**EXHIBIT 10.2**

 

**AXESSTEL, INC.**

**2002 STOCK OPTION PLAN**

 

**1. Establishment, Purpose andTerm of Plan.**

 

1.1 **Establishment.** The Axesstel,Inc. 2002 Stock Option Plan (the “***Plan****”*) is hereby established effective as of February 15, 2002. 

 

1.2 **Purpose.** The purpose of the Plan is to advance the interests of the Participating Company Group and its shareholders by providing an incentiveto attract and retain persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. 

 

1.3 **Term of Plan.** The Plan shall continue in effect until the earlierof its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options grantedunder the Plan have lapsed. However, all Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the shareholders of the Company. 

 

**2. Definitions and Construction.**

 

2.1 **Definitions.**Whenever used herein, the following terms shall havetheir respective meanings set forth below: 

 

(a) “***Board***” means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, “***Board***” also means such Committee(s). 

 

(b) “***Code***” means the InternalRevenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. 

 

(c) “***Committee***” means the Compensation Committee or other committee of the Board duly appointed to administer thePlan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power toamend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. 

 

(d) “***Company***” means Axesstel, Inc., a California corporation, or any successor corporation thereto. 

 

(e) “***Consultant***” means a personengaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided wouldnot preclude the Company from offering or selling securities to such 

 

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person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under theSecurities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act. 

 

(f) “***Director***” means a member of theBoard or of the board of directors of any other Participating Company. 

 

(g) “***Disability***” means the inability of the Optionee, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Optionee’s position with theParticipating Company Group because of the sickness or injury of the Optionee. 

 

(h) “***Employee***” means any person treated as an employee (including an officer or a Director who is also treated asan employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director norpayment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. 

 

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

 

(j) “***Fair Market Value***” means, as ofany date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following: 

 

(i) If, on such date, the Stock is listed on a nationalor regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) asquoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such othersource as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on whichthe Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion. 

 

(ii) If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of ashare of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse. 

 

(k) “***Incentive Stock Option***” means an Option intended to be (as set forth in theOption Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code. 

 

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(l) “***Insider****”* means an officer or a Director of theCompany or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act. 

 

(m) “***Nonstatutory Stock Option****”* means an Option not intended to be (as set forth in the Option Agreement)or which does not qualify as an Incentive Stock Option. 

 

(n) “***Option****”* means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an IncentiveStock Option or a Nonstatutory Stock Option. 

 

(o) “***Option Agreement****”* means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon theexercise thereof. An Option Agreement may consist of a form of “Notice of Grant of Stock Option” and a form of “Stock Option Agreement” incorporated therein by reference, or such other form or forms as the Board may approve fromtime to time. 

 

(p)“***Optionee****”* means a person who has been granted one or more Options. 

 

(q) “***Parent Corporation****”* means any present or future “parent corporation” of the Company, asdefined in Section 424(e) of the Code. 

 

(r)“***Participating Company****”* means the Company or any Parent Corporation or Subsidiary Corporation. 

 

(s) “***Participating Company Group****”* means, at any point in time, all corporations collectively which are thenParticipating Companies. 

 

(t) “***Rule16b-3****”* means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation. 

 

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

 

(v) “***Service****”* means anOptionee’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. An Optionee’s Service shall not be deemed to have terminated merely because of a change in thecapacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee’sService. Furthermore, an Optionee’s Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company; provided,however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee’s Service shall be deemed tohave terminated unless the Optionee’s right to return to Service with the Participating CompanyGroup is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under theOptionee’s Option Agreement. The Optionee’s 

 

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Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for whichthe Optionee performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Optionee’s Service has terminated and the effective date of such termination. 

 

(w) “***Stock****”* means thecommon stock of the Company, as adjusted from time to time in accordance with Section 4.2. 

 

(x) “***Subsidiary Corporation****”* means any present or future “subsidiary corporation” of the Company,as defined in Section 424(f) of the Code. 

 

(y)“***Ten Percent Owner Optionee****”* means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of aParticipating Company within the meaning of Section 422(b)(6) of the Code. 

 

2.2 **Construction.** Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context,the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. 

 

**3. Administration.**

 

3.1 **Administration by the Board.** The Plan shall be administered bythe Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. 

 

3.2 **Authority of Officers.** Any officer of a Participating Companyshall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authoritywith respect to such matter, right, obligation, determination or election. 

 

3.3 ***Powers of the Board.*** In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its discretion:

 

(a) to determine the persons to whom, and thetime or times at which, Options shall be granted and the number of shares of Stock to be subject to each Option; 

 

(b) to designate Options as Incentive Stock Options or Nonstatutory Stock Options; 

 

(c) to determine the Fair Market Value of shares of Stock orother property; 

 

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(d) to determine the terms, conditions and restrictions applicable to each Option (whichneed not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the Option, (iii) the method forsatisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the Option or thevesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s termination of Service with the Participating Company Group on any of the foregoing, and (vii) all otherterms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan; 

 

(e) to approve one or more forms of Option Agreement; 

 

(f) to amend, modify, extend, cancel or renew any Option or to waive any restrictions or conditionsapplicable to any Option or any shares acquired upon the exercise thereof; 

 

(g) to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee’stermination of Service with the Participating Company Group; 

 

(h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary ordesirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and 

 

(i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all otherdeterminations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law. 

 

3.4 **Administration with Respect to Insiders.** With respect toparticipation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.

 

3.5 **Indemnification.** In addition to such other rightsof indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board orthe Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection withany appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted 

 

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hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved byindependent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that suchperson is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, theopportunity at its own expense to handle and defend the same. 

 

**4. SharesSubject to Plan.**

 

4.1 **Maximum Number of SharesIssuable.** Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be 3,000,000 and shall consist of authorized but unissued or reacquired shares of Stock or anycombination thereof. If an outstanding Option for any reason expires or is terminated or canceled or if shares of Stock are acquired upon the exercise of an Option subject to a Company repurchase option and are repurchased by the Company at theOptionee’s exercise price, the shares of Stock allocable to the unexercised portion of such Option or such repurchased shares of Stock shall again be available for issuance under the Plan. Notwithstanding the foregoing, at any such time as theoffer and sale of securities pursuant to the Plan is subject to compliance with Section 260.140.45 of Title 10 of the California Code of Regulations (“***Section 260.140.45***”), the total number of shares of Stock issuableupon the exercise of all outstanding Options (together with options outstanding under any other stock option plan of the Company) and the total number of shares provided for under any stock bonus or similar plan of the Company shall not exceedthirty percent (30%) (or such other higher percentage limitation as may be approved by the shareholders of the Company pursuant to Section 260.140.45) of the then outstanding shares of the Company as calculated in accordance with the conditions andexclusions of Section 260.140.45. 

 

4.2 **Adjustments forChanges in Capital Structure**. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be madein the number and class of shares subject to the Plan and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject tooutstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the “***New Shares***”), the Board mayunilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall beadjusted in a fair and equitable manner as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number,and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding andconclusive. 

 

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**5. Eligibility and Option Limitations.**

 

5.1 **Persons Eligible for Options**. Options may be granted only to Employees, Consultants, and Directors. For purposesof the foregoing sentence, “Employees,” “Consultants” and “Directors” shall include prospective Employees, prospective Consultants and prospective Directors to whom Options are granted in connection with written offersof an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option. 

 

5.2 **Option Grant Restrictions**. Any person who is not an Employee on the effective date of the grant of an Option to such person may be granted onlya Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences Service with a Participating Company,with an exercise price determined as of such date in accordance with Section 6.1. 

 

5.3 **Fair Market Value Limitation**. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) becomeexercisable by an Optionee for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portions of such options which exceed such amount shall be treated as NonstatutoryStock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option withrespect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date and with respect to suchOptions as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.3, the Optionee maydesignate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing eachsuch portion shall be issued upon the exercise of the Option. 

 

**6. Termsand Conditions of Options.**

 

Options shall be evidencedby Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by afully executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 

 

6.1 **Exercise Price**. The exercise price for each Option shall beestablished in the discretion of the Board; provided, however, that (a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option, (b) theexercise price per share for a Nonstatutory Stock 

 

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Option shall be not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effectivedate of grant of the Option, and (c) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of theOption. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to anassumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code. 

 

6.2 **Exercisability and Term of Options.** Options shall be exercisable at such time or times, or upon such event or events, and subject to suchterms, conditions, performance criteria and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10)years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option, (c) no Optiongranted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service with a Participating Company, and (d) with the exception of an Option granted to anofficer, Director or Consultant, no Option shall become exercisable at a rate less than twenty percent (20%) per year over a period of five (5) years from the effective date of grant of such Option, subject to the Optionee’s continued Service.Subject to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance withits provisions. 

 

6.3 **Payment of Exercise Price.**

 

(a) ***Forms of ConsiderationAuthorized.*** Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, orattestation to the ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securitieslaws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by delivery of a properly executed notice together with irrevocable instructions to a broker providing for the assignment to the Company of the proceedsof a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by theBoard of Governors of the Federal Reserve System) (a “***Cashless Exercise****”*), (iv) provided that the Optionee is an Employee and in the Company’s sole discretion at the time the Option is exercised, by delivery ofthe Optionee’s promissory note in a form approved by the Company for the aggregate exercise price, provided that, if the Company is incorporated in the State of Delaware, the Optionee shall pay in cash that portion of the aggregate exerciseprice not less than the par value of the shares being acquired, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at anytime or from time to time, by approval of or by amendment to the standard forms of Option Agreement described in Section 7, or by other 

 

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means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of theexercise price or which otherwise restrict one or more forms of consideration. 

 

(b) ***Limitations on Forms of Consideration.***

 

(i) **Tender of Stock.** Notwithstanding the foregoing, an Option may not be exercised by tender to theCompany, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unlessotherwise provided by the Board, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were notacquired, directly or indirectly, from the Company. 

 

(ii) **Cashless Exercise.** The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options bymeans of a Cashless Exercise. 

 

(iii)**Payment by Promissory Note.** No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at thetime the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateralacceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extensionof credit in connection with the Company’s securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with suchapplicable regulations. 

 

6.4 **Tax Withholding.** TheCompany shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, asdetermined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercisethereof. Alternatively or in addition, in its discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for anysuch tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such taxwithholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuantto the Option Agreement until the Participating Company Group’s tax withholding obligations have been satisfied by the Optionee. 

 

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6.5 **Repurchase Rights.** Shares issued under the Plan may be subject to a right of first refusal,one or more repurchase options, or other conditions and restrictions as determined by the Board in its discretion at the time the Option is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether ornot such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stockhereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions. 

 

6.6 **Effect of Termination of Service.**

 

(a) ***Option Exercisability.*** Subject to earliertermination of the Option as otherwise provided herein and unless otherwise provided by the Board in the grant of an Option and set forth in the Option Agreement, an Option shall be exercisable after an Optionee’s termination of Service onlyduring the applicable time period determined in accordance with this Section 6.6 and thereafter shall terminate: 

 

(i) **Disability.** If the Optionee’s Service with the Participating Company Group terminates because of the Disability of theOptionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to theexpiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event no later than the date of expiration of the Option’sterm as set forth in the Option Agreement evidencing such Option (the “***Option Expiration Date***”). 

 

(ii) **Death.** If the Optionee’s Service with the Participating Company Group terminates because of the death of the Optionee,the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or other person who acquired the right to exercise the Option by reasonof the Optionee’s death at any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event nolater than the Option Expiration Date. The Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months (or such longer period of time as determined by the Board, in its discretion)after the Optionee’s termination of Service. 

 

(iii) **Other Termination of Service.** If the Optionee’s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee onthe date on which the Optionee’s Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3) months (or such longer period of time as determined by the Board, in its discretion) after the date on whichthe Optionee’s Service terminated, but in any event no later than the Option Expiration Date. 

 

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(b) ***Extension if Exercise Prevented by Law.*** Notwithstanding the foregoing,if the exercise of an Option within the applicable time periods set forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the Option shall remain exercisable until three (3) months (or such longer period of time as determinedby the Board, in its discretion) after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date. 

 

(c) ***Extension if Optionee Subject to Section 16(b).*** Notwithstanding the foregoing, if a salewithin the applicable time periods set forth in Section 6.6(a) of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest tooccur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii)the Option Expiration Date. 

 

6.7 **Transferability ofOptions.** During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by thelaws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Board, in its discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferablesubject to the applicable limitations, if any, described in Section 260.140.41 of Title 10 of the California Code of Regulations, Rule 701 under the Securities Act, and the General Instructions to Form S-8 Registration Statement under the SecuritiesAct. 

 

**7. Standard Forms of Option Agreement.**

 

7.1 **Option Agreement.** Unless otherwise provided by the Board at thetime the Option is granted, an Option shall comply with and be subject to the terms and conditions set forth in the form of Option Agreement approved by the Board concurrently with its adoption of the Plan and as amended from time to time.

 

7.2 **Authority to Vary Terms.** The Board shall have theauthority from time to time to vary the terms of any standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standardform or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan. 

 

**8. Change in Control.**

 

8.1 **Definitions.**

 

(a) An “***Ownership Change Event***”shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent(50%) of the voting stock of the Company; (ii) a merger or consolidation in 

 

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which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of theCompany; or (iv) a liquidation or dissolution of the Company. 

 

(b) A *“****Change in Control******”* shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a “***Transaction****”*)wherein the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before theTransaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company weretransferred (the “***Transferee Corporation(s)****”*), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of thevoting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right todetermine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. 

 

8.2 **Effect of Change in Control on Options.** In the event of a Changein Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstandingOptions or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. For purposes of this Section 8.2, an Option shall be deemed assumed if, following the Change in Control, the Option confersthe right to purchase in accordance with its terms and conditions, for each share of Stock subject to the Option immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) to which a holder ofa share of Stock on the effective date of the Change in Control was entitled. The Board may, in its discretion, provide in any Option Agreement that, in the event of a Change in Control, the exercisability and vesting of the outstanding Option andany shares acquired upon the exercise thereof shall accelerate upon such circumstances and to such extent as specified in such Option Agreement. The exercise or vesting of any Option and any shares acquired upon the exercise thereof that waspermissible solely by reason of this Section 8.2 and the provisions of such Option Agreement shall be conditioned upon the consummation of the Change in Control. Any Options which are neither assumed or substituted for by the Acquiring Corporationin connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired uponexercise of an Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing suchOption except as otherwise provided in such Option Agreement. 

 

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**9. Provision of Information.**

 

At least annually, copies of the Company’s balance sheet and income statement for the just completed fiscal year shallbe made available to each Optionee and purchaser of shares of Stock upon the exercise of an Option. The Company shall not be required to provide such information to key employees whose duties in connection with the Company assure them access toequivalent information. 

 

**10. Compliance with Securities Law.**

 

The grant of Options and the issuance of shares of Stockupon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise wouldconstitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may beexercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company,the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body havingjurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such sharesas to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with anyapplicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 

 

**11. Termination or Amendment of Plan.**

 

The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law, regulations or rules that would permit otherwise,without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in theclass of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s shareholders under any applicable law, regulation or rule. No termination or amendment of the Planshall affect any then outstanding Option unless expressly provided by the Board. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option without the consent of the Optionee, unless such termination oramendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule. 

 

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**12. Shareholder Approval.**

 

The Plan or any increase in the maximum aggregate number of shares of Stock issuable thereunder as provided in Section 4.1(the “***Authorized Shares****”*) shall be approved by the shareholders of the Company within twelve (12) months of the date of adoption thereof by the Board. Options granted prior to shareholder approval of the Plan or inexcess of the Authorized Shares previously approved by the shareholders shall become exercisable no earlier than the date of shareholder approval of the Plan or such increase in the Authorized Shares, as the case may be. 

 

 

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**PLAN HISTORY**

 
February 15, 2002  Board adopts Plan, with an initial reserve of 3,000,000 shares.February 15, 2002  Shareholders approve Plan, with an initial reserve of 3,000,000 shares.

**AXESSTEL, INC.**

**STOCK OPTION AGREEMENT**

(Immediately Exercisable) 

 

Axesstel, Inc. has granted to the individual (the“***Optionee***”) named in the *Notice of Grant of Stock Option* (the “***Notice***”) to which this Stock Option Agreement (the “***Option Agreement***”) is attached an option (the“***Option***”) to purchase certain shares of Stock upon the terms and conditions set forth in the Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms andconditions of the Axesstel, Inc. 2002 Stock Option Plan (the “***Plan***”), as amended to the Date of Option Grant, the provisions of which are incorporated herein by reference. By signing the Notice, the Optionee:(a) represents that the Optionee has read and is familiar with the terms and conditions of the Notice, the Plan and this Option Agreement, including the Effect of Termination of Service set forth in Section 7, the Unvested Share RepurchaseOption set forth in Section 11 and the Right of First Refusal set forth in Section 12, (b) accepts the Option subject to all of the terms and conditions of the Notice, the Plan and this Option Agreement, (c) agrees to accept as binding, conclusiveand final all decisions or interpretations of the Board upon any questions arising under the Notice, the Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and this Option Agreement. 

 

**1. DEFINITIONS AND CONSTRUCTION.**

 

1.1 **Definitions**. Unless otherwise defined herein, capitalized termsshall have the meanings assigned to such terms in the Notice or the Plan. Whenever used herein, the following terms shall have their respective meanings set forth below: 

 

(a) “***Cause***” shall mean any of the following: (i) the Optionee’s theft ofCompany property or falsification of any Participating Company documents or records; (ii) the Optionee’s improper use or disclosure of a Participating Company’s confidential or proprietary information; (iii) any action by the Optioneewhich has a detrimental effect on a Participating Company’s reputation or business; (iv) the Optionee’s failure or inability to perform any reasonable assigned duties after written notice from the Participating Company Group of, and areasonable opportunity to cure, such failure or inability; (v) any material breach by the Optionee of any employment agreement between the Optionee and the Participating Company Group, which breach is not cured pursuant to the terms of suchagreement; or (vi) the Optionee’s conviction (including any plea of guilty or no contest) of any criminal act which impairs the Optionee’s ability to perform his or her duties with the Participating Company Group. 

 

(b) “***Good Reason***” shall mean any oneor more of the following: 

 

(i) without theOptionee’s express written consent, the assignment to the Optionee of any duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the Optionee’s positions, duties, responsibilities and status withthe Participating Company Group immediately prior to the date of the Change in Control; 

 

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(ii) without the Optionee’s express written consent, the relocation of the principalplace of the Optionee’s employment to a location that is more than fifty (50) miles from the Optionee’s principal place of employment immediately prior to the date of the Change in Control, or the imposition of travel requirementssubstantially more demanding of the Optionee than such travel requirements existing immediately prior to the date of the Change in Control; 

 

(iii) any failure by the Participating Company Group to pay, or any material reduction by the Participating Company Group of theOptionee’s base salary in effect immediately prior to the date of the Change in Control (unless reductions comparable in amount and duration are concurrently made for all other employees of the Participating Company Group with responsibilities,organizational level and title comparable to the Optionee’s); or 

 

(iv) any failure by the Participating Company Group to (1) continue to provide the Optionee with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee groupwhich customarily includes a person holding the employment position or a comparable position with the Participating Company Group then held by the Optionee, in any benefit or compensation plans and programs, including, but not limited to, theParticipating Company Group’s life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Optionee was participating immediately prior to the date of the Change in Control, ortheir equivalent, or (2) provide the Optionee with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee group which customarily includes a person holding the employment position or a comparableposition with the Participating Company Group then held by the Optionee. 

 

(c) “***Termination After Change in Control***” shall mean either of the following events occurring within twelve (12) months after (or directly in connection with) a Change in Control: 

 

(i) termination by the Participating Company Group of theOptionee’s Service with the Participating Company Group for any reason other than for Cause; or 

 

(ii) the Optionee’s resignation for Good Reason from Service with the Participating Company Group within a reasonable period of timefollowing the event constituting Good Reason. 

 

Notwithstanding any provisionherein to the contrary, Termination After Change in Control shall not include any termination of the Optionee’s Service with the Participating Company Group which (1) is for Cause; (2) is a result of the Optionee’s death or Disability; (3)is a result of the Optionee’s voluntary termination of Service other than for Good Reason; or (4) occurs prior to the effectiveness of a Change in Control (and is not a direct result of the Change in Control). 

 

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1.2 **Construction.** Captions and titles contained herein are for convenience only and shall notaffect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is notintended to be exclusive, unless the context clearly requires otherwise. 

 

**2.TAX CONSEQUENCES.**

 

2.1 **Tax Status of Option.**This Option is intended to have the tax status designated in the Notice. 

 

(a) ***Incentive Stock Option.*** If the Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent orwarrant that this Option qualifies as such. The Optionee should consult with the Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 ofthe Code, including, but not limited to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent andtotal disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.) 

 

(b) ***Nonstatutory Stock Option.*** If the Noticeso designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code. 

 

2.2 **ISO Fair Market Value Limitation.***If the Notice designates this Option as an Incentive Stock Option,* thento the extent that the Option (together with all Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year forshares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated asIncentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for adifferent limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive StockOption in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optioneeshall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of theOption (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the ParticipatingCompany Group) is greater than 

 

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$100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifiesas an Incentive Stock Option.) 

 

2.3 **Election Under Section83(b) of the Code.** If the Optionee exercises this Option to purchase shares of Stock that are both nontransferable and subject to a substantial risk of forfeiture, the Optionee understands that the Optionee should consult with theOptionee’s tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which the Optionee exercises theOption. Shares acquired upon exercise of the Option are nontransferable and subject to a substantial risk of forfeiture if, for example, they are unvested and are subject to a right of the Company to repurchase such shares at the Optionee’soriginal purchase price if the Optionee’s Service terminates. Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Optionee. The Optionee acknowledges that the Optionee has been advisedto consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEEPURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE’S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCHELECTION ON HIS OR HER BEHALF. 

 

**3. ADMINISTRATION.**

 

All questions of interpretation concerning this Option Agreement shall bedetermined by the Board. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect toany matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. 

 

**4. EXERCISE OF THE OPTION.**

 

4.1 **Right to Exercise.**Except as otherwise provided herein, theOption shall be exercisable on and after the Date of Option Grant (or if later, the Optionee’s Service commencement date) and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the Number of OptionShares less the number of shares previously acquired upon exercise of the Option, subject to the Company’s repurchase rights set forth in Section 11 and Section 12. 

 

4.2 **Method of Exercise.** Exercise of the Option shall be by written notice to the Company which must state theelection to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Optionee’s investment intent with respect to such shares as may be requiredpursuant to the provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such othermeans as the Company may permit, to the 

 

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Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior tothe termination of the Option as set forth in Section 6, accompanied by (i) full payment of the aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed copy, if required herein, of the then current form ofescrow agreement referenced below. The Option shall be deemed to be exercised upon receipt by the Company of such written notice, the aggregate Exercise Price, and, if required by the Company, such executed agreement. 

 

4.3 **Payment of Exercise Price.**

 

(a) ***Forms of Consideration Authorized.*** Exceptas otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or attestation tothe ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws oragreements with an underwriter for the Company) not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), or (iv) by any combination of the foregoing. 

 

(b) ***Limitations on Forms of Consideration.***

 

(i) **Tender of Stock.** Notwithstandingthe foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreementrestricting the redemption of the Company’s stock. The Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6)months or were not acquired, directly or indirectly, from the Company. 

 

(ii) **Cashless Exercise.** A “***Cashless Exercise***” means the delivery of a properly executed notice together with irrevocable instructions to a broker in a form acceptable to the Companyproviding for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, withoutlimitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’ssole and absolute discretion, to decline to approve or terminate any such program or procedure. 

 

4.4 **Tax Withholding.** At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optioneehereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required tosatisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the 

 

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exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired uponexercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon exercise of the Option. The Company shall have noobligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to this Option Agreement until the tax withholding obligations of the Participating Company Group have been satisfied by the Optionee.

 

4.5 **Certificate Registration.** Except in the event theExercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, in the names of the heirs of the Optionee. 

 

4.6 **Restrictions on Grant of the Option and Issuance of Shares.** Thegrant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised ifthe issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock maythen be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or(ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE ISCAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain fromany regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect ofthe failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary orappropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 

 

4.7 **Fractional Shares.** The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

**5. NONTRANSFERABILITY OF THE OPTION.**

 

The Option may be exercised during the lifetime of the Optionee only by theOptionee or the Optionee’s guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent providedin Section 7, may be exercised by the Optionee’s legal representative or by any person empowered to do so under the deceased Optionee’s will or under the then applicable laws of descent and distribution. 

 

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**6. TERMINATION OF THE OPTION.**

 

The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Expiration Date, (b) thelast date for exercising the Option following termination of the Optionee’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8. 

 

**7. EFFECT OF TERMINATION OF SERVICE.**

 

7.1 **Option Exercisability.**

 

(a) ***Disability.*** If the Optionee’s Service with the Participating Company Group terminates because of the Disability ofthe Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to theexpiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. 

 

(b) ***Death.*** If the Optionee’s Service with the Participating Company Group terminates because of the death of theOptionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or other person who acquired the right to exercise the Optionby reason of the Optionee’s death at any time prior to the expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. The Optionee’s Serviceshall be deemed to have terminated on account of death if the Optionee dies within three (3) months after the Optionee’s termination of Service. 

 

(c) ***Other Termination of Service.*** If the Optionee’s Service with the Participating Company Group terminates for anyreason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3)months (or such other longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. 

 

7.2 **Additional Limitation on Option Exercise.** Notwithstanding theprovisions of Section 7.1, the Option may not be exercised after the Optionee’s termination of Service to the extent that the shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase Option as providedin Section 11. 

 

7.3 **Extension if Exercise Prevented byLaw.** Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three (3) months after thedate the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date. 

 

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7.4 **Extension if Optionee Subject to Section 16(b).** Notwithstanding the foregoing, if a salewithin the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest tooccur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii)the Option Expiration Date. 

 

**8. CHANGE IN CONTROL.**

 

In the event of a Change in Control, the Acquiring Corporation may eitherassume the Company’s rights and obligations under the Option or substitute for the Option a substantially equivalent option for the Acquiring Corporation’s stock. The Option shall terminate and cease to be outstanding effective as of thedate of the Change in Control to the extent that the Option is neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control. Notwithstanding theforegoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of thisOption Agreement except as otherwise provided herein. 

 

**9. ADJUSTMENTS FORCHANGES IN CAPITAL STRUCTURE.**

 

In the event of anystock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number, Exercise Price and class of shares ofstock subject to the Option. If a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares ofanother corporation (the “***New Shares***”), the Board may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the Number of Option Shares and the ExercisePrice shall be adjusted in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearestwhole number, and in no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 9 shall be final, binding andconclusive. 

 

**10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.**

 

The Optionee shall have no rights as a stockholder withrespect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transferagent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 9. If the Optionee is an Employee, the Optioneeunderstands and acknowledges that, except as otherwise provided in a separate, written 

 

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employment agreement between a Participating Company and the Optionee, the Optionee’s employment is “atwill” and is for no specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group toterminate the Optionee’s Service as an Employee or Consultant, as the case may be, at any time. 

 

**11. UNVESTED SHARE REPURCHASE OPTION.**

 

11.1 **Grant of Unvested Share Repurchase Option.** In the event the Optionee’s Service with the Participating Company Group is terminated for any reason or no reason, with or without cause, or, if theOptionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event) any UnvestedShares, as defined in Section 11.2 below (the “***Unvested Shares***”), the Company shall have the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth in this Section 11 (the“***Unvested Share Repurchase Option***”). 

 

11.2 **Unvested Shares Defined.** The “***Unvested Shares***” shall mean, on any given date, the number of shares of Stock acquired upon exercise of the Option which exceed the Vested Shares determined as of such date.

 

11.3 **Exercise of Unvested Share Repurchase Option.** TheCompany may exercise the Unvested Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a) termination of the Optionee’s Service (or exercise of the Option, if later) or (b) the Company has received notice ofthe attempted disposition of Unvested Shares. If the Company fails to give notice within such sixty (60) day period, the Unvested Share Repurchase Option shall terminate unless the Company and the Optionee have extended the time for the exercise ofthe Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at all, for all of the Unvested Shares, except as the Company and the Optionee otherwise agree. 

 

11.4 **Payment for Shares and Return of Shares to Company.** The purchaseprice per share being repurchased by the Company shall be an amount equal to the Optionee’s original cost per share, as adjusted pursuant to Section 9 (the “***Repurchase Price***”). The Company shall pay the aggregateRepurchase Price to the Optionee in cash or by check within thirty (30) days after the date of the written notice to the Optionee of the Company’s exercise of the Unvested Share Repurchase Option. For purposes of the foregoing, cancellation ofany purchase money indebtedness of the Optionee to any Participating Company for the shares shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The shares being repurchasedshall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee. 

 

11.5 **Assignment of Unvested Share Repurchase Option.** The Company shall have the right to assign the Unvested Share Repurchase Option at any time,whether or not such option is then exercisable, to one or more persons as may be selected by the Company. 

 

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11.6 **Ownership Change Event**. Upon the occurrence of an Ownership Change Event, any and all new,substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee’s ownership of Unvested Shares shall be immediately subject to the Unvested Share Repurchase Option and included in the terms“Stock” and “Unvested Shares” for all purposes of the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event. While the aggregate Repurchase Priceshall remain the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as appropriate. For purposes ofdetermining the Vested Shares following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is aParticipating Company both before and after the Ownership Change Event. 

 

**12. RIGHT OF FIRST REFUSAL.**

 

12.1**Grant of Right of First Refusal**. Except as provided in Section 12.7 below, in the event the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange,transfer, pledge, or otherwise dispose of any Vested Shares (the “***Transfer Shares***”) to any person or entity, including, without limitation, any stockholder of a Participating Company, the Company shall have the right torepurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 12 (the “***Right of First Refusal***”). 

 

12.2 **Notice of Proposed Transfer**. Prior to any proposed transfer of the Transfer Shares, the Optionee shall deliverwritten notice (the “***Transfer Notice***”) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “***ProposedTransferee***”) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, theproposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Optionee proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Optionee shallprovide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the ProposedTransferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal. 

 

12.3 **Bona Fide Transfer**. If the Company determines that the information provided by the Optionee in the Transfer Notice is insufficient toestablish the bona fide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice of the Optionee’s failure to comply with the procedure described in this Section 12, and the Optionee shall have no right totransfer the Transfer Shares without first complying with the procedure described in this Section 12. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide. 

 

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12.4 **Exercise of Right of First Refusal**. If the Company determines the proposed transfer to bebona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by deliveryto the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company’s exercise or failure to exercise the Right of First Refusal with respectto any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other TransferNotice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereuponconsummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the ProposedTransferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent ofthe consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee incash to the extent of the unpaid principal and any accrued interest canceled. 

 

12.5 **Failure to Exercise Right of First Refusal**. If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree) within the periodspecified in Section 12.4 above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) daysfollowing delivery to the Company of the Transfer Notice. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shareswas actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposedtransfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shallrequire compliance by the Optionee with the procedure described in this Section 12. 

 

12.6 **Transferees of Transfer Shares**. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a formsatisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Option Agreement, including this Section 12 providing for the Right of First Refusalwith respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this Section 12 are met. 

 

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12.7 **Transfers Not Subject to Right of First Refusal**. The Right of First Refusal shall not applyto any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of aParticipating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 12.9 below result in a termination of the Right of First Refusal. 

 

12.8 **Assignment of Right of First Refusal**. The Company shall have theright to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company. 

 

12.9 **Early Termination of Right of First Refusal**. The other provisions of this Option Agreement notwithstanding, theRight of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes the Company’s rights and obligations under the Option or substitutes asubstantially equivalent option for the Acquiring Corporation’s stock for the Option, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal. A *“****public market****”*shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days ina recognized financial journal. 

 

**13. ESCROW.**

 

13.1 **Establishment of Escrow**. To ensure that shares subject to theUnvested Share Repurchase Option will be available for repurchase, the Company may require the Optionee to deposit the certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an agent designated by the Companyunder the terms and conditions of an escrow agreement approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, the Company reserves the right at any time to require the Optionee to so depositthe certificate in escrow. Upon the occurrence of an Ownership Change Event or a change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of thisOption Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee’s ownership of shares of Stock acquired upon exercise of the Option that remain, followingsuch Ownership Change Event or change described in Section 9, subject to the Unvested Share Repurchase Option shall be immediately subject to the escrow to the same extent as such shares of Stock immediately before such event. The Company shall bearthe expenses of the escrow. 

 

13.2 **Delivery of Shares toOptionee**. As soon as practicable after the expiration of the Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow agent shall deliver to the Optionee the shares and any other property no longersubject to such restriction. 

 

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13.3 **Notices and Payments**. In the event the shares and any other property held in escrow aresubject to the Company’s exercise of the Unvested Share Repurchase Option or the Right of First Refusal, the notices required to be given to the Optionee shall be given to the escrow agent, and any payment required to be given to the Optioneeshall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the shares and any other property which the Company has purchased to the Company and shall deliver the payment received from theCompany to the Optionee. 

 

**14. STOCK DISTRIBUTIONS SUBJECT TO OPTIONAGREEMENT.**

 

If, from time to time, there is any stockdividend, stock split or other change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and allnew, substituted or additional securities to which the Optionee is entitled by reason of the Optionee’s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Unvested Share Repurchase Option and theRight of First Refusal with the same force and effect as the shares subject to the Unvested Share Repurchase Option and the Right of First Refusal immediately before such event. 

 

**15. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.**

 

The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of thisOption Agreement. In addition, *if the Notice designates this Option as an Incentive Stock Option,* the Optionee shall (a) promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquiredpursuant to the Option within one (1) year after the date the Optionee exercises all or part of the Option or within two (2) years after the Date of Option Grant and (b) provide the Company with a description of the circumstances of suchdisposition. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant tothe Option in the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Option Grant. At any time during the one-year ortwo-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. Theobligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence. 

 

**16. LEGENDS.**

 

The Company may at any time place legends referencing the Unvested Share Repurchase Option, the Right of First Refusal, and any applicable federal, stateor foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificatesrepresenting shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section. Unless 

 

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otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, thefollowing: 

 

16.1 “THE SECURITIES EVIDENCED BY THISCERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE ISMADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION ANDPROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.” 

 

16.2“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’SPREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.” 

 

16.3 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTHIN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.” 

 

16.4 *If the Notice designates this Option as an Incentive StockOption*: “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED(“ISO*”*). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [*INSERT THE LATER OF TWO YEARS AFTER THE DATE OF OPTION GRANT OR ONE YEAR AFTER THE DATE OFEXERCISE.*]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALLSHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.” 

 

**17. LOCK-UP AGREEMENT.**

 

The Optionee hereby agrees that in the event of any underwritten publicoffering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, 

 

29 

contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose ofany shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided,however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registeredin the public offering under the Securities Act. 

 

**18. RESTRICTIONS ONTRANSFER OF SHARES.**

 

No shares acquired upon exerciseof the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner whichviolates any of the provisions of this Option Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required(a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to paydividends to any transferee to whom such shares will have been so transferred. 

 

**19. MISCELLANEOUS PROVISIONS.**

 

19.1**Binding Effect.** Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors andassigns. 

 

19.2 **Termination or Amendment.** The Board mayterminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereofwithout the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation or is required to enable the Option, if designated an Incentive Stock Option in the Notice, to qualifyas an Incentive Stock Option. No amendment or addition to this Option Agreement shall be effective unless in writing. 

 

19.3 **Notices.** Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent thatthis Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the otherparty at the address shown below that party’s signature on the Notice or at such other address as such party may designate in writing from time to time to the other party. 

 

19.4 **Integrated Agreement.** The Notice, this Option Agreement and the Plan constitute the entire understanding andagreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes 

 

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any prior agreements, understandings, restrictions, representations, or warranties among the Optionee and theParticipating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of the Notice and the Option Agreement shall survive anyexercise of the Option and shall remain in full force and effect. 

 

19.5 **Applicable Law.** This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State ofCalifornia. 

 

19.6 **Counterparts.** The Notice may beexecuted in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

 

 

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TMIncentive Stock Option
   Optionee:                                                             
TMNonstatutory Stock Option
        Date:                                                             
 

**STOCK OPTIONEXERCISE NOTICE**

**(IMMEDIATELY EXERCISABLE)**

 

**Axesstel, Inc.**

6480 Weathers Place,Suite 300 

San Diego, CA 92121-3910 

 

Ladies and Gentlemen: 

 

1. **Option**. I was granted an option (the *“********Option********”*) to purchase shares of the common stock(the *“********Shares********”*) of Axesstel, Inc. (the *“********Company********”*) pursuant to the Company’s 2002 Stock Option Plan (the*“********Plan********”*), my Notice of Grant of Stock Option (the *“********Notice********”*) and my Stock Option Agreement (the *“********OptionAgreement********”*) as follows: 

 

Grant Number:
       
Date of Option Grant:
       
Number of Option Shares:
       
Exercise Price per Share:
  $                                            
 

2. **Exercise ofOption**. I hereby elect to exercise the Option to purchase the following number of Shares: 

 

Vested Shares:
       
Unvested Shares:
       
Total Shares Purchased:
       
Total Exercise Price (Total Shares X Price per Share)
  $                                            
 

3.**Payments**. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement: 

 

TMCash:
  $                                            
TMCheck:
  $                                            
TMTenderof Company Stock:
   Contact Plan Administrator
 

1 

4. **Tax Withholding.** I authorize payroll withholding and otherwise will make adequateprovision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option. 

 

5. **Optionee Information.**

 

My address is:
   
My Social Security Number is:
  
 

6. **Notice ofDisqualifying Disposition**. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part ofthe Option or within two (2) years of the Date of Option Grant. 

 

7. **Binding Effect**. I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option Agreement, including the Unvested Share Repurchase Option and the Right ofFirst Refusal set forth therein, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon the my heirs, executors, administrators, successors and assigns. I agree that if required by the Company, Iwill deposit the certificate(s) evidencing the Shares, along with a blank stock assignment separate from certificate executed by me, with an escrow agent designated by the Company, to be held pursuant to the Company’s standard Joint EscrowInstructions. 

 

8. **Transfer**. I understand andacknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the *“********Securities Act********”*), and that consequently the Shares must be held indefinitely unless they aresubsequently registered under the Securities Act, an exemption from such registration is available, or they are sold in accordance with Rule 144 or Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under noobligation to register the Shares. I understand that the certificate or certificates evidencing the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required inthe opinion of legal counsel satisfactory to the Company. 

 

I amaware that Rule 144 under the Securities Act, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions aresatisfied. I understand that any sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me uponrequest. 

 

9. **Election Under Section 83(b) of theCode**. I understand and acknowledge that if I am exercising the Option to purchase Unvested Shares (i.e., shares that remain subject to the Company’s Unvested Share Repurchase Option), that I should consult with my tax advisor regardingthe advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which I exercise the Option. I acknowledge that I have been advised toconsult with a tax advisor prior to the exercise of the Option regarding the tax consequences to me of exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIODCANNOT BE EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A 

 

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SECTION 83(b) ELECTION IS MY SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO FILE SUCHELECTION ON MY BEHALF. 

 

I understand that I am purchasing theShares pursuant to the terms of the Plan, the Notice and my Option Agreement, copies of which I have received and carefully read and understand. 

 

Very truly yours,

(Signature)

 

 

Receipt of the above is hereby acknowledged. 

 

AXESSTEL, INC.
By:    Title:    Dated:    
 

3 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OFTHE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100,25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 

 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT ANDNOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCHREGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 

 

**AXESSTEL, INC.**

**STOCK OPTION AGREEMENT**

 

**Axesstel, Inc.** has granted to the individual (the *“********Optionee********”*)named in the *Notice of Grant of Stock Option* (the *“********Notice********”*) to which this Stock Option Agreement (the *“********Option Agreement********”*) is attached anoption (the *“********Option********”*) to purchase certain shares of Stock upon the terms and conditions set forth in the Notice and this Option Agreement. The Option has been granted pursuant to and shall in allrespects be subject to the terms and conditions of the **Axesstel, Inc.** 2002 Stock Option Plan (the *“********Plan********”*), as amended to the Date of Option Grant, the provisions of which are incorporatedherein by reference. By signing the Notice, the Optionee: (a) represents that the Optionee has read and is familiar with the terms and conditions of the Notice, the Plan and this Option Agreement, including the Effect of Termination of Service setforth in Section 7, the Right of First Refusal set forth in Section 11, (b) accepts the Option subject to all of the terms and conditions of the Notice, the Plan and this Option Agreement, (c) agrees to accept as binding, conclusive and final alldecisions or interpretations of the Board upon any questions arising under the Notice, the Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and this Option Agreement. 

 

**1. DEFINITIONS AND CONSTRUCTION.**

 

1.1 **Definitions**. Unless otherwise defined herein, capitalized termsshall have the meanings assigned to such terms in the Notice or the Plan. Whenever used herein, the following terms shall have their respective meanings set forth below: 

 

(a) *“********Cause********”* shall mean any of the following: (i) theOptionee’s theft of Company property or falsification of any Participating Company documents or records; (ii) the Optionee’s improper use or disclosure of a Participating Company’s confidential or 

 

1 

proprietary information; (iii) any action by the Optionee which has a detrimental effect on a ParticipatingCompany’s reputation or business; (iv) the Optionee’s failure or inability to perform any reasonable assigned duties after written notice from the Participating Company Group of, and a reasonable opportunity to cure, such failure orinability; (v) any material breach by the Optionee of any employment agreement between the Optionee and the Participating Company Group, which breach is not cured pursuant to the terms of such agreement; or (vi) the Optionee’s conviction(including any plea of guilty or no contest) of any criminal act which impairs the Optionee’s ability to perform his or her duties with the Participating Company Group. 

 

(b) *“********Good Reason********”* shall mean any one or more of thefollowing: 

 

(i) without the Optionee’sexpress written consent, the assignment to the Optionee of any duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the Optionee’s positions, duties, responsibilities and status with theParticipating Company Group immediately prior to the date of the Change in Control; 

 

(ii) without the Optionee’s express written consent, the relocation of the principal place of the Optionee’s employment to alocation that is more than fifty (50) miles from the Optionee’s principal place of employment immediately prior to the date of the Change in Control, or the imposition of travel requirements substantially more demanding of the Optionee thansuch travel requirements existing immediately prior to the date of the Change in Control; 

 

(iii) any failure by the Participating Company Group to pay, or any material reduction by the Participating Company Group of the Optionee‘s base salary in effect immediately prior to the date of the Change in Control (unless reductions comparable in amount and duration are concurrently made for all other employees of the Participating Company Group with responsibilities,organizational level and title comparable to the Optionee’s); or 

 

(iv) any failure by the Participating Company Group to (1) continue to provide the Optionee with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee groupwhich customarily includes a person holding the employment position or a comparable position with the Participating Company Group then held by the Optionee, in any benefit or compensation plans and programs, including, but not limited to, theParticipating Company Group’s life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Optionee was participating immediately prior to the date of the Change in Control, ortheir equivalent, or (2) provide the Optionee with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee group which customarily includes a person holding the employment position or a comparableposition with the Participating Company Group then held by the Optionee. 

 

(c) *“********Termination After Change in Control********”* shall mean either of the following events occurring within twelve (12) months after (or directly in connection with) aChange in Control: 

 

2 

(i) termination by the Participating Company Group of the Optionee’s Service withthe Participating Company Group for any reason other than for Cause; or 

 

(ii) the Optionee’s resignation for Good Reason from Service with the Participating Company Group within a reasonable period of time following the event constituting Good Reason. 

 

Notwithstanding any provision herein to the contrary, Termination After Change in Controlshall not include any termination of the Optionee’s Service with the Participating Company Group which (1) is for Cause; (2) is a result of the Optionee’s death or Disability; (3) is a result of the Optionee’s voluntary termination ofService other than for Good Reason; or (4) occurs prior to the effectiveness of a Change in Control (and is not a direct result of the Change in Control). 

 

1.2 **Construction**. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provisionof this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearlyrequires otherwise. 

 

**2. TAX CONSEQUENCES.**

 

2.1 **Tax Status of Option**. This Option is intended to have the taxstatus designated in the Notice. 

 

(a)***Incentive Stock Option.*** If the Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies assuch. The Optionee should consult with the Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to,holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.) 

 

(b) ***Nonstatutory Stock Option.*** If the Notice so designates, this Option is intended to be aNonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code. 

 

2.2 **ISO Fair Market Value Limitation.***If the Notice designates this Option as an Incentive Stock Option,* then to the extent that the Option(together with all Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair MarketValue greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options aretaken into account in the order in which they were granted, and the Fair Market Value of stock is 

 

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determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for adifferent limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive StockOption in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optioneeshall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of theOption (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the ParticipatingCompany Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.) 

 

**3. ADMINISTRATION.**

 

All questions of interpretation concerning this Option Agreement shall be determined by the Board. All determinations by the Board shall be final andbinding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of orwhich is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. 

 

**4. EXERCISE OF THE OPTION.**

 

4.1 **Right to Exercise.**Except as otherwise provided herein, the Option shall be exercisable on and after the Date of Option Grant and prior to thetermination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option, subject to the Company’s repurchase rights set forth inSection 11. 

 

4.2 **Method of Exercise**. Exercise of theOption shall be by written notice to the Company which must state the election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to theOptionee’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail,return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to thetermination of the Option as set forth in Section 6, accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of suchwritten notice and the aggregate Exercise Price. 

 

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4.3 **Payment of Exercise Price.**

 

(a) ***Forms of Consideration Authorized.*** Except as otherwise provided below, payment of theaggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of whole shares of Stockowned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for theCompany) not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), or (iv) by any combination of the foregoing. 

 

(b) ***Limitations on Forms of Consideration.***

 

(i) **Tender of Stock.** Notwithstanding the foregoing,the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting theredemption of the Company’s stock. The Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were notacquired, directly or indirectly, from the Company. 

 

(ii) **Cashless Exercise.** A *“********Cashless Exercise********”* means the delivery of a properly executed notice together with irrevocable instructions to a broker in a form acceptable to the Companyproviding for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, withoutlimitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’ssole and absolute discretion, to decline to approve or terminate any such program or procedure. 

 

4.4 **Tax Withholding**. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optioneehereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required tosatisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or inpart, of the Option, (ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction withrespect to any shares acquired upon exercise of the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Optionee. 

 

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4.5 **Certificate Registration**. Except in the event the Exercise Price is paid by means of aCashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, in the names of the heirs of the Optionee. 

 

4.6 **Restrictions on Grant of the Option and Issuance of Shares**. Thegrant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised ifthe issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock maythen be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or(ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE ISCAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain fromany regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect ofthe failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary orappropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 

 

4.7 **Fractional Shares**. The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

**5. NONTRANSFERABILITY OF THE OPTION.**

 

The Option may be exercised during the lifetime of the Optionee only by theOptionee or the Optionee’s guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent providedin Section 7, may be exercised by the Optionee’s legal representative or by any person empowered to do so under the deceased Optionee’s will or under the then applicable laws of descent and distribution. 

 

**6. TERMINATION OF THE OPTION.**

 

The Option shall terminate and may no longer be exercised on the first tooccur of (a) the Option Expiration Date, (b) the last date for exercising the Option following termination of the Optionee’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8. 

 

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**7. EFFECT OF TERMINATION OF SERVICE.**

 

7.1 **Option Exercisability.**

 

(a) ***Disability.*** If the Optionee’s Service with the Participating Company Group terminates because of the Disabilityof the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to theexpiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. 

 

(b) ***Death.*** If the Optionee’s Service with the Participating Company Group terminates because of the death of theOptionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or other person who acquired the right to exercise the Optionby reason of the Optionee’s death at any time prior to the expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. The Optionee’s Serviceshall be deemed to have terminated on account of death if the Optionee dies within three (3) months after the Optionee’s termination of Service. 

 

(c) ***Other Termination of Service.*** If the Optionee’s Service with the Participating Company Group terminates for anyreason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3)months (or such other longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date. 

 

7.2 **Extension if Exercise Prevented by Law.** Notwithstanding theforegoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the date the Optionee is notified bythe Company that the Option is exercisable, but in any event no later than the Option Expiration Date. 

 

7.3 **Extension if Optionee Subject to Section 16(b).** Notwithstanding the foregoing, if a sale within the applicable time periods set forth inSection 7.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the dateon which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the Option Expiration Date. 

 

**8. CHANGE IN CONTROL.**

 

In the event of a Change in Control, vesting of the shares subject to theOption shall accelerate as provided in the Notice. In addition, the Acquiring Corporation may either assume the Company’s rights and obligations under the Option or substitute for the Option a substantially equivalent option for the AcquiringCorporation’s stock. The Option shall 

 

7 

terminate and cease to be outstanding effective as of the date of the Change in Control to the extent that the Option isneither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to theChange in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein. 

 

**9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.**

 

In the event of any stock dividend, stock split, reverse stock split,recapitalization, combination, reclassification, or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number, Exercise Price and class of shares of stock subject to the Option. If a majority of theshares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the*“********New Shares********”*), the Board may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the Number of Option Shares and the ExercisePrice shall be adjusted in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearestwhole number, and in no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 9 shall be final, binding andconclusive. 

 

**10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.**

 

The Optionee shall have no rights as a stockholder withrespect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transferagent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 9. If the Optionee is an Employee, the Optioneeunderstands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Optionee, the Optionee’s employment is “at will” and is for no specified term. Nothingin this Option Agreement shall confer upon the Optionee any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee’s Service as an Employeeor Consultant, as the case may be, at any time. 

 

**11. RIGHT OF FIRSTREFUSAL.**

 

11.1 **Grant of Right of First Refusal**.Except as provided in Section 11.7 below, in the event the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of anyshares acquired upon exercise of the Option (the *“********Transfer Shares********”*) to any person or entity, including, without limitation, any stockholder of a Participating Company, the 

 

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Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth inthis Section 11 (the *“********Right of First Refusal********”*). 

 

11.2 **Notice of Proposed Transfer**. Prior to any proposed transfer of the Transfer Shares, the Optionee shall deliver written notice (the*“********Transfer Notice********”*) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the*“********Proposed Transferee********”*) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the eventof a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Optionee proposes to transfer any Transfer Shares to morethan one Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute abinding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal. 

 

11.3 **Bona Fide Transfer**. If the Company determines that the information provided by the Optionee in the TransferNotice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice of the Optionee’s failure to comply with the procedure described in this Section 11, and the Optioneeshall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 11. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide. 

 

11.4 **Exercise of Right of First Refusal**. If the Company determinesthe proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in theTransfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company’s exercise or failure to exercise the Right ofFirst Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whetheror not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and theOptionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offeredby the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cashequivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to theOptionee in cash to the extent of the unpaid principal and any accrued interest canceled. 

 

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11.5 **Failure to Exercise Right of First Refusal**. If the Company fails to exercise the Right ofFirst Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree) within the period specified in Section 11.4 above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the termsand conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice. The Company shall have the right to demand further assurances from the Optioneeand the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the booksof the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as anysubsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this Section 11. 

 

11.6 **Transferees of Transfer Shares**. All transferees of the TransferShares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interesttherein subject to all of the terms and conditions of this Option Agreement, including this Section 11 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of theOption shall be void unless the provisions of this Section 11 are met. 

 

11.7 **Transfers Not Subject to Right of First Refusal**. The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with anOwnership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of a Participating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 12.9below result in a termination of the Right of First Refusal. 

 

11.8 **Assignment of Right of First Refusal**. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by theCompany. 

 

11.9 **Early Termination of Right of FirstRefusal**. The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes theCompany’s rights and obligations under the Option or substitutes a substantially equivalent option for the Acquiring Corporation’s stock for the Option, or (b) the existence of a public market for the class of shares subject to the Rightof First Refusal. A *“********public market********”* shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded onthe over-the-counter market and prices therefor are published daily on business days in a recognized financial journal. 

 

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**12. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.**

 

If, from time to time, there is any stock dividend, stock split or otherchange, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additionalsecurities to which the Optionee is entitled by reason of the Optionee’s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the sharessubject to the Right of First Refusal immediately before such event. 

 

**13.NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.**

 

The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, *if the Notice designates this Option as an Incentive Stock Option,* the Optioneeshall (a) promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Optionee exercises all or part of the Option or within two (2)years after the Date of Option Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this OptionAgreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after theexercise of the Option and the two-year period immediately after Date of Option Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant tothe Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placedon the certificate pursuant to the preceding sentence. 

 

**14. LEGENDS.**

 

The Company may at any time place legends referencing theRight of First Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company,promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legendsplaced on such certificates may include, but shall not be limited to, the following: 

 

14.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVEREGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH

 

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SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCHACT.” 

 

14.2 “THE SHARES REPRESENTED BY THISCERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ONFILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.” 

 

14.3*If the Notice designates this Option as an Incentive Stock Option*: “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OFTHE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO*”*). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [*INSERT THE LATER OF TWO YEARS AFTER THE DATE OF OPTIONGRANT OR ONE YEAR AFTER THE DATE OF EXERCISE.*]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THEREGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.” 

 

**15. LOCK-UP AGREEMENT.**

 

The Optionee hereby agrees that in the event of any underwritten publicoffering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grantany option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement asmay be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with suchpublic offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. 

 

**16. RESTRICTIONS ON TRANSFER OF SHARES.**

 

No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent ofthe Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Option Agreement, and any such attempted disposition shall be void. The Company shallnot be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this 

 

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Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividendsto any transferee to whom such shares will have been so transferred. 

 

**17.MISCELLANEOUS PROVISIONS.**

 

17.1 **BindingEffect.** Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

17.2 **Termination or Amendment.** The Board may terminateor amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof withoutthe consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation or is required to enable the Option, if designated an Incentive Stock Option in the Notice, to qualify as anIncentive Stock Option. No amendment or addition to this Option Agreement shall be effective unless in writing. 

 

17.3 **Notices.** Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent thatthis Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the otherparty at the address shown below that party’s signature on the Notice or at such other address as such party may designate in writing from time to time to the other party. 

 

17.4 **Integrated Agreement.** The Notice, this Option Agreement and the Plan constitute the entire understanding andagreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes any prior agreements, understandings, restrictions, representations, or warranties among the Optionee and theParticipating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of the Notice and the Option Agreement shall survive anyexercise of the Option and shall remain in full force and effect. 

 

17.5 **Applicable Law.** This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State ofCalifornia. 

 

17.6 **Counterparts.** The Notice may beexecuted in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

 

 

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TMIncentive Stock Option
   Optionee:                                                             
TMNonstatutory Stock Option
        Date:                                                             
 

**STOCK OPTIONEXERCISE NOTICE**

 

**Axesstel, Inc.**

6480 Weathers Place, Suite 300 

San Diego, CA 92121-3910 

 

Ladies and Gentlemen: 

 

1. **Option**. I was granted an option (the *“********Option********”*) topurchase shares of the common stock (the *“********Shares********”*) of **Axesstel, Inc.** (the *“********Company********”*) pursuant to the Company’s 2002 Stock Option Plan(the *“********Plan********”*), my Notice of Grant of Stock Option (the *“********Notice********”*) and my Stock Option Agreement (the *“********OptionAgreement********”*) as follows: 

 

Grant Number:
       
Date of Option Grant:
       
Number of Option Shares:
       
Exercise Price per Share:
  $                                            
 

2. **Exercise ofOption**. I hereby elect to exercise the Option to purchase the following number of Shares: 

 

Total Shares Purchased:
       
Total Exercise Price (Total Shares X Price per Share)
  $                                            
 

3.**Payments**. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement: 

 

TMCash:
  $                                            
TMCheck:
  $                                            
TMTenderof Company Stock:
   Contact Plan Administrator
 

4. **TaxWithholding**. I authorize payroll withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option. 

 

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5. **Optionee Information.**

 

My address is:
   
My Social Security Number is:
  
 

6. **Notice ofDisqualifying Disposition**. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part ofthe Option or within two (2) years of the Date of Option Grant. 

 

7. **Binding Effect**. I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option Agreement, including the Right of First Refusal set forth therein, to all ofwhich I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns. 

 

8. **Transfer**. I understand and acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the*“********Securities Act********”*), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, orthey are sold in accordance with Rule 144 or Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under no obligation to register the Shares. I understand that the certificate or certificates evidencing theShares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company. 

 

I am aware that Rule 144 under the Securities Act, which permits limitedpublic resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied. I understand that any sale of the Shares that might be madein reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request. 

 

[Remainder of page intentionally left blank] 

 

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I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Notice and my OptionAgreement, copies of which I have received and carefully read and understand. 

 

Very truly yours,

(Signature)

 

 

Receipt of the above is hereby acknowledged. 

 

**AXESSTEL, INC.**
By:    Title:    Dated:    
 

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**AXESSTEL, INC.**

**NOTICE OF GRANT OF STOCK OPTION**

 

                     (the *“********Optionee********”*) has been granted an option (the*“********Option********”*) to purchase certain shares of Stock of Axesstel, Inc. pursuant to the Axesstel, Inc. **2002 Stock Option Plan** (the *“********Plan********”*), asfollows: 

 

**Date of Option Grant:**
   
**Number of Option Shares:**
   
**Exercise Price:**
  
$             per share

**Initial Vesting Date:**
   **Option Expiration Date:**  
The date ten (10) years after the Date of Option Grant.

**Tax Status of Option:**
  
             Stock Option. (Enter “Incentive” or“Nonstatutory.” If blank, this Option will be a Nonstatutory Stock Option.)

 

**Vested Shares:**Except as provided in the Stock Option Agreement, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Number of Option Shares by the *“********VestedRatio********”* determined as of such date as follows: 

 
   **Vested Ratio**