Document:

exv10w01

 

Exhibit 10.01

Letter Agreement
Regarding Severance Offer and General Release

 

 

[CROSSROADS LETTERHEAD]

August 27, 2004

Andrea Wenholz

9001 Glenlake Drive

Austin, Texas 78730

Re: Severance Offer and General Release

Dear Andrea:

     As we have discussed, your employment as Vice President and Chief
Financial Officer of with Crossroads Systems, Inc. (the “Company”) will end on
September 15, 2004 (the “Employment End Date”) as a result of your voluntary
resignation, which has been accepted by the Company. In connection with the
cessation of your employment, you may receive certain severance benefits. Your
eligibility of such benefits depends upon your execution of a general release
and your other agreements contained in this Letter Agreement. Attached as
Exhibit A to this Letter Agreement is a copy of the general release (the
“Release”) the Company is requiring you to sign in order to receive the
benefits. This Letter Agreement summarizes the benefits that may be available
and the terms and requirements related thereto.

I. Background

     As of the date of the Employment End Date, your annual salary was $180,000
($15,000.00 monthly), and you had received and held the following option
grants:

          i. On January 6, 2003, you received an option grant under the terms of the
Company’s 1999 Stock Option Plan, as amended (the “Plan”), to purchase up to an
aggregate of 140,000 shares of the Company’s common stock, par value $0.001 per
share (the “Common Stock”), with an exercise price of $1.02 per share (“Option
I”). As of your Employment End Date, you will be vested in 52,500 shares from
Option I (“Option I Vested Shares”) and 87,500 shares will remain unvested (the
“Option I Unvested Shares”).

          ii. On August 21, 2003, you received an option grant under the terms of
the Plan to purchase up to an aggregate of 15,000 shares of Common Stock with
an exercise price of $1.87 per share (“Option II”). As of your Employment End
Date, you will have vested in 3,750 shares from Option II (“Option II Vested
Shares”) and 11,250 shares will remain unvested (the “Option II Unvested
Shares”).

          iii. On February 4, 2004, you received an option grant under the terms of
the Plan to purchase up to an aggregate of 50,000 shares of Common Stock with
an exercise price of $2.66 per share (“Option III”). As of your Employment End
Date, you will not be vested in any of the shares from Option III and 50,000
shares will remain unvested (the “Option III Unvested Shares”).

 

 

          iv. On January 6, 2003 you received a stock performance grant under the
terms of the 2003 Stock Bonus Incentive Program of 112,000 shares of Common
Stock at zero cost basis (the “Bonus Shares”). As of your Employment End Date,
you have received 83,118 of the Bonus Shares. There are 28,882 remaining
Bonus Shares (“Remaining Bonus Shares”) to which you would have been entitled
had you remained an employee through December 15, 2004.

II. Termination Rights and Obligations

     A. Payment of Current Salary. On September 15, 2004, you will receive
your final paycheck for wages earned through the Employment End Date.

     B. Continuation of Health and Welfare Coverage. If you elect not to sign
the Release and accept the health coverage benefits offered to you herein, your
health care coverage will terminate on September 30, 2004. Upon termination of
your coverage, you may choose to continue your health care coverage under the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”). If you elect to
continue health coverage under federal COBRA, you will be solely responsible
for your and your dependents’ health benefits, including all COBRA premiums. A
COBRA notification form containing an explanation of your COBRA rights will be
mailed to you and your dependents at your last known address on file with the
Company. You will have sixty (60) days from the date of the COBRA notice to
elect continuation of benefits under COBRA. It is your responsibility to
ensure that you and/or your eligible dependents timely make the COBRA election,
and if you fail to do so, you will have waived rights under COBRA.

     C. Reimbursement of Expenses. The Company will reimburse you for actual
and reasonable out-of-pocket costs and expenses incurred by you on behalf of
the Company prior to the Employment End Date, provided that you provide proof
of such costs and expenses on the appropriate forms and consistent with Company
policies.

     D. Other Agreements and/or Obligations. Both the Indemnity Agreement
dated January 3, 2003 by and between the Company and you (the “Indemnity
Agreement”) and the Proprietary Information and Inventions Agreement dated
January 3, 2003 by and between the Company and you (the “PIIA”) shall remain in
full force and effect pursuant to their respective terms. A copy of the
Indemnification Agreement is attached hereto as Exhibit B and a copy of the
PIIA is attached hereto as Exhibit C.

     E. Securities Laws. As an executive officer of a public company, you also
remain subject to certain federal securities laws, including laws restricting
your trading in the Company’s stock for a period of time following the
cessation of your employment. You acknowledge that compliance with these laws
is your responsibility.

III. Separation Package

     Section IV of this Letter Agreement sets forth certain Restrictive
Covenants to be made by you, a violation or breach of which would limit your
Severance Benefits. Therefore, unless

 

 

and until Section IV is invoked by the Company and based upon the terms of this
Letter Agreement and upon executing the Release, on the Effective Date you will
be eligible to receive the following (the items provided in paragraphs A-D
below being the “Severance Benefits”):

     A. Salary Continuation. Twelve months of your monthly base salary,
$11,666.67 monthly, less all applicable withholdings (your “Salary
Continuation”), to be paid to you in the Company’s normal payroll practices.
Although Salary Continuation is to begin on your Employment End Date, a check
will be sent to you after the Effective Date.

     B. Vesting of Certain Stock Options. Upon the Effective Date, you will
become vested in: 26,250 of the Option I Unvested Shares; 1,875 of the Option
II Unvested Shares; and 12,500 of the Option III Unvested Shares (collectively,
the “Accelerated Options”), representing the amount which you would have vested
had you remained in the Company’s employ for a period of seven (7) months
following Employment End Date. Please note, these options, as well as your
Vested Options, shall be exercisable until three months following the
Employment End Date and are subject to applicable income and withholding taxes.
If you do not exercise the Accelerated Options or the Vested Options prior to
the Expiration Date you will forfeit them.

     C. Bonus Shares. Upon the earlier of (i) two (2) business days following
the date on which the Company announces it financial results for the fourth
quarter of fiscal 2004 or (ii) December 10, 2004, the Company will request that
the administrator of the Plan, Salomon Smith Barney, issue the Remaining Bonus
Shares to you in accordance with its standard procedures for the issuance of
shares under the Plan, including payment of applicable taxes. Please note,
however, that shares will not be issued to you until the Company receives
payment from you for such applicable taxes.

     D. Continuation of Health Coverage. The Company will, at its expense,
continue to provide you and your eligible dependents with the Company’s paid
portion of health care coverage under the Company’s medical/dental plan until
the earlier of (i) the one year anniversary of the Employment End Date or (ii)
the first date that you are covered under another employer’s health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such Health Care Coverage will
be in lieu of any other continued health care coverage to which you or your
dependents would otherwise be entitled at your own cost under Code Section
4980B by reason of your termination of employment.

     E. Non-Disparagement. Neither the Company’s officers, director level
employees, members of executive staff nor any members of the Company’s Board of
Directors shall make any negative or disparaging statements or comments,
whether oral or written and as either fact or as opinion, about you, your
performance, or the circumstances of your departure.

 

 

IV. Restrictive Covenants

          Your entitlement to Salary Continuation and Continuation of Health
Coverage under this Letter Agreement will immediately cease (“Cessation of
Benefits”) should you (the items provided in clauses 1-6 below being the
“Restrictive Covenants”):

          1. render, anywhere in the United States, any services or provide any
advice or assistance to any Competing Business, whether as equity holder or in
any other capacity, without the express prior written consent of the Company.
Competing Business is defined as the [five (5)] companies designated by the
Company on the list attached hereto as Exhibit D. However, you are not
limited in making any passive investment representing an interest of less than
two percent (2%) of an outstanding class of publicly-traded securities of any
corporation or other enterprise;

          2. solicit customers, clients, suppliers, agents or other persons or
entities under contract or otherwise associated or doing business with the
Company and/or its controlled affiliates to reduce or alter any such
association or business with the Company and/or its controlled affiliates on
behalf of any Competing Business;

          3. solicit any employee or contractor of the Company and/or its
controlled affiliates to (a) alter or reduce such relationship with the
Company, and/or (b) accept employment, or enter into any consulting
arrangement, with any person other than the Company and/or its controlled
affiliates;

          4. counsel or assist in any way or act as a witness in a lawsuit,
dispute, claim, charge, grievance, complaint, allegation, investigation,
proceeding or otherwise (a “Dispute”) against the Company and/or its controlled
affiliates or against any Company officer, director, or employee whether or not
such Dispute has been filed with any administrative, state, federal or
governmental entity, agency, board or court, or before any other tribunal or
panel or arbitrators, public or private, except as may be required of you by
law;

          5. make any negative or disparaging statements or comments, either as
fact or as opinion, about the Company and/or its controlled affiliates,
including but not limited to its employees, officers, directors, shareholders,
investors, vendors, products or services, business, technologies, market
position, performance, and other similar information concerning the Company;

          6. breach any material provision of the PIIA including, without
limitation, paragraphs 1, 3, 4 and 8.

Should you commit any of the Restrictive Covenants and the Company invoke
section IV so that there is a Cessation of Benefits, please note, this Letter
Agreement and the Release shall remain in full force and effect and you shall
continue to be bound by both this Letter Agreement and the Release.

 

 

V. Miscellaneous

     By signing this Letter Agreement you are acknowledging and agreeing that
you will make yourself available from time to time, as questions arise and as
reasonably required, in order to assist the transition to another Chief
Financial Officer and in order to assist the Company in the ordinary course of
finance business and disclosure requirements.

     This Letter Agreement and the Release are binding on your representatives,
heirs, executors, administrators, successors and assigns and upon the Company’s
successors and assigns. You understand and agree that in any dispute between
you and the Company regarding the terms of this Letter Agreement and/or the
Release and/or any alleged breach thereof, that the prevailing party shall be
entitled to recover its costs and reasonable attorneys’ fees arising out of
such dispute.

     By signing this Letter Agreement and the Release, you acknowledge that you
have had an opportunity to consult with counsel and tax and other advisors
regarding this Agreement and the matters related thereto. You understand that
Andrews Kurth LLP has acted solely as legal counsel for the Company with
respect to the preparation of this Agreement and the other matters related
thereto and has not acted as legal counsel for you. You further understand
that the Company is not providing you with any tax, legal or financial advice
regarding any of the matters covered herein, including but not limited to, your
tax obligations under this Letter Agreement or the Release. You are personally
responsible for the payment of all federal, state and local taxes that are due,
or may be due, for any payments and other consideration received by you under
this Letter Agreement or the Release. You agree to indemnify the Company and
hold the Company harmless, from any and all taxes, penalties and/or other
assessments that the Company is, or may become, obligated to pay on account of
your failure to comply with the preceding sentence.

     By signing this Letter Agreement and the Release, you acknowledge that you
do not have any Company property in your possession, nor have you failed to
return any Company property to the Company including but not limited to access
cards, keys, credit card and telephone calling card, cell phone, pagers, and
computer equipment including laptops, PDA and software, other than software for
which you have a valid personal license and you are entitled to retain your
Nokia mobile phone. You hereby also acknowledge that you do not have in your
possession any of the Company’s Proprietary Information, as that term is
defined in the PIIA.

     This Letter Agreement, together with the Release, including any agreements
or documents referred to herein, constitute an integrated, written contract,
expressing the entire agreement between the Company and you with respect to the
subject matter hereof and supersedes any previous discussion or agreements,
including the Severance Benefit Plan dated December 18, 2002. You acknowledge
that you do not have any rights under the Severance Benefit Plan and it is null
and void as to you. You further represent and warrant that you are not relying
on any promises or representations that do not appear in this Letter Agreement
or the Release. This Letter Agreement and the Release can be amended or
modified only by a written agreement signed by you and the Company.

 

 

     This Letter Agreement and the Release shall, in all respects, be
interpreted, enforced and governed under the laws of the State of Texas
applicable to contracts executed and performed in Texas without giving effect
to conflicts of law principles. You agree that any disputes or litigation that
may arise with respect to this Letter Agreement and/or the Release shall be
brought and prosecuted in Travis County, Texas, and you agree to waive any
objections to the location of such disputes or litigation, including, but not
limited to objections based on forum non conveniens.

     You agree that if any provision or portion of any provision of this Letter
Agreement or the Release is held to be invalid or unenforceable or to be
contrary to public policy or any law, for any reason, the remainder of the
Letter Agreement and the remainder of the Release shall not be affected
thereby.

     You and the Company each agree to take whatever additional actions and
execute whatever additional documents that may be necessary or advisable in
order to carry out or effect one or more of the obligations provided for in
this Letter Agreement or the Release.

     This Letter Agreement and the Release may be executed in separate
counterparts and by facsimile and each such counterpart shall be deemed an
original with the same effect as if the Company and you signed the same
document.

VI. Conclusion

     If you wish to receive the Severance Benefits pursuant to this Letter
Agreement please: (i) review this Letter Agreement; (ii) review the attached
Release; (iii) deliver the executed Letter Agreement on or before September 15,
2004, and (iv) execute and deliver the Release to the Company on September 15,
2004 (the “Delivery Deadline”). This Letter Agreement will be deemed
“delivered” to the Company when you have dated, signed and faxed or
hand-delivered it to Kathy Blair at the Company’s office located at 8300 North
MoPac Expressway, Austin, Texas 78759, on or before the Delivery Deadline.
Should you desire to fax the executed Release to the Company instead, you
should use the following fax number: 512-928-7199. This Letter Agreement will
become effective on the date the executed Letter Agreement and the executed
Release have both been delivered to the Company (if delivered separately, the
date of delivery of the second document shall apply) (herein, the “Effective
Date”).

     We wish you the best of luck in your future endeavors and appreciate the
service you have provided to the Company.

Very truly yours,

CROSSROADS SYSTEMS, INC.

By: /s/                                        

 

 

Name:                                        

Title:                                          

By executing this Letter Agreement, I hereby agree to the provisions hereof,
and acknowledge that I am concurrently delivering an executed copy of the
Release, without which the Company’s other agreements herein shall be null and
void.

ACCEPTED AND ACKNOWLEDGED:

/s/ Andrea Wenholz          

Andrea Wenholz

 

 

EXHIBIT A

GENERAL RELEASE

     By signing this General Release (this “Release”) and accepting the
severance being offered to Andrea Wenholz (“you” or “You”) in the Severance
Offer and General Release Letter Agreement to which this Release is an exhibit,
you agree to waive, release, and forever discharge Crossroads Systems, Inc.
(the “Company”) and its parents, successors, assigns, divisions, subsidiaries,
affiliates, partners, officers, directors, executives, investors, shareholders,
managers, supervisors, employees, agents, attorneys and representatives
(collectively the “Released Parties” or “Releasees”), from any and all claims,
demands, and causes of action which you have or claim to have, whether known or
unknown, of whatever nature, which exist or may exist as of the date of your
execution of this Release. “Claims,” “demands,” and “causes of action”
include, but are not limited to, those based on contract, fraud, equity, tort,
discrimination, sexual harassment, retaliation, personal injury, constructive
discharge, emotional distress, public policy, wage and hour law, defamation,
claims for debts, accounts, attorneys’ fees, compensatory damages, punitive
damages, and/or liquidated damages, claims for vesting or accelerated vesting
of options to purchase the Company’s Common Stock, claims for any additional
shares of the Company’s Common Stock, and any and all claims arising under the
Americans with Disabilities Act, the Family and Medical Leave Act, or any other
federal or state statute governing employment, including but not limited to
Title VII of the Civil Rights Act of 1964, the Employee Retirement Income
Security Act of 1974, the Worker Adjustment Retraining and Notification Act,
the Texas Labor Code, and the Texas Commission on Human Rights Act, as such
statutes may have been or may be amended from time to time.

     You understand and agree, in compliance with any statute or ordinance
which requires a specific release of unknown claims or benefits, that this
Release includes a release of unknown claims, and you hereby expressly waive
and relinquish any and all claims, rights or benefits that you may have which
are unknown to you at the time of the execution of this Release. You
understand and agree that if, hereafter, you discover facts different from or
in addition to those which you now know or believe to be true, that the waivers
and releases of this Release shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery of such
fact(s).

     You represent and warrant that you do not presently have on file, and
further represent and warrant to the maximum extent allowed by law that you
will not hereafter file, any lawsuits, claims, charges, grievances or
complaints against the Company and/or the Released Parties in or with any
administrative, state, federal or governmental entity, agency, board or court,
or before any other tribunal or panel or arbitrators, public or private, based
upon any actions or omissions by the Company and/or the Released Parties
occurring prior to the Effective Date of this Release. You understand that
nothing in this Release prevents you from filing a charge or complaint with or
from participating in an investigation or proceeding conducted by the EEOC or
any other federal, state or local agency charged with the enforcement of any
employment laws. To the extent that you are still entitled to file an
administrative charge with any governmental agency,

 

 

you hereby release any personal entitlement to reinstatement, back pay, or
any other types of damages or injunctive relief in connection with any civil
action brought on your behalf after your filing of any administrative charge.

     The only claims that this Release does not include are claims related to
your rights under the employment benefits plans of the Company, (as applicable
to you on the date of your termination) and any claims that controlling law
clearly states may not be released by settlement.

     Nothing in this Release shall constitute or be treated as an admission of
any wrongdoing or liability on your part or on the part of the Company and/or
the Released Parties. You acknowledge that you have been advised to consult
with an attorney of your choosing prior to entering into this Release.

     Nothing in this Release is intended to alter, modify or waive the
Company’s and your continuing rights and obligations under the Company’s
Confidentiality, Proprietary Information and Inventions Agreement or its
Indemnity Agreement, each signed by you and each incorporated herein by this
reference. You understand and agree that a breach of any continuing obligation
contained in the above agreements shall also constitute a breach of this
Release.

     Finally, you represent and agree that you are the sole and lawful owner of
all rights, title and interest in and to all released matters, claims and
demands arising out of or in any way related to your employment with the
Company and/or the termination thereof.

     You acknowledge that you have until September 15, 2004 to consider this
Release and that you received this Release on August 27, 2004. You must
execute and deliver this Release to Kathy Blair at the Company on September 15,
2004 (the “Delivery Deadline). This Release will be deemed “delivered” to the
Company when you have dated, signed and faxed or hand-delivered it to Kathy
Blair at the Company’s office located at 8300 North MoPac Expressway, Austin,
Texas 78759, on or before 5:00 p.m. on the Delivery Deadline. Should you
desire to fax the executed Release to the Company instead, you should use the
following fax number: 512-928-7199. This Release will become effective on the
date the executed document is delivered to the Company (herein, the “Release
Effective Date”).

[Signature Page Follows]

 

 

ANDREA WENHOLZ

	 	 	 
	

	 
	 	 
	Dated:
	 	 
	

	 	

ACCEPTED AND ACKNOWLEDGED:

CROSSROADS SYSTEMS, INC.

	 	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	

	Title:
	 	 
	

	 	

	 
	 	 
	Dated:
	 	 
	

	 	

 

 

EXHIBIT B

INDEMNIFICATION AGREEMENT

(See Attached)

 

 

EXHIBIT C

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

(See Attached)

 

 

EXHIBIT D

COMPETING BUSINESS LIST

Advanced Digital Information Corporation

Atto

Dot Hill Systems Corp.

Brocade Communications Systems, Inc.

Cisco Systems, Inc.Exhibit 4.1

 

Exhibit 4.1

EPOCH BIOSCIENCES, INC.

2003 STOCK INCENTIVE PLAN

     This 2003 STOCK INCENTIVE PLAN (the “Plan”) is hereby established by Epoch
Biosciences, Inc., a Delaware corporation (the “Company”), adopted by its Board
of Directors as of the 20th day of February, 2003, and approved by its
stockholders as of the 22nd day of May, 2003 (the “Effective Date”).

ARTICLE 1.

PURPOSES OF THE PLAN

     1.1 Purposes. The purposes of the Plan are (a) to enhance the Company’s
ability to attract and retain the services of qualified employees, officers and
directors (including non-employee officers and directors), and consultants and
other service providers upon whose judgment, initiative and efforts the
successful conduct and development of the Company’s business largely depends,
and (b) to provide additional incentives to such persons or entities to devote
their utmost effort and skill to the advancement and betterment of the Company,
by providing them an opportunity to participate in the ownership of the Company
and thereby have an interest in the success and increased value of the Company.

ARTICLE 2.

DEFINITIONS

     For purposes of this Plan, the following terms shall have the meanings
indicated:

     2.1 Administrator. “Administrator” means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term
Administrator shall mean the Committee.

     2.2 Affiliated Company. “Affiliated Company” means any “parent
corporation” or “subsidiary corporation” of the Company, whether now existing
or hereafter created or acquired, as those terms are defined in Sections 424(e)
and 424(f) of the Code, respectively.

     2.3 Authorized Plan Shares. “Authorized Plan Shares” shall have the
meaning set forth in Section 4.1(b).

     2.4 Board. “Board” means the Board of Directors of the Company.

     2.5 Calculation Date. “Calculation Date” shall have the meaning set forth
in Section 4.1(b).

     2.6 Change in Control. “Change in Control” shall mean:

          (a) The acquisition, directly or indirectly, in one transaction or a
series of related transactions, by any person or group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the
beneficial ownership of securities of the Company possessing more than fifty
percent (50%) of the total combined voting power of all outstanding securities
of the Company;

1

 

          (b) A merger or consolidation in which the Company is not the surviving
entity, except for a transaction in which the holders of the outstanding voting
securities of the Company immediately prior to such merger or consolidation
hold as a result of holding Company securities prior to such transaction, in
the aggregate, securities possessing more than fifty percent (50%) of the total
combined voting power of all outstanding voting securities of the surviving
entity immediately after such merger or consolidation;

          (c) A reverse merger in which the Company is the surviving entity, except
for a transaction in which securities possessing fifty percent (50%) or less of
the total combined voting power of all outstanding voting securities of the
Company are transferred to or acquired by the acquiring entity;

          (d) The sale, transfer or other disposition (in one transaction or a
series of related transactions) of all or substantially all of the assets of
the Company, except for a transaction in which the holders of the outstanding
voting securities of the Company immediately prior to such transaction(s)
receive as a distribution with respect to securities of the Company, in the
aggregate, securities possessing more than fifty percent (50%) of the total
combined voting power of all outstanding voting securities of the acquiring
entity immediately after such transaction(s); or

          (e) The approval by the stockholders of a plan or proposal for the
liquidation or dissolution of the Company.

     2.7 Code. “Code” means the Internal Revenue Code of 1986, as amended from
time to time.

     2.8 Committee. “Committee” means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1 hereof.

     2.9 Common Stock. “Common Stock” means the Common Stock of the Company,
subject to adjustment pursuant to Section 4.2 hereof.

     2.10 Consultant. “Consultant” means any consultant or advisor if: (i) the
consultant or advisor renders bona fide services to the Company or any
Affiliated Company; (ii) the services rendered by the consultant or advisor are
not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities; and (iii) the consultant or advisor is a natural
person who has contracted directly with the Company or any Affiliated Company
to render such services.

     2.11 Covered Employee. “Covered Employee” means the chief executive
officer of the Company (or the individual acting in such capacity) and the four
(4) other individuals that are the highest compensated officers of the Company
for the relevant taxable year for whom total compensation is required to be
reported to stockholders under the Exchange Act. Provisions in this Plan
making reference to a Covered Employee shall apply only at such time that the
Company is Publicly Held.

     2.12 Diluted Shares Outstanding. “Diluted Shares Outstanding” shall have
the meaning set forth in Section 4.1(b).

2

 

     2.13 Disability. “Disability” means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator’s determination of
a Disability or the absence thereof shall be conclusive and binding on all
interested parties.

     2.14 Effective Date. “Effective Date” means the date on which the Plan is
approved by the Company’s stockholders, as set forth on the first page hereof.

     2.15 Exchange Act. “Exchange Act” means the Securities and Exchange Act of
1934, as amended.

     2.16 Exercise Price. “Exercise Price” means the purchase price per share
of Common Stock payable upon exercise of an Option.

     2.17 Fair Market Value. “Fair Market Value” at any given time means the
value of one share of Common Stock, determined as follows:

          (a) If the Common Stock is then listed or admitted to trading on a Nasdaq
market system or a stock exchange which reports closing sale prices, the Fair
Market Value shall be the closing sale price on such Nasdaq market system or
principal stock exchange on which the Common Stock is then listed or admitted
to trading, or, if no closing sale price is quoted at such time, then the Fair
Market Value shall be the closing sale price of the Common Stock on such Nasdaq
market system or such exchange on the next preceding day for which a closing
sale price is reported.

          (b) If the Common Stock is not then listed or admitted to trading on a
Nasdaq market system or a stock exchange which reports closing sale prices, the
Fair Market Value shall be the average of the closing bid and asked prices of
the Common Stock in the over-the-counter market at the time of valuation.

          (c) If neither (a) nor (b) is applicable as of the date of valuation, then
the Fair Market Value shall be determined by the Administrator in good faith
using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested parties.

     2.18 Incentive Option. “Incentive Option” means any Option designated and
qualified as an “incentive stock option” as defined in Section 422 of the Code.

     2.19 Incentive Option Agreement. “Incentive Option Agreement” means an
Option Agreement with respect to an Incentive Option.

     2.20 NASD Dealer. “NASD Dealer” means a broker-dealer that is a member of
the National Association of Securities Dealers, Inc.

     2.21 Nonqualified Option. “Nonqualified Option” means any Option that is
not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable
to a 10% Stockholder or because it exceeds the annual limit provided for in
Section 5.6 below, it shall to that extent constitute a Nonqualified Option.

     2.22 Nonqualified Option Agreement. “Nonqualified Option Agreement” means
an Option Agreement with respect to a Nonqualified Option.

3

 

     2.23 Option. “Option” means any option to purchase Common Stock granted
pursuant to the Plan.

     2.24 Option Agreement. “Option Agreement” means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.

     2.25 Optionee. “Optionee” means a Participant who holds an Option.

     2.26 Participant. “Participant” means an individual or entity who holds
an Option or Restricted Stock under the Plan.

     2.27 Purchase Price. “Purchase Price” means the purchase price per share
of Restricted Stock.

     2.28 Restricted Stock. “Restricted Stock” means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and conditions
as are established pursuant to such Article 6.

     2.29 Service Provider. “Service Provider” means a Consultant or other
natural person the Administrator authorizes to become a Participant in the Plan
and who provides services to (i) the Company, (ii) an Affiliated Company, or
(iii) any other business venture designated by the Administrator in which the
Company (or any entity that is a successor to the Company) or an Affiliated
Company has a significant ownership interest.

     2.30 Stock Purchase Agreement. “Stock Purchase Agreement” means the
written agreement entered into between the Company and a Participant with
respect to the purchase of Restricted Stock under the Plan.

     2.31 10% Stockholder. “10% Stockholder” means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of an
Affiliated Company.

ARTICLE 3.

ELIGIBILITY

     3.1 Incentive Options. Only employees of the Company or of an Affiliated
Company (including officers of the Company and members of the Board if they are
employees of the Company or of an Affiliated Company) are eligible to receive
Incentive Options under the Plan.

     3.2 Nonqualified Options and Restricted Stock. Employees of the Company
or of an Affiliated Company, officers of the Company and members of the Board
(whether or not employed by the Company or an Affiliated Company), and Service
Providers are eligible to receive Nonqualified Options or acquire Restricted
Stock under the Plan.

4

 

     3.3 Section 162(m) Limitation. Subject to the provisions of Section 4.2, no
employee of the Company or of an Affiliated Company shall be eligible to be
granted Options covering more than 500,000 shares of Common Stock during any
calendar year. The foregoing shall not apply until such time as required by
Section 162(m) of the Code and the rules and regulations thereunder.

ARTICLE 4.

PLAN SHARES

     4.1 Shares Subject to the Plan.

          (a) A total of Two Million Ninety Three Thousand One Hundred and
Twenty-Seven (2,093,127) shares of Common Stock may be issued under the Plan,
subject to adjustment as to the number and kind of shares pursuant to Section
4.2 hereof.

          (b) Notwithstanding Section 4.1(a) hereof and subject to the provisions of
Section 4.2 below relating to adjustments upon changes in capital structure, on
the first day of each fiscal year of the Company (the “Calculation Date”) for a
period of nine (9) years, commencing with the first day of the Company’s fiscal
year 2004, the aggregate number of shares of Common Stock that is available for
issuance under the Plan shall automatically be increased by a number of shares
determined by the Board, such number being no greater than the lesser of (1)
2.5% of the “Diluted Shares Outstanding”, or (2) 750,000 shares of Common
Stock. However, on any Calculation Date, in no event shall the Board increase
the number of shares of common stock available for issuance under the Plan to
the extent such increase causes the “Authorized Plan Shares” to exceed Eighteen
percent (18%) of the Diluted Shares Outstanding.

     “Diluted Shares Outstanding” shall mean, as of any Calculation Date, (1)
the number of shares of outstanding Common Stock on such Calculation Date, plus
(2) the additional number of shares of Common Stock issuable upon such
Calculation Date assuming the conversion of all outstanding Company preferred
stock and convertible notes, plus (3) the additional number of shares of Common
Stock outstanding assuming the exercise of all Company options and warrants,
plus (4) the number of authorized but unissued shares of common stock available
for issuance under the Plan, as of such Calculation Date.

     “Authorized Plan Shares” shall mean, as of any Calculation Date, (1) the
number of shares of common stock available for issuance under the Plan, plus
(2) the additional number of shares of Common Stock outstanding assuming the
exercise of all Company options (including options granted under the Plan and
options granted under previous Company stock incentive plans).

          (c) In the event that (1) all or any portion of any Option or Restricted
Stock granted or offered under the Plan (or pursuant to similar awards under
the Company’s 1991 and 1993 plans) can no longer under any circumstances be
exercised, or (2) any shares of Common Stock are reacquired by the Company
which were initially the subject of an Incentive Option Agreement, Nonqualified
Option Agreement or Stock Purchase Agreement (under the Plan or pursuant to
similar awards under the Company’s 1991 and 1993 plans), the shares of Common
Stock allocable to the unexercised portion of such Option or such Stock
Purchase Agreement, or the shares so reacquired, shall again be available for
grant or issuance under the Plan.

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     4.2 Changes in Capital Structure. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, reverse stock split,
combination of shares, reclassification, stock dividend, or other change in the
capital structure of the Company, then appropriate adjustments shall be
automatically made to the aggregate number and kind of shares subject to this
Plan, the number and kind of shares and the price per share subject to
outstanding Option Agreements and Stock Purchase Agreements and the limit on
the number of shares under Section 3.3, all in order to preserve, as nearly as
practical, but not to increase, the benefits to Participants.

ARTICLE 5.

OPTIONS

     5.1 Option Agreement. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement that shall specify the number of shares
subject thereto, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical following the
grant of an Option, an Option Agreement shall be duly executed and delivered by
or on behalf of the Company to the Optionee to whom such Option was granted.
Each Option Agreement shall be in such form and contain such additional terms
and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal and resale
obligations upon any shares of Common Stock acquired pursuant to an Option
Agreement. Each Option Agreement may be different from each other Option
Agreement.

     5.2 Exercise Price. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, subject to the
following: (a) the Exercise Price of an Incentive Option shall not be less
than 100% of Fair Market Value at the time the Incentive Option is granted, (b)
the Exercise Price for Nonqualified Options granted to Covered Employees shall
not be less than 100% of Fair Market Value at such time, and (c) if the person
to whom an Incentive Option is granted is a 10% Stockholder on the date of
grant, the Exercise Price shall not be less than 110% of Fair Market Value at
the time the Option is granted. However, an Option may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424 of the Code.

     5.3 Payment of Exercise Price. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock acquired pursuant to the exercise of an
Option (provided that shares acquired pursuant to the exercise of options
granted by the Company must have been held by the Optionee for the requisite
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes), which surrendered shares shall be valued at Fair Market
Value as of the date of such exercise; (d) the cancellation of indebtedness of
the Company to the Optionee; (e) the waiver of compensation due or accrued to
the Optionee for services rendered; (f) provided that a public market for the
Common Stock exists, a “same day sale” commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
sell a portion of the shares so purchased to pay for the Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the Exercise Price directly to the Company; (g) provided that a public
market for the Common Stock exists, a

6

 

“margin” commitment from the Optionee and an NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option and to pledge the shares so
purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such shares to forward the Exercise
Price directly to the Company; or (h) any combination of the foregoing methods
of payment or any other consideration or method of payment as shall be
permitted by applicable law.

     5.4 Term and Termination of Options. The term and provisions for
termination of each Option shall be as fixed by the Administrator, but no
Option may be exercisable more than ten (10) years after the date it is
granted. An Incentive Option granted to a person who is a 10% Stockholder on
the date of grant shall not be exercisable more than five (5) years after the
date it is granted.

     5.5 Vesting and Exercise of Options. Each Option shall vest and become
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator.

     5.6 Annual Limit on Incentive Options. To the extent required for
“incentive stock option” treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock
shall not, with respect to which Incentive Options granted under this Plan and
any other plan of the Company or any Affiliated Company become exercisable for
the first time by an Optionee during any calendar year, exceed $100,000.

     5.7 Nontransferability of Options. Except as otherwise provided by the
Administrator in an Option Agreement and as permissible under applicable law,
no Option shall be assignable or transferable except by will or the laws of
descent and distribution, and during the life of the Optionee shall be
exercisable only by such Optionee.

     5.8 Rights as Stockholder. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.

     5.9 Unvested Shares. The Administrator shall have the discretion to grant
Options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease being an employee, a Service Provider, an officer, director or
Consultant of the Company while owning such unvested shares, the Company shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Administrator and set forth in the document evidencing such repurchase
right.

7

 

ARTICLE 6.

RESTRICTED STOCK

     6.1 Issuance and Sale of Restricted Stock. The Administrator shall have
the right to issue, at a Purchase Price determined by the Administrator
(provided that such Purchase Price shall not be less than Fair Market Value for
shares issued to a Covered Employee), shares of Common Stock subject to such
terms, restrictions and conditions as the Administrator may determine at the
time of grant (“Restricted Stock”). Such conditions may include, but are not
limited to, continued employment or the achievement of specified performance
goals or objectives.

     6.2 Restricted Stock Purchase Agreements. A Participant shall have no
rights with respect to the shares of Restricted Stock covered by a Stock
Purchase Agreement until the Participant has paid the full Purchase Price to
the Company in the manner set forth in Section 6.3 hereof and has executed and
delivered to the Company the Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and
such other terms, conditions and restrictions of the Restricted Stock, not
inconsistent with the provisions of this Plan, as the Administrator shall, from
time to time, deem desirable. Each Stock Purchase Agreement may be different
from each other Stock Purchase Agreement.

     6.3 Payment of Purchase Price. Subject to any legal restrictions, payment
of the Purchase Price may be made, in the discretion of the Administrator, by:
(a) cash; (b) check; (c) the surrender of shares of Common Stock owned by the
Participant that have been held by the Participant for the requisite period
necessary to avoid a charge to the Company’s earnings for financial reporting
purposes, which surrendered shares shall be valued at Fair Market Value as of
the date of such acceptance; (d) the cancellation of indebtedness of the
Company to the Participant; (e) the waiver of compensation due or accrued to
the Participant for services rendered; or (f) any combination of the foregoing
methods of payment or any other consideration or method of payment as shall be
permitted by applicable law.

     6.4 Rights as a Stockholder. Upon complying with the provisions of
Section 6.2 hereof, a Participant shall have the rights of a stockholder with
respect to the Restricted Stock purchased pursuant to a Stock Purchase
Agreement, including voting and dividend rights, subject to the terms,
restrictions and conditions as are set forth in such Stock Purchase Agreement.
Unless the Administrator shall determine otherwise, certificates evidencing
shares of Restricted Stock shall remain in the possession of the Company until
such shares have vested in accordance with the terms of the Stock Purchase
Agreement.

     6.5 Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Stock Purchase Agreement. In the event of
termination of a Participant’s employment, service as a director of the Company
or Service Provider status for any reason whatsoever (including death or
disability), the Stock Purchase Agreement may provide, in the discretion of the
Administrator, that the Company shall have the right, exercisable at the
discretion of the Administrator, to repurchase at the original Purchase Price
any shares of Restricted Stock which have not vested as of the date of
termination (the “Repurchase Right”).

8

 

     6.6 Vesting of Restricted Stock. The Stock Purchase Agreement shall
specify the date or dates, the performance goals or objectives which must be
achieved, and any other conditions on which the Restricted Stock may vest.

     6.7 Dividends. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.

ARTICLE 7.

ADMINISTRATION OF THE PLAN

     7.1 Administrator. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate
such responsibilities in whole or in part to a committee consisting of two (2)
or more members of the Board (the “Committee”). Members of the Committee may
be appointed from time to time by, and shall serve at the pleasure of, the
Board. The Board may limit the composition of the Committee to those persons
necessary to comply with the requirements of Section 162(m) of the Code and
Section 16 of the Exchange Act. As used herein, the term “Administrator” means
the Board or, with respect to any matter as to which responsibility has been
delegated to the Committee, the term Administrator shall mean the Committee.

     7.2 Powers of the Administrator. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator (or the Committee, as the case may be; or the Administrator’s
other delegate, to the extent and as approved by the Board of Directors and as
permitted by applicable law) shall have full power and authority: (a) to
determine the persons to whom, and the time or times at which, Incentive
Options or Nonqualified Options or rights to purchase Restricted Stock shall be
granted, the number of shares to be represented by each Option and the number
of shares of Restricted Stock to be offered, and the consideration to be
received by the Company upon the exercise of such Options or sale of such
Restricted Stock; (b) to interpret the Plan; (c) to create, amend or rescind
rules and regulations relating to the Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Option Agreements
and Stock Purchase Agreements; (e) to determine the identity or capacity of any
persons who may be entitled to exercise a Participant’s rights under any Option
or Stock Purchase Agreement under the Plan; (f) to correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any Option
Agreement or Stock Purchase Agreement; (g) to accelerate the vesting of any
Option or release or waive any repurchase rights of the Company with respect to
Restricted Stock; (h) to extend the exercise date of any Option or acceptance
date of any Restricted Stock; (i) to provide for rights of first refusal and/or
repurchase rights; (j) to amend outstanding Option Agreements and Stock
Purchase Agreements to provide for, among other things, any change or
modification which the Administrator could have included in the original
Agreement or in furtherance of the powers provided for herein; and (k) to make
all other determinations necessary or advisable for the administration of the
Plan, but only to the extent not contrary to the express provisions of the
Plan. Any action, decision, interpretation or determination made in good faith
by the Administrator in the exercise of its authority conferred upon it under
the Plan shall be final and binding on the Company and all Participants.

9

 

     7.3 Limitation on Liability. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board
or Committee, and any employee of the Company with duties under the Plan, who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person’s conduct in the performance of duties
under the Plan.

ARTICLE 8.

CHANGE IN CONTROL

     8.1 Change in Control. In order to preserve a Participant’s rights in the
event of a Change in Control of the Company:

          (a) Vesting of all outstanding Options shall accelerate automatically
effective as of immediately prior to the consummation of the Change in Control
unless the Options are to be assumed by the acquiring or successor entity (or
parent thereof) or new options or New Incentives are to be issued in exchange
therefor, as provided in subsection (b) below.

          (b) Vesting of outstanding Options shall not accelerate if and to the
extent that: (i) the Options (including the unvested portion thereof) are to
be assumed by the acquiring or successor entity (or parent thereof) or new
options of comparable value are to be issued in exchange therefor pursuant to
the terms of the Change in Control transaction, or (ii) the Options (including
the unvested portion thereof) are to be replaced by the acquiring or successor
entity (or parent thereof) with other incentives of comparable value under a
new incentive program (“New Incentives”) containing such terms and provisions
as the Administrator in its discretion may consider equitable. If outstanding
Options are assumed, or if new options of comparable value are issued in
exchange therefor, then each such Option or new option shall be appropriately
adjusted, concurrently with the Change in Control, to apply to the number and
class of securities or other property that the Participant would have received
pursuant to the Change in Control transaction in exchange for the shares
issuable upon exercise of the Option had the Option been exercised immediately
prior to the Change in Control, and appropriate adjustment also shall be made
to the Exercise Price such that the aggregate Exercise Price of each such
Option or new option shall remain the same as nearly as practicable.

          (c) If any Option is assumed by an acquiring or successor entity (or
parent thereof) or a new option of comparable value or New Incentive is issued
in exchange therefor pursuant to the terms of a Change in Control transaction,
then if so provided in an Option Agreement, the vesting of the Option, the new
option or the New Incentive shall accelerate if and at such time as the
Participant’s service as an employee, director, officer, consultant or other
service provider to the acquiring or successor entity (or a parent or
subsidiary thereof) is terminated involuntarily or voluntarily under certain
circumstances within a specified period following consummation of the Change in
Control, pursuant to such terms and conditions as shall be set forth in the
Option Agreement.

10

 

          (d) If outstanding Options will accelerate pursuant to subsection (a) above,
the Administrator in its discretion may provide, in connection with the Change
in Control transaction, for the purchase or exchange of each Option for an
amount of cash or other property having a value equal to the difference (or
“spread”) between: (x) the value of the cash or other property that the
Participant would have received pursuant to the Change in Control transaction
in exchange for the shares issuable upon exercise of the Option had the Option
been exercised immediately prior to the Change in Control, and (y) the Exercise
Price of the Option.

          (e) In the event of a Change in Control of the Company, all Repurchase
Rights shall automatically terminate immediately prior to the consummation of
such Change in Control, and the shares of Common Stock subject to such
terminated Repurchase Rights shall immediately vest in full, except to the
extent that: (i) in connection with such Change in Control, the acquiring or
successor entity (or parent thereof) provides for the continuance or assumption
of Stock Purchase Agreements or the substitution of new agreements of
comparable value covering shares of a successor corporation, with appropriate
adjustments as to the number and kind of shares and purchase price, or (ii)
such accelerated vesting is precluded by other limitations imposed by the
Administrator in the Stock Purchase Agreement at the time the Restricted Stock
is issued.

          (f) If, upon a Change in Control, the acquiring or successor entity (or
parent thereof) provides for the continuance or assumption of any Stock
Purchase Agreement or the substitution of new agreements of comparable value
covering shares of a successor corporation (with appropriate adjustments as to
the number and kind of shares and purchase price), then, to the extent provided
in such Stock Purchase Agreement, any Repurchase Right provided for in such
Stock Purchase Agreement shall terminate, and the shares of Common Stock
subject to the terminated Repurchase Right or any substituted shares shall
immediately vest in full, if the Participant’s service as an employee,
director, officer, consultant or other service provider to the acquiring or
successor entity (or a parent or subsidiary thereof) is terminated
involuntarily or voluntarily under certain circumstances within a specified
period following consummation of a Change in Control pursuant to such terms and
conditions as shall be set forth in the Stock Purchase Agreement.

          (g) The Administrator shall have the discretion to provide in each option
Agreement or Stock Purchase Agreement other terms and conditions that relate to
(i) vesting of such Option or Restricted Stock in the event of a Change in
Control, and (ii) assumption of such Options or Stock Purchase Agreements or
issuance of comparable securities or New Incentives in the event of a Change in
Control. The aforementioned terms and conditions may vary in each Option and
Stock Purchase Agreement, and may be different from and have precedence over
the provisions set forth in Sections 8.1(a) — 8.1(f) above.

          (h) Outstanding Options shall terminate and cease to be exercisable upon
consummation of a Change in Control except to the extent that the Options are
assumed by the successor entity (or parent thereof) pursuant to the terms of
the Change in Control transaction.

          (i) The Administrator shall cause written notice of a proposed Change in
Control transaction to be given to Participants not less than fifteen (15) days
prior to the anticipated effective date of the proposed transaction.

11

 

ARTICLE 9.

AMENDMENT AND TERMINATION OF THE PLAN

     9.1 Amendments. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant’s consent. The Board may alter or amend the Plan to comply with
requirements under the Code relating to Incentive Options or other types of
options which give Optionees more favorable tax treatment than that applicable
to Options granted under this Plan as of the date of its adoption. Upon any
such alteration or amendment, any outstanding Option granted hereunder may, if
the Administrator so determines and if permitted by applicable law, be subject
to the more favorable tax treatment afforded to an Optionee pursuant to such
terms and conditions.

     9.2 Plan Termination. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Restricted Stock may be granted under the Plan
thereafter, but Option Agreements and Stock Purchase Agreements then
outstanding shall continue in effect in accordance with their respective terms.

ARTICLE 10.

TAX WITHHOLDING

     10.1 Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the Plan. To
the extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions as
it may deem appropriate, permit a Participant to satisfy his or her obligation
to pay any such tax, in whole or in part, up to an amount determined on the
basis of the highest marginal tax rate applicable to such Participant, by (a)
directing the Company to apply shares of Common Stock to which the Participant
is entitled as a result of the exercise of an Option or as a result of the
purchase of or lapse of restrictions on Restricted Stock or (b) delivering to
the Company shares of Common Stock owned by the Participant. The shares of
Common Stock so applied or delivered in satisfaction of the Participant’s tax
withholding obligation shall be valued at their Fair Market Value as of the
date of measurement of the amount of income subject to withholding.

ARTICLE 11.

MISCELLANEOUS

     11.1 Benefits Not Alienable. Other than as provided above, benefits under
the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or
other disposition shall be without effect.

12

 

     11.2 No Enlargement of Employee Rights. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Participant to be consideration for, or an
inducement to, or a condition of, the employment of any Participant. Nothing
contained in the Plan shall be deemed to give the right to any Participant to
be retained as an employee of the Company or any Affiliated Company or to limit
the right of the Company or any Affiliated Company to discharge any Participant
at any time.

     11.3 Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.

     11.4 Stockholder Approval. The Company shall obtain stockholder approval
of the Plan within twelve (12) months before or after the adoption of the Plan
by the Board of Directors.

13

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