Document:

Exhibit 10.3

 

2006 Executive Bonus Program

 

Each executive officer of Network Engines, Inc. (the “Company”) has the
opportunity to earn quarterly performance bonuses, based on his or her
performance and the achievement of specific goals. Under the Executive Bonus
Program, the Compensation Committee of the Board of Directors selects, reviews
and/or approves individual objectives for each executive that directly
contribute to overall Company performance objectives.  The Compensation Committee and Chief Executive
Officer assign a specific dollar value to each objective and evaluates each
executive’s performance against those selected goals, generally on a quarterly
basis. The Company will pay to each of the executive officers, on a quarterly
basis, a percentage of their annual base salaries if the executive achieves
selected targets for the quarter.

 

The Compensation Committee has approved the following guidelines for
the Executive Bonus Program:

 

•                  The
Chief Executive Officer of the Company (“CEO”), with approval from the
Compensation Committee, will designate an executive as a participant in the
Executive Bonus Program.

 

•                  Participants
must be full time employees for the entire period, either a quarter or the
entire fiscal year, depending on the bonus component.

 

•                  The
CEO and/or the Compensation Committee reserve the right to modify the fiscal
2006 program to reflect substantial changes in business conditions.

 

•                  Quarterly
bonus payments will be paid at the rates defined in individual plans based on
the actual performance compared to targeted performance for specified
parameters. Quarterly bonus payments are only payable to certain maximum
amounts for each specified parameter.  Where
appropriate, quarterly performance for metrics such as revenue, contribution margin
and operating income will be measured on the better of performance for the
specific quarter or the cumulative year-to-date performance at the end of that
quarter.

 

•                  The
Compensation Committee and CEO will approve any Management Based Objective (“MBO”)
bonus opportunities and the CEO will determine if a participant has
achieved/partially achieved such qualitative bonuses.

 

•                  Bonus
components related to Company financial performance will be based on
appropriate documents and reports filed with the SEC and/or as included in
internal financial reports provided to the Board of Directors by the CFO. The
CEO/CFO, with Compensation Committee approval, may modify such targets, for
example to eliminate non cash/non-recurring charges/credits.

 

•                  Sales,
contribution margin and other financial metrics for purposes of the Executive Bonus
Program are defined in advance by the CFO and CEO. The CFO and/or CEO, with
approval of the Compensation Committee, will determine the definition of
operating metrics for purposes of executive bonuses.

 

 

This Executive Bonus Program and payments made to eligible participants
are subject to approval and/or modification by the Compensation Committee.Exhibit 10.22

 

DITECH COMMUNICATIONS CORPORATION

 

2005 NEW RECRUIT STOCK OPTION PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  NOVEMBER 15, 2005

AMENDED BY THE BOARD OF DIRECTORS:  FEBRUARY 4, 2006

STOCKHOLDER APPROVAL NOT REQUIRED

TERMINATION DATE: NOVEMBER 14, 2015

 

1.                                      GENERAL.

 

(a)                                  Eligible Stock Award Recipients. Only
Eligible Employees may receive Stock Awards under the Plan.

 

(b)                                  Available Stock Awards. The Plan
provides for the grant of Nonstatutory Stock Options.

 

(c)                                  Purpose. The Company, by means of
the Plan, seeks to secure and retain the services of Eligible Employees, to
provide incentives for such persons to exert maximum efforts for the success of
the Company and any Affiliate, and to provide a means by which such eligible
recipients may be given an opportunity to benefit from increases in value
of the Common Stock through the granting of Stock Awards. The Plan is intended
to be exempt from the stockholder approval requirements under the “inducement
grant exception” provided by Rule 4350(i)(1)(A)(iv) of the NASD
Marketplace Rules.

 

2.                                      DEFINITIONS.

 

As used in the Plan, the following definitions shall
apply to the capitalized terms indicated below:

 

(a)                                  “Affiliate” means (i) any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company,
provided each corporation in the unbroken chain (other than the Company) owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain, and (ii) any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
provided each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The Board shall have the authority to
determine (i) the time or times at which the ownership tests are applied,
and (ii) whether “Affiliate” includes entities other than corporations
within the foregoing definition.

 

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

 

(c)                                  “Capitalization Adjustment” has the meaning ascribed to
that term in Section 9(a).

 

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(d)                                  “Change in Control” means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of
the following events:

 

(i)                                    any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of
the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction. Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur (A) on
account of the acquisition of securities of the Company by an investor, any
affiliate thereof or any other Exchange Act Person from the Company in a
transaction or series of related transactions the primary purpose of which
is to obtain financing for the Company through the issuance of equity
securities or (B) solely because the level of Ownership held by any
Exchange Act Person (the “Subject
Person”) exceeds the
designated percentage threshold of the outstanding voting securities as a
result of a repurchase or other acquisition of voting securities by the Company
reducing the number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

 

(ii)                                there
is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of
such merger, consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the combined outstanding voting power of
the surviving Entity in such merger, consolidation or similar transaction or (B) more
than fifty percent (50%) of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction;

 

(iii)                            the
stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or
liquidation of the Company shall otherwise occur;

 

(iv)                               there
is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its
Subsidiaries to an Entity, more than fifty
percent (50%) of the combined voting power of the voting securities of
which are Owned by stockholders of the Company in substantially the same
proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such sale, lease, license or other disposition; or

 

(v)                                   individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”)
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the
appointment or election (or

 

2

 

nomination for election)
of any new Board member was approved or recommended by a majority vote of the
members of the Incumbent Board then still in office, such new member shall, for
purposes of this Plan, be considered as a member of the Incumbent Board.

 

The term Change in Control shall not include a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company.

 

Notwithstanding the foregoing or any other provision
of this Plan, the definition of Change in Control (or any analogous term) in an
individual written agreement between the Company or any Affiliate and the
Participant shall supersede the foregoing definition with respect to Stock
Awards subject to such agreement; provided,
however, that if no definition of Change in Control or any analogous
term is set forth in such an individual written agreement, the foregoing
definition shall apply.

 

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

 

(f)                                    “Committee” means a committee of one (1) or more
members of the Board to whom authority has been delegated by the Board in accordance
with Section 3(c).

 

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

 

(h)                                 “Company” means Ditech Communications Corporation, a
Delaware corporation.

 

(i)                                    “Consultant”
means any person, including an advisor, who is (i) engaged by the Company
or an Affiliate to render consulting or advisory services and is compensated
for such services, or (ii) serving as a member of the Board of Directors
of an Affiliate and is compensated for such services. However, service solely
as a Director, or payment of a fee for such service, shall not cause a Director
to be considered a “Consultant” for purposes of the Plan.

 

(j)                                    “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. A change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant’s service with the Company or an Affiliate, shall not terminate
a Participant’s Continuous Service. For example, a change in status from an
employee of the Company to a consultant  of an Affiliate or to a Director shall not
constitute an interruption of Continuous Service. To the extent permitted by
law, the Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave. Notwithstanding
the foregoing, a leave of absence shall be treated as Continuous Service for
purposes of vesting in a Stock Award only to such extent as may be
provided in the Company’s leave of absence policy or in the written terms of
the Participant’s leave of absence.

 

(k)                                “Corporate Transaction” means the occurrence, in a
single transaction or in a series of related transactions, of any one or
more of the following events:

 

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(i)                                    a
sale or other disposition of all or
substantially all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries;

 

(ii)                                a
sale or other disposition of at least ninety
percent (90%) of the
outstanding securities of the Company;

 

(iii)                            the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or

 

(iv)                               the
consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation
or similar transaction into other property, whether in the form of
securities, cash or otherwise.

 

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

 

(m)                              “Disability” means the permanent and total disability of
a person within the meaning of Section 22(e)(3) of the Code.

 

(n)                                 “Eligible Employee” means an Employee newly employed by
the Company or an Affiliate; provided, however,
that (i) such person was not previously an Employee or director of the
Company or an Affiliate, or (ii) such person enters into an employment
relationship with the Company following a bona fide
period of non-employment.

 

(o)                                  “Employee”
means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a
Director to be considered an “Employee” for purposes of the Plan.

 

(p)                                  “Entity” means a corporation, partnership or other
entity.

 

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

 

(r)                                  “Exchange Act Person” means any natural person, Entity
or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), except that “Exchange Act Person” shall not include (i) the
Company or any Subsidiary of the Company, (ii) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) an Entity
Owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their Ownership of stock of the Company;
or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act) that, as of the effective date of the Plan as
set forth in Section 12, is the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding securities.

 

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

 

4

 

(i)                                    If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the date of determination, as reported in The Wall
Street Journal or such other source
as the Board deems reliable. Unless otherwise provided by the Board, if there
is no closing sales price (or closing bid if no sales were reported) for the
Common Stock on the date of determination, then the Fair Market Value shall be
the closing selling price (or closing bid if no sales were reported) on the
last preceding date for which such quotation exists.

 

(ii)                                In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined by the Board in good faith.

 

(t)                                    “Independent Director” means a Director who is an “independent
director” within the meaning of Rule 4200 of the NASD Marketplace Rules.

 

(u)                                 “Non-Employee Director”  means a Director who either (i) is
not a current employee or officer of the Company or an Affiliate, does not
receive compensation, either directly or indirectly, from the Company or an
Affiliate for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction
for which disclosure would be required under Item 404(a) of Regulation
S-K, and is not engaged in a business relationship for which disclosure would be
required pursuant to Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(v)                                   “Nonstatutory Stock Option” means an Option not intended
to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.

 

(w)                                “Option” means a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.

 

(x)                                  “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.

 

(y)                                  “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(z)                                  “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be deemed to “Own,”
to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of
securities if such person or Entity, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
voting power, which includes the power to vote or to direct the voting, with
respect to such securities.

 

5

 

(aa)                            “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(bb)                            “Plan” means this Ditech Communications Corporation 2005
New Recruit Stock Option Plan.

 

(cc)                            “Rule 16b-3” means Rule 16b-3 promulgated
under the Exchange Act or any successor to Rule 16b-3, as in effect from
time to time.

 

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

 

(ee)                            “Stock Award” means any right granted under the Plan,
including a Nonstatutory Stock Option.

 

(ff)                                “Stock Award Agreement”
means a written agreement between the Company and a Participant evidencing the
terms and conditions of a Stock Award grant. Each Stock Award Agreement shall
be subject to the terms and conditions of the Plan.

 

(gg)                          “Subsidiary” means, with respect to the Company, (i) any
corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, Owned by the Company, and (ii) any partnership in
which the Company has a direct or indirect interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%).

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration
by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee, as provided in Section 3(c).
All grants of Stock Awards to Eligible Employees must be approved either by a
majority of Independent Directors or by the Company’s independent Compensation
Committee.

 

(b)                                  Powers
of Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

 

(i)                                    To
determine from time to time (1) which of the persons eligible under the
Plan shall be granted Stock Awards; (2) when and how each Stock Award
shall be granted; (3) the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to receive Common Stock pursuant to a Stock Award; and (4) the
number of shares of Common Stock with respect to which a Stock Award shall be
granted to each such person.

 

(ii)                                To
construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board,
in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any

 

6

 

Stock Award Agreement, in
a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

 

(iii)                            To
amend the Plan or a Stock Award as provided in Section 10.

 

(iv)                               To
terminate or suspend the Plan as provided in Section 11.

 

(v)                                   Generally,
to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company and that
are not in conflict with the provisions of the Plan.

 

(vi)                               To
adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Eligible Employees who are foreign nationals or
employed outside the United States.

 

(c)                                  Delegation
to Committee.

 

(i)                                    General. The Board may delegate
some or all of the administration of the Plan to a Committee or Committees. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board that have been delegated to the Committee, including the
power to delegate to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to the Board
shall thereafter be to the Committee or subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may retain the authority
to concurrently administer the Plan with the Committee and may, at any time,
revest in the Board some or all of the powers previously delegated.

 

(ii)                                Rule 16b-3 Compliance. In the
sole discretion of the Board, the Committee may consist solely of two (2) or
more Non-Employee Directors, in accordance with Rule 16b-3.

 

(d)                                  Effect of Board’s Decision. All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

4.                                      SHARES
SUBJECT TO THE PLAN.

 

(a)                                  Share
Reserve. Subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, the number of shares of Common Stock that may be
issued pursuant to Stock Awards shall not exceed, in the aggregate, five hundred
thousand (500,000) shares of Common Stock.

 

(b)                                  Reversion
of Shares to the Share Reserve. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, if any shares of Common Stock issued to a Participant
pursuant to a Stock Award are forfeited to or repurchased by the Company, including,
but not limited to, any repurchase or forfeiture caused by the failure to meet
a contingency or condition required for the vesting of such shares,

 

7

 

then the shares of Common
Stock not issued under such Stock Award, or forfeited to or repurchased by the
Company, shall revert to and again become available for issuance under the Plan.
If any shares subject to a Stock Award are not delivered to a Participant
because such shares are withheld for the payment of taxes or the Stock Award is
exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”), the number of
shares that are not delivered to the Participant shall remain available for
issuance under the Plan. If the exercise price of any Stock Award is satisfied
by tendering shares of Common Stock held by the Participant (either by actual
delivery or attestation), then the number of shares so tendered shall remain
available for issuance under the Plan.

 

(c)                                  Source
of Shares. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Company on the open market.

 

5.                                      OPTION
PROVISIONS.

 

Each
Option shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate. All Options shall be designated as Nonstatutory
Stock Options at the time of grant. The provisions of separate Options need not
be identical; provided, however,
that each Option Agreement shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

 

(a)                                  Term.
No Option shall be exercisable after the expiration of ten (10) years
from the date of grant, or such shorter period specified in the Option
Agreement.

 

(b)                                  Exercise
Price of a Nonstatutory Stock Option. The exercise price of each
Nonstatutory Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock 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 consistent with the provisions of Section 424(a) of
the Code.

 

(c)                                  Consideration.
The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as
determined by the Board in its sole discretion, by any combination of the
methods of payment set forth below. The Board shall have the authority to grant
Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options
that require the consent of the Company to utilize a particular method of
payment. The methods of payment permitted by this Section 5(c) are:

 

(i)                                    by
cash or check;

 

(ii)                                pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds;

 

8

 

(iii)                            by
delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;

 

(iv)                               by
a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issued upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the aggregate
exercise price; provided, however,
the Company shall accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price not satisfied
by such reduction in the number of whole shares to be issued; provided, however, shares of Common Stock
will no longer be outstanding under an Option and will not be exercisable
thereafter to the extent that (i) shares are used to pay the exercise
price pursuant to the “net exercise,” (ii) shares are delivered to the
Participant as a result of such exercise, and (iii) shares are withheld to
satisfy tax withholding obligations;

 

(v)                                   according
to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest shall
compound at least annually and shall be charged at the minimum rate of interest
necessary to avoid (i) the imputation of interest income to the Company
and compensation income to the Optionholder under any applicable provisions of
the Code, and (ii) the treatment of the Option as a variable award for
financial accounting purposes; or

 

(vi)                               in
any other form of legal consideration that may be acceptable to the
Board.

 

(d)                                  Transferability
of Options. The Board may, in its sole discretion, impose such limitations
on the transferability of Options as the Board shall determine. In the absence
of such a determination by the Board to the contrary, the following
restrictions on the transferability of Options shall apply:

 

(i)                                    Restrictions
on Transfer. An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder.

 

(ii)                                Domestic
Relations Orders. Notwithstanding the foregoing, an Option may be
transferred pursuant to a domestic relations order.

 

(iii)                            Beneficiary
Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or
otherwise satisfactory to the Company, designate a third party who, in the
event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

 

(e)                                  Vesting
Generally. The total number of shares of Common Stock subject to an Option may vest
and therefore become exercisable in periodic installments that may or may not
be equal. The Option may be subject to such other terms and conditions on
the time or times when it may or may not be exercised (which may be
based on performance or other criteria) as the Board may deem appropriate.
The vesting provisions of individual Options may vary. The provisions of
this Section 5(e) are subject to any Option provisions governing the
minimum number of shares of Common Stock as to which an Option may be
exercised.

 

9

 

(f)                                    Termination of Continuous Service. In
the event that an Optionholder’s Continuous Service terminates (other than upon
the Optionholder’s death or Disability), the Optionholder may exercise his
or her Option (to the extent that the Optionholder was entitled to exercise
such Option as of the date of termination of Continuous Service) but only
within such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Optionholder’s Continuous Service (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination of Continuous Service, the Optionholder does not exercise his
or her Option within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate.

 

(g)                                 Extension of Termination Date. An
Optionholder’s Option Agreement may provide that if the exercise of the
Option following the termination of the Optionholder’s Continuous Service
(other than upon the Optionholder’s death or Disability or upon a Change in
Control) would be prohibited at any time solely because the issuance of shares
of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of a period of three (3) months after the termination of the
Optionholder’s Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.

 

(h)                                 Disability of Optionholder. In the
event that an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option
(to the extent that the Optionholder was entitled to exercise such Option as of
the date of termination of Continuous Service), but only within such period of
time ending on the earlier of (i) the date twelve (12) months following
such termination of Continuous Service (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination of
Continuous Service, the Optionholder does not exercise his or her Option within
the time specified herein or in the Option Agreement (as applicable), the
Option shall terminate.

 

(i)                                    Death of Optionholder. In the
event that (i) an Optionholder’s Continuous Service terminates as a result
of the Optionholder’s death, or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the
Option may be exercised (to the extent the Optionholder was entitled to
exercise such Option as of the date of death) by the Optionholder’s estate, by
a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the
Optionholder’s death, but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration
of the term of such Option as set forth in the Option Agreement. If, after the
Optionholder’s death, the Option is not exercised within the time specified
herein or in the Option Agreement (as applicable), the Option shall terminate.

 

10

 

6.                                      COVENANTS
OF THE COMPANY.

 

(a)                                  Availability
of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy
such Stock Awards.

 

(b)                                  Securities
Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to grant Stock Awards and to issue and sell shares of Common Stock
upon exercise of the Stock Awards; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
that counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Stock Awards unless and until such authority is obtained.

 

7.                                      USE
OF PROCEEDS FROM SALES OF COMMON STOCK.

 

Proceeds
from the sale of shares of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

 

8.                                      MISCELLANEOUS.

 

(a)                                  Acceleration
of Exercisability and Vesting. The Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during
which a Stock Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.

 

(b)                                  Stockholder
Rights. No Participant shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common Stock subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

 

(c)                                  No
Employment or Other Service Rights. Nothing in the Plan, any Stock Award
Agreement or other instrument executed thereunder or any Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a Consultant
pursuant to the terms of such Consultant’s agreement with the Company or an
Affiliate, or (iii) the service of a Director pursuant to the Bylaws of
the Company or an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is incorporated, as the case
may be.

 

(d)                                  Investment
Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give
written assurances

 

11

 

satisfactory to the
Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock subject to the
Stock Award for the Participant’s own account and not with any present
intention of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or
acquisition of Common Stock under the Stock Award has been registered under a
then currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

 

(e)                                  Withholding
Obligations. To the extent provided by the terms of a Stock Award
Agreement, the Company may, in its sole discretion, satisfy any federal, state
or local tax withholding obligation relating to a Stock Award by any of the
following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of
such means: (i) causing the Participant to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise
issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law (or such lower amount as may be necessary to avoid
variable award accounting); or (iii) by such other method as may be
set forth in the Stock Award Agreement.

 

(f)                                    Electronic
Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the
Company’s intranet.

 

9.                                      ADJUSTMENTS
UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)                                  Capitalization
Adjustments. If any change is made in, or other events occur with respect
to, the Common Stock subject to the Plan or subject to any Stock Award after
the effective date of the Plan set forth in Section 12 without the receipt
of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company (each a “Capitalization Adjustment”)), the Board
shall appropriately adjust: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Section 4(a),  and (ii) the class(es) and number of
securities and price per share of stock subject to outstanding Stock Awards. The
Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (Notwithstanding the foregoing, the conversion of any
convertible securities of the Company shall not be treated as a transaction “without
receipt of consideration” by the Company.)

 

12

 

(b)                                  Dissolution
or Liquidation. In the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards consisting of
vested and outstanding shares of Common Stock not subject to the Company’s
right of repurchase) shall terminate immediately prior to the completion of such
dissolution or liquidation, and the shares of Common Stock subject to the
Company’s repurchase option may be repurchased by the Company
notwithstanding the fact that the holder of such Stock Award is providing
Continuous Service, provided, however,
that the Board may, in its sole discretion, cause some or all Stock Awards to
become fully vested, exercisable and/or no longer subject to repurchase or
forfeiture (to the extent such Stock Awards have not previously expired or
terminated) before the dissolution or liquidation is completed but contingent
on its completion.

 

(c)                                  Corporate
Transaction. The following provisions shall apply to Stock Awards in the
event of a Corporate Transaction unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of the Stock
Award:

 

(i)                                    Stock Awards May Be Assumed. In
the event of a Corporate Transaction, any surviving corporation or acquiring
corporation (or the surviving or acquiring corporation’s parent company) may assume
or continue any or all Stock Awards outstanding under the Plan or may substitute
similar stock awards for Stock Awards outstanding under the Plan (including but
not limited to, awards to acquire the same consideration paid to the
stockholders of the Company pursuant to the Corporate Transaction), and any
reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to
the successor of the Company (or the successor’s parent company, if any), in
connection with such Corporate Transaction. A surviving corporation or
acquiring corporation may choose to assume or continue only a portion of a
Stock Award or substitute a similar stock award for only a portion of a Stock
Award. The terms of any assumption, continuation or substitution shall be set
by the Board in accordance with the provisions of Section 3(b).

 

(ii)                                Stock Awards Held by Current Participants. In
the event of a Corporate Transaction in which the surviving corporation or
acquiring corporation (or its parent company) does not assume or continue such
outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by Participants whose
Continuous Service has not terminated prior to the effective time of the
Corporate Transaction (referred to as the “Current Participants”), the vesting of such
Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate
Transaction) be accelerated in full to a date prior to the effective time of
such Corporate Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Stock Awards shall
terminate if not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction, and any reacquisition or repurchase rights held by
the Company with respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).

 

(iii)                            Stock Awards Held by Former Participants. In
the event of a Corporate Transaction in which the surviving corporation or
acquiring corporation (or its parent

 

13

 

company) does not assume
or continue such outstanding Stock Awards or substitute similar stock awards
for such outstanding Stock Awards, then with respect to Stock Awards that have
not been assumed, continued or substituted and that are held by persons other
than Current Participants, the vesting of such Stock Awards (and, if
applicable, the time at which such Stock Award may be exercised) shall not
be accelerated and such Stock Awards (other than a Stock Award consisting of
vested and outstanding shares of Common Stock not subject to the Company’s
right of repurchase) shall terminate if not exercised (if applicable) prior to
the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards shall not
terminate and may continue to be exercised notwithstanding the Corporate
Transaction.

 

(iv)                               Payment for Stock Awards in Lieu of Exercise.
Notwithstanding the foregoing, in the event a Stock Award will
terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder
of such Stock Award may not exercise such Stock Award but will receive a
payment, in such form as may be determined by the Board, equal in
value to the excess, if any, of (i) the value of the property the holder
of the Stock Award would have received upon the exercise of the Stock Award,
over (ii) any exercise price payable by such holder in connection with
such exercise.

 

(d)                                  Change
in Control. A Stock Award may be subject to additional acceleration of
vesting and exercisability upon or after a Change in Control as may be
provided in the Stock Award Agreement for such Stock Award or as may be
provided in any other written agreement between the Company or any Affiliate
and the Participant. A Stock Award may vest as to all or any portion of
the shares subject to the Stock Award (i) immediately upon the occurrence
of a Change in Control, whether or not such Stock Award is assumed, continued,
or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in
the event a Participant’s Continuous Service is terminated, actually or
constructively, within a designated period following the occurrence of a Change
in Control. In the absence of such provisions, no such acceleration shall
occur.

 

10.                               AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment
of Plan. Subject to the limitations, if any, of applicable law, the Board
at any time, and from time to time, may amend the Plan. However, except as
provided in Section 9(a) relating to Capitalization Adjustments, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary to satisfy applicable law.

 

(b)                                  Contemplated
Amendments. It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide Eligible
Employees with the maximum benefits provided hereunder.

 

(c)                                  No
Impairment of Rights. Rights under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the affected Participant, and (ii) such
Participant consents in writing.

 

14

 

(d)                                  Amendment
of Stock Awards. The Board, at any time and from time to time, may amend
the terms of any one or more Stock Awards, including, but not limited to,
amendments to provide terms more favorable than previously provided in the
Stock Award Agreement, subject to any specified limits in the Plan that are not
subject to Board discretion; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the affected
Participant, and (ii) such Participant consents in writing.

 

11.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan
Term. The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

 

(b)                                  No
Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Stock Award granted while the Plan is
in effect except with the written consent of the affected Participant.

 

12.                               EFFECTIVE
DATE OF PLAN.

 

The Plan shall become effective as determined by the
Board.

 

13.                               CHOICE
OF LAW.

 

The law of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation of this
Plan, without regard to that state’s conflict of laws rules.

 

15

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