Exhibit 10.22


 


DITECH COMMUNICATIONS CORPORATION


 


2005 NEW RECRUIT STOCK OPTION PLAN


 


ADOPTED BY THE BOARD OF DIRECTORS: November 15,
2005

STOCKHOLDER APPROVAL NOT REQUIRED

TERMINATION DATE: November 14, 2015


 


1.             GENERAL.


 


(a)           Eligible Stock Award Recipients.  Only Eligible Employees may receive Stock
Awards under the Plan.


 


(b)           Available Stock Awards.  The Plan provides for the grant of Nonstatutory
Stock Options.


 


(c)           Purpose.  The Company, by means of the Plan, seeks to
secure and retain the services of Eligible Employees, to provide incentives for
such persons to exert maximum efforts for the success of the Company and any
Affiliate, and to provide a means by which such eligible recipients may be
given an opportunity to benefit from increases in value of the Common Stock
through the granting of Stock Awards. 
The Plan is intended to be exempt from the stockholder approval
requirements under the “inducement grant exception” provided by Rule 4350(i)(1)(A)(iv) of
the NASD Marketplace Rules.


 


2.             DEFINITIONS.


 


As used in the Plan, the
following definitions shall apply to the capitalized terms indicated below:


 


(a)           “Affiliate” means (i) any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company,
provided each corporation in the unbroken chain (other than the Company) owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain, and (ii) any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
provided each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. 
The Board shall have the authority to determine (i) the time or
times at which the ownership tests are applied, and (ii) whether “Affiliate”
includes entities other than corporations within the foregoing definition.


 


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


 


(c)           “Capitalization Adjustment” has the meaning ascribed to
that term in Section 9(a).


 


(d)           “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:


 


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(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 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, exclusive 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.


 


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The term Change in
Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.


 


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 Awards subject to such agreement; provided, 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.


 


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


 


(f)            “Committee” means a committee of one (1) or more
members of the Board to whom authority has been delegated by the Board in
accordance with Section 3(c).


 


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


 


(h)           “Company” means Ditech Communications Corporation, a
Delaware corporation.


 


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


 


(j)            “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. 
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 service with the Company
or an Affiliate, shall not terminate a Participant’s Continuous Service.  For example, a change in status from an
employee of the Company to a consultant of an Affiliate or to a Director shall
not constitute an interruption of Continuous Service.  To the extent permitted by law, 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 a Stock Award only to such extent
as may be provided in the Company’s leave of absence policy or in the written
terms of the Participant’s leave of absence.


 


(k)           “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 sole 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;


 


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


 


(iv)          the consummation
of 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.


 


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


 


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


 


(n)           “Eligible Employee” means an Employee newly employed by
the Company or an Affiliate; provided, however,
that (i) such person was not previously an Employee or director of the
Company or an Affiliate, or (ii) such person enters into an employment
relationship with the Company following a bona fide
period of non-employment.


 


(o)           “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.


 


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


 


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


 


(r)           “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 (i) the
Company or any Subsidiary of the Company, (ii) 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, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) 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;
or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act) that, as of the effective date of the Plan as
set forth in Section 12, is 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.


 


(s)           “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 date of determination, as reported in


 


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The Wall
Street Journal or such other
source as the Board deems reliable. 
Unless otherwise provided by the Board, if there is no closing sales
price (or closing bid if no sales were reported) for the Common Stock on the
date of determination, then the Fair Market Value shall be the closing selling price
(or closing bid if no sales were reported) on the last preceding date for which
such quotation exists.


 


(ii)           In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined by the Board in good faith.


 


(t)            “Independent Director” means a Director who is an “independent
director” within the meaning of Rule 4200 of the NASD Marketplace Rules.


 


(u)           “Non-Employee Director”  means a Director who either (i) is
not a current employee or officer of the Company or an Affiliate, does not
receive compensation, either directly or indirectly, from the Company or an
Affiliate 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
for which disclosure would be required under Item 404(a) of Regulation
S-K, and is not engaged in a business relationship for which disclosure would
be required pursuant to Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.


 


(v)            “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.


 


(w)           “Option” means a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.


 


(x)           “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an Option
grant.  Each Option Agreement shall be
subject to the terms and conditions of the Plan.


 


(y)           “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.


 


(z)           “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.


 


(aa)         “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.


 


(bb)         “Plan” means this Ditech Communications Corporation 2005
New Recruit Stock Option Plan.


 


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(cc)         “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.


 


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


 


(ee)         “Stock Award” means any right granted under the Plan,
including a Nonstatutory Stock Option.


 


(ff)           “Stock Award Agreement”
means a written agreement between the Company and a Participant evidencing the
terms and conditions of a Stock Award grant. 
Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.


 


(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). 
All grants of Stock Awards to Eligible Employees must be approved either
by a majority of Independent Directors or by the Company’s independent
Compensation Committee.


 


(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 (1) which of the persons eligible under the
Plan shall be granted Stock Awards; (2) when and how each Stock Award
shall be granted; (3) 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 Common Stock pursuant to a Stock Award; and (4) the
number of shares of Common Stock 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 10.


 


(iv)          To
terminate or suspend the Plan as provided in Section 11.


 


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(v)            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.


 


(vi)          To
adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Eligible Employees who are foreign nationals or
employed outside the United States.


 


(c)           Delegation
to Committee.


 


(i)            General.  The Board may delegate some or all of the
administration of the Plan to a Committee or Committees.  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.


 


(ii)           Rule 16b-3 Compliance.  In the sole discretion of the Board, the
Committee may consist solely of two (2) or more Non-Employee Directors, in
accordance with Rule 16b-3.


 


(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 9(a) relating to Capitalization Adjustments, the number of
shares of Common Stock that may be issued pursuant to Stock Awards shall not
exceed, in the aggregate, two hundred thousand (200,000) 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, if any shares of Common Stock
issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any repurchase or
forfeiture caused by the failure to meet a contingency or condition required
for the vesting of such shares, then the shares of Common Stock not issued
under such Stock Award, or forfeited to or repurchased by the Company, shall
revert to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld for the payment
of taxes or the Stock Award is exercised through a reduction of shares subject
to the Stock Award (i.e., “net
exercised”), the number of shares that are not delivered to the Participant
shall remain available for issuance under the Plan.  If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the


 


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Participant
(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 stock issuable under the
Plan shall be shares of authorized but unissued or reacquired Common Stock,
including shares repurchased by the Company on the open market.


 


5.             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 designated as Nonstatutory
Stock Options at the time of grant.  The
provisions of separate Options need not be identical; provided, however, that each Option
Agreement shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:


 


(a)           Term.  No Option shall be exercisable after the
expiration of ten (10) years from the date of grant, or such shorter
period specified in the Option Agreement.


 


(b)           Exercise
Price of a Nonstatutory Stock Option. 
The exercise price of each Nonstatutory Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common 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 consistent with the provisions of Section 424(a) of
the Code.


 


(c)           Consideration.  The purchase price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by
applicable law and as determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below.  The Board shall have the authority to grant
Options that do not permit all of the following methods of payment (or otherwise
restrict the ability to use certain methods) and to grant Options that require
the consent of the Company to utilize a particular method of payment.  The methods of payment permitted by this Section 5(c) are:


 


(i)            by
cash or check;


 


(ii)           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;


 


(iii)         by
delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;


 


(iv)          by a “net
exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise by the largest whole number of
shares with a Fair Market Value that does not exceed the aggregate exercise
price; provided, however, the
Company shall accept a cash or other payment from the Participant to the


 


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extent
of any remaining balance of the aggregate exercise price not satisfied by such reduction
in the number of whole shares to be issued; provided,
however, shares of Common Stock will no longer be outstanding under
an Option and will not be exercisable thereafter to the extent that (i) shares
are used to pay the exercise price pursuant to the “net exercise,” (ii) shares
are delivered to the Participant as a result of such exercise, and (iii) shares
are withheld to satisfy tax withholding obligations;


 


(v)            according
to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest shall
compound at least annually and shall be charged at the minimum rate of interest
necessary to avoid (i) the imputation of interest income to the Company
and compensation income to the Optionholder under any applicable provisions of
the Code, and (ii) the treatment of the Option as a variable award for
financial accounting purposes; or


 


(vi)          in any
other form of legal consideration that may be acceptable to the Board.


 


(d)           Transferability
of Options.  The Board may, in its
sole discretion, impose such limitations on the transferability of Options as
the Board shall determine.  In the
absence of such a determination by the Board to the contrary, the following
restrictions on the transferability of Options shall apply:


 


(i)            Restrictions
on Transfer.  An 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.


 


(ii)           Domestic
Relations Orders.  Notwithstanding
the foregoing, an Option may be transferred pursuant to a domestic relations
order.


 


(iii)         Beneficiary
Designation.  Notwithstanding the
foregoing, the 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 Generally.  The total number of shares of Common Stock
subject to an Option may vest and therefore become exercisable in periodic
installments that may or may not be equal. 
The Option may be subject to such other terms and conditions on the time
or times when it may or may not 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 Section 5(e) are
subject to any Option provisions governing the minimum number of shares of
Common Stock as to which an Option may be exercised.


 


(f)            Termination of Continuous Service.  In the event that 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 such Option as of the date of
termination of Continuous Service) but only within such period of time ending
on the earlier of (i) the date three (3) months following the
termination of the Optionholder’s Continuous Service (or such longer or shorter
period specified in the Option


 


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Agreement),
or (ii) 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 herein or in the Option Agreement (as applicable),
the Option shall terminate.


 


(g)           Extension of Termination Date.  An Optionholder’s Option Agreement may
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 or upon a Change in Control) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of a period of three (3) months after
the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration
requirements, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.


 


(h)           Disability of Optionholder.  In the event that 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 such Option as of the date of termination
of Continuous Service), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination of
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) 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 herein or in the Option Agreement (as
applicable), the Option shall terminate.


 


(i)            Death of Optionholder.  In the event that (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death, or (ii) 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 such 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, but only within the period ending on the
earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option
Agreement.  If, after the Optionholder’s
death, the Option is not exercised within the time specified herein or in the
Option Agreement (as applicable), the Option shall terminate.


 


6.             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 grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of


 


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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 Common 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 that 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 Stock Awards unless and until such authority is obtained.


 


7.             USE
OF PROCEEDS FROM SALES OF COMMON STOCK.


 


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


 


8.             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 of Common Stock 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, any Stock Award Agreement or other instrument
executed thereunder or any Stock Award granted pursuant thereto shall confer
upon any Participant 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 (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 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
a Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) 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 (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for
the Participant’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


 


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to
such requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act, or (ii) 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 a Stock Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation
relating to a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award; provided,
however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such
lower amount as may be necessary to avoid variable award accounting); or (iii) by
such other method as may be set forth in the Stock Award Agreement.


 


(f)            Electronic
Delivery.  Any reference herein to a “written”
agreement or document shall include any agreement or document delivered
electronically or posted on the Company’s intranet.


 


9.             ADJUSTMENTS
UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.


 


(a)           Capitalization
Adjustments.  If any change is made
in, or other events occur with respect to, the Common Stock subject to the Plan
or subject to any Stock Award after the effective date of the Plan set forth in
Section 12 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 Board shall appropriately adjust: (i) the
class(es) and maximum number of securities subject to the Plan pursuant to Section 4(a),
and (ii) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards. 
The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. 
(Notwithstanding the foregoing, 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, all outstanding Stock Awards (other
than Stock Awards consisting of vested and outstanding shares of Common Stock
not subject to the Company’s right of repurchase) shall terminate immediately
prior to the completion of such dissolution or liquidation, and the shares of
Common Stock subject to the Company’s repurchase option may be repurchased by
the Company notwithstanding the fact that the holder of such Stock Award is
providing Continuous Service, provided,
however, that the Board may, in its sole discretion, cause some or
all Stock


 


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Awards
to become fully vested, exercisable and/or no longer subject to repurchase or
forfeiture (to the extent such Stock Awards have not previously expired or
terminated) before the dissolution or liquidation is completed but contingent
on its completion.


 


(c)           Corporate
Transaction.  The following
provisions shall apply to Stock Awards in the event of a Corporate Transaction
unless otherwise provided in a written agreement between the Company or any
Affiliate and the holder of the Stock Award:


 


(i)            Stock Awards May Be Assumed.  In the event of a Corporate Transaction, any
surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) may assume or continue any or all Stock Awards
outstanding under the Plan or may substitute similar stock awards for Stock
Awards outstanding under the Plan (including but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant
to the Corporate Transaction), and any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to Stock Awards may
be assigned by the Company to the successor of the Company (or the successor’s
parent company, if any), in connection with such Corporate Transaction.  A surviving corporation or acquiring
corporation may choose to assume or continue only a portion of a Stock Award or
substitute a similar stock award for only a portion of a Stock Award.  The terms of any assumption, continuation or
substitution shall be set by the Board in accordance with the provisions of Section 3(b).


 


(ii)           Stock Awards Held by Current Participants.  In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent
company) does not assume or continue such outstanding Stock Awards or
substitute similar stock awards for such outstanding Stock Awards, then with
respect to Stock Awards that have not been assumed, continued or substituted
and that are held by Participants whose Continuous Service has not terminated
prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”),
the vesting of such Stock Awards (and, if applicable, the time at which such
Stock Awards 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 Stock Awards
shall terminate if not exercised (if applicable) at or prior to the effective
time of the Corporate Transaction, and any reacquisition or repurchase rights
held by the Company with respect to such Stock Awards shall lapse (contingent
upon the effectiveness of the Corporate Transaction).


 


(iii)         Stock Awards Held by Former Participants.  In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent
company) does not assume or continue such outstanding Stock Awards or
substitute similar stock awards for such outstanding Stock Awards, then with
respect to Stock Awards that have not been assumed, continued or substituted
and that are held by persons other than Current Participants, the vesting of
such Stock Awards (and, if applicable, the time at which such Stock Award may
be exercised) shall not be accelerated and such Stock Awards (other than a
Stock Award consisting of vested and outstanding shares of Common Stock not
subject to the Company’s right of repurchase) shall terminate if not exercised
(if applicable) prior to the


 


13





















 


effective
time of the Corporate Transaction; provided,
however, that any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall not terminate and may continue
to be exercised notwithstanding the Corporate Transaction.


 


(iv)          Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a
Stock Award will terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole discretion, that the
holder of such Stock Award may not exercise such Stock Award but will receive a
payment, in such form as may be determined by the Board, equal in value to the
excess, if any, of (i) the value of the property the holder of the Stock
Award would have received upon the exercise of the Stock Award, over (ii) any
exercise price payable by such holder in connection with such exercise.


 


(d)           Change in
Control.  A Stock Award may be
subject to additional acceleration of vesting and exercisability upon or after
a Change in Control as may be provided in the Stock Award Agreement for such
Stock Award or as may be provided in any other written agreement between the
Company or any Affiliate and the Participant. 
A Stock Award may vest as to all or any portion of the shares subject to
the Stock Award (i) immediately upon the occurrence of a Change in
Control, whether or not such Stock Award is assumed, continued, or substituted
by a surviving or acquiring entity in the Change in Control, or (ii) in
the event a Participant’s Continuous Service is terminated, actually or
constructively, within a designated period following the occurrence of a Change
in Control.  In the absence of such
provisions, no such acceleration shall occur.


 


10.          AMENDMENT
OF THE PLAN AND STOCK AWARDS.


 


(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 9(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)           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 hereunder.


 


(c)           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 (i) the Company requests the consent of
the affected Participant, and (ii) such Participant consents in writing.


 


(d)           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,
including, but not limited to, amendments to provide terms more favorable than
previously provided in the Stock Award Agreement, subject to any specified
limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Stock Award
shall not be impaired by any such amendment unless (i) the Company
requests the consent of the affected Participant, and (ii) such
Participant consents in writing.


 


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11.                               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 (10th)
anniversary of the date the Plan is adopted by the Board.  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 affected Participant.


 


12.                               EFFECTIVE
DATE OF PLAN.


 


The Plan shall become
effective as determined by the Board.


 


13.                               CHOICE
OF LAW.


 


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


 


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