
Options 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 an Option
may first be exercised or the time during which an Option or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Plan or the Option stating the time at which it may first be exercised or the
time during which it will vest.


 


(b)           Stockholder Rights.  No
Optionholder shall be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of Common Stock subject to such Option
unless and until such Optionholder has satisfied all requirements for exercise
of the Option pursuant to its terms.


 


(c)           No Service Rights.  Nothing in
the Plan, any Option Agreement or other instrument executed thereunder or any
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of
a Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of 


 


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the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.


 


(d)           Investment Assurances.  The Company
may require an Optionholder, as a condition of exercising or acquiring Common
Stock under any Option, (i) to give written assurances satisfactory to the
Company as to the Optionholder’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 Option; and (ii) to give written assurances satisfactory to the Company
stating that the Optionholder is acquiring the Common Stock subject to the
Option for the Optionholder’s own account and not with any present intention of
selling or otherwise distributing the Common Stock.  The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Option has been registered under a then currently
effective registration statement under the Securities Act or (2) 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 Common Stock.


 


(e)           Withholding Obligations.  To the extent
provided by the terms of an Option Agreement, the Company may in its sole
discretion, satisfy any federal, state or local tax withholding obligation relating
to an Option 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:  (i) causing
the Optionholder to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Optionholder in connection with the Option; or (iii) via such other method as
may be set forth in the Option Agreement.


 


11.          ADJUSTMENTS UPON CHANGES IN COMMON STOCK.


 


(a)           Capitalization Adjustments.  If any change
is made in, or other event occurs with respect to, the Common Stock subject to
the Plan, or subject to any Option, 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 (each a “Capitalization Adjustment”)), the Plan will
be appropriately adjusted in the class(es) and maximum number of securities
subject both to the Plan pursuant to Section 4 and to the nondiscretionary
Options specified in Section 6, and the outstanding Options will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Options.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (Notwithstanding the foregoing, the 


 


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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 all outstanding Options
shall terminate immediately prior to the completion of such dissolution or
liquidation.


 


(c)           Corporate Transaction.  In the event
of a Corporate Transaction, any surviving corporation or acquiring corporation
may assume or continue any or all Options outstanding under the Plan or may
substitute similar stock options for Options outstanding under the Plan
(including options to acquire the same consideration paid to the stockholders
of the Company, as the case may be, pursuant to the Corporate
Transaction).  In the event that any
surviving corporation or acquiring corporation does not assume or continue all
such outstanding Options or substitute similar stock options for all such
outstanding Options, then with respect to Options that have been not assumed,
continued or substituted and that are held by Optionholders whose Continuous
Service has not terminated prior to the effective time of the Corporate
Transaction, the vesting of such Options (and, if applicable, the time at which
such Options may be exercised) shall (contingent upon the effectiveness of the
Corporate Transaction) be accelerated in full to a date prior to the effective
time of such Corporate Transaction as the Board shall determine (or, if the
Board shall not determine such a date, to the date that is five (5) days prior
to the effective time of the Corporate Transaction), and such Options shall
terminate on the effective time of the Corporate Transaction if not exercised
(if applicable) at or prior to such effective time.  With respect to any other Options outstanding
under the Plan that have not been assumed, continued or substituted, the
vesting of such Options (and, if applicable, the time at which such Options may
be exercised) shall not be accelerated, unless otherwise provided in a written
agreement between the Company or any Affiliate and the Optionholder, and such
Options shall terminate if not exercised (if applicable) prior to the effective
time of the Corporate Transaction.


 


(d)           Change in Control.  An Option may
be subject to additional acceleration of vesting and exercisability upon or
after a Change in Control as may be provided in the Option Agreement for such
Option or as may be provided in any other written agreement between the Company
or any Affiliate and the Optionholder, but in the absence of such provision, no
such acceleration shall occur.


 


12.          AMENDMENT OF THE PLAN AND OPTIONS.


 


(a)           Amendment of Plan.  Subject to
the limitations, if any, of applicable law, the Board, at any time and from
time to time, may amend the Plan. 
However, except as provided in Section 11(a) relating to Capitalization
Adjustments, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy applicable law.


 


(b)           Stockholder Approval.  The Board, in
its sole discretion, may submit any other amendment to the Plan for stockholder
approval.


 


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(c)           No Impairment of Rights.  Rights under
any Option granted before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the consent of the Optionholder
and (ii) the Optionholder consents in writing.


 


(d)           Amendment of Options.  The Board, at
any time, and from time to time, may amend the terms of any one or more
Options, including, but not limited to, amendments to provide terms more
favorable than previously provided in the agreement evidencing an Option,
subject to any specified limits in the Plan that are not subject to Board
discretion; provided, however, that
the rights under any Option shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.


 


13.          TERMINATION OR SUSPENSION OF THE PLAN.


 


(a)           Plan Term.  The Board may
suspend or terminate the Plan at any time. No Options 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
Option granted while the Plan is in effect except with the written consent of
the Optionholder.


 


14.          EFFECTIVE DATE OF PLAN.


 


                The Plan shall
become effective on the IPO Date, but no Option shall be exercised unless and
until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.


 


15.          CHOICE OF LAW.


 


The law of the state of California shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state’s conflict of laws rules.


 


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