Document:

Exhibit 10.5

 

USANA HEALTH SCIENCES, INC.

 

EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT

 

Optionee:

Date of Grant:

Number of Covered Shares:

Exercise Price Per Share:

Expiration Date:

 

This Incentive Stock Option Agreement (“Agreement”)
is entered into as of the      day of                          ,
between USANA HEALTH SCIENCES, INC., a Utah corporation (the “Company”), and                                
(“Optionee”).

 

WHEREAS, the Company has adopted the 2002
USANA Health Sciences, Inc. Stock Plan (the “Plan”) and has approved the
granting to certain employees of the Company of incentive stock options to
purchase common stock of the Company, par value $.001 per share (“Common Stock”);
and

 

WHEREAS, Optionee is employed by the Company
in a key executive capacity, or is engaged by the Company as an officer and/or
employee, and the Company desires that Optionee remain in such employ and
desires to secure or increase Optionee’s stock ownership of the Company in
order to increase Optionee’s incentive and personal interest in the welfare of
the Company.

 

NOW, THEREFORE, in consideration of the
premises, covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto have agreed and do hereby agree as follows:

 

1.             Grant of Options.  On the terms and conditions set forth in this
Agreement, including but not limited to the substitution provisions of Section
26 below, the Company hereby grants to Optionee incentive stock options as that
term is used in Section 422 of the Code (the “ISOs”) to purchase all or any
part of an aggregate amount of                        
(                )
shares of the Common Stock of the Company at a purchase price of $              
per share.  However, to the extent that
the Fair Market Value of Common Stock with respect to which ISOs are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a nonqualified stock option (“NSO”).  The ISOs and the NSOs are collectively
referred to herein as the “Options”.

 

2.             Term of Options; Vesting
Schedule.  Except as otherwise
provided in Sections 4 and 10 below, the Options shall vest and become
exercisable pursuant to the following vesting schedule, and shall remain
exercisable until                
(       ) years and               
(      ) days after the date of this Agreement (       /      /          ,
the “effective term”), at which time the Options shall terminate and not be
exercisable thereafter:

 

a.             Options to purchase                             
(              )
of the total number of shares subject to Options granted shall vest and become
exercisable      /     /     ,
provided Optionee satisfactorily completes                  
(      ) months of service (as determined by the
Company’s Board of Directors).

 

b.             Options to purchase                       
(          ) of the total
number of shares subject to Options granted shall vest and become exercisable      /    /      ,
     /    /      ,
     /    /      ,
and      /    /      ,
provided Optionee satisfactorily completes an additional               
(      )

 

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months
of service each year.

 

3.             Exercise of Options.  The Options or any portion thereof may be
exercised by Optionee paying the purchase price of any shares with respect to
which the Options are being exercised by cash, certified check or cashier’s
check (but no personal checks unless otherwise approved by the Committee).  Except as otherwise provided by the Committee
before the Option is exercised, (i) all or a portion of the Exercise Price may
be paid by Optionee by delivery of shares of Common Stock already owned by
Optionee for at least six (6) months and acceptable to the Committee having an
aggregate Fair Market Value (as of the date of exercise) that is equal to the
amount of cash that would otherwise be required; (ii) Optionee may pay the
Exercise Price by authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such exercise; or
(iii) Optionee may pay the Exercise Price by a reduction in the amount of any
Company liability to the Optionee.  In
each case Optionee’s payment shall be delivered with a written notice of
exercise which shall:

 

a.             State
the number of shares being exercised, the name, address and social security
number of each person for whom the stock certificate or certificates for such
shares of the Common Stock are to be registered;

 

b.             Contain
any representations and agreements as to Optionee’s investment intent with
respect to the shares exercised as may be satisfactory to the Company’s
counsel; and

 

c.             Be
signed by the person or persons entitled to exercise the Options and, if the
Options are being exercised by any person or persons other than Optionee, be
accompanied by proof satisfactory to counsel for the Company of the right of
such person or persons to exercise the Options.

 

In addition, unless the shares to be acquired
by Optionee have been registered under the Securities Act of 1933, as amended,
upon and effective as of the date of exercise of the Option under this
Agreement, Optionee agrees, represents and warrants that Optionee (i) is
acquiring the shares of Common Stock for investment with no present intention of
distributing or selling such shares or any interest therein except as permitted
under this Agreement; (ii) is not only an employee but also a director or
executive officer of the Company experienced in making risky investments and
has the capacity to protect his interests in connection with making his
decision to exercise the Option; (iii) is well-informed or capable of asking
questions of the Company’s officials to make himself well-informed concerning
the nature of his investment decision to exercise the Option and of the true
financial status of the Company; and (iv) has obtained, analyzed and retained
(or elected not to retain) copies of the Company’s current financial
statements.  Further, as a condition to
the exercise of the Options, the Company may require the person exercising the
Options to make any representation and warranty to the Company that may be
required by any applicable law or regulation.

 

4.             Termination of Employment or
Death.

 

a.             In
the event Optionee’s employment shall be involuntarily terminated by the
Company without cause, the Options shall only be exercisable for those portions
of the Options which have completely vested as of the date of Involuntary
Termination of Employment, provided such exercise occurs both within the remaining
effective term of the Options and ninety (90) days after the date of
termination by the Company.

 

b.             In
the event Optionee dies while employed by the Company or dies within ninety
(90) days after termination of employment with the Company, whether by reason
of

 

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Retirement or Disability, involuntary
termination without cause, or voluntary termination (but not termination For
Cause), the Options granted hereunder to Optionee shall be exercisable within
three (3) years after the date of Optionee’s death,  but the Options may not be exercised for more
than the number of Shares, if any, as to which the Options were exercisable by
Optionee immediately prior to the date of his death or, if sooner, the date of
termination of employment.  The legal
representative, if any, of Optionee’s estate, or otherwise the appropriate
legatees or distributees of Optionee’s estate, may exercise the Option on
behalf of Optionee.

 

c.             In
the event Optionee’s employment shall terminate on account of Retirement or
Disability, the Options held by Optionee, to the extent exercisable through the
date of such retirement or disability, may be exercised by Optionee, provided
such exercise occurs within both the remaining effective term of the Options
and three (3) years from the date of termination of employment.

 

d.             In
the event of Optionee’s Voluntary Termination of Employment, Optionee may
exercise the Options provided such exercise occurs within both the remaining
effective term of the Options and ninety (90) days from the date of
termination, but the Options may not be exercised for more than the number of
shares, if any, as to which the Options were exercisable by Optionee
immediately prior to such termination of employment.

 

e.             In
the event Optionee shall have an Involuntary Termination of Employment “For
Cause” (as defined in Section 12(d)(ii) of the Plan), no exercise period shall
exist and Optionee shall forfeit the Options as of the date of termination.

 

f.              To
the extent not then exercisable in accordance with this Section, the Options
shall terminate on the date Optionee’s employment terminates with the Company.

 

g.             For
purposes of this Agreement, termination of employment shall be considered to
occur when an employee is no longer an employee of the Company or any
Subsidiary. Whether an authorized leave of absence or absence on military or
government service shall constitute termination of employment for purposes of
this Agreement shall be determined by the Committee.  Retirement shall be considered to mean
retirement as defined in the Plan.

 

5.             Transfer of Options.  Unless the Company, upon advice of its
securities counsel, directs otherwise, the Options may not be assigned or
transferred in any manner except upon the death of Optionee by will or by the
laws of descent and distribution.  During
the lifetime of Optionee, the Options shall be exercisable only by Optionee.

 

6.             Reservation of Shares.  The Company, during the term hereof, will at
all times reserve and keep available, and will seek or obtain from any
regulatory body having jurisdiction any requisite authority in order to issue
and sell such number of shares of its Common Stock as shall be sufficient to
satisfy the requirements hereof.  The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any shares of stock hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such stock as to which
such requisite authority shall not have been obtained.

 

7.             Application of Section 16(b).  The parties acknowledge that, if the Company
has a class of securities required to be registered pursuant to the Securities
Exchange Act of 1934, and if Optionee is an officer, director or ten percent
(10%) shareholder of the Company, the grant to Optionee of Options hereunder,
or the Optionee’s sale of shares underlying the Options, may, unless the Plan
is qualified under Rule 16b-3 of the SEC, subject Optionee to liability under
the insider trading prohibitions of Section 16(b) of the Securities Exchange
Act of 1934, if Optionee purchases or sells Common Stock of

 

3

 

the
Company within six months before or after the grant of the Options, or within
six months before or after the sale of the shares underlying the Options.  This acknowledgment is for informational
purposes only and is not to be construed as increasing, limiting or describing
the rights and obligations of the parties hereunder.

 

8.             Restriction on Option Exercise.  Notwithstanding any contrary provision
hereof, the Options may not be exercised by Optionee unless the shares to be
acquired by Optionee have been registered under the Securities Act of 1933 (the
“Act”), and any other applicable securities laws of any other state, or the
Company receives an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company stating that the exercise of the Options
and the issuance of shares pursuant to the exercise is registered or exempt
from such registration requirements. 
Optionee shall represent that unless and until the shares have been
registered under the Act and applicable state securities laws:  (1) Optionee is acquiring the shares for
investment purposes only and without the intent of making any sale or
disposition thereof; (2) Optionee has been advised and understands that
the shares have not been registered for sale pursuant to federal and state
securities laws and are “restricted securities” under such laws; and
(3) Optionee acknowledges that the shares will be subject to stop transfer
instructions and bear the following legend:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY OTHER STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION.  NO OFFER, SALE OR TRANSFER
MAY TAKE PLACE WITHOUT PRIOR WRITTEN APPROVAL OF THE COMPANY BEING AFFIXED
HERETO.  IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT, SUCH APPROVAL SHALL BE GRANTED ONLY IF THE COMPANY HAS
RECEIVED AN OPINION OF SHAREHOLDER’S COUNSEL AT SHAREHOLDER’S EXPENSE
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THIS CERTIFICATE MAY BE LAWFULLY
TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION.

 

9.             Withholding of Taxes.  The Options may not be exercised unless
Optionee has paid or has made provision satisfactory to the Company for payment
of, federal, state and local income taxes, or any other taxes (other than stock
transfer taxes) which the Company may be obligated to collect as a result of
the issue or transfer of Common Stock upon such exercise of the Options.  In its sole discretion, and at the request of
Optionee, the Company may permit Optionee (other than an Optionee who would be
subject to Section 16(b) of the Exchange Act) to satisfy the obligation imposed
by this Section, in whole or in part, by instructing the Company to withhold up
to that number of shares otherwise issuable to Optionee with a fair market
value equal to the amount of tax to be withheld.

 

10.           Mergers, Reorganizations, and
Certain Other Changes.  In the event
of the Company’s liquidation, reorganization, separation, merger or
consolidation into, or acquisition of property or stock by another corporation,
or sale of substantially all assets to another corporation, the rights of
Optionee with respect to the Options granted hereunder shall be governed by the
Committee, as provided in the Plan.

 

11.           Antidilution.  The aggregate number of shares of Common
Stock available for issuance under the Options, and the price per share, shall
all be proportionately adjusted for any increase

 

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or
decrease in the number of issued shares of Common Stock subsequent to the date
of this Agreement resulting from a recapitalization, reorganization, merger,
consolidation or similar transaction as provided in the Plan.

 

12.           No Rights as a Stockholder.  Optionee or a permitted transferee of the
Options shall have no rights as a stockholder with respect to any shares
covered by the Options until the date as of which stock is issued following
exercise of such Options.  Except as provided
in this Agreement, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or any other
distributions for which the record date is prior to the date as of which such
stock is issued.

 

13.           No Employment Rights.  This Agreement is not an employment agreement
or contract and does not grant any employment rights to Optionee.

 

14.           Other Provisions.  The Company may, as a condition precedent to
the exercise of the Options, require Optionee (including, in the event of
Optionee’s death, his legal representatives, legatees or distributees) to enter
into such agreements or to make such representations as may be required to make
lawful the exercise of the Options and the ultimate disposition of the shares
acquired by such exercise.

 

15.           Notices.  Any notice which either of the parties hereto
is required or permitted to give to the other must be in writing and may be
given by personal delivery, electronic or facsimile transmission,  or by mailing the same by registered or
certified mail, return receipt requested, to the party to which or to whom the
notice is directed, at the address each party designates in writing.  Any notice mailed to such address shall be
effective when deposited in the mail, duly addressed and postage prepaid,
notwithstanding failure by the addressee thereof to receive the mailed notice.

 

16.           Governing Law.  All transactions contemplated hereunder and
all rights of the parties hereto shall be governed as to validity,
construction, enforcement and in all other respects by the laws and decisions
of the State of Utah.

 

17.           Titles.  The titles of the sections of this Agreement
are inserted only as a matter of convenience and for reference, and in no way
define, limit or describe the scope of this Agreement or the intent of any
provisions hereof.

 

18.           Amendment.  This Agreement shall not be modified or
amended except by written agreement signed by all of the parties hereto.

 

19.           Attorney’s Fees and Costs of
Enforcement.  If any party to this
Agreement shall incur any costs resulting from enforcement of this Agreement,
the defaulting party shall be liable to the prevailing party for such
costs.  Costs, as used herein, shall
include costs of enforcement, interpretation, or collection, including without
limitation, reasonable attorney’s fees, court costs, collection charges, travel
and other related or similar expenses.

 

20.           Severability of Provisions.  Any provision of this Agreement that is
invalid, prohibited, or unenforceable in any jurisdiction, shall not invalidate
the remainder of the provision or the remaining provisions of the Agreement.

 

21.           Entire Agreement.  Subject to the Plan, a copy of which in its
present form is available from the Secretary of the Company, this Agreement
contains all of the representations, declarations and statements from either
party to the other and expresses the entire understanding between

 

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the
parties with respect to the transactions provided for herein. All prior
memoranda, letters, statements and agreements concerning this subject matter,
if any, are merged in and replaced by this Agreement.

 

22.           Pronouns, Number and Gender.  Wherever necessary to implement the intent of
the parties hereto, references herein to the singular shall be interpreted as
the plural, and vice versa, and the feminine, masculine or neuter gender shall
be treated as one of the other genders.

 

23.           Binding Effect.  This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.

 

24.           Defined Terms.  The capitalized terms contained in this
Agreement but not otherwise defined herein shall have the same meanings given
to them in the Plan.

 

25.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument.

26.           Company Right to Substitute Award.  Notwithstanding anything to the contrary
herein, the Company, in its sole discretion, shall have the right to cancel in
whole or in part the Options granted to Optionee hereunder, provided that the
Company shall substitute therefore and grant to Optionee, alternative options,
or other equity or cash compensation or award, as may be permitted under the
Company’s then current omnibus equity incentive compensation plan, as may be
substantially equal in value to the Options (or cancelled portion thereof)
originally granted to Optionee hereunder.

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed the day and year first above written.

 

	
   

  	
  COMPANY:

  	
  USANA
  HEALTH SCIENCES, INC.,

  
	
   

  	
  a Utah
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Printed
  Name)

  

 

6Exhibit 4.1

 

DEL.ICIO.US,
INC. 2005 STOCK PLAN

 

SECTION 1. ESTABLISHMENT AND
PURPOSE.

 

The
purpose of the Plan is to offer selected persons an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, by purchasing Shares of the Company’s Stock. The Plan provides both
for the direct award or sale of Shares and for the grant of Options to purchase
Shares. Options granted under the Plan may include Nonstatutory Options as well
as ISOs intended to qualify under Section 422 of the Code.

 

Capitalized
terms are defined in Section 12.

 

SECTION 2. ADMINISTRATION.

 

(a)           Committees of the Board of
Directors. The Plan may be administered by one or more Committees. Each
Committee shall consist of one or more members of the Board of Directors who
have been appointed by the Board of Directors. Each Committee shall have such
authority and be responsible for such functions as the Board of Directors has
assigned to it. If no Committee has been appointed, the entire Board of Directors
shall administer the Plan. Any reference to the Board of Directors in the Plan
shall be construed as a reference to the Committee (if any) to whom the Board
of Directors has assigned a particular function.

 

(b)           Authority of the Board of
Directors. Subject to the provisions of the Plan, the Board of
Directors shall have full authority and discretion to take any actions it deems
necessary or advisable for the administration of the Plan. All decisions,
interpretations and other actions of the Board of Directors shall be final and
binding on all Purchasers, all Optionees and all persons deriving their rights
from a Purchaser or Optionee.

 

SECTION 3. ELIGIBILITY.

 

(a)           General Rule. Only
Employees, Outside Directors and Consultants shall be eligible for the grant of
Nonstatutory Options or the direct award or sale of Shares. Only Employees
shall be eligible for the grant of ISOs.

 

(b)           Ten-Percent Stockholders.
A person who owns more than 10% of the total combined voting power of all
classes of outstanding stock of the Company, its Parent or any of its
Subsidiaries shall not be eligible for the grant of an ISO unless (i) the
Exercise Price is at least 110% of the Fair Market Value of a Share on the date
of grant and (ii) such ISO by its terms is not exercisable after the expiration
of five years from the date of grant. For purposes of this Subsection (b), in
determining stock ownership, the attribution rules of Section 424(d) of the
Code shall be applied.

 

1

 

SECTION 4. STOCK SUBJECT TO PLAN.

 

(a)           Basic Limitation.
Not more than 700,000 Shares may be issued under the Plan (subject to
Subsection (b) below and Section 8). All of these Shares may be issued upon the
exercise of ISOs. The number of Shares that are subject to Options or other
rights outstanding at any time under the Plan shall not exceed the number of
Shares that then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan. Shares offered under
the Plan may be authorized but unissued Shares or treasury Shares.

 

(b)           Additional Shares.
In the event that Shares previously issued under the Plan are reacquired by the
Company, such Shares shall be added to the number of Shares then available for
issuance under the Plan. In the event that an outstanding Option or other right
for any reason expires or is canceled, the Shares allocable to the unexercised
portion of such Option or other right shall be added to the number of Shares
then available for issuance under the Plan.

 

SECTION 5. TERMS AND CONDITIONS
OF AWARDS OR SALES.

 

(a)           Stock Purchase Agreement.
Each award or sale of Shares under the Plan (other than upon exercise of an
Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser
and the Company. Such award or sale shall be subject to all applicable terms
and conditions of the Plan and may be subject to any other terms and conditions
which are not inconsistent with the Plan and which the Board of Directors deems
appropriate for inclusion in a Stock Purchase Agreement. The provisions of the
various Stock Purchase Agreements entered into under the Plan need not be
identical.

 

(b)           Duration of Offers and
Nontransferability of Rights. Any right to acquire Shares under the
Plan (other than an Option) shall automatically expire if not exercised by the
Purchaser within 30 days after the grant of such right was communicated to the
Purchaser by the Company. Such right shall not be transferable and shall be
exercisable only by the Purchaser to whom such right was granted.

 

(c)           Purchase Price.
The Purchase Price of Shares to be offered under the Plan, if newly issued,
shall not be less than the par value of such Shares. Subject to the preceding
sentence, the Board of Directors shall determine the Purchase Price at its sole
discretion. The Purchase Price shall be payable in a form described in Section
7.

 

(d)           Withholding Taxes.
As a condition to the purchase of Shares, the Purchaser shall make such
arrangements as the Board of Directors may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with such purchase.

 

(e)           Restrictions on Transfer
of Shares. Any Shares awarded or sold under the Plan shall be
subject to such special forfeiture conditions, rights of repurchase, rights of
first refusal and other transfer restrictions as the Board of Directors may
determine. Such restrictions shall be set forth in the applicable Stock
Purchase Agreement and shall apply in addition to any restrictions that may
apply to holders of Shares generally. A Stock Purchase Agreement may

 

2

 

provide
for accelerated vesting in the event of the Purchaser’s death, disability or
retirement or other events.

 

SECTION 6. TERMS AND CONDITIONS
OF OPTIONS.

 

(a)           Stock Option Agreement.
Each grant of an Option under the Plan shall be evidenced by a Stock Option
Agreement between the Optionee and the Company. Such Option shall be subject to
all applicable terms and conditions of the Plan and may be subject to any other
terms and conditions which are not inconsistent with the Plan and which the
Board of Directors deems appropriate for inclusion in a Stock Option Agreement.
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical.

 

(b)           Number of Shares.
Each Stock Option Agreement shall specify the number of Shares that are subject
to the Option and shall provide for the adjustment of such number in accordance
with Section 8. The Stock Option Agreement shall also specify whether the
Option is an ISO or a Nonstatutory Option.

 

(c)           Exercise Price.
Each Stock Option Agreement shall specify the Exercise Price. The Exercise
Price of an ISO shall not be less than 100% of the Fair Market Value of a Share
on the date of grant, and a higher percentage may be required by Section 3(b). The
Exercise Price of a Nonstatutory Option to purchase newly issued Shares shall
not be less than 30% of the Fair Market Value of a Share on the date of grant. Subject
to the preceding two sentences, the Exercise Price under an Option shall be
determined by the Board of Directors at its sole discretion. The Exercise Price
shall be payable in a form described in Section 7.

 

(d)           Exercisability.
Each Stock Option Agreement shall specify the date when all or any installment
of the Option is to become exercisable. No Option shall be exercisable unless
the Optionee has delivered an executed copy of the Stock Option Agreement to
the Company. The Board of Directors shall determine the exercisability
provisions of any Stock Option Agreement at its sole discretion. All of an
Optionee’s Options shall become exercisable in full if Section 8(b)(iv)
applies.

 

(e)           Term. The Stock
Option Agreement shall specify the term of the Option. The term shall not
exceed 10 years from the date of grant, and in the case of an ISO a shorter
term may be required by Section 3(b). Subject to the preceding sentence, the
Board of Directors at its sole discretion shall determine when an Option is to
expire. A Stock Option Agreement may provide for expiration prior to the end of
its term in the event of the termination of the Optionee’s Service or death.

 

(f)            Restrictions on Transfer
of Shares. Any Shares issued upon exercise of an Option shall be
subject to such special forfeiture conditions, rights of repurchase, rights of
first refusal and other transfer restrictions as the Board of Directors may
determine. Such restrictions shall be set forth in the applicable Stock Option
Agreement and shall apply in addition to any restrictions that may apply to
holders of Shares generally.

 

(g)           Transferability of Options.
An Option shall be transferable by the Optionee only by (i) a beneficiary
designation, (ii) a will or (iii) the laws of descent and

 

3

 

distribution,
except as provided in the next sentence. If the applicable Stock Option
Agreement so provides, a Nonstatutory Option shall also be transferable by gift
or domestic relations order to a Family Member of the Optionee. An ISO may be
exercised during the lifetime of the Optionee only by the Optionee or by the
Optionee’s guardian or legal representative.

 

(h)           Withholding Taxes.
As a condition to the exercise of an Option, the Optionee shall make such
arrangements as the Board of Directors may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with such exercise. The Optionee shall also make such arrangements
as the Board of Directors may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

 

(i)            No Rights as a Stockholder.
An Optionee, or a transferee of an Optionee, shall have no rights as a
stockholder with respect to any Shares covered by the Optionee’s Option until
such person becomes entitled to receive such Shares by filing a notice of
exercise and paying the Exercise Price pursuant to the terms of such Option.

 

(j)            Modification, Extension
and Assumption of Options. Within the limitations of the Plan, the
Board of Directors may modify, extend or assume outstanding Options or may
accept the cancellation of outstanding Options (whether granted by the Company or
another issuer) in return for the grant of new Options for the same or a
different number of Shares and at the same or a different Exercise Price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s
obligations under such Option.

 

SECTION 7. PAYMENT FOR SHARES.

 

(a)           General Rule. The
entire Purchase Price or Exercise Price of Shares issued under the Plan shall
be payable in cash or cash equivalents at the time when such Shares are
purchased, except as otherwise provided in this Section 7.

 

(b)           Surrender of Stock.
At the discretion of the Board of Directors, all or any part of the Exercise
Price may be paid by surrendering, or attesting to the ownership of, Shares
that are already owned by the Optionee. Such Shares shall be surrendered to the
Company in good form for transfer and shall be valued at their Fair Market
Value on the date when the Option is exercised. The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense
(or additional compensation expense) with respect to the Option for financial
reporting purposes.

 

(c)           Services Rendered.
At the discretion of the Board of Directors, Shares may be awarded under the
Plan in consideration of services rendered to the Company, a Parent or a
Subsidiary prior to the award.

 

(d)           Promissory Note.
At the discretion of the Board of Directors, all or a portion of the Exercise
Price or Purchase Price (as the case may be) of Shares issued under the Plan
may be paid with a full-recourse promissory note. The Shares shall be pledged
as security

 

4

 

for
payment of the principal amount of the promissory note and interest thereon. The
interest rate payable under the terms of the promissory note shall not be less
than the minimum rate (if any) required to avoid (i) the imputation of
additional interest under the Code and (ii) the recognition of compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes. Subject to the foregoing, the Board of Directors
(at its sole discretion) shall specify the term, interest rate, amortization
requirements (if any) and other provisions of such note.

 

(e)           Exercise/Sale. To
the extent that a Stock Option Agreement so provides, and if Stock is publicly
traded, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.

 

(f)            Exercise/Pledge.
To the extent that a Stock Option Agreement so provides, and if Stock is
publicly traded, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by the Company, as security for a loan,
and to deliver all or part of the loan proceeds to the Company in payment of
all or part of the Exercise Price and any withholding taxes.

 

(g)           Other Forms of Payment.
At the discretion of the Board of Directors, the Purchase Price or Exercise
Price of Shares issued under the Plan may be paid in any other form permitted
by the Delaware General Corporation Law, as amended.

 

SECTION 8. ADJUSTMENT OF SHARES.

 

(a)           General. In the
event of a subdivision of the outstanding Stock, a declaration of a dividend
payable in Shares or a combination or consolidation of the outstanding Stock
into a lesser number of Shares, corresponding adjustments shall automatically
be made in each of (i) the number of Shares available for future grants under
Section 4, (ii) the number of Shares covered by each outstanding Option and
(iii) the Exercise Price under each outstanding Option. In the event of a
declaration of an extraordinary dividend payable in a form other than Shares in
an amount that has a material effect on the Fair Market Value of the Stock, a
recapitalization, a spin-off, a reclassification or a similar occurrence, the
Board of Directors at its sole discretion may make appropriate adjustments in
one or more of (i) the number of Shares available for future grants under
Section 4, (ii) the number of Shares covered by each outstanding Option or
(iii) the Exercise Price under each outstanding Option.

 

(b)           Mergers and Consolidations.
In the event that the Company is a party to a merger or consolidation, all
outstanding Options shall be subject to the agreement of merger or
consolidation. Such agreement shall provide for one or more of the following:

 

(i)            The
continuation of such outstanding Options by the Company (if the Company is the
surviving corporation).

 

5

 

(ii)           The
assumption of such outstanding Options by the surviving corporation or its
parent in a manner that complies with Section 424(a) of the Code (whether or
not such Options are ISOs).

 

(iii)          The
substitution by the surviving corporation or its parent of new options for such
outstanding Options in a manner that complies with Section 424(a) of the Code
(whether or not such Options are ISOs).

 

(iv)          Full
exercisability of such outstanding Options and full vesting of the Shares
subject to such Options, followed by the cancellation of such Options. The full
exercisability of such Options and full vesting of the Shares subject to such
Options may be contingent on the closing of such merger or consolidation. The
Optionees shall be able to exercise such Options during a period of not less
than five full business days preceding the closing date of such merger or
consolidation, unless (A) a shorter period is required to permit a timely
closing of such merger or consolidation and (B) such shorter period still
offers the Optionees a reasonable opportunity to exercise such Options. Any
exercise of such Options during such period may be contingent on the closing of
such merger or consolidation.

 

(v)           The
cancellation of such outstanding Options and a payment to the Optionees equal
to the excess of (A) the Fair Market Value of the Shares subject to such
Options (whether or not such Options are then exercisable or such Shares are
then vested) as of the closing date of such merger or consolidation over (B)
their Exercise Price. Such payment shall be made in the form of cash, cash
equivalents, or securities of the surviving corporation or its parent with a
Fair Market Value equal to the required amount. Such payment may be made in
installments and may be deferred until the date or dates when such Options
would have become exercisable or such Shares would have vested. Such payment
may be subject to vesting based on the Optionee’s continuing Service, provided
that the vesting schedule shall not be less favorable to the Optionees than the
schedule under which such Options would have become exercisable or such Shares
would have vested. If the Exercise Price of the Shares subject to such Options
exceeds the Fair Market Value of such Shares, then such Options may be
cancelled without making a payment to the Optionees. For purposes of this
Paragraph (v), the Fair Market Value of any security shall be determined
without regard to any vesting conditions that may apply to such security.

 

SECTION 9. SECURITIES LAW
REQUIREMENTS.

 

Shares
shall not be issued under the Plan unless the issuance and delivery of such
Shares comply with (or are exempt from) all applicable requirements of law,
including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange or other securities
market on which the Company’s securities may then be traded.

 

6

 

SECTION 10. NO RETENTION RIGHTS.

 

Nothing
in the Plan or in any right or Option granted under the Plan shall confer upon
the Purchaser or Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the
Purchaser or Optionee) or of the Purchaser or Optionee, which rights are hereby
expressly reserved by each, to terminate his or her Service at any time and for
any reason, with or without cause.

 

SECTION 11. DURATION AND
AMENDMENTS.

 

(a)           Term of the Plan.
The Plan, as set forth herein, shall become effective on the date of its
adoption by the Board of Directors, subject to the approval of the Company’s
stockholders. If the stockholders fail to approve the Plan within 12 months
after its adoption by the Board of Directors, then any grants, exercises or
sales that have already occurred under the Plan shall be rescinded and no
additional grants, exercises or sales shall thereafter be made under the Plan. The
Plan shall terminate automatically 10 years after the later of (i) its adoption
by the Board of Directors or (ii) the most recent increase in the number of
Shares reserved under Section 4 that was approved by the Company’s stockholders.
The Plan may be terminated on any earlier date pursuant to Subsection (b)
below.

 

(b)           Right to Amend or
Terminate the Plan. The Board of Directors may amend, suspend or
terminate the Plan at any time and for any reason; provided, however, that any
amendment of the Plan shall be subject to the approval of the Company’s stockholders
if it (i) increases the number of Shares available for issuance under the Plan
(except as provided in Section 8) or (ii) materially changes the class of
persons who are eligible for the grant of ISOs. Stockholder approval shall not
be required for any other amendment of the Plan. If the stockholders fail to
approve an increase in the number of Shares reserved under Section 4 within 12
months after its adoption by the Board of Directors, then any grants, exercises
or sales that have already occurred in reliance on such increase shall be
rescinded and no additional grants, exercises or sales shall thereafter be made
in reliance on such increase.

 

(c)           Effect of Amendment or
Termination. No Shares shall be issued or sold under the Plan after
the termination thereof, except upon exercise of an Option granted prior to
such termination. The termination of the Plan, or any amendment thereof, shall
not affect any Share previously issued or any Option previously granted under
the Plan.

 

SECTION 12. DEFINITIONS.

 

(a)           “Board of Directors”
shall mean the Board of Directors of the Company, as constituted from time to
time.

 

(b)           “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

(c)           “Committee”
shall mean a committee of the Board of Directors, as described in Section 2(a).

 

7

 

(d)           “Company” shall
mean del.icio.us, Inc., a Delaware corporation.

 

(e)           “Consultant”
shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside
Directors.

 

(f)            “Employee”
shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

 

(g)           “Exercise Price”
shall mean the amount for which one Share may be purchased upon exercise of an
Option, as specified by the Board of Directors in the applicable Stock Option
Agreement.

 

(h)           “Fair Market Value”
shall mean the fair market value of a Share, as determined by the Board of
Directors in good faith. Such determination shall be conclusive and binding on
all persons.

 

(i)            “Family
Member” shall mean (i) any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, including adoptive relationships, (ii) any person sharing the
Optionee’s household (other than a tenant or employee), (iii) a trust in which
persons described in Clause (i) or (ii) have more than 50% of the beneficial interest,
(iv) a foundation in which persons described in Clause (i) or (ii) or the
Optionee control the management of assets and (v) any other entity in which
persons described in Clause (i) or (ii) or the Optionee own more than 50% of
the voting interests.

 

(j)            “ISO”
shall mean an employee incentive stock option described in Section 422(b) of
the Code.

 

(k)           “Nonstatutory Option”
shall mean a stock option not described in Sections 422(b) or 423(b) of the
Code.

 

(l)            “Option”
shall mean an ISO or Nonstatutory Option granted under the Plan and entitling
the holder to purchase Shares.

 

(m)          “Optionee” shall
mean a person who holds an Option.

 

(n)           “Outside Director”
shall mean a member of the Board of Directors who is not an Employee.

 

(o)           “Parent” shall
mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

 

(p)           “Plan” shall
mean this del.icio.us, Inc. 2005 Stock Plan.

 

8

 

(q)           “Purchase Price”
shall mean the consideration for which one Share may be acquired under the Plan
(other than upon exercise of an Option), as specified by the Board of
Directors.

 

(r)            “Purchaser”
shall mean a person to whom the Board of Directors has offered the right to
acquire Shares under the Plan (other than upon exercise of an Option).

 

(s)           “Service” shall
mean service as an Employee, Outside Director or Consultant.

 

(t)            “Share”
shall mean one share of Stock, as adjusted in accordance with Section 8 (if
applicable).

 

(u)           “Stock” shall
mean the Common Stock of the Company, with a par value of $0.0001 per Share.

 

(v)           “Stock Option Agreement”
shall mean the agreement between the Company and an Optionee that contains the
terms, conditions and restrictions pertaining to the Optionee’s Option.

 

(w)          “Stock Purchase Agreement”
shall mean the agreement between the Company and a Purchaser who acquires
Shares under the Plan that contains the terms, conditions and restrictions
pertaining to the acquisition of such Shares.

 

(x)            “Subsidiary”
shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

 

9

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