Prepared by MERRILL CORPORATION




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Exhibit 4.6    
  


  














 


ELASTIC NETWORKS INC.

STOCK OPTION PLAN  





 
 

TABLE OF CONTENTS    
  



	ARTICLE I DEFINITIONS	 	 
	 	 	1.01. Acceleration Date	 	 
	 	 	1.02 Administrator	 	 
	 	 	1.03. Agreement	 	 
	 	 	1.04. Board	 	 
	 	 	1.05. Cause	 	 
	 	 	1.06. Change in Control	 	 
	 	 	1.07. Code	 	 
	 	 	1.08. Committee	 	 
	 	 	1.09. Common Stock	 	 
	 	 	1.10. Company	 	 
	 	 	1.11. Control Change Date	 	 
	 	 	1.12. Employee	 	 
	 	 	1.13. Exchange Act	 	 
	 	 	1.14. Fair Market Value	 	 
	 	 	1.15. Nonqualified Stock Option	 	 
	 	 	1.16. Option	 	 
	 	 	1.17. Participant	 	 
	 	 	1.18. Person	 	 
	 	 	1.19. Plan	 	 
	 	 	1.20. Subsidiary	 	 
	 	 	1.21. Voting Stock	 	 
	

ARTICLE II PURPOSES	
 	

 
	

ARTICLE III ADMINISTRATION	
 	

 
	

ARTICLE IV ELIGIBILITY	
 	

 
	

ARTICLE V STOCK SUBJECT TO PLAN	
 	

 
	 	 	5.01. Shares Issued.	 	 
	 	 	5.02. Aggregate Limits.	 	 
	 	 	5.03. Reallocation of Shares.	 	 
	

ARTICLE VI TERMS AND CONDITIONS OF OPTIONS	
 	

 
	 	 	6.01. Grants.	 	 
	 	 	6.02. Option Price.	 	 
	 	 	6.03. Maximum Option Period.	 	 
	 	 	6.04. Nontransferability.	 	 
	 	 	6.05. Employee Status.	 	 
	 	 	6.06. Change in Control.	 	 
	 	 	6.07. Exercise.	 	 
	 	 	6.08. Payment.	 	 
	 	 	6.09. Shareholder Rights.	 	 
	 	 	6.10. Forfeiture Provisions.	 	 
	 	 	6.11. Other Conditions.	 	 
	

ARTICLE VII LIMITATION ON BENEFITS	
 	

 
	

ARTICLE VIII ADJUSTMENT UPON CHANGE IN COMMON STOCK	
 	

 
	

ARTICLE IX COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES	
 	

 
	 	 	9.01. Compliance.	 	 
	 	 	9.02. Postponement of Exercise.	 	 







	

ARTICLE X GENERAL PROVISIONS	
 	

 
	 	 	10.01 Effect on Employment.	 	 
	 	 	10.02. Unfunded Plan.	 	 
	 	 	10.03. Tax Withholding.	 	 
	 	 	10.04. Reservation of Shares.	 	 
	 	 	10.05. Governing Law.	 	 
	 	 	10.06. Other Actions.	 	 
	

ARTICLE XI AMENDMENT	
 	

 
	

ARTICLE XII DURATION OF PLAN	
 	

 
	

ARTICLE XIII EFFECTIVE DATE OF PLAN	
 	

 
	

ARTICLE XIV RULES OF CONSTRUCTION	
 	

 







 
 

ELASTIC NETWORKS INC.
  STOCK OPTION PLAN    
  


ARTICLE I

DEFINITIONS  


    1.01.  Acceleration Date  means the earlier of (i) the date that the Board approves a transaction
or series of transactions that, if consummated, would result in a Change in Control or (ii) the date that an agreement is entered into with respect to a transaction or series of transactions
that, if consummated, would result in a Change in Control. 


    1.02.  Administrator  means the Committee and any delegate of the Committee that is appointed in
accordance with Article III. 


    1.03.  Agreement  means a written agreement (including any amendment or supplement thereto) between the
Company and a Participant specifying the terms and conditions of the Option the Company grants to the Participant. 


    1.04.  Board  means the Board of Directors of the Company. 


    1.05.  Cause  has the same definition as under any employment agreement between the Participant and the
Company or any Subsidiary or, if no such employment agreement exists or if such employment agreement does not contain any such definition, Cause means (i) the Participant's willful and repeated
failure to comply with the lawful directives of the Board, the Board of Directors of any Subsidiary or any supervisory personnel of the Participant, (ii) any criminal act or act of dishonesty
or willful misconduct by the Participant that has a material adverse affect on the property, operations, business or reputation of the Company or any Subsidiary, (iii) the material breach by
the Participant of the terms of any confidentiality, noncompetition, nonsolicitation or employment agreement that the Participant has with the Company or any Subsidiary or (iv) acts by the
Participant of willful malfeasance or gross negligence in a matter of material importance to the Company or any Subsidiary. For purposes of the Plan, in no event shall any termination of employment be
deemed for Cause unless the Company's Chief Executive Officer concludes that the situation warrants a determination that the Participant's employment was terminated for Cause; in the case of the Chief
Executive Officer, any determination that the Chief Executive Officer's employment terminated for Cause shall be made by the Board acting without the Chief Executive Officer. 


    1.06.  Change in Control  means the occurrence of any of the following: (i)(a) the Company consolidates
with, or merges with or into, another Person, (b) there is a merger, reorganization, consolidation, share exchange or other transaction involving the Voting Stock of the Company, (c) the
Company sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company to any Person, (d) any Person consolidates with, or merges with
or into, the Company, or (e) any similar event, where with respect to any of the events described in (a) through (e) the outstanding Voting Stock of the Company is converted into
or exchanged for cash, securities or other property, except that none of the foregoing events will constitute a Change in Control where the outstanding Voting Stock of the Company is converted into or
exchanged for Voting Stock of the surviving or transferee Person and the beneficial owners of the Voting Stock of the Company immediately before such event own, directly or indirectly, Voting Stock
representing more than fifty percent (50%) of the voting power of the Voting Stock of the surviving or transferee Person immediately after such event, or (ii) any transaction that results in
any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, beneficially owning Voting Stock of the Company representing, directly or
indirectly, thirty percent (30%) or more of the voting power of the Voting Stock of the Company, or (iii) the approval by the holders of Voting Stock of the Company of any plan or proposal for
liquidation or dissolution of the Company or (iv) the consummation of any other transaction that a majority of the Board, in its sole and absolute discretion, determines constitutes a Change in
Control for purposes of this Plan. 


    1.07.  Code  means the Internal Revenue Code of 1986, as amended. 







    1.08.  Committee  means the Compensation Committee of the Board, if the Board appoints one and assigns it
the responsibility to administer the Plan, or the Board itself if no Compensation Committee is appointed or no such committee is assigned the responsibility to administer the Plan. If such
Compensation Committee is so appointed, if and to the extent deemed necessary by the Board, such Compensation Committee shall consist solely of two or more non-employee outside directors,
all of whom are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act. 


    1.09.  Common Stock  means the voting common stock, $.01 par value per share, of the Company. 


    1.10.  Company  means Elastic Networks Inc. 


    1.11.  Control Change Date  means the date on which a Change in Control occurs. If a Change in Control
occurs on account of a series of transactions, the "Control Change Date" is the date of the last of such transactions. 


    1.12.  Employee  means any person whom the Company or any Subsidiary employs under the rules of Code
Section 3401(c) and the regulations thereunder. 


    1.13.  Exchange Act  means the Securities Exchange Act of 1934, as amended. 



    1.14.  Fair Market Value  means, on any given date, the fair market value of a share of Common Stock as
the Administrator in its discretion shall determine; provided, however, that the Administrator shall determine Fair Market Value without regard to any restriction other than a restriction which, by
its terms, will never lapse and, if the shares of Common Stock are traded on any stock exchange, the Fair Market Value of a share of Common Stock shall be the closing price of a share of Common Stock
as reported on such stock exchange on such date, or if the shares of Common Stock are not traded on such stock exchange on such date, then on the next preceding day that the shares of Common Stock
were traded on such stock exchange, all as reported by such source as the Administrator shall select. The Fair Market Value that the Administrator determines shall be final, binding and conclusive on
the Company and each Participant. 


    1.15.  Nonqualified Stock Option  means an Option that is not subject to Section 422 of the Code. 


    1.16.  Option  means a stock option that entitles the holder to purchase from the Company a stated number
of shares of Common Stock at the price set forth in the Agreement that specifies the terms and conditions of the Option. 



    1.17.  Participant  means an Employee of the Company or any Subsidiary who satisfies the requirements of
Article IV and who the Administrator selects to receive an Option. 


    1.18.  Person  means any individual, corporation, partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or any other entity of any kind. 


    1.19.  Plan  means this Elastic Networks Inc. Stock Option Plan. 



    1.20.  Subsidiary  means any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, if at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other corporations in such chain. 


    1.21.  Voting Stock  with respect to any specified Person means any class or classes of stock of the
specified Person pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of the
specified Person. 





ARTICLE II

PURPOSES  


    This Plan is intended to assist the Company and its Subsidiaries in recruiting and retaining individuals with ability and initiative by enabling such persons
to participate in the future success of the Company and to associate their interests with those of the Company and its shareholders. The Plan is intended to
permit the grant of Options. The proceeds the Company receives from the sale of Common Stock pursuant to any Participant's exercise of an Option shall be used for general corporate purposes. 


ARTICLE III

ADMINISTRATION  


    The Administrator shall have the complete authority to grant Options on such terms (not inconsistent with the provisions of this Plan), as the Administrator
may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan) on the exercisability of all or any part of an Option. The Administrator also shall administer
the Plan. The Administrator shall have the complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements; to accelerate the exercisability of an Option; to adopt,
amend and rescind rules and regulations pertaining to the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant
in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. Any decision or action of the Administrator in connection with
the administration of this Plan shall be final and conclusive. Neither the Administrator nor any member of the Committee shall be liable for any act done or not done in good faith with respect to this
Plan, any Agreement or any Option. The Company shall bear all expenses of administering this Plan. The Administrator, in its discretion, may delegate to one or more officers of the Company or another
committee of the Board, all or part of the Administrator's authority and duties with respect to grants of Options to Participants who are not subject to the reporting and other provisions of
Section 16 of the Exchange Act. The Administrator may revoke or amend the terms of such delegation at any time but such action shall not invalidate any prior actions of the Administrator's
delegate or delegates that were consistent with the terms of the Plan. If and to the extent deemed necessary by the Board, all grants of Options to Participants who are subject to the reporting and
other provisions of Section 16 of the Exchange Act shall be made by the full Board or by a Committee consisting solely of two or more non-employee outside directors within the
meaning of Rule 16b-3 of the Exchange Act. 


ARTICLE IV

ELIGIBILITY  


    Any Employee of the Company or any Subsidiary (including a corporation that becomes a Subsidiary after the adoption of this Plan) is eligible to receive
Options if the Administrator, in its sole discretion, determines that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company
or any Subsidiary. 


ARTICLE V

STOCK SUBJECT TO PLAN  


    5.01.  Shares Issued.  On the exercise of any Option, the Company may deliver to the Participant (or the
Participant's broker if the Participant so directs) shares of Common Stock from its authorized but unissued shares of Common Stock or from reacquired shares of Common Stock. 



    5.02.  Aggregate Limits.  The maximum number of shares of Common Stock that may be issued under this Plan
pursuant to the exercise of Options is 1,000,000 shares of Common Stock. The maximum number of shares shall be subject to adjustment as provided in Article VIII. 


    5.03.  Reallocation of Shares.  If an Option is terminated, in whole or in part, for any reason other
than its exercise, the number of shares of Common Stock allocated to the Option or the terminated portion thereof may be reallocated to other Options to be granted under this Plan, subject to the
aggregate limit described above. 





ARTICLE VI

TERMS AND CONDITIONS OF OPTIONS  


    6.01.  Grants.  In accordance with the provisions of Article IV, the Administrator will designate
each individual to whom an Option is to be granted and will specify the number of shares of Common Stock covered by such grant. All Options granted under the Plan shall be Nonqualified Stock Options. 



    6.02.  Option Price.  The price per share for Common Stock payable upon the exercise of an Option shall
be twenty-six percent (26%) of the Fair Market Value of a share of Common Stock on the date of grant of the Option. 


    6.03.  Maximum Option Period.  The Administrator on the date of grant shall determine the maximum period
in which an Option may be exercised, except that no Option shall be exercisable after the expiration of 10 years from the date such Option is granted. The terms of any Option may provide that
it is exercisable for a period less than such maximum period. 


    6.04.  Nontransferability.  



    (a)  Except
as set forth in Section 6.04(b) below, each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer of an Option, the entire Option must be transferred to the same person or persons or entity or entities. Except as set forth in Section 6.04(b)
below, during the lifetime of the Participant to whom the Option is granted, only the Participant may exercise the Option. No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation or liability of such Participant. 


    (b)  Notwithstanding
Section 6.04(a) above, if the Agreement so provides, an Option may be transferred by the Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family members, a partnership in which such family members are the only partners or a limited liability company (treated like a
partnership for tax purposes) in which such family members are the only members, on such terms and conditions as the Securities Exchange Commission Rule 16b-3 as in effect from time
to time may permit. Any such transfer will be permitted only if (i) the Participant does not receive any consideration for the transfer and (ii) the Administrator expressly approves the
transfer. The holder of such Option shall be bound by the same terms and conditions that govern the Option during the period the Participant held it; provided, however, that such transferee may not
transfer such Option except by will or the laws of descent and distribution. Any such transfer shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof
shall be delivered to the Administrator on or prior to the effective date of the transfer. 




    6.05.  Employee Status.  In the event that the terms of any Option provide that it may be exercised only
during employment or within a specified period of time after termination of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness,
temporary disability or other reasons shall not be deemed interruptions of employment. 


    6.06.  Change in Control.  Notwithstanding any provision of any Agreement, in the event of or in
anticipation of a Change in Control, the Administrator in its discretion (i) may declare that some or all outstanding Options previously granted under the Plan shall terminate as of a date on
or after an Acceleration Date or before or on the Control Change Date without any payment to the holder of the Option, provided the Administrator gives prior written notice to the Participants of such
termination and gives such Participants a reasonable period of time (which shall not be less than ten (10) business days) to exercise their outstanding Options before such date to the extent
then exercisable or (ii) may terminate on or after an Acceleration Date or before or on the Control Change Date some or all outstanding Options previously granted under the Plan in
consideration of payment to the holder of the Option, with respect to each share of Common Stock to which the Option is then exercisable, of the excess of the Fair Market Value on such date of the
Common Stock subject to the exercisable portion of the Option over the Option price. The payment described in (ii) above may be made in any manner 








the Administrator determines, including in cash, Voting Stock or other property. The Administrator in its discretion may take the actions described in (i) or (ii) above with respect to
some or all outstanding Options or on an Option-by-Option basis, which actions need not be uniform with respect to all
outstanding Options. The preceding sentences to the contrary notwithstanding, the Options shall not be terminated to the extent that written provision is made for their continuance, assumption or
substitution by a successor employer or its parent or subsidiary in connection with the Change in Control. 


    6.07.  Exercise.  All outstanding Options previously granted under the Plan shall be exercisable, in
whole or in part, on the earlier of (i) the time immediately before the Administrator takes either of the actions described in (i) or (ii) of Section 6.06 above or
(ii) the Control Change Date, provided in either case the Participant is employed by the Company or any Subsidiary at such time; in either such event, all such Options which became exercisable
shall remain exercisable thereafter in accordance with the terms of the Plan and the applicable Agreement. Subject to the preceding sentences, an Option may be exercised in whole at any time or in
part from time to time at such times and in compliance with such requirements as the Administrator shall determine as set forth in the Agreement. An Option granted under this Plan may be exercised
with respect to any number of whole shares less than the full number of shares for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. 


    6.08.  Payment.  Unless the Agreement provides otherwise, payment of the Option price shall be made in
cash or a cash equivalent acceptable to the Administrator. If the Agreement so provides, the Administrator in its discretion may permit a Participant to pay all or part of the Option price
(i) by surrendering shares of Common Stock to the Company that the Participant has held for at least six months, (ii) by a cashless exercise through a broker, (iii) by delivery of
the full recourse, interest-bearing promissory note of the Participant, (iv) by such other medium of payment as the Administrator, in its discretion shall authorize or (v) by any
combination of the aforementioned methods of payment. If Common Stock is used to pay all or part of the Option price, the sum of the cash and cash equivalent and other payments and the Fair Market
Value of the Common Stock surrendered must not be less than the Option price of the shares for which the Option is being exercised. 


    6.09.  Shareholder Rights.  No Participant shall have any rights as a shareholder with respect to shares
of Common Stock subject to an Option until the proper exercise of such Option and the issuance to the Participant of the certificates representing the shares of Common Stock for which the Option is
exercised. The Company may include on any certificates representing shares of Common Stock issued pursuant to an Option such legends referring to any representations, restrictions or any other
applicable statements as the Company, in its discretion, shall deem appropriate. 


    6.10.  Forfeiture Provisions.  Notwithstanding any other provisions of the Plan or any Agreement, all
rights to any Common Stock that a Participant has regarding Options will be immediately discontinued and forfeited, and the Company shall not have any further obligation hereunder to the Participant
with respect to any Option and the Option will not be exercisable for any number of shares of Common Stock (whether or not previously exercisable), on and after the time the Participant is discharged
from employment with the Company or any Subsidiary for Cause. 


    6.11.  Other Conditions.  The Administrator, in its discretion, may, as a condition to the grant of an
Option, require the Participant on or before the date of grant of the Option to enter into (i) a covenant not to compete (including a confidentiality, non-solicitation or other
similar agreement) with the Company or any Subsidiary, which shall become effective on the date of termination of employment of a Participant with the Company or any Subsidiary or another specified
date and contain such terms and conditions as the Administrator shall otherwise specify, and (ii) an agreement to cancel any employment agreement, fringe benefit or compensation arrangement
then in effect between the Company or any Subsidiary and such Participant. If the Participant shall fail to enter into any such agreement or agreements at the Administrator's request, then no Option
shall be granted to the 







Participant and the number of shares of Common Stock that would have been subject to such Option shall be added to the remaining shares of Common Stock available under the Plan. 


ARTICLE VII

LIMITATION ON BENEFITS  


    Despite any other provisions of this Plan to the contrary, if the receipt of any payments under this Plan would subject a Participant to tax under Code
Section 4999, the Administrator may determine whether some amount of payments would meet the definition of a "Reduced Amount." If the Administrator determines that there is a Reduced Amount,
the total payments to the Participant hereunder must be reduced to such Reduced Amount, but not below zero. If the Administrator determines that the benefits and payments must be reduced to the
Reduced Amount, the Company must promptly notify the Participant of that determination, with a copy of the detailed calculations by the Administrator. All determinations of the Administrator under
this Article VII are binding upon the Company and the Participant. It is the intention of the Company and the Participant to reduce the payments under this Plan only if the aggregate Net After
Tax Receipts to the Participant would thereby be increased. If as result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Administrator
under this Article VII, however, it is possible that amounts will have been paid under the Plan to or for the benefit of a Participant which should not have been so paid ("Overpayment") or that
additional amounts which will not have been paid under the Plan to or for the benefit of a Participant could have been so paid ("Underpayment")—in each case, consistent with the
calculation of the Reduced Amount. If the Administrator, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant which the Administrator
believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment must be treated for all purposes
as a loan which the Participant must repay to the Company together with interest at the applicable federal rate under Code Section 7872(f)(2); provided, however, that no such loan may be deemed
to have been made and no amount shall be payable by Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Participant is subject
to tax under Code Section 1, 3101 or 4999 or generate a refund of such taxes. If the Administrator, based upon controlling precedent or other substantial authority, determines that an
Underpayment has occurred, the Administrator must promptly notify the Company of the amount of the Underpayment, which then shall be paid to the Participant. For purposes of this section,
(i) "Net After Tax Receipt" means the Present Value of a payment under this Plan net of all taxes imposed on Participant with respect thereto under Code Sections 1, 3101 and 4999, determined by
applying the
highest marginal rate under Code Section 1 which applied to the Participant's taxable income for the immediately preceding taxable year; (ii)"Present Value" means the value determined in
accordance with Code Section 280G(d)(4); and (iii)"Reduced Amount" means the smallest aggregate amount of all payments under this Plan which (a) is less than the sum of all payments
under this Plan and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate payments under this Plan
were any other amount less than the sum of all payments to be made under this Plan. 


ARTICLE VIII

ADJUSTMENT UPON CHANGE IN COMMON STOCK  


    The maximum number of shares as to which Options may be granted under this Plan and the terms of outstanding Options shall be adjusted as the Administrator
shall determine to be equitably required in the event that (a) the Company (i) effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares
or (ii) engages in a transaction to which Code Section 424 applies or (b) there occurs any other event which, in the judgment of the Administrator, necessitates such action. In
addition, the Administrator may make such other adjustments to the terms of an outstanding Option to the extent equitable and necessary to prevent an enlargement or dilution of the Participant's
rights thereunder as a result of any similar transaction. Any determination the Administrator makes under this Article VIII shall be final and conclusive. The issuance by the 







Company of either shares of stock of any class or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the maximum number of shares as to which Options may be granted or the terms of outstanding Options. The Administrator may grant Options in substitution for
performance shares, stock awards, stock options, stock appreciation rights, phantom shares, or similar awards held by an individual who becomes an Employee, contractor, agent or other service provider
of the Company in connection with a transaction described in the first paragraph of this Article VIII. Notwithstanding any provision of the Plan (other than the limitations of
Section 5.02), the terms of such substituted Option shall be as the Administrator, in its discretion, determines is appropriate. 


ARTICLE IX

COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES  


    9.01.  Compliance.  No Option shall be exercisable, no Common Stock shall be issued, no certificates for
shares of Common Stock shall be delivered, and no payment shall be made except in compliance with
all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement with any stock exchange to which the Company is a party, and
the rules of all domestic stock exchanges on which the Company's shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any certificate for
shares issued to evidence Common Stock for which an Option is exercised may bear such legends and statements as the Administrator may deem advisable to assure compliance with federal and state laws
and regulations. No Option shall be exercisable, no Common Stock shall be issued, no certificate for shares of Common Stock shall be delivered, and no payment shall be made under this Plan until the
Company has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters. 


    9.02.  Postponement of Exercise.  The Administrator may postpone any exercise of an Option for such time
as the Administrator in its sole discretion may deem necessary in order to permit the Company (i) to effect, amend or maintain any necessary registration of the Plan or the shares of Common
Stock issuable upon the exercise of any Option under the securities laws, (ii) to permit any action to be taken in order to (A) list such shares of Common Stock on a stock exchange if
shares of Common Stock are then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its shares of Common Stock, including
any rules or regulations of any stock exchange on which the shares of Common Stock are listed, or (iii) to determine that such shares of Common Stock in the Plan are exempt from such
registration or that no action of the kind referred to in (ii)(B) above needs to be taken; and the Company shall not be obligated by virtue of any terms and conditions of any Agreement or any
provision of the Plan to recognize the exercise of an Option or to sell or issue shares of Common Stock in violation of the securities laws or the laws of any government having jurisdiction thereof.
Any such postponement shall not extend the term of the Option and neither the Company nor its directors and officers shall have any obligation or liability to any Participant or to any other person
with respect to shares of Common Stock as to which the Option shall lapse because of such postponement. 


ARTICLE X

GENERAL PROVISIONS  


    10.01.  Effect on Employment.  Neither the adoption of this Plan, its operation, nor any Agreement or
other documents describing or referring to this Plan shall confer upon any individual any right to continue in the employ of the Company or any Subsidiary or in any way affect the right and power of
the Company or any Subsidiary to terminate the employment of any individual at any time with or without assigning a reason therefor. 


    10.02.  Unfunded Plan.  The Plan, insofar as it provides for grants of Options, shall be unfunded, and
the Company shall not be required to segregate any assets that may at any time be represented by 








grants under this Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. 


    10.03.  Tax Withholding.  Unless an Agreement provides otherwise, each Participant shall be responsible
for satisfying in cash or cash equivalent acceptable to the Administrator any income and employment tax withholding obligations attributable to participation in the Plan and the grant of Options or
the exercise of Options granted thereunder. In accordance with procedures that the Administrator establishes, the Administrator may permit a Participant to pay such amounts (i) by surrendering
shares of Common Stock that the Participant has held for at least six months, (ii) by delivery of the full recourse, interest-bearing promissory note of the Participant, (iii) by such
other medium of payment as the Administrator, in its discretion, shall authorize, or (iv) by any combination of the aforementioned methods of payment. 


    10.04.  Reservation of Shares.  The Company, during the term of this Plan, shall at all times reserve and
keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. Additionally, the Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite authorizations needed in order to issue and to sell such number of shares of Common Stock as shall be sufficient to satisfy the
requirements of the Plan. However, the inability of the Company to obtain from any such regulatory agency the requisite authorizations the Company's counsel deems to be necessary for the lawful
issuance and sale of any shares of Common Stock hereunder, or the inability of the Company to confirm to its satisfaction that any issuance and sale of any shares of Common Stock hereunder will meet
applicable legal requirements, shall relieve the Company of any liability in respect to the failure to issue or to sell such shares of Common Stock as to which such requisite authority shall not have
been obtained. 


    10.05.  Governing Law.  This Plan and all Options granted hereunder shall be governed by the laws of the
State of Delaware, except to the extent federal law applies. 


    10.06.  Other Actions.  Nothing in the Plan shall be construed to limit the authority of the Company to
exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant options for proper corporate purposes otherwise than under the Plan to any
employee or to any other person, firm, corporation, association or other entity, or to grant options to, or assume options of any person in connection with, the acquisition, purchase, lease, merger,
consolidation, reorganization or otherwise, of all or any part of the business and assets of any person, firm, corporation, association or other entity. 


ARTICLE XI

AMENDMENT  


    The Board may amend this Plan from time to time or terminate the Plan. No amendment shall, without a Participant's consent, adversely affect any rights of such
Participant under any Option outstanding at the time such amendment is made. 


ARTICLE XII

DURATION OF PLAN  


    No Option may be granted under this Plan 10 years after the Board adopts the Plan. Options granted before that date shall remain valid in accordance
with their terms. 


ARTICLE XIII

EFFECTIVE DATE OF PLAN  


    Options may be granted under this Plan on and after its adoption by the Board. 





ARTICLE XIV

RULES OF CONSTRUCTION  


    Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or
other provision of law shall be construed to refer to any amendment to or successor of such provision of law. 



	 	 	ELASTIC NETWORKS INC.
	

 	
 	

BY:	
 	

/s/ GUY D. GILL   

	

 	
 	

TITLE:	
 	
Chairman of the Board, Chief Executive Officer and President











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ELASTIC NETWORKS INC. STOCK OPTION PLAN