Document:

Exhibit 10.2

    CONFIDENTIAL

    Placement
      Agent Agreement

     

    ZNOMICS,
      INC.

    2611
      SW
      3rd
      Avenue

    Suite
      200

    Portland,
      OR 97201

     

    June
      11,
      2007

    

    Griffin
      Securities, Inc.

    17
      State
      Street

    New
      York,
      NY 10004

    

    Attention:
      Adrian Z. Stecyk, President

    

    Gentlemen:

    

    The
      undersigned, Znomics, Inc., a Delaware corporation (the “Company”), hereby
      agrees (the “Agreement”) with Griffin Securities, Inc. (“Griffin” or the
“Placement Agent”) to engage the Placement Agent to raise equity capital of up
      to $10 million in a private placement transaction to be sold to qualified
      investors. This letter confirms the terms and conditions of the
      Agreement.

    

    1. 
      Best
      Efforts Offering.
      The
      Company hereby engages Griffin to act as its exclusive Placement Agent during
      the term of the offering as provided herein to offer and sell on a “best
      efforts” basis (the “Offering”) shares of the Company’s Series C Convertible
      Preferred Stock (“Preferred Stock”) (or other securities of the Company
      determined by the Company and the Placement Agent) (the Preferred Stock or
      other
      securities are hereinafter sometimes referred to as the “Securities”). The
      Preferred Stock shall be a class that is senior to other outstanding classes
      of
      equity securities of the Company. The Securities shall be offered and sold
      without registration in reliance on one or more applicable exemptions under
      the
      Securities Act of 1933, as amended, and the rules and regulations promulgated
      thereunder (the “Act”) including the exemption from registration provided by
      Regulation D thereof.
      The
      Offering shall be for a minimum (the “Minimum”) of at least $3 million and a
      maximum of $10 million (the “Maximum”). An initial closing of the Offering will
      occur on or before August 31, 2007 provided the Minimum is subscribed for,
      and a
      final closing may be held on or before October 31, 2007 as determined by the
      Company and the Placement Agent. All proceeds from subscriptions by investors
      will be deposited in an escrow account with a bank reasonably satisfactory
      to
      the Company and the Placement Agent. 

     

    2. 
      Offering
      Materials.
      The
      Company shall, as soon as practicable, prepare offering materials (the "Offering
      Materials"), which shall meet the anti-fraud and other requirements of federal
      and state securities laws, in form and substance reasonably satisfactory to
      the
      Company and Placement Agent. 

     

    3. 
      Compensation.
      The
      Placement Agent will be paid at each closing of the Offering
      a cash
      commission of 7.0% of the aggregate amount of the Offering proceeds (the “Cash
      Compensation”) for Securities sold to all investors (other than an aggregate of
      up to $1 million of Offering proceeds from those investors listed on Exhibit
      A
      hereto (each an “Excluded Investor”). In addition, the Placement Agent shall
      receive at each closing warrants to purchase such number of shares of the
      Company’s 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Preferred
      Stock (or other Securities) equal to 7.0% of number of shares of Preferred
      Stock
      (or other Securities) sold in the Offering (the “Warrant Compensation”). Such
      warrants shall be exercisable for a period of 5 years from the applicable
      closing date at an exercise price equal to the price per share paid by the
      investors in the Offering,
      subject
      to usual adjustments, and shall contain a provision for cashless
      exercise.
      The
      Placement Agent shall be entitled to the same registration rights, if any,
      with
      respect to its Warrant Compensation and the underlying securities as may be
      granted to any investors. The Placement Agent may designate any of its officers,
      directors, partners, principals, employees and agents to receive any part of
      the
      Warrant Compensation. 

    

    Bridgeworks
      Capital will be permitted to assist the Company in the private placement of
      shares of Preferred Stock to investors introduced by Bridgeworks Capital
      (“Bridgeworks Investors”). With respect to sales of Preferred Stock to
      Bridgeworks Investors, Company will pay a cash commission and warrant
      compensation to Bridgeworks Capital pursuant to a separate agreement between
      the
      Company and Bridgeworks Capital. Placement Agent agrees that Placement Agent
      will receive no Cash Compensation or Warrant Compensation (or any other
      compensation) with respect to sales to Bridgeworks Investors, limited, however,
      to a maximum gross proceeds of $1 million from the sale of Preferred Stock
      to
      the Bridgeworks Investors. 

     

    Notwithstanding
      anything to the contrary herein, if, during the term of the Offering hereunder,
      an investor (other than an Excluded Investor) is informed of the Offering by
      the
      Placement Agent and if (i) the Offering hereunder does not close and such
      investor purchases from the Company any privately placed securities of the
      Company within 12 months after the termination of the Offering or (ii) the
      Offering hereunder closes and such investor makes an investment
      in the Offering and subsequently purchases from the Company within 12 months
      after the final closing of the Offering any privately placed securities of
      the
      Company, the Placement Agent shall be entitled to Cash Compensation and Warrant
      Compensation as set forth in the preceding paragraph with respect to purchases
      by such investor. For the purposes hereof, an investor shall be deemed to have
      been informed of the Offering by the Placement Agent if such investor had at
      least one meeting in person or by telephone with a representative of the
      Company. The provisions of this paragraph shall survive the Closing and any
      termination of the Offering or this Agreement.

     

    Whether
      or not any Securities have been sold, if, at any time from the date hereof
      until
      12 months after termination of the Offering as provided herein, the Company
      engages in a business transaction (as hereinafter defined) with a person or
      entity introduced to the Company by the Placement Agent prior to the termination
      of the Offering, the Company will pay or cause to be paid to the Placement
      Agent
      at the closing of such business transaction a cash fee equal to 5% of the total
      consideration paid or contributed to the Company or shareholders of the Company,
      including cash, securities, indebtedness, indebtedness assumed, contingent
      or
      future payment or other property, in such business transaction. If any such
      consideration is other than cash, for the purpose of calculating the fee to
      the
      Placement Agent hereunder, such consideration will be valued at fair market
      value as determined by the parties in good faith. For the purposes hereof,
      a
      business transaction shall include without limitation a purchase, sale,
      exchange, lease or license of stock or assets other than in the ordinary course
      of business of the Company, merger, consolidation or other form of business
      combination, strategic alliance, joint venture or similar transaction.
      Notwithstanding anything to the contrary provided above, the 12 months period
      covered by this paragraph shall be extended if a business transaction is being
      negotiated in good faith but is not yet closed during such period until the
      closing shall occur. The provisions of this paragraph shall survive the closing
      and any termination of the Offering or this Agreement. 

     

              4. 
Expenses.
      Whether
      or not the Offering is successfully completed, it shall be the Company’s
      obligation to bear all of its expenses in connection with the proposed Offering.
      In addition, the Company shall reimburse the Placement Agent for its reasonable
      actual out of pocket expenses, 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    including
      reasonable legal fees and disbursements up to a maximum aggregate amount of
      $50,000. The
      provisions of this paragraph shall survive the Closing and any termination
      of
      the Offering or this Agreement.

     

    5. 
      Further
      Representations and Agreements of the Company.
      The
      Company further represents and agrees that (i) it is authorized to enter into
      this Agreement and to carry out the Offering contemplated hereunder and this
      Agreement constitutes a legal, valid and binding obligation of the Company,
      enforceable in accordance with its terms, (ii) the Company shall not during
      the
      term of the Offering without notifying the Placement Agent in advance issue
      any
      equity securities or securities convertible into, exchangeable for, or giving
      the holder thereof the right to acquire equity securities of the Company (other
      than shares pursuant to the exercise of presently outstanding warrants or
      options pursuant to its existing stock option plan or successor plan covering
      no
      more securities than the existing plan or other shares issuable pursuant to
      existing contractual obligations), (iii) subject to the Placement Agent’s
      obligation to maintain the confidentiality of any information not yet disclosed
      by the Company to the public, the Company will, during the course of the
      Offering, provide the
      Placement Agent
      with all
      information and copies of documentation with respect to the Company's business,
      financial condition and other matters as the Placement Agent may reasonably
      deem
      relevant, including copies of all documents sent to stockholders or filed with
      any federal authorities, and will make reasonably available to the Placement
      Agent the Company’s auditors, counsel, officers and directors to discuss with
      the Placement Agent any aspect of the Company or its business which the
      Placement Agent may reasonably deem relevant, and (iv) the Company will deliver
      at the closing of the Offering (a) subscription documents signed by the Company
      and each investor and (b) an opinion of counsel for the Company in customary
      form
      and
      reasonably satisfactory to the Placement Agent, (v) the Company shall use its
      best efforts to qualify the Securities for offer and sale under applicable
      exemptions from registration under the securities or Blue Sky laws of such
      jurisdictions as the Placement Agent may reasonably request.

    

    6. 
      Indemnification.
      The
      Company agrees to indemnify the Placement Agent and certain affiliated and
      related persons in accordance with the provisions set forth in Exhibit B
      attached hereto. The
      Placement Agent shall indemnify and hold harmless the Company and each of its
      affiliates, stockholders, directors, officers, employees, agents and controlling
      persons within the meaning of the Securities Act of 1933, as amended, to the
      same extent as set forth in the indemnity from the Company in Exhibit B, but
      only in connection with (i) information relating to the Placement Agent
      furnished in writing to the Company specifically for inclusion in the Offering
      Materials and (ii) any and all losses, claims, expenses, damages and liabilities
      arising out of the gross negligence or willful misconduct of the Placement
      Agent. Such indemnification will survive the Closing and any termination of
      the
      Offering or this Agreement.

    7. 
      Termination.
      This
      Agreement and the Offering shall terminate on October 31, 2007 if the Offering
      has not been consummated prior to such date. The Company and the Placement
      Agent
      may also terminate or extend the Agreement at any time by mutual written
      consent.

    

    8. 
      Competing
      Claims.
      The
      Company acknowledges and agrees that no entity has any claims or is entitled
      to
      any payments for services in the nature of a finder’s fee or any other
      arrangements, agreements, payments or understandings pursuant to this Offering,
      except as specified in Section 3 above. 

    

    9.  Miscellaneous.

    

    (a) 
      Governing
      Law.
      This
      Agreement and the transactions contemplated hereby shall be governed in all
      respects by the laws of the State of New York, without giving effect to its
      conflict of laws principles. Venue for all purposes herein shall be in the
      State
      of New York.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b) 
      Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute one and the same
      instrument.

    

    (c) 
      Notices.
      Whenever notice is required to be given pursuant to this Agreement, such notice
      shall be in writing and shall either be mailed by certified first class mail,
      postage prepaid, or delivered personally or by express courier, addressed to
      the
      parties at their respective addresses set forth above. The notice shall be
      deemed given, if sent by mail, on the third day after deposit in a United States
      post office receptacle, or if delivered personally or by express courier, then
      upon delivery. Either party may change its address by like notice.

     

    (d) 
      Dispute.
      In the
      event of any action at law, suit in equity or arbitration proceeding in relation
      to this Agreement or the transactions contemplated by this Agreement, the
      prevailing party, or parties, shall be paid its reasonable attorney's fees
      and
      expenses arising from such action, suit or proceeding by the other
      party.

    

    (e)
       Entire
      Agreement.
      Except
      for any non-disclosure or confidentiality agreement entered into by and between
      the parties hereto, this Agreement sets forth the entire understanding of the
      parties relating to the subject matter hereof, and supersedes and cancels any
      prior communications, understanding, and agreements between parties. This
      Agreement cannot be modified or changed, nor can any of its provisions be
      waived, except by written agreement signed by the parties against which
      enforcement is sought.

    

    (f)
       Broker-Dealer
      Registration.
      The
      Placement Agent represents and warrants that it is duly licensed as a
      broker-dealer in each jurisdiction in which its activities hereunder require
      registration or license and it is authorized to enter into this Agreement and
      to
      carry out the Offering contemplated hereunder and this Agreement constitutes
      a
      legal, valid and binding obligation of the Placement Agent, enforceable in
      accordance with its terms.

    

    If
      the
      foregoing correctly sets forth the understanding
      between the Placement Agent and the Company, please so indicate in the space
      provided below for that purpose whereupon this letter shall constitute a binding
      agreement between us.

     

    
      	 Very truly yours,
	 
	 ZNOMICS, INC
	 
	 By /s/ Richard A
              Sessions
	 Richard Sessions, Chief Executive
              Officer

    

     

    Confirmed
      and agreed to:

    

    GRIFFIN
      SECURITIES, INC. 

    

    By
/s/
      Adrian Z. Stecyk

    Adrian
      Z.
      Stecyk, President

    
      Date:    June
        11,
        2007

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      CONFIDENTIAL

       

    

    EXHIBIT
      A

    

    
      
        	 Znomics Excluded Investor
                List	 
	 	 
	 Roger Cone 	 (Founder)
	 Richard Sessions    	 (Founder)
	 Dwight Sangrey 	 (Founder)
	 Stephen Kurtz 	 (Founder)
	 Wenbiao Chen	 (Founder)
	 	 
	 Roger Cone 	 (Investor, Series A & B)
                
	 Richard Sessions 	 (Investor, Series A &
                B)
	 Stephen Kurtz 	 (Investor, Series A)
	 Dwight Sangrey    	 (Investor, Series A)
	 Richard Fernandes 	 (Investor, Series A & B)
                
	 Steven Lieberman 	 (Investor,
                Series A & B)
	 Vince D’Agostino 	 (Investor, Series A)
	 Stuart Bell 	 (Investor, Series A)
	 Robert Bosselman 	 (Investor, Series A)
	 Forrest Seitz 	 (Investor,
                Series A)
	 Jay Finkelstein 	 (Investor, Series A &
                B)
	 Punk, Ziegel Co. 	 (Investor, Series A &
                B)
	 James Ackerman 	 (Investor, Series A)
	 John Bligh 	 (Investor, Series A)
	 Philip Dileo 	 (Investor,
                Series A & B)
	 Mathew and Sharon Kaplan	 (Investors,
                Series A)
	 Patrick Murphy	 (Investor, Series A)
	 William Punk 	 (Investor, Series A)
	 Sharon Seiler and Charles
                Spielholz	 (Investors, Series A)
	 Nick Stanley 	 (Investor,
                Series B)
	 Lawrence Silverman 	 (Investor, Series B)
	 OHSU	 (Investor, Series A)
	 	 
	 Any Znomics current employees or
                consultants	 
	 	 
	 Jay Zidell	(Bridgeworks)
	 Cheryl Krane	(Bridgeworks)
	 Irving Levin	(Bridgeworks)
	 Paulson Investment Co	(Bridgeworks)
	 Denis Burger	(Bridgeworks)

      

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    CONFIDENTIAL

    EXHIBIT
      B

     

    June
      11,
      2007

    

    Griffin
      Securities, Inc.

    17
      State
      Street

    New
      York,
      NY 10004

    

    Attention:
      Adrian Z. Stecyk, President

    

    Dear
      Mr.
      Stecyk:

    

    In
      connection with our (the “Company”) engagement of Griffin Securities, Inc.
      ("Griffin") as our financial advisor and/or placement agent, we hereby agree
      to
      indemnify and hold harmless Griffin and its affiliates, and the respective
      controlling persons, directors, officers, shareholders, agents and employees
      of
      any of the foregoing (collectively the "Indemnified Persons"), from and against
      any and all claims, actions, suits, proceedings (including those of
      shareholders), damages, liabilities and expenses incurred by any of them
      (including the reasonable fees and expenses of counsel), (collectively a
      "Claim"), which are (A) related to or arise out of (i) any actions taken or
      omitted to be taken (including any untrue statements or alleged untrue
      statements made or any statements omitted or alleged to have been omitted to
      be
      made) by the Company, or (ii) any actions taken or omitted to be taken by any
      Indemnified Person in connection with our engagement of Griffin, or (B)
      otherwise relate to or arise out of Griffin's activities on our behalf pursuant
      to Griffin’s engagement, and we shall reimburse any Indemnified Person for all
      expenses (including the reasonable fees and expenses of counsel) incurred by
      such Indemnified Person in connection with investigating, preparing or defending
      any such claim, action, suit or proceeding, whether or not in connection with
      pending or threatened litigation, in which any Indemnified Person is a party.
      We
      will not, however, be responsible for any Claim which is finally judicially
      determined to have resulted from
      the
      gross negligence or willful misconduct of any Indemnified Person. We further
      agree that no Indemnified Person shall have any liability to us for or in
      connection with our engagement of Griffin except for any Claim incurred by
      us as
      a result of any Indemnified Person's gross negligence or willful
      misconduct.

    

    We
      further agree that we will not, without the prior written consent of Griffin,
      settle, compromise or consent to the entry of any judgment in any pending or
      threatened Claim in respect of which indemnification may be sought hereunder
      (whether or not any Indemnified Person is an actual or potential party to such
      Claim), unless such settlement, compromise or consent includes an unconditional,
      irrevocable release of each Indemnified Person hereunder from any and all
      liability arising out of such Claim.

     

    Promptly
      upon receipt by an Indemnified Person of notice of any complaint or the
      assertion or institution of any Claim with respect to which indemnification
      is
      being sought hereunder, such Indemnified Person shall notify us in writing
      of
      such complaint or of such assertion or institution, but failure to so notify
      us
      shall not relieve us from any obligation we may have hereunder unless and only
      to the extent such failure results in the forfeiture by us of substantial rights
      and defenses. If we so elect or are requested by such Indemnified Person, we
      will assume the defense of such Claim, including the employment of counsel
      reasonably satisfactory to such Indemnified Person and the payment of the fees
      and expenses of such counsel. In the event, however, that legal counsel to
      such
      Indemnified Person 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

      reasonably
        determines and provides written correspondence to us that having common counsel
        would present such counsel with a conflict of interest or if the defendant
        in,
        or target of, any such Claim, includes an Indemnified Person and us, and
        legal
        counsel to such Indemnified Person reasonably concludes that there may be
        legal
        defenses available to it or other Indemnified Persons different from or in
        addition to those available to us, then such Indemnified Person may employ
        its
        own separate counsel to represent or defend it in any such Claim and we shall
        pay the reasonable fees and expenses of such counsel. Notwithstanding anything
        herein to the contrary, if we fail timely or diligently to defend, contest,
        or
        otherwise protect against any Claim, the Indemnified Person shall have the
        right, but not the obligation,
        to defend, contest, assert cross claims, or counterclaims or otherwise protect
        against the same, and shall be fully indemnified by us therefor, including
        without limitation, for the reasonable fees and expenses of its counsel and
        all
        amounts paid as a result of such Claim or the compromise or settlement thereof.
        In no event, however, will any Indemnified Party, without our prior written
        consent (which will not be unreasonably withheld), settle, compromise or
        consent
        to the entry of any judgment in any pending or threatened Claim in respect
        of
        which indemnification may be sought hereunder (whether or not any Indemnified
        Person is an actual or potential party to such Claim). In any Claim in which
        we
        assume the defense, the Indemnified Person shall have the right to participate
        in such Claim and to retain its own counsel therefor at its own
        expense.

    

    

    We
      agree
      that if any indemnity sought by an Indemnified Person hereunder is unavailable
      for any reason then (whether or not Griffin is the Indemnified Person), we
      and
      Griffin shall contribute to the Claim for which such indemnity is held
      unavailable in such proportion as is appropriate to reflect the relative
      benefits to us, on the one hand, and Griffin on the other, in connection with
      Griffin's engagement referred to above, subject to the limitation that in no
      event shall the amount of Griffin's contribution to such Claim exceed the amount
      of fees actually received by Griffin from us pursuant to Griffin's engagement.
      We hereby agree that the relative benefits to us, on the one hand, and Griffin
      on the other, with respect to Griffin's engagement shall be deemed to be in
      the
      same proportion as (a) the total value paid or proposed to be paid or received
      by us or our stockholders as the case may be, pursuant to the transaction
      (whether or not consummated) for which you are engaged to render services bears
      to (b) the fee paid or proposed to be paid to Griffin in connection with such
      engagement.

    

    Our
      indemnity, reimbursement and contribution obligations under this Agreement
      shall
      be in addition to, and shall in no way limit or otherwise adversely affect
      any
      rights that any Indemnified Party may have at law or at equity.

     

    The
      validity and interpretation of this agreement shall be governed by and construed
      and enforced in accordance with the laws of the State of New York applicable
      to
      agreements made and to be fully performed therein (excluding the conflicts
      of
      laws rules). Each of Griffin and the Company hereby irrevocably submits to
      the
      jurisdiction of any court of the State of New York for the purpose of any suit,
      action or other proceeding arising out of this agreement or the transactions
      contemplated hereby, which is brought by or against Griffin or the Company
      and
      in connection therewith, each of Griffin and the Company (i) hereby irrevocably
      agrees that all claims in respect of any such suit, action or proceeding may
      be
      heard and determined in any such court, (ii) to the extent that it has acquired,
      or hereafter may acquire, any immunity from jurisdiction of any such court
      or
      from any legal process therein, it hereby waives, to the fullest extent
      permitted by law, such immunity and (iii) agrees not to commence any action,
      suit or proceeding relating to this agreement other than in any such court.
      Each
      of Griffin and the Company hereby waives and agrees not to assert in any such
      action, suit or proceeding, to the fullest extent permitted by applicable law,
      any claim that (a) it is not personally subject to the jurisdiction of any
      such
      court, (b) it is immune from any legal process (whether through service or
      notice, attachment prior to judgment, attachment in aid of execution, execution
      or otherwise) with respect to its property of (c) any suit, action or proceeding
      is brought in an inconvenient forum. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    The
      provisions of this Agreement shall survive and remain in full force and effect
      following the completion or termination of Griffin's
      engagement.

    
      	 Very truly yours,
	 
	 ZNOMICS, INC
	 
	 By /s/ Richard A
              Sessions
	 Richard Sessions, Chief Executive
              Officer

    

     

    Confirmed
      and agreed to:

    

    GRIFFIN
      SECURITIES, INC.

    

    By
/s/
      Adrian Z. Stecyk

    Adrian
      Z.
      Stecyk, President

    
       

      Date: 
        June
        11,
        2007Exhibit 10.35

                             SALON MEDIA GROUP, INC.
                                 2004 STOCK PLAN
                 As Amended and Restated through October 4, 2007

     1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
          ----------------------------------------

          1.1 Establishment. Salon Media Group, Inc. 2004 Stock Plan was
initially established November 17, 2004 (the "Initial Plan"), the date on which
it was approved by the stockholders of the Company (the "Effective Date"). The
Initial Plan is hereby amended and restated in its entirety (the "Plan")
effective as of October 4, 2007, the date of its approval by the stockholders of
the Company.

          1.2 Purpose. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Restricted Stock
Purchase Rights, and Restricted Stock Bonuses.

          1.3 Term of Plan. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.

     2.   DEFINITIONS AND CONSTRUCTION.
          -----------------------------

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

               (a) "Affiliate" means (i) an entity, other than a Parent
Corporation, that directly, or indirectly through one or more intermediary
entities, controls the Company or (ii) an entity, other than a Subsidiary
Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term "control"
(including the term "controlled by") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

               (b) "Award" means an Option, Restricted Stock Purchase Right, or
Restricted Stock Bonus granted under the Plan.

               (c) "Award Agreement" means a written or electronic agreement
between the Company and a Participant setting forth the terms, conditions and
restrictions of the Award granted to the Participant.

                                       1
<PAGE>

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

               (e) "Code" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

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

               (g) "Company" means Salon Media Group, Inc., a Delaware
corporation, or any successor corporation thereto.

               (h) "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration
Statement under the Securities Act.

               (i) "Director" means a member of the Board or of the board of
directors of any other Participating Company.

               (j) "Disability" means the inability of the Participant, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Participant's position with the Participating Company Group
because of the sickness or injury of the Participant.

               (k) "Employee" means any person treated as an employee (including
an Officer or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual's employment or termination of employment,
as the case may be. For purposes of an individual's rights, if any, under the
terms of the Plan as of the time of the Company's determination of whether or
not the individual is an Employee, all such determinations by the Company shall
be final, binding and conclusive as to such rights, if any, notwithstanding that
the Company or any court of law or governmental agency subsequently makes a
contrary determination as to such individual's status as an Employee.

                                       2
<PAGE>

               (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

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

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

                    (ii) If, on such date, the Stock is not listed on a national
or regional securities exchange, market system or OTCBB, the Fair Market Value
of a share of Stock shall be as determined by the Board in good faith without
regard to any restriction other than a restriction which, by its terms, will
never lapse, and subject to the applicable requirements of Section 409A of the
Code.

               (n) "Incentive Stock Option" means an Option intended to be (as
set forth in the Award Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.

               (o) "Insider" means an Officer, a Director of the Company or
other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.

               (p) "Insider Trading Policy" means the written policy of the
Company pertaining to the purchase, sale, transfer or other disposition of the
Company's equity securities by Directors, Officers, Employees or other service
providers who may possess material, nonpublic information regarding the Company
or its securities.

               (q) "Nonstatutory Stock Option" means an Option not intended to
be (as set forth in the Award Agreement) or which does not qualify as an
Incentive Stock Option.

               (r) "Officer" means any person designated by the Board as an
officer of the Company.

               (s) "Option" means a right granted under Section 6 to purchase
Stock pursuant to the terms and conditions of the Plan. An Option may be either
an Incentive Stock Option or a Nonstatutory Stock Option.

                                       3
<PAGE>

               (t) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (u) "Participant" means any eligible person who has been granted
one or more Awards.

               (v) "Participating Company" means the Company or any Parent
Corporation, Subsidiary Corporation or Affiliate.

               (w) "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.

               (x) "Restricted Stock Award" means an Award of a Restricted Stock
Bonus or a Restricted Stock Purchase Right.

               (y) "Restricted Stock Bonus" means Stock granted to a Participant
pursuant to Section 7.

               (z) "Restricted Stock Purchase Right" means a right to purchase
Stock granted to a Participant pursuant to Section 7.

               (aa) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.

               (bb) "Section 162(m)" means Section 162(m) of the Code.

               (cc) "Securities Act" means the Securities Act of 1933, as
amended.

               (dd) "Service" means a Participant's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. A Participant's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders Service to the Participating Company Group or a change in the
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant's Service.
Furthermore, a Participant's Service shall not be deemed to have terminated if
the Participant takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the one hundred eighty-first (181st) day following
the commencement of such leave any Incentive Stock Option held by the
Participant shall cease to be treated as an Incentive Stock Option and instead
shall be treated thereafter as a Nonstatutory Stock Option unless the
Participant's right to return to Service is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining vesting under the Participant's Award Agreement. Except as
otherwise provided by the Board, in its discretion, the Participant's Service
shall be deemed to have terminated either upon an actual termination of Service
or upon the corporation for which the Participant performs Service ceasing to be
a Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant's Service has terminated and
the effective date of and reason for such termination.

                                       4
<PAGE>

               (ee) "Stock" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

               (ff) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

               (gg) "Ten Percent Stockholder" means a person who, at the time an
Award is granted to such person, owns stock possessing more than ten percent
(10%) of the total combined voting power (as defined in Section 194.5 of the
California Corporations Code) of all classes of stock of a Participating Company
(other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.

               (hh) "Vesting Conditions" mean those conditions established in
accordance with the Plan prior to the satisfaction of which shares subject to an
Award remain subject to forfeiture or a repurchase option in favor of the
Company exercisable for the Participant's monetary purchase price, if any, for
such shares upon the Participant's termination of Service.

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

     3.   ADMINISTRATION.
          ---------------

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

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

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

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

               (b) to determine the type of Award granted;

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

                                       5
<PAGE>

               (d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Award, (ii) the method of payment for shares purchased upon the exercise
of the Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Award or such shares, including by the
withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Award or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the Award,
(vi) the effect of the Participant's termination of Service on any of the
foregoing, and (vii) all other terms, conditions and restrictions applicable to
the Award or such shares not inconsistent with the terms of the Plan;

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

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

               (g) to accelerate, continue, extend or defer the exercisability
of any Award or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following a Participant's termination of
Service with the Participating Company Group;

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

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

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

          3.5 Committee Complying with Section 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m) of the Code,
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).

          3.6 Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom

                                       6
<PAGE>

authority to act for the Board or the Company is delegated shall be indemnified
by the Company against all reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

     4.   SHARES SUBJECT TO PLAN.
          -----------------------

          4.1 Maximum Number of Shares Issuable. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be three million one hundred seventy-five
thousand (3,175,000) and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof. If an outstanding Award for any
reason expires or is terminated or canceled or if shares of Stock are acquired
upon the exercise of an Award subject to a Company repurchase option and are
repurchased by the Company at the Participant's exercise or purchase price, the
shares of Stock allocable to the unexercised portion of such Award or such
repurchased shares of Stock shall again be available for issuance under the
Plan. However, except as adjusted pursuant to Section 4.2, in no event shall
more than three million one hundred seventy-five thousand (3,175,000) shares of
Stock be available for issuance pursuant to the exercise of Incentive Stock
Options (the "ISO Share Limit"). Shares of Stock shall not be deemed to have
been issued pursuant to the Plan to the extent such shares are withheld in
satisfaction of tax withholding obligations pursuant to Section 10.2. If the
exercise price of an Option is paid by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant, the number of shares
available for issuance under the Plan shall be reduced by the gross number of
shares for which the Option is exercised. Notwithstanding the foregoing, at any
such time as the offer and sale of securities pursuant to the Plan is subject to
compliance with Section 260.140.45 of Title 10 of the California Code of
Regulations ("Section 260.140.45"), the total number of shares of Stock issuable
upon the exercise of all outstanding Awards (together with options outstanding
under any other stock plan of the Company) and the total number of shares
provided for under any stock bonus or similar plan of the Company shall not
exceed thirty percent (30%) (or such other higher percentage limitation as may
be approved by the stockholders of the Company pursuant to Section 260.140.45)
of the then outstanding shares of the Company as calculated in accordance with
the conditions and exclusions of Section 260.140.45.

          4.2 Adjustments for Changes in Capital Structure. Subject to any
required action by the stockholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting normal cash dividends) that has a material
effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Awards, in the

                                       7
<PAGE>

ISO Share Limit set forth in Section 4.1, in the Section 162(m) Grant Limit set
forth in Section 5.4 and in the exercise or purchase price per share of any
outstanding Awards in order to prevent dilution or enlargement of Participants'
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as "effected without
receipt of consideration by the Company." Any fractional share resulting from an
adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the exercise price of any Award be decreased
to an amount less than the par value, if any, of the stock subject to the Award.
Such adjustments shall be determined by the Board, and its determination shall
be final, binding and conclusive.

     5.   ELIGIBILITY AND OPTION LIMITATIONS.
          -----------------------------------

          5.1 Persons Eligible for Awards. Awards may be granted only to
Employees, Consultants, and Directors of a Participating Company.

          5.2 Participation. Awards are granted solely at the discretion of the
Board. Eligible persons may be granted more than one Award. However, eligibility
in accordance with this Section shall not entitle any person to be granted an
Award, or, having been granted an Award, to be granted an additional Award.

          5.3 Incentive Stock Option Limitations.

               (a) Persons Eligible. An Incentive Stock Option may be granted
only to a person who, on the effective date of grant, is an Employee of the
Company, a Parent Corporation or a Subsidiary Corporation (each being an
"ISO-Qualifying Corporation"). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to
such person may be granted only a Nonstatutory Stock Option.

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

          5.4 Section 162(m) Grant Limit. Subject to adjustment as provided in
Section 4.2, at any such time as the Company is a "publicly held corporation"
within the meaning of

                                       8
<PAGE>

Section 162(m) of the Code, no Employee shall be granted one or more Options
within any fiscal year of the Company which in the aggregate are for the
purchase of more than three hundred thousand (300,000) shares (the "Section
162(m) Grant Limit").

     6.   STOCK OPTIONS.
          --------------

          Options shall be evidenced by Award Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish. Award Agreements may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:

          6.1 Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option and (b) no Incentive Stock
Option granted to a Ten Percent Stockholder shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.

          6.2 Exercisability and Term of Options. Options shall be exercisable
at such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Award Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Stockholder shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) with the exception of an Option granted to an Officer, a Director or a
Consultant, no Option shall become exercisable at a rate less than twenty
percent (20%) per year over a period of five (5) years from the effective date
of grant of such Option, subject to the Participant's continued Service. Subject
to the foregoing, unless otherwise specified by the Board in the grant of an
Option, any Option granted hereunder shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.

          6.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the assignment
to the Company of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) by such other

                                       9
<PAGE>

consideration as may be approved by the Board from time to time to the extent
permitted by applicable law, or (v) by any combination thereof. The Board may at
any time or from time to time, by approval of or by amendment to the standard
forms of Award Agreement described in Section 8, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of consideration.

               (b) Limitations on Forms of Consideration.

                    (i) Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Board, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months (and were not used
for another Option exercise by attestation during such period) or were not
acquired, directly or indirectly, from the Company.

                    (ii) Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.

          6.4 Effect of Termination of Service.

               (a) Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the Board
in the grant of an Option and set forth in the Award Agreement, an Option shall
be exercisable after a Participant's termination of Service only during the
applicable time period determined in accordance with this Section 6.4 and
thereafter shall terminate:

                    (i) Disability. If the Participant's Service terminates
because of the Disability of the Participant, the Option, to the extent
unexercised and exercisable on the date on which the Participant's Service
terminated, may be exercised by the Participant (or the Participant's guardian
or legal representative) at any time prior to the expiration of twelve (12)
months (or such longer period of time as determined by the Board, in its
discretion) after the date on which the Participant's Service terminated, but in
any event no later than the date of expiration of the Option's term as set forth
in the Award Agreement evidencing such Option (the "Option Expiration Date").

                    (ii) Death. If the Participant's Service terminates because
of the death of the Participant, the Option, to the extent unexercised and
exercisable on the date on which the Participant's Service terminated, may be
exercised by the Participant's legal representative or other person who acquired
the right to exercise the Option by reason of the Participant's death at any
time prior to the expiration of twelve (12) months (or such longer period of
time as determined by the Board, in its discretion) after the date on which the

                                       10
<PAGE>

Participant's Service terminated, but in any event no later than the Option
Expiration Date. The Participant's Service shall be deemed to have terminated on
account of death if the Participant dies within three (3) months (or such longer
period of time as determined by the Board, in its discretion) after the
Participant's termination of Service.

                    (iii) Termination for Cause. Notwithstanding any other
provision of the Plan to the contrary, if the Participant's Service with the
Participating Company Group is terminated for Cause, as defined by the
Participant's Award Agreement or contract of employment or service (or, if not
defined in any of the foregoing, as defined below), the Option shall terminate
and cease to be exercisable immediately upon such termination of Service. Unless
otherwise defined by the Participant's Award Agreement or contract of employment
or service, for purposes of this Section 6.4(a)(iii) "Cause" shall mean any of
the following: (1) the Participant's theft, dishonesty, or falsification of any
Participating Company documents or records; (2) the Participant's improper use
or disclosure of a Participating Company's confidential or proprietary
information; (3) any action by the Participant which has a material detrimental
effect on a Participating Company's reputation or business; (4) the
Participant's failure or inability to perform any reasonable assigned duties
after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (5) any material breach by the
Participant of any employment or service agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (6) the Participant's conviction (including any plea of guilty or
nolo contendere) of any criminal act which impairs the Participant's ability to
perform his or her duties with a Participating Company.

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

               (b) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing other than termination of Service for Cause, if the exercise of an
Option within the applicable time periods set forth in Section 6.4(a) is
prevented by the provisions of Section 11 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined
by the Board, in its discretion) after the date the Participant is notified by
the Company that the Option is exercisable, but in any event no later than the
Option Expiration Date.

               (c) Extension if Participant Subject to Section 16(b).
Notwithstanding the foregoing other than termination of Service for Cause, if a
sale within the applicable time periods set forth in Section 6.4(a) of shares
acquired upon the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which a sale of such shares by the Participant would no longer be subject to
such suit, (ii) the

                                       11
<PAGE>

one hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.

          6.5 Transferability of Options. During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant's guardian or legal representative. No Option shall be assignable or
transferable by the Participant, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Board, in its discretion, and set forth in the Award Agreement evidencing such
Option, a Nonstatutory Stock Option shall be assignable or transferable subject
to the applicable limitations, if any, described in Section 260.140.41 of Title
10 of the California Code of Regulations and the General Instructions to Form
S-8 Registration Statement under the Securities Act.

     7.   RESTRICTED STOCK AWARDS.
          ------------------------

          Restricted Stock Awards shall be evidenced by Award Agreements
specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock
Purchase Right and the number of shares of Stock subject to the Award, in such
form as the Board shall from time to time establish. Award Agreements evidencing
Restricted Stock Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

          7.1 Types of Restricted Stock Awards Authorized. Restricted Stock
Awards may be granted in the form of either a Restricted Stock Bonus or a
Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon
such conditions as the Board shall determine, including, without limitation,
upon the attainment of one or more performance goals.

          7.2 Purchase Price. The purchase price for shares of Stock issuable
under each Restricted Stock Purchase Right shall be established by the Board in
its discretion. No monetary payment (other than applicable tax withholding)
shall be required as a condition of receiving shares of Stock pursuant to a
Restricted Stock Bonus, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit. Notwithstanding the
foregoing, if required by applicable state corporate law, the Participant shall
furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock subject to a Restricted Stock Award.

          7.3 Purchase Period. A Restricted Stock Purchase Right shall be
exercisable within a period established by the Board, which shall in no event
exceed thirty (30) days from the effective date of the grant of the Restricted
Stock Purchase Right.

          7.4 Payment of Purchase Price. Except as otherwise provided below,
payment of the purchase price for the number of shares of Stock being purchased
pursuant to any Restricted Stock Purchase Right shall be made (a) in cash or by
check or cash equivalent, (b) by such other consideration as may be approved by
the Board from time to time to the extent permitted by applicable law, or (c) by
any combination thereof.

          7.5 Vesting and Restrictions on Transfer. Shares issued pursuant to
any Restricted Stock Award may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, as shall be established by the Board and
set forth in the Award Agreement evidencing such Award. During any

                                       12
<PAGE>

period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event or as provided in Section 7.8. The Board, in its
discretion, may provide in any Award Agreement evidencing a Restricted Stock
Award that, if the satisfaction of Vesting Conditions with respect to any shares
subject to such Restricted Stock Award would otherwise occur on a day on which
the sale of such shares would violate the provisions of the Insider Trading
Policy, then satisfaction of the Vesting Conditions automatically shall be
determined on the next trading day on which the sale of such shares would not
violate the Insider Trading Policy. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.

          7.6 Voting Rights; Dividends and Distributions. Except as provided in
this Section, Section 7.5 and any Award Agreement, during any period in which
shares acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, the Participant shall have all of the rights of a stockholder of the
Company holding shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to such shares.
However, in the event of a dividend or distribution paid in shares of Stock or
other property or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, any and all new,
substituted or additional securities or other property (other than normal cash
dividends) to which the Participant is entitled by reason of the Participant's
Restricted Stock Award shall be immediately subject to the same Vesting
Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.

          7.7 Effect of Termination of Service. Unless otherwise provided by the
Board in the Award Agreement evidencing a Restricted Stock Award, if a
Participant's Service terminates for any reason, whether voluntary or
involuntary (including the Participant's death or disability), then (a) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Restricted
Stock Purchase Right which remain subject to Vesting Conditions as of the date
of the Participant's termination of Service and (b) the Participant shall
forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the date
of the Participant's termination of Service. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right
is then exercisable, to one or more persons as may be selected by the Company.

          7.8 Nontransferability of Restricted Stock Award Rights. Rights to
acquire shares of Stock pursuant to a Restricted Stock Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant's beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Restricted Stock Award granted to
a Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant's guardian or legal representative.

                                       13
<PAGE>

     8.   STANDARD FORMS OF AGREEMENTS.
          -----------------------------

          8.1 Award Agreement. Each Award shall comply with and be subject to
the terms and conditions set forth in the appropriate form of Award Agreement
approved by the Board and as amended from time to time. No Award or purported
Award shall be a valid and binding obligation of the Company unless evidenced by
a fully executed Award Agreement. Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated therein
by reference, or such other form or forms, including electronic media, as the
Board may approve from time to time.

          8.2 Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of any standard form of agreement described in
this Section 8 either in connection with the grant or amendment of an individual
Award or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of agreement are not inconsistent with the terms
of the Plan.

     9.   CHANGE IN CONTROL.
          ------------------

          9.1 Definitions.

               (a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

               (b) A "Change in Control" shall mean an Ownership Change Event or
a series of related Ownership Change Events (collectively, a "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 9.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "Transferee"), as the case
may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

                                       14
<PAGE>

          9.2 Effect of Change in Control on Awards.

               (a) Accelerated Vesting. The Board may, in its discretion,
provide in any Award Agreement or, in the event of a Change in Control, may take
such actions as it deems appropriate to provide for the acceleration of the
exercisability, vesting and/or settlement in connection with such Change in
Control of each or any outstanding Award or portion thereof and shares acquired
pursuant thereto upon such conditions, including termination of the
Participant's Service prior to, upon, or following such Change in Control, to
such extent as the Board shall determine.

               (b) Assumption, Continuation or Substitution. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
"Acquiror"), may, without the consent of any Participant, either assume or
continue the Company's rights and obligations under each or any Award or portion
thereof outstanding immediately prior to the Change in Control or substitute for
each or any such outstanding Award or portion thereof a substantially equivalent
award with respect to the Acquiror's stock, as applicable. For purposes of this
Section, if so determined by the Board, in its discretion, an Award shall be
deemed assumed if, following the Change in Control, the Award confers the right
to receive, subject to the terms and conditions of the Plan and the applicable
Award Agreement, for each share of Stock subject to the Award immediately prior
to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of
Stock on the effective date of the Change in Control was entitled; provided,
however, that if such consideration is not solely common stock of the Acquiror,
the Board may, with the consent of the Acquiror, provide for the consideration
to be received upon the exercise or settlement of the Award, for each share of
Stock subject to the Award, to consist solely of common stock of the Acquiror
equal in Fair Market Value to the per share consideration received by holders of
Stock pursuant to the Change in Control. If any portion of such consideration
may be received by holders of Stock pursuant to the Change in Control on a
contingent or delayed basis, the Board may, in its sole discretion, determine
such Fair Market Value per share as of the time of the Change in Control on the
basis of the Board's good faith estimate of the present value of the probable
future payment of such consideration. Any Award or portion thereof which is
neither assumed or continued by the Acquiror in connection with the Change in
Control nor exercised as of the time of consummation of the Change in Control
shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control.

               (c) Cash-Out of Outstanding Awards. The Board may, in its
discretion and without the consent of any Participant, determine that, upon the
occurrence of a Change in Control, each or any Award or a portion thereof
outstanding immediately prior to the Change in Control and not previously
exercised shall be canceled in exchange for a payment with respect to each
vested share (and each unvested share, if so determined by the Board) of Stock
subject to such canceled Award in (i) cash, (ii) stock of the Company or of a
corporation or other business entity a party to the Change in Control, or (iii)
other property which, in any such case, shall be in an amount having a Fair
Market Value equal to the Fair Market Value of the consideration to be paid per
share of Stock in the Change in Control, reduced by the exercise or purchase
price per share, if any, under such Award. If any portion of such consideration
may be received by holders of Stock pursuant to the Change in Control on a
contingent or delayed

                                       15
<PAGE>

basis, the Board may, in its sole discretion, determine such Fair Market Value
per share as of the time of the Change in Control on the basis of the Board's
good faith estimate of the present value of the probable future payment of such
consideration. In the event such determination is made by the Board, the amount
of such payment (reduced by applicable withholding taxes, if any) shall be paid
to Participants in respect of the vested portions of their canceled Awards as
soon as practicable following the date of the Change in Control and in respect
of the unvested portions of their canceled Awards in accordance with the vesting
schedules applicable to such Awards.

     10.  TAX WITHHOLDING.
          ----------------

          10.1 Tax Withholding in General. The Company shall have the right to
deduct from any and all payments made under the Plan, or to require the
Participant, through payroll withholding, cash payment or otherwise, to make
adequate provision for, the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to an Award or the shares acquired pursuant thereto. The Company shall have no
obligation to deliver shares of Stock or to release shares of Stock from an
escrow established pursuant to an Award Agreement until the Participating
Company Group's tax withholding obligations have been satisfied by the
Participant.

          10.2 Withholding in Shares. . The Company shall have the right, but
not the obligation, to deduct from the shares of Stock issuable to a Participant
upon the exercise of an Award, or to accept from the Participant the tender of,
a number of whole shares of Stock having a Fair Market Value, as determined by
the Company, equal to all or any part of the tax withholding obligations of the
Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not
exceed the amount determined by the applicable minimum statutory withholding
rates.

     11.  COMPLIANCE WITH SECURITIES LAW.
          -------------------------------

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

                                       16
<PAGE>

     12.  TERMINATION OR AMENDMENT OF PLAN.
          ---------------------------------

          The Board may amend, suspend or terminate the Plan at any time.
However, without the approval of the Company's stockholders, there shall be (a)
no increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's stockholders under any applicable law, regulation or rule,
including the rules of any stock exchange or market system upon which the Stock
may then be listed. No amendment, suspension or termination of the Plan shall
affect any then outstanding Award unless expressly provided by the Board. Except
as provided by the next sentence, no amendment, suspension or termination of the
Plan may adversely affect any then outstanding Award without the consent of the
Participant. Notwithstanding any other provision of the Plan to the contrary,
the Board may, in its sole and absolute discretion and without the consent of
any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming the Plan or such Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to,
Section 409A of the Code.

     13.  MISCELLANEOUS PROVISIONS.
          -------------------------

          13.1 Repurchase Rights. Shares issued under the Plan may be subject to
one or more repurchase options, or other conditions and restrictions as
determined by the Board in its discretion at the time the Award is granted. The
Company shall have the right to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company. Upon request by the Company, each Participant
shall execute any agreement evidencing such transfer restrictions prior to the
receipt of shares of Stock hereunder and shall promptly present to the Company
any and all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

          13.2 Provision of Information. If required by applicable law, at least
annually, copies of the Company's balance sheet and income statement for the
just completed fiscal year shall be made available to each Participant and
purchaser of shares of Stock upon the exercise of an Award. The Company shall
not be required to provide such information to key persons whose duties in
connection with the Company assure them access to equivalent information.

          13.3 Rights as Employee, Consultant or Director. No person, even
though eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee, Consultant or Director, or interfere
with or limit in any way any right of a Participating Company to terminate the
Participant's Service at any time. To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award shall in no event be understood or interpreted to mean that the
Company is the Employee's employer or that the Employee has an employment
relationship with the Company.

                                       17
<PAGE>

          13.4 Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.2 or another provision of the Plan.

          13.5 Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of any Award.

          13.6 Beneficiary Designation. Subject to local laws and procedures,
each Participant may file with the Company a written designation of a
beneficiary who is to receive any benefit under the Plan to which the
Participant is entitled in the event of such Participant's death before he or
she receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. If a married Participant
designates a beneficiary other than the Participant's spouse, the effectiveness
of such designation may be subject to the consent of the Participant's spouse.
If a Participant dies without an effective designation of a beneficiary who is
living at the time of the Participant's death, the Company will pay any
remaining unpaid benefits to the Participant's legal representative.

          13.7 Stockholder Approval. The Plan or any increase in the maximum
aggregate number of shares of Stock issuable thereunder as provided in Section
4.1 (the "Authorized Shares") shall be approved by a majority of the outstanding
securities of the Company entitled to vote within twelve (12) months before or
after the date of adoption thereof by the Board. Awards granted prior to
security holder approval of the Plan or in excess of the Authorized Shares
previously approved by the security holders shall become exercisable no earlier
than the date of security holder approval of the Plan or such increase in the
Authorized Shares, as the case may be.

                                       18
<PAGE>

                                  PLAN HISTORY
                                  ------------

September 23, 2004            Board adopts Plan effective as of the Effective
                              Date, with an initial reserve of 30,000,000
                              shares.

November 17, 2004             Stockholders approve Plan at annual meeting on the
                              Effective Date.

July 14, 2005                 Board amends Plan to increase share reserve by
                              16,000,000 shares to a total of 46,000,000 shares.

October 20, 2005              Stockholders approve amendment to Plan to increase
                              share reserve to 46,000,000 shares.

November 15, 2006             Effective date of a 1-for-20 reverse stock split,
                              resulting in an adjusted share reserve of
                              2,300,000.

August 22, 2007               Board amends and restates Plan to (i) increase
                              share reserve from 2,300,000 to 3,175,000 and
                              (ii) authorize the grant of Restricted Stock
                              Awards.

October 4, 2007               Stockholders approve amendment and restatement of
                              Plan to increase share reserve to 3,175,000 shares
                              and to authorize the grant of Restricted Stock
                              Awards.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]