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Exhibit
4.2 

 
 

LOCK-UP AGREEMENT    
  

    THIS LOCK-UP AGREEMENT (this "Agreement") is entered into as of February   , 2001, by and
between EMBARCADERO TECHNOLOGIES, INC., a Delaware corporation (the "Company") and             (the "Stockholder"). 

 
 

RECITALS

    A.  The Company and the Stockholder desire to provide for the orderly disposition of the securities of the Company held
by the Stockholder. 

    B.  In order to induce the Stockholder to enter into this Agreement, concurrently herewith the Company is granting to
the Stockholder the piggyback registration rights set forth in Section 2. In consideration for such registration rights, the Stockholder has agreed not to offer, contract to sell or otherwise sell,
dispose of, loan, pledge, grant any rights with respect to, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect
as a sale of (each, a "Disposition"), any shares of the Company Common Stock or other securities of the Company held the Stockholder (collectively, the "Subject Securities") except as permitted under
this Agreement. 

 
 

AGREEMENT    
  

    The Stockholder, intending to be legally bound, agrees as follows: 

    1.  Disposition of Subject Securities.

        (a) The
Stockholder agrees that, during the period beginning on the date hereof and ending on January 31, 2002 (the "Lock-up Period"), the Stockholder shall not
make a Disposition of any Subject Securities except as permitted under Section 1(b) below. 

        (b) Notwithstanding
the foregoing, during the Lock-up Period, the Stockholder shall be released from the restrictions set forth in Section 1(a) with respect to
      shares of Company Common Stock (as adjusted for stock splits, stock dividends and other similar transactions affecting the Company Common Stock which occur subsequent to the date
hereof) as of February 14, 2001, April 30, 2001, July 31, 2001 and October 31, 2001, such that as of October 31, 2001, the Stockholder shall have been released from
the restrictions set forth in Section 1(a) with respect to      shares of Company Common Stock. On January 31, 2002, the Stockholder shall be released from the restrictions
set forth in Section 1(a) with respect to any Subject Securities that were not previously released pursuant to this Section 1(b). 

        (c) Stockholder
agrees to comply with the trading window period set forth in the Company's written policy regarding trading in the Company's stock, dated as of
July 17, 2000, as such policy may be amended subsequent to the date hereof (the "Insider Trading Policy"), regardless of whether the Stockholder is an employee or director of the Company. The
Stockholder has read and understands the Insider Trading Policy. 

        (d) The
Stockholder authorizes the Company to cause the Company's transfer agent to decline to transfer and/or to note stop transfer restrictions on the transfer books
and records of the Company with respect to any Subject Securities for which the Stockholder is the record holder and, in the case of any such shares or securities for which the Stockholder is the
beneficial but not the record holder, agrees to cause the record holder to cause the transfer agent to decline to transfer and/or to note stop transfer restrictions on such books and records with
respect to such Subject Securities. 

    2.  Piggyback Registration Rights.  

        (a) Notice and Effective Period.  Subject to the terms of this Agreement, in the event the Company
decides to register under the Securities Act of 1933, as amended (the "Act") any of its 

common stock for its own account other than a registration relating solely to employee benefit plans or a registration relating to a corporate reorganization or other transaction under Rule 145
of the Act or a registration on any registration form that does not permit secondary sales (a "Registration"), the Company will (i) promptly give Stockholder written notice thereof and
(ii) include in the Registration and in any underwriting involved therein, that number of shares of Company Common Stock beneficially owned by the Stockholder ("Registrable Securities")
specified in a written request delivered to the Company by the Stockholder within 5 days after delivery of such written notice from the Company. These piggyback registration rights shall terminate as
of January 31, 2002. 

        (b) Information.  It shall be a condition precedent of the Company's obligations
under this Section 2 that Stockholder shall furnish to the Company such information regarding the Stockholder and the distribution proposed by the Stockholder as the Company shall reasonably request. 

        (c) Underwriting.  If the Registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so advise Stockholder as a part of the written notice given pursuant to Section 2(a). In such event, the right of Stockholder to
be included in the Registration shall be conditioned upon such underwriting and the inclusion of the Registrable Securities in such underwriting to the extent provided in this Section 2. If
Stockholder wishes to distribute its securities through such underwriting, Stockholder shall (together with the Company and the other stockholders distributing their securities through such
underwriting) enter into an underwriting agreement with the underwriter's representative for such offering. Stockholder shall have no right to participate in the selection of the underwriters for an
offering pursuant to this Section 2(c). 

        (d) Marketing Limitation in Underwritten Registration.  If the underwriter's
representative advises Stockholder in writing that market factors (including, without limitation, the aggregate number of shares of common stock requested to be registered, the general condition of
the market, and the status of the persons proposing to sell securities pursuant to the Registration) require a limitation of the number of shares to be underwritten, the underwriter's representative
may limit the number of shares to be included in such Registration in the following manner: the number of shares that may be included in the Registration and underwriting by selling stockholders shall
be allocated among Stockholder and all other holders of Embarcadero securities requesting and legally entitled to include such securities in such Registration, in proportion, as nearly as practicable,
to the respective amounts of securities (including the Registrable Securities) which such holders would otherwise be entitled to include in such Registration. No Registrable Securities or other
securities excluded from the underwriting by reason of this Section 2(d) shall be included in the Registration Statement. 

        (e) Expenses of Registration.  All expenses (other than underwriting discounts
and commissions) incurred in connection with Registrations shall be borne by the Company. 

        (f)  The Company's Indemnification of Stockholder.  To the extent permitted by
law, the Company will indemnify Stockholder, each of its officers, directors, and constituent partners, legal counsel for Stockholder, and each person controlling Stockholder, with respect to which
Registration, qualification, or compliance of the Registrable Securities has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter
against all claims, losses, damages, liabilities, or actions in respect thereof (collectively, "Damages") to the extent such Damages arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or other document (including any related registration statement) incident to any such Registration, qualification, or compliance, or
are based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Act applicable to the Company and relating to action or inaction required of the Company in connection with any such Registration,
qualification, or compliance; and the Company will reimburse Stockholder, underwriter, and each person who controls Stockholder or the underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss, damage, liability, or action; provided, however, that the indemnity contained in this Section 2(f) shall not apply
to amounts paid in settlement of any such Damages if settlement is 

effected without the consent of the Company (which consent shall not unreasonably be withheld); and provided, further, that the Company will not be liable in any such case to the extent that any such
Damages arise out of or are based upon any untrue statement or omission based upon written information furnished to the Company by Stockholder, the underwriter, or any controlling person and stated to
be for use in connection with the offering of securities of the Company. 

        (g) Stockholder's Indemnification of the Company.  To the extent permitted by
law, Stockholder will, if the Registrable Securities held by Stockholder are included in the securities as to which such Registration, qualification or, compliance is being effected pursuant to this
Agreement, indemnify the Company, each of its directors and officers, each legal counsel and independent accountant of the Company, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such underwriter within the meaning of the Act, against all Damages arising out of or based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular, or other document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Stockholder of any rule or regulation promulgated under the Act applicable to
Stockholder and relating to action or inaction required of Stockholder in connection with any such Registration, qualification, or compliance, and will reimburse the Company, such directors, officers,
partners, persons, law and accounting firms, underwriters or control persons for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim,
loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by Stockholder and stated to be
specifically for use in connection with the offering of securities of the Company, provided, however, that the indemnity contained in this Section 2(g) shall not apply to amounts paid in
settlement of any such Damages if settlement is effected without the consent of such Stockholder (which consent shall not be unreasonably withheld) and provided, further, that each Stockholder's
liability under this Section 2(g) shall not exceed Stockholder's proceeds from the offering of securities made in connection with such Registration. 

    3.  Ownership.  Exhibit A hereto accurately and
completely sets forth the Stockholder's beneficial ownership of the Company's securities. 

    4.  Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect hereto. No addition to or modification of any provision of this Agreement shall be
binding upon either party unless made in writing and signed by both parties. 

    5.  Authority.  The Stockholder hereby represents and warrants that the Stockholder has full power and
authority to enter into this Agreement, and that, upon request, the Stockholder will execute any additional documents necessary or desirable in connection with the enforcement hereof. 

    6.  Assignment; Binding Effect.  Except as provided herein, neither this Agreement nor any of the
interests or obligations hereunder may be assigned or delegated by the Stockholder and any attempted or purported assignment or delegation of any of such interests or obligations shall be void.
Subject to the preceding sentence, this Agreement shall be binding upon the Stockholder and its successors and assigns, and shall inure to the benefit of the Company and its successors and assigns and
the underwriters. Without limiting any of the restrictions set forth in Section 1 or elsewhere in this Agreement, this Agreement shall be binding upon any Person to whom the Stockholder may transfer
any Subject Securities. Except with respect to the underwriters, nothing in this Agreement is intended to confer on any Person (other than the Company and its successors and assigns) any rights or
remedies of any nature. 

    7.  Specific Performance.  The parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. The Stockholder agrees that, in the event of any breach or threatened breach 

by the Stockholder of any covenant or obligation contained in this Agreement, the Company shall be entitled (in addition to any other remedy that may be available to it, including monetary damages) to
seek (a) a decree or order of specific performance to enforce the observance and performance of such covenant or obligation, and (b) an injunction restraining such breach or threatened
breach. The Stockholder further agrees that neither the Company nor any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to
obtaining any remedy referred to in this Section 7, and the Stockholder irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. 

    8.  Governing Law; Venue.  This Agreement shall be construed in accordance with, and governed in all
respects by, the laws of the State of Delaware (without giving effect to principles of conflicts of laws). 

    9.  Attorneys' Fees.  If any legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition
to any other relief to which the prevailing party may be entitled). 

    10. Counterparts.  This Agreement may be executed by the parties in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 

[Remainder of page intentionally left blank] 

    IN WITNESS WHEREOF, the Company and Stockholder have caused this Agreement to be executed as of the date first written above. 

	 	EMBARCADERO TECHNOLOGIES, INC.
	

 	
By: 

	

 	

Name: 

	

 	

Title: 

	
STOCKHOLDER	

 
	

	

 

 
 

AMENDMENT NO. 1 TO
  LOCK-UP AGREEMENT    
  

    THIS AMENDMENT NO. 1 TO LOCK-UP AGREEMENT (this "Amendment") is entered into as of
February   , 2001, by and between EMBARCADERO TECHNOLOGIES, INC., a Delaware corporation (the "Company") and          
(the "Stockholder"). 

 
 

RECITALS    
  

    A.  The Company and the Stockholder have entered into that certain Lock-up Agreement, dated as of
February   , 2001 (the "Lock-up Agreement"). 

    B.  The Company and the Stockholder desire to amend the Lock-up Agreement as set forth in this Amendment in connection
with a proposed public offering (the "Public Offering") of the Company's Common Stock. The Company and the Stockholder acknowledge that the Company intends to file a Registration Statement under the
Securities Act of 1933, as amended relating to the Public Offering (the "Registration Statement") within 10 days of the date hereof and that the Stockholder shall have the right to sell in the Public
Offering, on a pro rata basis with certain other stockholders of the Company in accordance with Section 2 of the Lock-up Agreement, certain shares of Company Common Stock held by the
Stockholder that are subject to the restrictions set forth in the Lock-up Agreement. The Stockholder acknowledges that the completion of the Public Offering is subject to a number of risks and
uncertainties, and that there can be no assurance that the Public Offering will be completed. 

    C.  In consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows: 

 
 

AMENDMENT    
  

        1.  Section 1.  Sections 1(a) and 1(b) of the Lock-up Agreement are
amended and restated in their entirety to read as follows: 

    "(a) The
Stockholder agrees that, during the period beginning on the date hereof and ending on January 31, 2003 (the "Lock-up Period"), the Stockholder shall not
make a Disposition of any Subject Securities except as permitted under Section 1(b) below or in any public offering of Company Common Stock in which the Stockholder as contemplated by
Section 2 below. 

    (b) Notwithstanding
the foregoing, during the Lock-up Period, the Stockholder shall be released from the restrictions set forth in Section 1(a) with respect to
      shares of Company Common Stock (as adjusted for stock splits, stock dividends and other similar transactions affecting the Company Common Stock which occur subsequent to the
date hereof) as of July 31, 2001, with respect to       shares as of October 31, 2001 and with respect to       shares as of January 31, 2002
and      as of each of April 30, 2002, July 31, 2002, and October 31, 2002, such that as of October 31, 2002, the Stockholder shall have been released from the
restrictions set forth in Section 1(a) with respect to       shares of Company Common Stock. On
January 31, 2003, the Stockholder shall be released from the restrictions set forth in Section 1(a) with respect to any Subject Securities that were not previously released pursuant to
this Section 1(b)." 

        2.  Section 2.  The last sentence of Section 2(a) of the Lock-up Agreement
is hereby amended and restated in its entirety to read as follows: 

    "These
piggyback registration rights shall terminate as of January 31, 2003." 

        3.  Exhibit A.  Exhibit A to the Lock-up Agreement is hereby amended and restated
in its entirety to read as set forth on Exhibit A attached hereto. 

        4.  Public Offering.  The Stockholder agrees to execute any lock-up agreement
reasonably requested by the underwriters in the Public Offering and acknowledges that Stockholder's obligations under any such lock-up agreement shall be in addition to, and not in lieu of, the
Stockholder's obligations under the Lock-up Agreement, as amended hereby. The Stockholder further agrees to use all reasonable efforts to facilitate the timely completion of the Public Offering,
including without limitation by executing the underwriting agreement relating to the Public Offering and providing to the underwriters or the Company in a timely manner any information reasonably
requested from the Stockholder in connection with the Public Offering and the preparation of the registration statement related to the Public Offering. 

        5.  Remaining Terms.  All other terms of the Lock-up Agreement shall remain in
full force and effect. 

[Remainder of page intentionally left blank] 

    IN WITNESS WHEREOF, the Company and Stockholder have caused this Amendment No. 1 to Lock-up Agreement to be executed as of the date
first written above. 

	 	EMBARCADERO TECHNOLOGIES, INC.
	

 	
By: 

	

 	

Name: 

	

 	

Title: 

	
STOCKHOLDER	

 
	

	

 

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LOCK-UP AGREEMENT

RECITALS

AGREEMENT

AMENDMENT NO. 1 TO LOCK-UP AGREEMENT

RECITALS

AMENDMENTPrepared by MERRILL CORPORATION www.edgaradvantage.com

Exhibit 10.1  

     AMENDED AND RESTATED

EMBARCADERO TECHNOLOGIES, INC.

1993 STOCK OPTION PLAN

(as amended through October 12, 2000)  

 1.  Purpose.  

    The purpose of the Embarcadero Technologies, Inc. 1993 Stock Option
Plan (the "Plan") is to grant to selected employees, directors, and consultants of Embarcadero Technologies, Inc., a California
corporation (the "Company"), a favorable opportunity to acquire Common Stock of the Company, thereby encouraging such persons to accept or continue a productive relationship with the Company, and
furnishing such persons with an incentive to improve operations and increase profits of the Company. Capitalized terms not previously defined herein are defined in Section 18 of this Plan. 

2.  Options and Shares.  

    2.1  Number of Shares.  Options granted under this Plan (the "Options") are for the purchase of Common
Stock of the Company (the "Shares"). Subject to adjustment as provided in this Plan, the aggregate number of Shares that may be issued pursuant to Options granted under this Plan is 11,300,000 Shares.
If any Option expires or is terminated without being exercised in whole or in part, the unexercised or released Shares from such Option shall be available for future grant and purchase under this
Plan. 

    2.2  Individual Limitation.  The company may not grant options covering in the aggregate more than
600,000 Shares (subject to adjustment as provided in this Plan) to any one participant in any one-year period. 

    2.3  Reservation of Shares.  At all times during the term of this Plan, the Company shall reserve and
keep available such number of Shares as shall be required to satisfy the requirements of outstanding Options under this Plan. 

3.  Administration.  

    The Plan shall be administered by the Board of Directors of the Company (the "Board"), or by a committee of the Board that is composed solely of two or more
Non-Employee Directors (in either case, the "Administrator"). As used in this Plan, references to "Non-Employee Directors" shall have the meaning set forth in Rule 16b-3 as promulgated by the
Securities and Exchange Commission under Section 16(b) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The interpretation by the Administrator of any of the
provisions of this Plan or any Option granted under this Plan shall be final and binding upon the Company and all persons having an interest in any option or any Shares purchased pursuant to an
Option. 

    The
Administrator may delegate nondiscretionary administrative duties to such employees of the Company as it deems proper and may delegate the authority to the Chief Executive Officer
of the Company to grant Options to employees of, or consultants to, the Company who are not officers or directors of the Company and whose transactions in securities of the Company are not subject to
Section 16 of the Exchange Act. Subject to the provisions of the Plan, the Administrator shall have the sole authority, in its discretion: 

	(a)
	to
determine to which of the eligible individuals, and the time or times at which, options to purchase Common Stock of the Company shall be granted;

	(b)
	to
determine the number of shares of Common Stock to be subject to options granted to each eligible individual; 

 

	(c)
	to
determine the price to be paid for the shares of Common Stock upon the exercise of each option;

	(d)
	to
determine the term and the exercise schedule of each option;

	(e)
	to
determine the terms and conditions of each stock option grant (which need not be identical) entered into between the Company and any eligible individual to whom the Administrator
has granted an option, subject to Section 15 hereof;

	(f)
	to
interpret the Plan;

	(g)
	to
accelerate the exercise date or schedule with respect to any option granted under the Plan or, with the consent of the holder thereof, to modify or amend any such option;

	(h)
	to
make all determinations deemed necessary or advisable for the administration of the Plan;

	(i)
	to
determine whether Optionee has ceased to be employed by the Company or any Parent, Subsidiary or Affiliate of the Company and the effective date on which such employment
terminated; and

	(j)
	to
determine whether an Optionee, who is a director, consultant or advisor of the Company, is "employed by the Company or any Parent, Subsidiary or Affiliate of the Company"
pursuant to the foregoing Sections. 

4.  Eligibility.  

    Options may be granted to employees, officers, directors, consultants and advisers (provided such consultants and advisers render bona fide services not in
connection with the offer and sale of securities in a capital-raising transaction) of the Company or any Parent, Subsidiary or Affiliate of the Company. Incentive Stock Options may be granted only to
employees of the Company or a Parent or Subsidiary of the Company. The Administrator in its sole discretion shall select the recipients of Options ("Optionees"). An Optionee may be granted more than
one Option under this Plan. The Company may also, from time to time, assume outstanding options granted by another company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Option under this Plan in replacement of the option assumed by the Company, or (b) treating the assumed option as if it had been granted under this
Plan if the terms of such assumed option could be applied to an Option granted under this Plan. Such assumption shall be permissible if the holder of the assumed option would have been eligible to be
granted an Option hereunder if the other company had applied the rules of this Plan to such grant. 

5.  Terms and Conditions of Options.  

    5.1  Option Grant.  Each option granted under the Plan shall be evidenced by a written stock option grant
(the "Option") Each such agreement shall designate the option thereby granted as a Common Stock option. Each such Option shall be subject to the terms and conditions set forth in this Section 5, and
to such other terms and conditions not inconsistent herewith as the Administrator may deem appropriate in each case. 

    5.2  Date of Option.  The date of grant of an Option shall be the date on which the Administrator makes
the determination to grant such Option unless otherwise specified by the Administrator. The Option representing the Option will be delivered to Optionee with a copy of this Plan within a reasonable
time after the granting of the Option. 

    5.3  Exercise Price.  The exercise price of an Incentive Stock Option shall be not less than 100% of the
Fair Market Value of the Shares on the date the Option is granted. The exercise price of a Nonqualified Stock Option granted prior to the Company's Common Stock is listed or approved for 

2

 

listing on the Nasdaq National Market shall not be less than 85% of the Fair Market Value of the Shares on the date the Option is granted. The exercise price of any Incentive Stock Option granted to a
person owning more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company ("Ten Percent Shareholder") shall not be less than 110%
of the Fair Market Value of the Shares on the date the Option is granted. For purposes of this Section 5.3, in determining stock ownership, an Optionee shall be considered as owning the voting capital
stock owned, directly or indirectly, by or for his brothers and sisters, spouse, ancestors and lineal descendants. Voting capital stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as being owned proportionately by or for its shareholders, partners or beneficiaries, as applicable. Common Stock with respect to which any such
Optionee holds an Option shall not be counted. Additionally, for purposes of this Section 5.3, outstanding capital stock shall include all capital stock actually issued and outstanding immediately
after the grant of the Option to the Optionee. Outstanding capital stock shall not include capital stock authorized for issue under outstanding Options held by the Optionee or by any other person. 

    5.4  Exercise Period.  Subject to the limitations set forth herein, Options shall be exercisable within
the times or upon the events determined by the Administrator as set forth in the Option. No Option shall be exercisable after the expiration of ten (10) years from the date the Option is
granted. 

    5.5  Options Non-Transferable.  Except as otherwise determined by the Administrator and expressly set
forth in the Option agreement, options granted under this Plan, and any interest therein, shall not be transferable or assignable by Optionee, and may not be made subject to execution, attachment or
similar process, otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title 1 of the Employee Retirement
Income Security Act, or the rules thereunder, and shall be exercisable during the lifetime of the Optionee only by Optionee. 

    5.6  Assumed Options.  In the event the Company assumes an option granted by another company, the
exercise price and the number and nature of shares issuable upon exercise, of such assumed option will be adjusted appropriately pursuant to the Code. In the event the Company elects to grant a new
option rather than assuming an existing option (as specified in Section 4), such new option need not be granted at Fair Market Value on the date of grant and may instead be granted with a similarly
adjusted exercise price. 

6.  Exercise of Options.  

    6.1  Notice.  Options may be exercised only by delivery to the Company of a written stock option exercise
agreement (the "Exercise Agreement") in a form approved by the Administrator (which need not be the same for each Optionee), stating the number of Shares being purchased, the restrictions imposed on
the Shares, if any, and such representations and agreements regarding Optionee's investment intent and access to information, if any, as may be required by the Company to comply with applicable
securities laws, together with payment in full of the exercise price for the number of shares being purchased. 

    6.2  Payment.  Payment for the Shares may be made in cash (by check) or, where approved by the
Administrator in its sole discretion and where permitted by law: (a) by cancellation of indebtedness of the Company to the Optionee; (b) by surrender of shares of common stock of the Company
having a Fair Market Value equal to the applicable exercise price of the Option that have been owned by Optionee for more than six (6) months (and which have been paid for within the meaning of
the Securities and Exchange Commission ("SEC") Rule 144 and, if such Shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such
shares), or
were obtained by Optionee in the open public market; (c) by waiver of compensation due or accrued to Optionee for services rendered; (d) provided that a public market for the Company's stock
exists, 

3

 

through a "same day sale" commitment from Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby Optionee irrevocable 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; (e) provided that a public market for the Company's stock exists, through a "margin commitment from Optionee and an NASD Dealer whereby Optionee irrevocable
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 (f) by any combination of the foregoing. 

    6.3  Withholding Taxes.  Prior to issuance of the Shares upon exercise of an Option, Optionee shall pay
or make adequate provision for any federal or state withholding obligations of the Company, if applicable. Where approved by the Administrator in its sole discretion, Optionee may provide for payment
of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the amount of taxes the Administrator determines is, in its discretion,
required to be withheld. In such case, the Company shall issue the net number of Shares to Optionee by deducting the Shares retained from the Shares exercised. 

    6.4  Limitations on Exercise.  Notwithstanding the exercise periods set forth in the Option, exercise of
an Option shall always be subject to the following: 

    6.4.1  If
Optionee ceases to be employed by the Company or any Parent or Subsidiary of the Company for any reason except death or disability, Optionee may exercise such
Optionee's ISOs to the extent (and only to the extent) that they would have been exercisable upon the date of termination, within ninety (90) days after the date of termination (or such shorter time
period as may be specified in the Option); 

    6.4.2  If
Optionee's employment with the Company or any Parent or Subsidiary or Affiliate of the Company is terminated because of the death of Optionee or disability
(as defined in Section 22 (e) (3) of the Code) of Optionee, Optionee's Options may be exercised to the extent (and only to the extent) that they would have been exercisable by
Optionee on the date of termination, by Optionee (or Optionee's legal representative) within one year after the date of termination (or such shorter time period as may be specified in the Option), but
in any event no later than the expiration date of the Options. 

7.  Securities Law Requirements.  

    No shares of Common Stock shall be issued upon the exercise of any option unless and until counsel for the Company determines that: 

	(a)
	the
company and the Optionee have satisfied all applicable requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934;

	(b)
	any
applicable listing requirement of any stock exchange on which the Company's Common Stock is listed has been satisfied; and

	(c)
	all
other applicable provisions of state and federal law have been satisfied. 

8.  Restrictions On Shares.  

    At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Grant a right to repurchase a portion of or all Shares held
by an Optionee upon Optionee's termination of employment or service with the Company, or a Parent, Subsidiary or Affiliate of the Company for any reason, within a specified time as determined by the
Committee at the time of grant, 

4

 

at Optionee's original purchase price, the Fair Market Value of such Shares or a price determined by a formula or other provision set forth in the Grant. 

9.  Modification, Extension and Renewal of Options.  

    The Administrator shall have the power to accelerate the exercise date or schedule of any outstanding Option, or to otherwise modify, extend or renew
outstanding Options and to authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written
consent of
Optionee, impair any rights under any Option previously granted. The Administrator shall have the power to reduce the exercise price of outstanding Options without the consent of Optionees by a
written notice to the Optionees affected; provided, however, that the exercise price per Share may not be reduced below the minimum exercise price that
would be permitted under Section 5.3 of this Plan for Options granted on the date the action is taken to reduce the exercise price. 

10. STOCK OWNERSHIP; FINANCIAL STATEMENTS.  

    Notwithstanding any other provisions of the Plan and except as provided in this Section 10, no Optionee shall have any of the rights of a shareholder
(including the right to vote and receive dividends) of the Company, by reason of the provisions of this Plan or any action taken hereunder, until the date such Optionee shall both have paid the
exercise price for the Common Stock and shall have been issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) the stock
certificate evidencing such shares. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to such date, except as provided in this Plan.
However, the Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of the financial statements of the Company, consisting of, at
a minimum, a balance sheet and an income statement, at such time after the close of each fiscal year of the Company as such statements are released by the Company to its shareholders. The Company
shall not be required to provide such information to key employee's whose duties in connection with the Company assume their access to equivalent information. 

11. No Obligation to Employ.  

    Nothing in this Plan or any Option granted under this Plan shall confer on any Optionee any right to continue in the employ of, or other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company, nor limit or otherwise impair the right of the Company, or any Parent, Subsidiary or Affiliate of the Company to terminate Optionee's
employment or other relationship at any time, with or without cause. 

12. Adjustments upon Changes in Capitalization or Change in Control.  

    12.1  Changes in Capitalization.  Subject to any required action by the Company's shareholders, the
number of Shares of Common Stock covered by this Plan as provided in Section 2, the number of Shares covered by each outstanding Option granted hereunder and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the number of shares of Common Stock resulting from a stock split, reverse stock split, recapitalization, combination or reclassification of
the shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such outstanding shares of Common Stock effected without the receipt of
consideration by the Company; provided, however, that the conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". 

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    12.2  Effect of Triggering Event.  In the event of a Triggering Event each option granted hereunder shall
be assumed or an equivalent option substituted by the successor entity (including as a "successor" any purchaser of substantially all of the assets of the Company) or a parent or subsidiary of the
successor entity. In the event that the successor does not assume or substitute for the Option, the Optionee shall have the right to exercise the Option as to 100% of the shares of Common Stock
covered by the Option, including shares as to which it would not otherwise be exercisable. If an Option is exercisable in lieu of assumption or substitution in the event of a merger, sale of assets or
other transaction, the Administrator shall notify the Optionee that the Option shall be fully exercisable for a period of at least 20 days from the date of such notice, and the Option shall terminate
upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger, sale of assets, or other transaction, the Option confers the
right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the merger, sale of assets, or other transaction, the consideration (whether stock, cash, or
other securities or property) received in such transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received was not solely common stock of the
successor entity or its parent entity, the Option shall also be deemed assumed if the Administrator, with the consent of the successor corporation, provides for the consideration to be received upon
the exercise of the Option, for each share of Common Stock subject to the Option, to be solely common stock of the successor entity or its parent entity equal in fair market value to the per share
consideration received by holders of Common Stock in the merger, sale of assets or other transaction. 

    12.3  Expiration.  In the event the Company is ceasing to exist as a separate corporate entity, then
notwithstanding any contrary terms in the Option, each of the Options granted hereunder shall expire on a date at least 20 days after the Board gives written notice to Optionees, specifying the terms
and conditions of such termination. 

13. Adoption and Shareholder Approval.  

    This Plan shall become effective on the date that it is adopted by the Board of the Company. This Plan shall be approved by the shareholders of the Company, in
any manner permitted by applicable corporate law, within twelve months before or after the date this Plan is adopted by the Board. Upon the effective date of the Plan, the Board may grant Options
pursuant to this Plan; provided that, in the event that shareholder approval is not obtained within the time period provided herein, all Options granted
hereunder shall terminate. No Option that is issued as a result of any increase in the number of shares authorized to be issued under this Plan shall be exercised prior to the time such increase has
been approved by the shareholders of the Company and all such Options granted pursuant to such increase shall similarly terminate if such Shareholder approval is not obtained. 

14. Term of Plan and Governing Law.  

    Options may be granted pursuant to this Plan from time to time within a period of ten (10) years after the date on which this Plan is adopted by the
Board. This Plan and the Options granted pursuant hereto shall be governed by California law, except for that body of law pertaining to conflict of laws. 

15. Amendment Or Termination of Plan.  

    The Board may terminate the Plan or amend the Plan from time to time in such respects as the Board may deem advisable, except that, without the approval of the
Company's shareholders in compliance with the requirements of applicable law, no such revision or amendment shall amend this Plan in any manner that requires shareholder approval pursuant to the Code
or the regulations promulgated thereunder as such provisions apply to Incentive Stock Option plans, without obtaining such shareholder approval. 

6

 

16. Reservation of Shares.  

    The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to
satisfy the requirements of the Plan. 

17. Effective Date.  

    This Plan was adopted by the Board of Directors of the Company on November 1, 1993, and shall be effective on said date, provided the Plan is approved within
twelve (12) months of said date by the shareholders of the Company in accordance with the requirements of the Code and other applicable law. Options may be granted, but may not be exercised, prior to
the date of such shareholder approval. 

18. Certain Definitions.  

    As used in this Plan, the following terms shall have the following meanings: 

    18.1  "Parent"
means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if, at the time of the granting of the
Option, each of such corporations other than the Company owns stock possession 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

    18.2  "Subsidiary"
means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting of the
Option, 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. 

    18.3  "Affiliate"
means any corporation that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with,
another corporation, where "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to cause the direction of the
management and policies of the corporation, whether through the ownership of voting securities, by contract or otherwise. 

    18.4  "Fair
Market Value" shall mean the fair market value of the Shares as determined by the Administrator from time to time in good faith. If a public market exists
for the Shares, the Fair Market Value shall be the average of the last reported bid and asked prices for common stock of the Company on the last trading day prior to the date of determination (or the
average closing price over the number of consecutive working days preceding the date of determination as the Administrator shall deem
appropriate) or, in the event the common stock of the Company is listed on a stock exchange or on the Nasdaq National Market System, the Fair Market Value shall be the closing price on such exchange
or quotation system on the last trading day prior to the date of determination (or the average closing price over the number of consecutive working days preceding the date of determination as the
Administrator shall deem appropriate). 

    18.5  "Triggering
Event" shall mean the occurrence of any of the following: 

   (i) any
person or entity acquires ownership or control, directly or indirectly, of securities of the Company (or a successor to the Company) representing fifty percent (50%) or
more of the combined voting power of the then outstanding securities of the Company or such successor; and 

   (ii) (a) a
sale or disposition of assets of the Company involving all or substantially all of the assets of the Company; (b) any merger or reorganization of the
Company or other transaction pursuant to which all of the shareholders of the Company immediately prior to the transaction, hold (immediately after the transaction) less than fifty percent (50%) of
the combined voting power of the Company or any successor Company; and (c) any other event or transaction which the Board determines, in its discretion, would materially alter the structure,
ownership or control of the Company. 

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