**Exhibit 10.78**

***As Amended on June 21, 2005***

***(giving effect to 40-for-1 reverse***

***stock split effective as of***

***March 10, 2006)***

**OCCAM NETWORKS, INC.**

**AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN**

**ARTICLE ONE**

**GENERAL PROVISIONS**

 

This 2000 Stock IncentivePlan is intended to promote the interests of Occam Networks, Inc., a Delaware corporation, by providing eligible persons in the Corporation’s service with the opportunity to acquire a proprietary interest, or otherwise increase theirproprietary interest, in the Corporation as an incentive for them to remain in such service. 

Capitalized terms shall have the meaningsassigned to such terms in the attached Appendix. 

 

A.    The Plan shall be divided into three separate equity incentives programs: 

–    the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, 

–    the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued sharesof Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), and 

–    the Automatic Option Grant Program under which eligible non-employee Board members shall automatically receive option grants at designated intervals over their period of continued Boardservice. 

B.    The provisions of Articles One and Six shall apply to all equity programs under the Plan and shallgovern the interests of all persons under the Plan. 

 

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 **III.****ADMINISTRATION OF THE PLAN**
A.    The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. Administration of the DiscretionaryOption Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board’s discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the powerto administer those programs with respect to all such persons. However, any discretionary option grants or stock issuances for members of the Primary Committee must be authorized by a disinterested majority of the Board. 

B.    Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine andmay be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. 

C.    Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority(subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue suchinterpretations of, the provisions of those programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Planshall be final and binding on all parties who have an interest in the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any stock option or stock issuance thereunder. 

D.    Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of eachsuch committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission madein good faith with respect to the Plan or any option grants or stock issuances under the Plan. 

E.    Administration ofthe Automatic Option Grant Program shall be self-executing in accordance with the terms of that program, and no Plan Administrator shall exercise any discretionary functions with respect to any option grants or stock issuances made under thatprogram. 

 
 **IV.****ELIGIBILITY**
A.    The personseligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 

(i) Employees, 

(ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and 

 

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(iii) consultants and other independent advisors who provide services to the Corporation (or any Parentor Subsidiary). 

B.    Each Plan Administrator shall, within the scope of its administrative jurisdiction under thePlan, have full authority to determine, (i) with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive such grants, the time or times when those grants are to be made, the number ofshares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the optionshares and the maximum term for which the option is to remain outstanding and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive such issuances, the time or times when the issuances areto be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares. Except in the case of options granted to officers, directors and consultants,options and stock issuances shall become exercisable at a rate of no less than 20% per year over five (5) years from the date the options and stock issuances are granted. 

C.    The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Discretionary OptionGrant Program or to effect stock issuances in accordance with the Stock Issuance Program. 

D.    The individuals whoshall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals who first become non-employee Board members on or after the Underwriting Date, whether through appointment by the Board or electionby the Corporation’s stockholders, and (ii) those individuals who continue to serve as non-employee Board members at one or more Annual Stockholders Meetings held after the Underwriting Date. A non-employee Board member who has previouslybeen in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but shall be eligible toreceive periodic option grants under the Automatic Option Grant Program while he or she continues to serve as a non-employee Board member. 

 
 **V.****STOCK SUBJECT TO THE PLAN**
A.    The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. As of June 21, 2005, the aggregatenumber of shares of Common Stock that have been reserved for issuance over the term of the Plan is two million twenty-four thousand two hundred forty-five (2,024,245) shares. Such reserve shall include the number of shares estimated to remainavailable for issuance, as of the Plan Effective Date, under the Predecessor Plan as last approved by the Corporation’s stockholders, including the shares subject to outstanding options under the Predecessor Plan. 

B.    The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first tradingday of January each calendar year during the term of the Plan, beginning with calendar year 2006, by an amount equal to three percent (3%) of the total 

 

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number of shares of Common Stock outstanding (including shares of Common Stock issuable upon conversion of all outstanding shares of Preferred Stock) on thelast trading day in December of the immediately preceding calendar year. 

C.    No one person participating in the Planmay receive stock options, separately exercisable stock appreciation rights and direct stock issuances for more than five million (5,000,000) shares of Common Stock in the aggregate per calendar year. 

D.    Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan)shall be available for subsequent issuance under the Plan to the extent (i) those options expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisionsof Article Two. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation at the original issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be addedback to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. However, should the exerciseprice of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exerciseof an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under thestock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. Shares of Common Stock underlying one or more stock appreciation rights exercised under Section IV of Article Two,Section III of Article Three or Section II of Article Five of the Plan shall not be available for subsequent issuance under the Plan. 

E.    If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstandingCommon Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximumnumber and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year, (iii) the number and/or class of securitiesfor which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, (iv) the number and/or class of securities and the exercise price per share in effect under each outstandingoption under the Plan, (v) the number and/or class of securities and exercise price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan and (vi) the maximum number and/or class ofsecurities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section V.B of this Article One. Such adjustments to the outstanding options are to be effected in a manner which shallpreclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 

 

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**ARTICLE TWO**

**DISCRETIONARY OPTION GRANT PROGRAM**

 
 **I.****OPTION TERMS**
Each option shall be evidenced byone or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to theprovisions of the Plan applicable to such options. 

A.    **Exercise Price**. 

1.    The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent(100%) of the Fair Market Value per share of Common Stock on the option grant date. 

2.    The exercise priceshall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Six and the documents evidencing the option, be payable in one or more of the forms specified below: 

(i) cash or check made payable to the Corporation, 

(ii) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or

(iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which theOptionee shall concurrently provide irrevocable instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlementdate, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and(b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. 

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

B.    **Exercise and Term of Options**. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the PlanAdministrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. 

 

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C.    **Effect of Termination of Service**. 

1.    The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service ordeath: 

(i) Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable forsuch period of time thereafter (of at least thirty (30) days for any cessation of Service other than due to Optionee’s death or disability and at least six (6) months for any cessation of Service due to Optionee’s death ordisability) as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. 

(ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personalrepresentative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of thatoption. 

(iii) Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct whileholding one or more outstanding options under this Article Two, then all those options shall terminate immediately and cease to be outstanding. 

(iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of theOptionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option hasnot been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 

2.    The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any timewhile the option remains outstanding, to: 

(i) extend the period of time for which the option is to remain exercisable following theOptionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term,and/or 

(ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number ofvested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optioneecontinued in Service. 

 

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D.    **Stockholder Rights**. The holder of an option shall have nostockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. 

E.    **Repurchase Rights**. The Plan Administrator shall have the discretion to grant options which are exercisable forunvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms uponwhich such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencingsuch repurchase right. 

F.    **Limited Transferability of Options**. During the lifetime of the Optionee,Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death. Non-Statutory Options shall be subject to the samerestriction, except that a Non-Statutory Option may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s family or to a trust established exclusively for one or more such family members orto Optionee’s former spouse, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire aproprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued tothe assignee as the Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two, andthose options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferredoptions subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

 
 **II.****INCENTIVE OPTIONS**
The terms specified below shallbe applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Six shall be applicable to Incentive Options. Options which are specifically designated asNon-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II. 

A.    **Eligibility**. Incentive Options may only be granted to Employees. 

B.    **Dollar Limitation**. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee underthe Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Tothe extent 

 

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the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on theexercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 

C.    **10% Stockholder**. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the FairMarket Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 

 
 **III.****CORPORATE TRANSACTION/CHANGE IN CONTROL**
A.    In the event of any Corporate Transaction, each outstanding option under the Discretionary Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective dateof the Corporate Transaction, become exercisable for all the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock. However, an outstanding option shall**not** become exercisable on such an accelerated basis if and to the extent: (i) such option is, in connection with the Corporate Transaction, to be assumed by the successor corporation (or parent thereof) or (ii) such option is to bereplaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Corporate Transaction on any shares for which the option is not otherwise at that time exercisable and provides for subsequentpayout in accordance with the same exercise/vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant.

B.    All outstanding repurchase rights under the Discretionary Option Grant Program shall automatically terminate,and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (orparent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 

C.    Immediately following the consummation of the Corporate Transaction, all outstanding options under the Discretionary OptionGrant Program shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). 

D.    Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would havebeen issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to(i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available forissuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under thePlan per calendar year and 

 

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(iv) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year. To the extent the actualholders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Corporate Transaction, the successor corporation may, in connection with the assumption of the outstanding optionsunder the Discretionary Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Corporate Transaction. 

E.    The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under theDiscretionary Option Grant Program so that those options shall, immediately prior to the effective date of such Corporate Transaction, become exercisable for all the shares of Common Stock at the time subject to those options and may be exercisedfor any or all of those shares as fully vested shares of Common Stock, whether or not those options are to be assumed in the Corporate Transaction. In addition, the Plan Administrator shall have the discretionary authority to structure one or moreof the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall not be assignable in connection with such Corporate Transaction and shall accordingly terminate upon the consummation of suchCorporate Transaction, and the shares subject to those terminated rights shall thereupon vest in full. 

F.    The PlanAdministrator shall have full power and authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall become exercisable for all the shares of Common Stock at the time subject tothose options in the event the Optionee’s Service is subsequently terminated by reason of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the effective date of any Corporate Transaction inwhich those options are assumed and do not otherwise accelerate. In addition, the Plan Administrator may structure one or more of the Corporation’s repurchase rights so that those rights shall immediately terminate with respect to any sharesheld by the Optionee at the time of his or her Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time. 

G.    The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under theDiscretionary Option Grant Program so that those options shall, immediately prior to the effective date of a Change in Control, become exercisable for all the shares of Common Stock at the time subject to those options and may be exercised for anyor all of those shares as fully vested shares of Common Stock. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option GrantProgram so that those rights shall terminate automatically upon the consummation of such Change in Control, and the shares subject to those terminated rights shall thereupon vest in full. Alternatively, the Plan Administrator may condition theautomatic acceleration of one or more outstanding options under the Discretionary Option Grant Program and the termination of one or more of the Corporation’s outstanding repurchase rights under such program upon the subsequent termination ofthe Optionee’s Service by reason of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the effective date of such Change in Control. 

 

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H.    The portion of any Incentive Option accelerated in connection with a CorporateTransaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the acceleratedportion of such option shall be exercisable as a Nonstatutory Option under the Federal tax laws. 

I.    The outstandingoptions shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business orassets. 

 
 **IV.****CANCELLATION AND REGRANT OF OPTIONS**
The PlanAdministrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Discretionary Option Grant Program (includingoutstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or a different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share ofCommon Stock on the new grant date. 

 
 **V.****STOCK APPRECIATION RIGHTS**
A.    The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. 

B.    The following terms shall govern the grant and exercise of tandem stock appreciation rights: 

(i) One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exerciseof the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the numberof shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price payable for such shares. 

(ii) No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender orat any earlier time. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares andpartly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 

(iii) If the surrender of an option is notapproved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to thelater of (a) five (5) business days after the receipt of the rejection notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the 

 

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documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant date. 

C.    The following terms shall govern the grant and exercise of limited stock appreciation rights: 

(i) One or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. 

(ii) Upon the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have theunconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation. In return for the surrendered option, the Optionee shall receive a cash distribution from theCorporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common Stock at the time subject to such option (whether or not the option is otherwise at that time exercisable for those shares) over (B) theaggregate exercise price payable for those shares. Such cash distribution shall be paid within five (5) days following the option surrender date. 

(iii) At the time such limited stock appreciation right is granted, the Plan Administrator shall pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, nofurther approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. 

**ARTICLE THREE**

**STOCK ISSUANCE PROGRAM**

 
 **I.****STOCK ISSUANCE TERMS**
Shares of Common Stock maybe issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. Sharesof Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals to officers and directors of the Corporationand key employees of the Corporation who earn at least $65,000 per year. 

A.**    Purchase Price**.

1.    The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundredpercent (100%) of the Fair Market Value per share of Common Stock on the issuance date. 

 

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2.    Subject to the provisions of Section I of Article Six, shares ofCommon Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: 

(i) cash or check made payable to the Corporation, or 

(ii) past services rendered to the Corporation (or any Parent or Subsidiary). 

B.    **Vesting Provisions**. 

1.    Shares of Common Stock issued under theStock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performanceobjectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement. Shares ofCommon Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals. 

2.    Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend)which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other changeaffecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and(ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 

3.    The Participant shall havefull stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have theright to vote such shares and to receive any regular cash dividends paid on such shares. 

4.    Should the Participantcease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, thenthose shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to theParticipant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel theunpaid principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares. 

 

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5.    The Plan Administrator may in its discretion waive the surrender andcancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall result inthe immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment ornon-attainment of the applicable performance objectives. 

6.    Outstanding share right awards under the StockIssuance Program shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals established for such awards are not attained. The Plan Administrator, however, shallhave the discretionary authority to issue shares of Common Stock under one or more outstanding share right awards as to which the designated performance goals have not been attained. 

 
 **II.****CORPORATE TRANSACTION/CHANGE IN CONTROL**
A.    All of the Corporation’s outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediatelyvest in full, in the event of any Corporate Transaction, except to the extent (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) suchaccelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement. 

B.    The PlanAdministrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part, and the shares ofCommon Stock subject to those terminated rights shall immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed twelve (twelve)months) following the effective date of any Corporate Transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof). 

C.    The Plan Administrator shall also have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rightsshall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest, either upon the occurrence of a Change in Control or upon the subsequent termination of theParticipant’s Service by reason of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the effective date of that Change in Control. 

 
 **III.****SHARE ESCROW/LEGENDS**
Unvested shares may, in thePlan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvestedshares. 

 

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**ARTICLE FOUR**

**AUTOMATIC OPTION GRANT PROGRAM**

 
 **I.****OPTION TERMS**
A.    **Grant Dates**. Option grants shall be made on the dates specified below: 

1.    Each individual who is first elected or appointed as a non-employee Board member at any time on or after the Underwriting Date shall automatically be granted, on the date of such initial election or appointment, aNon-Statutory Option to purchase thirty thousand (30,000) shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary. 

2.    On the date of each Annual Stockholders Meeting held after the Underwriting Date, each individual who is to continue to serveas a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular Annual Meeting, shall automatically be granted a Non-Statutory Option to purchase ten thousand (10,000) shares of CommonStock, provided such individual has served as a non-employee Board member for at least six (6) months. There shall be no limit on the number of such 10,000-share option grants any one non-employee Board member may receive over his or her periodof Board service, and non-employee Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) or who have otherwise received one or more stock option grants from the Corporation prior to the UnderwritingDate shall be eligible to receive one or more such annual option grants over their period of continued Board service. 

B.    **Exercise Price**. 

1.    The exercise price per share shall be equal toone hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 

2.    The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder isutilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

C.    **OptionTerm**. Each option shall have a term of ten (10) years measured from the option grant date. 

D.    **Exercise and Vesting of Options**. Each option shall be immediately exercisable for any or all of the option shares. However, any unvested shares purchased under the option shall be subject torepurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. The shares subject to each initial 30,000-share grant shall vest, and the Corporation’srepurchase right shall lapse, in a series of eight (8) successive equal quarterly installments upon the Optionee’s completion of each three (3)-month period of service as a Board member over the twenty-four (24)-month period measured from

 

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the option grant date. The shares subject to each annual 10,000-share option grant shall vest in two (2) successive semi-annual installments upon theOptionee’s completion of each six (6)-month period of service over the twelve (12)-month period measured from the grant date. 

E.    **Limited Transferability of Options**. Each option under this Article Five may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’sfamily or to a trust established exclusively for one or more such family members or to Optionee’s former spouse, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. Theassigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediatelyprior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or heroutstanding options under this Article Five, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Suchbeneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which theoption may be exercised following the Optionee’s death. 

F.    **Termination of Board Service**. Thefollowing provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve as a Board member: 

(i) The Optionee (or, in the event of Optionee’s death, the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws ofinheritance or the designated beneficiary or beneficiaries of such option) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option. 

(ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of CommonStock for which the option is exercisable at the time of the Optionee’s cessation of Board service. 

(iii) Should the Optionee ceaseto serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Boardservice, be exercised for all or any portion of those shares as fully vested shares of Common Stock. 

(iv) In no event shall the optionremain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vestedshares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Board service for any reason other than death or 

 

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Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 

 
 **II.****CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER**
A.    In the event of any Corporate Transaction while the Optionee remains a Board member, the shares of Common Stock at the time subject to each outstanding option held by such Optionee under thisAutomatic Option Grant Program but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all the option shares as fullyvested shares of Common Stock and may be exercised for any or all of those vested shares. Immediately following the consummation of the Corporate Transaction, each automatic option grant shall terminate and cease to be outstanding, except to theextent assumed by the successor corporation (or parent thereof). 

B.    In the event of any Change in Control while theOptionee remains a Board member, the shares of Common Stock at the time subject to each outstanding option held by such Optionee under this Automatic Option Grant Program but not otherwise vested shall automatically vest in full so that each suchoption shall, immediately prior to the effective date of the Change in Control, become exercisable for all the option shares as fully vested shares of Common Stock and may be exercised for any or all of those vested shares. Each such option shallremain exercisable for such fully vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. 

C.    All outstanding repurchase rights under this under this Automatic Option Grant Program shall automatically terminate, and theshares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction or Change in Control. 

D.    Upon the occurrence of a Hostile Take-Over while the Optionee remains a Board member, such Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his orher outstanding options under this Automatic Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock atthe time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five(5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan Administrator shall be required at the time of the actual option surrender and cash distribution. 

E.    Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after suchCorporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction.Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities 

 

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shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stockin consummation of the Corporate Transaction, the successor corporation may, in connection with the assumption of the outstanding options under the Automatic Option Grant Program, substitute one or more shares of its own common stock with a fairmarket value equivalent to the cash consideration paid per share of Common Stock in such Corporate Transaction. 

F.    The grant of options under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge,consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

 
 **III.****REMAINING TERMS**
The remaining terms of eachoption granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 

**ARTICLE FIVE**

**MISCELLANEOUS**

 
 **I.****FINANCING**
The Plan Administrator may permit anyOptionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest-bearing promissory note payable inone or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to theOptionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares (less the par value of such shares) plus (ii) any Federal, state and local income and employment taxliability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. 

 
 **II.****TAX WITHHOLDING**
A.    TheCorporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income andemployment tax withholding requirements. 

B.    The Plan Administrator may, in its discretion, provide any or allholders of Non-Statutory Options or unvested shares of Common Stock under the Plan (other than the options granted or the shares issued under the Automatic Option Grant Program) with the right to use shares of Common Stock in satisfaction of all orpart of the Withholding Taxes to which such holders may 

 

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become subject in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either orboth of the following formats: 

1.    Stock Withholding: The election to have the Corporation withhold, fromthe shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceedone hundred percent (100%)) designated by the holder. 

2.    Stock Delivery: The election to deliver tothe Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering theWithholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 

 
 **III.****EFFECTIVE DATE AND TERM OF THE PLAN**
A.    The Plan shall become effective immediately on the Plan Effective Date. Options may be granted under the Discretionary Option Grant at any time on or after the Plan Effective Date, and the initial option grantsunder the Automatic Option Grant Program shall also be made on the Plan Effective Date to any non-employee Board members eligible for such grants at that time. However, no options granted under the Plan may be exercised, and no shares shall beissued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval is not obtained within twelve (12) months after the Plan Effective Date, then all options previously granted under this Planshall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. 

B.    The Plan shall serve as the successor to the Predecessor Plan, and no further option grants or direct stock issuances shall be made under the Predecessor Plan after the Plan Effective Date. All options outstandingunder the Predecessor Plan on the Plan Effective Date shall be incorporated into the Plan at that time and shall be treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solelyby the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares ofCommon Stock. 

C.    One or more provisions of the Plan, including (without limitation) the option/vesting accelerationprovisions of Article Two relating to Corporate Transactions and Changes in Control, may, in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain suchprovisions. 

D.    The Plan shall terminate upon the earliest to occur of (i) March 31, 2010 (ii) thedate on which all shares available for issuance under the Plan shall have been issued as fully vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Should the Plan terminate onMarch 31, 2010 then all option grants and unvested stock 

 

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issuances outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing such grants orissuances. 

 
 **IV.****AMENDMENT OF THE PLAN**
A.    The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations withrespect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuantto applicable laws or regulations. 

B.    Options to purchase shares of Common Stock may be granted under theDiscretionary Option Grant Program and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actuallyissued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is notobtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) theCorporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for theperiod the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 

 
 **V.****USE OF PROCEEDS**
Any cash proceeds received by theCorporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 

 
 **VI.****REGULATORY APPROVALS**
A.    The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock IssuanceProgram shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant toit. 

B.    No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until thereshall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and allapplicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 

 

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 **VII.****NO EMPLOYMENT/SERVICE RIGHTS**
Nothing in the Planshall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing orretaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause. 

 
 **VIII.****INFORMATION TO OPTIONEES**
The Corporation shallprovide to each Optionee and to each individual who acquires Shares of Common Stock pursuant to the Plan, not less frequently than annually during the period such Optionee has one or more Options or Stock Issuances outstanding, and, in the case ofan individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Corporation shall not be required to provide such statements to key employees whose duties inconnection with the Corporation assure their access to equivalent information. 

 

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**APPENDIX**

The following definitions shall be in effect under the Plan: 

A.    **AutomaticOption Grant Program** shall mean the automatic option grant program in effect under Article Five of the Plan. 

B.    **Board** shall mean the Corporation’s Board of Directors. 

C.    **Change in Control** shall mean a change in ownership or control of the Corporation effected through either of the following transactions: 

(i) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectlycontrols, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined votingpower of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders, or 

(ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Boardmembership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majorityof the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 

D.    **Code** shall mean the Internal Revenue Code of 1986, as amended. 

E.    **Common Stock** shall mean the Corporation’s common stock. 

F.    **Corporate Transaction** shall mean either of the following stockholder-approved transactions to which the Corporation is a party: 

(i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of theCorporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 

(ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of theCorporation. 

G.    **Corporation** shall mean Occam Networks, Inc., a Delaware corporation, and anycorporate successor to all or substantially all of the assets or voting stock of Occam Networks, Inc. which shall by appropriate action adopt the Plan. 

 

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H.    **Discretionary Option Grant Program** shall mean the discretionaryoption grant program in effect under Article Two of the Plan. 

I.    **Employee** shall mean anindividual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 

J.    **Exercise Date** shall mean the date on which the Corporation shall have received written notice of the optionexercise. 

K.    **Fair Market Value** per share of Common Stock on any relevant date shall be determined inaccordance with the following provisions: 

(i) If the Common Stock is at the time traded on the Nasdaq National Market, then the FairMarket Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market and published in The Wall StreetJournal. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of CommonStock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in TheWall Street Journal. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

(iii) For purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at whichthe Common Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement. 

L.    **Hostile Take-Over** shall mean the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, iscontrolled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of theCorporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept. 

M.    **Incentive Option** shall mean an option which satisfies the requirements of Code Section 422. 

N.    **Involuntary Termination** shall mean the termination of the Service of any individual which occurs by reason of:

 

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(i) such individual’s involuntary dismissal or discharge by the Corporation for reasons other thanMisconduct, or 

(ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporationwhich materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under anycorporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reductionor relocation is effected by the Corporation without the individual’s consent. 

O.    **Misconduct**shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent orSubsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of allthe acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary).

P.    **1934 Act** shall mean the Securities Exchange Act of 1934, as amended. 

Q.    **Non-Statutory Option** shall mean an option not intended to satisfy the requirements of Code Section 422.

R.    **Optionee** shall mean any person to whom an option is granted under the Discretionary Option Grantor Automatic Option Grant Program. 

S.    **Parent** shall mean any corporation (other than the Corporation)in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the totalcombined voting power of all classes of stock in one of the other corporations in such chain. 

T.    **Participant** shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 

U.    **Permanent Disability or Permanently Disabled** shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant Program, Permanent Disability or PermanentlyDisabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous durationof twelve (12) months or more. 

 

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V.    **Plan** shall mean the Corporation’s 2000 Stock Incentive Plan,as set forth in this document. 

W.    **Plan Administrator** shall mean the particular entity, whether thePrimary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying outits administrative functions under those programs with respect to the persons under its jurisdiction. 

X.    **PlanEffective Date** shall mean the date the Plan shall become effective and shall be coincident with the Underwriting Date. 

Y.    **Predecessor Plan** shall mean the Corporation’s 1997 Stock Option/Stock Issuance Plan in effect immediately prior to the Plan Effective Date hereunder. 

Z.    **Primary Committee** shall mean the committee of two (2) or more non-employee Board members appointed by theBoard to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. 

AA.    **Secondary Committee** shall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligiblepersons other than Section 16 Insiders. 

BB.    **Section 16 Insider** shall mean an officer ordirector of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 

CC.    **Service** shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or aconsultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 

DD.    **Stock Exchange** shall mean either the American Stock Exchange or the New York Stock Exchange. 

EE.    **Stock Issuance Agreement** shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock IssuanceProgram. 

FF.    **Stock Issuance Program** shall mean the stock issuance program in effect underArticle Four of the Plan. 

GG.    **Subsidiary** shall mean any corporation (other than the Corporation)in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty 

 

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percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

HH.    **Take-Over Price** shall mean the greater of (i) the Fair Market Value per share of Common Stock on thedate the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrenderedoption is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. 

II.    **10% Stockholder** shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock ofthe Corporation (or any Parent or Subsidiary). 

JJ.    **Underwriting Agreement** shall mean the agreementbetween the Corporation and the underwriter or underwriters managing the initial public offering of the Common Stock. 

KK.    **Underwriting Date** shall mean the date on which the Underwriting Agreement is executed and priced in connection with an initial public offering of the Common Stock. 

LL.    **Withholding Taxes** shall mean the Federal, state and local income and employment withholding taxes to which theholder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with the exercise of those options or the vesting of those shares. 

 

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