Advanced Materials Group, Inc. 2003 Stock Plan


     

    Exhibit
      4.2

     

    ADVANCED
      MATERIALS GROUP, INC.

     

    2003
      STOCK PLAN

     

    1.  Purposes of the Plan.
      The
      purposes of this Plan are to attract and retain the best available personnel
      for
      positions of substantial responsibility, to provide additional incentive to
      Employees, Directors and Consultants and to promote the success of the Company’s
      business. Options granted under the Plan may be Incentive Stock Options or
      Nonstatutory Stock Options, as determined by the Administrator at the time
      of
      grant. Stock Purchase Rights may also be granted under the Plan.

     

    2.  Definitions.
      As used
      herein, the following definitions shall apply:

     

    (a)  “Administrator”
      means
      the
      Board or any of its Committees as shall be administering the Plan in accordance
      with Section 4.

     

    (b)  “Applicable
      Laws”
      means
      the
      requirements relating to the administration of stock option plans under U.S.
      state corporate laws, U.S. federal and state securities laws, the Code, any
      stock exchange or quotation system on which the Common Stock is listed or quoted
      and the applicable laws of any other country or jurisdiction where Options
      or
      Stock Purchase Rights are granted under the Plan.

     

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

     

    (d)  “Change
      in Control”
      means
      the
      occurrence of any of the following events:

     

    (i)  Any
      “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
      becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act),
      directly or indirectly, of securities of the Company representing 50% or more
      of
      the total voting power represented by the Company’s then outstanding voting
      securities; or

     

    (ii)  The
      consummation of the sale or disposition by the Company of all or substantially
      all of the Company’s assets; or

     

    (iii)  The
      consummation of a merger or consolidation of the Company with any other
      corporation, other than a merger or consolidation which would result in the
      voting securities of the Company outstanding immediately prior thereto
      continuing to represent (either by remaining outstanding or by being converted
      into voting securities of the surviving entity or its parent) at least 50%
      of
      the total voting power represented by the voting securities of the Company
      or
      such surviving entity or its parent outstanding immediately after such merger
      or
      consolidation.

     

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

     

    (f)  “Committee”
means
      a
      committee of Directors or of other individuals appointed by the Board in
      accordance with Section 4
      who are
“outside directors” under the regulations promulgted under Section 162(m) of the
      Code and are “non-employee directors” under Rule 16b-3 promulgated under the
      Exchange Act, and who otherwise satisfy Applicable Laws.

     

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

     

    (h)  “Company”
means
      ADVANCED MATERIALS GROUP, INC., a California corporation.

     

    (i)  “Consultant”
means
      any person who is engaged by the Company or any Parent or Subsidiary to render
      consulting or advisory services to such entity.

     

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

     

    (k)  “Disability”
means
      total and permanent disability as defined in Section 22(e)(3) of the
      Code.

     

    (l)  “Employee”
means
      any person, including officers, employed by the Company or any Parent or
      Subsidiary of the Company. Neither service as a Director nor payment of a
      director’s fee by the Company shall be sufficient to constitute “employment” by
      the Company.

     

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

     

    (n)  “Fair
      Market Value”
means,
      as of any date, the value of Common Stock determined as follows:

     

    (i)  If
      the
      Common Stock is listed on any established stock exchange or a national market
      system, including without limitation The Nasdaq National Market, The Nasdaq
      SmallCap Market or the American Stock Exchange, its Fair Market Value shall
      be
      the closing sales price for such stock (or the closing bid, if no sales were
      reported) as quoted on such exchange or system on the day of determination,
      as
      reported in The
      Wall Street Journal
      or such
      other source as the Administrator deems reliable;

     

    (ii)  If
      the
      Common Stock is regularly quoted by a recognized securities dealer but selling
      prices are not reported, its Fair Market Value shall be the mean between the
      high bid and low asked prices for the Common Stock on the day of determination;
      or

     

    (iii)  In
      the
      absence of an established market for the Common Stock, the Fair Market Value
      thereof shall be determined in good faith by the Administrator. 

     

    (o)  “Incentive
      Stock Option”
means
      an Option intended to qualify as an incentive stock option within the meaning
      of
      Section 422 of the Code.

     

    (p)  “Nonstatutory
      Stock Option”
means
      an Option not intended to qualify as an Incentive Stock Option.

     

    (q)  “Option”
means
      a
      stock option granted pursuant to the Plan.

     

    (r)  “Option
      Agreement”
means
      a
      written or electronic agreement between the Company and an Optionee evidencing
      the terms and conditions of an individual Option grant. The Option Agreement
      is
      subject to the terms and conditions of the Plan.

     

    (s)  “Optioned Stock”
means
      the Common Stock subject to an Option or a Stock Purchase Right.

     

    (t)  “Optionee”
means
      the holder of an outstanding Option or Stock Purchase Right granted under the
      Plan.

     

    (u)  “Parent”
means
      a
“parent corporation,” whether now or hereafter existing, as defined in
      Section 424(e) of the Code.

     

    (v)  “Plan”
means
      this 2003 Stock Plan.

     

    (w)  “Restricted
      Stock”
      means
      Shares issued pursuant to a Stock Purchase Right or Shares of restricted stock
      issued pursuant to an Option.

     

    (x)  “Restricted
      Stock Purchase Agreement”
means
      a
      written agreement between the Company and the Optionee evidencing the terms
      and
      restrictions applying to Shares purchased under a Stock Purchase Right. The
      Restricted Stock Purchase Agreement is subject to the terms and conditions
      of
      the Plan and the notice of grant.

     

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

     

    (z)  “Service
      Provider”
means
      an Employee, Director or Consultant.

     

    (aa)  “Share”
means
      a
      share of the Common Stock, as adjusted in accordance with Section 12.

     

    (bb)  “Stock
      Purchase Right”
means
      a
      right to purchase Common Stock pursuant to Section
      11.

     

    (cc)  “Subsidiary”
means
      a
“subsidiary corporation,” whether now or hereafter existing, as defined in
      Section 424(f) of the Code.

     

    3.  Stock Subject to the Plan.
      Subject
      to the provisions of Section 13,
      the
      maximum aggregate number of Shares that may be subject to and sold under the
      Plan is 3,000,000 Shares.

     

    If
      an
      Option or Stock Purchase Right expires or becomes unexercisable without having
      been exercised in full, the unexercised or unpurchased Shares that were subject
      thereto shall become available for future grant or sale under the Plan (unless
      the Plan has terminated). However, Shares that have actually been issued under
      the Plan, upon exercise of either an Option or Stock Purchase Right, shall
      not
      be returned to the Plan and shall not become available for future distribution
      under the Plan, except that if Shares of Restricted Stock are repurchased by
      the
      Company at their original purchase price, such Shares shall become available
      for
      future grant under the Plan.

     

    4.  Administration of the Plan.

     

    (a)  Administrator.
      The
      Plan shall be administered by the Board or a Committee appointed by the Board,
      which Committee shall be constituted to comply with Applicable Laws. In all
      situations involving the grant of an Option or Stock Purchase Right to an
      individual who is a “covered employee” under Section 162(m) of the Code or is
      subject to Section 16(b) of the Exchange Act, the Administrator shall be a
      Committee as defined herein.

     

    (b)  Powers of the Administrator.
      Subject
      to the provisions of the Plan and, in the case of a Committee, the specific
      duties delegated by the Board to the Committee, and subject to the approval
      of
      any relevant authorities, the Administrator shall have the authority in its
      discretion:

     

    (i)  to
      determine the Fair Market Value;

     

    (ii)  to
      select
      the Service Providers to whom Options and Stock Purchase Rights may from time
      to
      time be granted hereunder;

     

    (iii)  to
      determine the number of Shares to be covered by each such award granted
      hereunder;

     

    (iv)  to
      approve forms of agreement for use under the Plan;

     

    (v)  to
      determine the terms and conditions of any Option or Stock Purchase Right granted
      hereunder. Such terms and conditions include, but are not limited to, the
      exercise price, the time or times when Options or Stock Purchase Rights may
      be
      exercised (which may be based on performance criteria), any vesting acceleration
      or waiver of forfeiture restrictions, and any restriction or limitation
      regarding any Option or Stock Purchase Right or the Common Stock relating
      thereto, based in each case on such factors as the Administrator, in its sole
      discretion, shall determine;

     

    (vi)  to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to sub-plans established for the
      purpose of satisfying applicable foreign laws;

     

    (vii)  to
      allow
      Optionees to satisfy withholding tax obligations by electing to have the Company
      withhold from the Shares to be issued upon exercise of an Option or Stock
      Purchase Right that number of Shares having a Fair Market Value equal to the
      minimum amount required to be withheld. The Fair Market Value of the Shares
      to
      be withheld shall be determined on the date that the amount of tax to be
      withheld is to be determined. All elections by Optionees to have Shares withheld
      for this purpose shall be made in such form and under such conditions as the
      Administrator may deem necessary or advisable; and

     

    (viii)  to
      construe and interpret the terms of the Plan and Options granted pursuant to
      the
      Plan.

     

    (c)  Effect of Administrator’s Decision.
      All
      decisions, determinations and interpretations of the Administrator shall be
      final and binding on all Optionees.

     

    5.  Eligibility.
      Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service
      Providers. Incentive Stock Options may be granted only to Employees. The
      Adminstrator shall determine which Service Providers who are covered by Section
      162(m) of the Code or Section 16(b) of the Exchange Act may be granted Options
      or Stock Purchase Rights.

     

    6.  Limitations.

     

    (a)  Incentive
      Stock Option Limit.
      Each
      Option shall be designated in the Option Agreement as either an Incentive Stock
      Option or a Nonstatutory Stock Option. However, notwithstanding such
      designation, to the extent that the aggregate Fair Market Value of the Shares
      with respect to which Incentive Stock Options are exercisable for the first
      time
      by the Optionee during any calendar year (under all plans of the Company and
      any
      Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
      Nonstatutory Stock Options. For purposes of this Section 6(a),
      Incentive Stock Options shall be taken into account in the order in which they
      were granted. The Fair Market Value of the Shares shall be determined as of
      the
      time the Option with respect to the Shares is granted.

     

    (b)  At-Will
      Employment.
      Neither
      the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee
      any right with respect to continuing the Optionee’s relationship as a Service
      Provider with the Company, nor shall it interfere in any way with his or her
      right or the Company’s right to terminate such relationship at any time, with or
      without cause, and with or without notice.

     

    7.  Term of Plan.
      Subject
      to shareholder approval in accordance with Section
      19,
      the
      Plan shall become effective upon its adoption by the Board. Unless sooner
      terminated under Section 15,
      it
      shall continue in effect for a term of ten years from the later of (i) the
      effective date of the Plan, or (ii) the earlier of the most recent board or
      shareholder approval of an increase in the number of Shares reserved for
      issuance under the Plan. 

     

    8.  Term
      of Option.
      The
      term of each Option shall be stated in the Option Agreement; provided, however,
      that the term shall be no more than ten years from the date of grant thereof.
      In
      the case of an Incentive Stock Option granted to an Optionee who, at the time
      the Option is granted, owns stock representing more than 10% of the voting
      power
      of all classes of stock of the Company or any Parent or Subsidiary, the term
      of
      the Option shall be five years from the date of grant or such shorter term
      as
      may be provided in the Option Agreement.

     

    9.  Option
      Exercise Price and Consideration.

     

    (a)  Exercise
      Price.
      The per
      share exercise price for the Shares to be issued upon exercise of an Option
      shall be such price as is determined by the Administrator, but shall be subject
      to the following:

     

    (i)  In
      the
      case of an Incentive Stock Option

     

    (A)  granted
      to an Employee who, at the time of grant of such Option, owns stock representing
      more than 10% of the voting power of all classes of stock of the Company or
      any
      Parent or Subsidiary, the exercise price shall be no less 110% of the Fair
      Market Value per Share on the date of grant.

     

    (B)  granted
      to any other Employee, the per Share exercise price shall be no less than 100%
      of the Fair Market Value per Share on the date of grant.

     

    (ii)  In
      the
      case of a Nonstatutory Stock Option

     

    (A)  granted
      to a Service Provider who, at the time of grant of such Option, owns stock
      representing more than 10% of the voting power of all classes of stock of the
      Company or any Parent or Subsidiary, the exercise price shall be no less than
      110% of the Fair Market Value per Share on the date of grant.

     

    (B)  granted
      to any other Service Provider, the per Share exercise price shall be no less
      than 85% of the Fair Market Value per Share on the date of grant.

     

    (iii)  Notwithstanding
      the foregoing, Options may be granted with a per Share exercise price other
      than
      as required above pursuant to a merger or other corporate
      transaction.

     

    (b)  Forms
      of Consideration.
      The
      consideration to be paid for the Shares to be issued upon exercise of an Option,
      including the method of payment, shall be determined by the Administrator (and,
      in the case of an Incentive Stock Option, shall be determined at the time of
      grant). The consideration may consist of, without limitation, (1) cash,
      (2) check, (3) promissory note, (4) other Shares, provided Shares
      acquired directly from the Company (x) have been owned by the Optionee for
      more
      than six months on the date of surrender, and (y) have a Fair Market Value
      on the date of surrender equal to the aggregate exercise price of the Shares
      as
      to which such Option shall be exercised, (5) consideration received by the
      Company under a cashless exercise program implemented by the Company in
      connection with the Plan, or (6) any combination of the foregoing methods
      of payment. In making its determination as to the type of consideration to
      accept, the Administrator shall consider if acceptance of such consideration
      may
      be reasonably expected to benefit the Company.

     

    10.  Exercise of Option.

     

    (a)  Procedure for Exercise;
      Rights as a Shareholder.
      Any
      Option granted hereunder shall be exercisable according to the terms hereof
      at
      such times and under such conditions as determined by the Administrator and
      set
      forth in the Option Agreement. An Option may not be exercised for a fraction
      of
      a Share. Except in the case of Options granted to officers, Directors and
      Consultants, Options shall become exercisable at a rate of no less than 20%
      per
      year over five years from the date the Options are granted.

     

    An
      Option
      shall be deemed exercised when the Company receives (i) written or
      electronic notice of exercise (in accordance with the Option Agreement) from
      the
      person entitled to exercise the Option, and (ii) full payment for the
      Shares with respect to which the Option is exercised. Full payment may consist
      of any consideration and method of payment authorized by the Administrator
      and
      permitted by the Option Agreement and the Plan. Shares issued upon exercise
      of
      an Option shall be issued in the name of the Optionee or, if requested by the
      Optionee, in the name of the Optionee and his or her spouse. Until the Shares
      are issued (as evidenced by the appropriate entry on the books of the Company
      or
      of a duly authorized transfer agent of the Company), no right to vote or receive
      dividends or any other rights as a shareholder shall exist with respect to
      the
      Shares, notwithstanding the exercise of the Option. The Company shall issue
      (or
      cause to be issued) the Shares promptly after the Option is exercised. No
      adjustment will be made for a dividend or other right for which the record
      date
      is prior to the date the Shares are issued, except as provided in Section 13.

     

    Exercise
      of an Option in any manner shall result in a decrease in the number of Shares
      thereafter available, both for purposes of the Plan and for sale under the
      Option, by the number of Shares as to which the Option is
      exercised.

     

    (b)  Termination of
      Relationship as a Service Provider.
      If an
      Optionee ceases to be a Service Provider, the Optionee may exercise his or
      her
      Option within 30 days of termination, or such longer period of time as specified
      in the Option Agreement, to the extent that the Option is vested on the date
      of
      termination (but in no event later than the expiration of the term of the Option
      as set forth in the Option Agreement). If, on the date of termination, the
      Optionee is not vested as to his or her entire Option, the Shares covered by
      the
      unvested portion of the Option shall revert to the Plan. If, after termination,
      the Optionee does not exercise his or her Option within the time specified
      by
      the Administrator, the Option shall terminate, and the Shares covered by the
      Option shall revert to the Plan.

     

    (c)  Disability
      of Optionee.
      If an
      Optionee ceases to be a Service Provider as a result of the Optionee’s
      Disability, the Optionee may exercise his or her Option within six months of
      termination, or such longer period of time as specified in the Option Agreement,
      to the extent the Option is vested on the date of termination (but in no event
      later than the expiration of the term of such Option as set forth in the Option
      Agreement). If, on the date of termination, the Optionee is not vested as to
      his
      or her entire Option, the Shares covered by the unvested portion of the Option
      shall revert to the Plan. If, after termination, the Optionee does not exercise
      his or her Option within the time specified herein, the Option shall terminate,
      and the Shares covered by such Option shall revert to the Plan.

     

    (d)  Death of Optionee.
      If an
      Optionee dies while a Service Provider, the Option may be exercised within
      six
      months following Optionee’s death, or such longer period of time as specified in
      the Option Agreement, to the extent that the Option is vested on the date of
      death (but in no event later than the expiration of the term of the Option
      as
      set forth in the Option Agreement) by the Optionee’s designated beneficiary,
      provided the beneficiary has been designated prior to Optionee’s death in a form
      acceptable to the Administrator. If no beneficiary has been designated by the
      Optionee, then the Option may be exercised by the personal representative of
      the
      Optionee’s estate or by the person(s) to whom the Option is transferred pursuant
      to the Optionee’s will or in accordance with the laws of descent and
      distribution. If, at the time of death, the Optionee is not vested as to his
      or
      her entire Option, the Shares covered by the unvested portion of the Option
      shall immediately revert to the Plan. If the Option is not so exercised within
      the time specified herein, the Option shall terminate, and the Shares covered
      by
      the Option shall revert to the Plan.

     

    (e)  Leaves
      of Absence.

     

    (i)  Unless
      the Administrator provides otherwise, vesting of Options granted hereunder
      to
      officers and Directors shall be suspended during any unpaid leave of
      absence.

     

    (ii)  A
      Service
      Provider shall not cease to be an Employee in the case of (A) any leave of
      absence approved by the Company or (B) transfers between locations of the
      Company or between the Company, its Parent, any Subsidiary, or any
      successor.

     

    (iii)  For
      purposes of Incentive Stock Options, no leave may exceed 90 days, unless
      reemployment upon expiration of such leave is guaranteed by statute or contract.
      If reemployment upon expiration of a leave of absence approved by the Company
      is
      not so guaranteed, then three months following the 91st day of the leave, any
      Incentive Stock Option held by the Optionee shall cease to be treated as an
      Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
      Stock Option.

     

    11.  Stock
      Purchase Rights.

     

    (a)  Rights
      to Purchase.
      Stock
      Purchase Rights may be issued either alone, in addition to, or in tandem with
      other awards granted under the Plan and/or cash awards made outside of the
      Plan.
      After the Administrator determines that it will offer Stock Purchase Rights
      under the Plan, it shall advise the offeree in writing or electronically of
      the
      terms, conditions and restrictions related to the offer, including the number
      of
      Shares that the offeree shall be entitled to purchase, the price to be paid,
      and
      the time within which the offeree must accept the offer. The terms of the offer
      shall comply in all respects with Section 260.140.42 of Title 10 of the
      California Code of Regulations. The offer shall be accepted by execution of
      a
      Restricted Stock Purchase Agreement in the form determined by the
      Administrator.

     

    (b)  Repurchase
      Option.
      Unless
      the Administrator determines otherwise, the Restricted Stock Purchase Agreement
      shall grant the Company a repurchase option exercisable within 90 days of the
      voluntary or involuntary termination of the purchaser’s service with the Company
      for any reason (including death or disability). The purchase price for Shares
      repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
      original price paid by the purchaser and may be paid by cancellation of any
      indebtedness of the purchaser to the Company. The repurchase option shall lapse
      at such rate as the Administrator may determine.

     

    (c)  Other
      Provisions.
      The
      Restricted Stock Purchase Agreement shall contain such other terms, provisions
      and conditions not inconsistent with the Plan as may be determined by the
      Administrator in its sole discretion. 

     

    (d)  Rights
      as a Shareholder.
      Once
      the Stock Purchase Right is exercised, the purchaser shall have rights
      equivalent to those of a shareholder and shall be a shareholder when his or
      her
      purchase is entered upon the records of the duly authorized transfer agent
      of
      the Company. No adjustment shall be made for a dividend or other right for
      which
      the record date is prior to the date the Stock Purchase Right is exercised,
      except as provided in Section
      13.

     

    12.  Limited
      Transferability of Options and Stock Purchase Rights.
      Unless
      determined otherwise by the Administrator, Options and Stock Purchase Rights
      may
      not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
      any
      manner other than by will or the laws of descent and distribution, and may
      be
      exercised during the lifetime of the Optionee, only by the Optionee. If the
      Administrator in its sole discretion makes an Option or Stock Purchase Right
      transferable, such Option or Stock Purchase Right may only be transferred (i)
      by
      will, (ii) by the laws of descent and distribution, or (iii) to family members
      (within the meaning of Rule 701 under the Securities Act) through gifts or
      domestic relations orders, as permitted by Rule 701 under the Securities
      Act.

     

    13.  Adjustments;
      Dissolution or Liquidation; Merger or Change in Control.

     

    (a)  Adjustments.
      If any
      dividend or other distribution (whether in the form of cash, Shares, other
      securities, or other property), recapitalization, stock split, reverse stock
      split, reorganization, merger, consolidation, split-up, spin-off, combination,
      repurchase, or exchange of Shares or other securities of the Company, or other
      change in the corporate structure of the Company affecting the Shares occurs,
      the Administrator, in order to prevent diminution or enlargement of the benefits
      or potential benefits intended to be made available under the Plan, may (in
      its
      sole discretion) adjust the number and class of Shares that may be delivered
      under the Plan and/or the number, class, and price of Shares covered by each
      outstanding Option or Stock Purchase Right; provided, however, that the
      Administrator shall make the adjustments to the extent required by Section
      25102(o) of the California Corporations Code.

     

    (b)  Dissolution
      or Liquidation.
      In the
      event of the proposed dissolution or liquidation of the Company, the
      Administrator shall notify each Optionee as soon as practicable prior to the
      effective date of the proposed transaction. To the extent it has not been
      previously exercised, an Option or Stock Purchase Right will terminate
      immediately prior to the consummation of the proposed action.

     

    (c)  Merger
      or Change in Control.
      In the
      event of a merger of the Company with or into another corporation, or a Change
      in Control, each outstanding Option and Stock Purchase Right shall fully vest
      and the Optionee shall have the right to exercise the Option or Stock Purchase
      Right as to all of the Optioned Stock, including Shares as to which it would
      not
      otherwise be vested or exercisable. In the event of a merger or Change in
      Control, the Administrator shall notify the Optionee in writing or
      electronically that each outstanding Option or Stock Purchase Right shall be
      fully exercisable for a period of 15 days from the date of the notice, and
      the
      Option or Stock Purchase Right shall terminate upon expiration of such
      period.

     

    14.  Time of Granting Options
      and Stock Purchase Rights.
      The
      date
      of grant of an Option or Stock Purchase Right shall, for all purposes, be the
      date on which the Administrator makes the determination granting such Option
      or
      Stock Purchase Right, or such later date as is determined by the Administrator.
      Notice of the determination shall be given to each Service Provider to whom an
      Option or Stock Purchase Right is so granted within a reasonable time after
      the
      date of such grant.

     

    15.  Amendment and Termination of the Plan.

     

    (a)  Amendment
      and Termination.
      The
      Board may at any time amend, alter, suspend or terminate the Plan.

     

    (b)  Shareholder
      Approval.
      The
      Board shall obtain shareholder approval of any Plan amendment to the extent
      necessary and desirable to comply with Applicable Laws.

     

    (c)  Effect of Amendment or Termination.
      No
      amendment, alteration, suspension or termination of the Plan shall impair the
      rights of any Optionee, unless mutually agreed otherwise between the Optionee
      and the Administrator, which agreement must be in writing and signed by the
      Optionee and the Company. Termination of the Plan shall not affect the
      Administrator’s ability to exercise the powers granted to it hereunder with
      respect to Options granted under the Plan prior to the date of
      termination.

     

    16.  Conditions
      Upon Issuance of Shares.

     

    (a)  Legal
      Compliance.
      Shares
      shall not be issued pursuant to the exercise of an Option unless the exercise
      of
      the Option and the issuance and delivery of the Shares complies with Applicable
      Laws, including without limitation, Sections 260.140.41 and 260.140.42 of Title
      10 of the California Code of Regulations. and is further subject to the approval
      of counsel for the Company with respect to compliance.

     

    (b)  Investment
      Representations.
      As a
      condition to the exercise of an Option, the Administrator may require the person
      exercising the Option to represent and warrant at the time of any exercise
      that
      the Shares are being purchased only for investment and without any present
      intention to sell or distribute the Shares if, in the opinion of counsel for
      the
      Company, such a representation is required.

     

    17.  Inability
      to Obtain Authority.
      The
      inability of the Company to obtain authority from any regulatory body having
      jurisdiction, which authority is deemed by the Company’s counsel to be necessary
      to the lawful issuance and sale of any Shares hereunder, shall relieve the
      Company of any liability in respect of the failure to issue or sell the Shares
      as to which such requisite authority shall not have been obtained.

     

    18.  Reservation of Shares.
      The
      Company, during the term of this Plan, shall at all times reserve and keep
      available a number of Shares sufficient to satisfy the requirements of the
      Plan.

     

    19.  Shareholder
      Approval.
      The
      Plan
      shall be subject to approval by the shareholders of the Company within 12 months
      after the date the Plan is adopted. Shareholder approval shall be obtained
      in
      the degree and manner required under Applicable Laws.

     

    20.  Information
      to Optionees.
      The
      Company shall provide copies of annual financial statements to (i) each Optionee
      during the period the Optionee has one or more outstanding vested Options or
      Stock Purchase Rights covering Shares no longer subject to the Company’s
      Repurchase Option and (ii) each individual who acquires Shares pursuant to
      the
      Plan during the period the individual owns the
      Shares.