Document:

exv10w15

 

Exhibit 10.15

Amendment to

Corporate Purchase Agreement

Contract No. 2171 - 080101

(“CPA”)

MARKET DEVELOPMENT FUNDS

This is Amendment Number 2 (“Amendment 2”) to Corporate Purchase Agreement (CPA) Contract
No. 2171 - 080101 between SMART Modular Technologies, Inc
(“Company”) and Hewlett-Packard Company
(“HP”). Amendment 2 is effective on the data set forth in Section 6 below.

WHEREAS,
Company desires to provide HP funding for marketing of Company Products (as defined
herein) included with HP Products (as defined herein), and

WHEREAS,
HP desires to utilize such funding to generate demand for HP Products, that include HP products,

 Therefore Company and HP agree as to amend the CPA as
follows:

Add a new
Section as follows; Market Development Funds

	1.0	 	Purpose
	 
	 	 	The purpose of this Amendment 2 is to set forth the marketing efforts and terms
required to enable the parties to work together to create a framework
and structure for
market development funds related to Company and HP Products.
	 
	2.0	 	Executive Overview
	 
	 	 	 HP and Company anticipate working together in a number of ways with the
objective of working together in a mutually beneficial relationship to increase the revenue
and profitability of each without constraining each
others’ business.
	 
	 	 	HP and Company wish to cooperate to simplify, guide and accelerate customer buying
decisions and improve customer satisfaction and awareness, with tightly integrated and
comprehensive sales and marketing programs leveraging HP’s worldwide sales organizations and
sales infrastructure.
	 
	3.0	 	Definitions
	 
	 	 	The definitions contained herein apply to this Amendment 2
	 
	 	 	“HP Products” shall mean HP servers, desktops, portables, and server storage products
and options, including without limitation HP memory option kits. HP Products may include
products which are developed by or for HP, products which are jointly developed by HP and
Company, and products which are provided to HP for sale as a HP-branded product.
	 
	 	 	“Company Products” shall mean memory modules (SIMMs, DIMMs, SODIMMs, Reg DIMMs) manufactured
by company or sourced by Company for resale as part of Company’s product offering.
	 
	 	 	“MDF” shall mean the funding provided by Company, as further described herein below, to be
managed and allocated by HP’s Storage, Networking and Infrastructure marketing organization
for the purpose of promoting HP Products that contain or include Company Products.
	 
	 	 	“MDF Expenditure” shall mean any expense incurred by HP in connection with HP’s sales and
marketing efforts to promote HP Products that contain or include Company Products. Such sales
and marketing efforts may include, but are not limited to

	 	•	 	Product Awareness
	 
	 	•	 	 Channel Development

Market
Development Funds

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	 	•	 	Advertising
	 
	 	•	 	Trade Shows
	 
	 	•	 	Conference Events
	 
	 	•	 	Announcements/Press Events
	 
	 	•	 	Training
	 
	 	•	 	Product Promotions
	 
	 	•	 	Third-party sales and marketing services

	4.0	 	Responsibilities

	 	4.1	 	HP Responsibilities.

	 	(a)	 	HP will develop and maintain a marketing plan to effectively utilize the MDF to promote
HP Products that contain or include Company Products. HP’s plan
will include reasonable efforts to provide promotion and awareness of
Company’s Products. HP’s plan may include both
stand-alone and solution-oriented awareness as HP deems appropriate for the product and
HP’s overall solution strategy. This plan will be presented to Company on a semi-annual
basis, and Company will be given the opportunity to reasonably contribute to such plan.
	 
	 	(b)	 	HP will manage MDF Expenditures in accordance with this Amendment 2 and will ensure
that monies allocated to the MDF are not applied to expenditures that do not support the
purpose of the MDF set forth in this Amendment 2. Where such MDF Expenditures involve the
use of third parties to produce marketing documents, supplies and materials, HP will
exercise due care in the selection of Such third parties to obtain favorable pricing,
quality, and delivery terms. Subject to the requirements of this Amendment 2, HP will
manage and allocate MDF Expenditures at its sole option and discretion.
	 
	 	(c)	 	HP will review the results of the MDF Expenditures with Company on a semi-annual basis.
HP will determine the format and content of such reviews, and may include information
regarding percentage increases in sales of HP Products that contain or include Company
Products, increases in customer contacts regarding such products, and other information
deemed appropriate by HP.

	 	4.2	 	Company Responsibilities.

	 	(a)	 	Company shall collect MDF monies on a monthly basis, calculated as a percentage of
the sale price of memory option kits. The MDF percentage is
additional to the material mark-up cost and will be a stand alone percentage for determining MDF monies. The MDF monies
shall be defined by HP business units on a quarterly basis and reviewed by all parties. HP
business units will define the MDF percentage one week before the start of a new quarter.
Each business unit will confirm their MDF contribution percentage in writing for the
upcoming quarter or specify a revised MDF contribution percentage. No response from the
business unit means the business unit does not want to contribute any MDF (0%) for the
upcoming quarter. However, in no event shall the MDF amount exceed 2% of the sale price of
memory options. Company shall report its total sales of Company Products to HP by HP
business unit within thirty (30) days following the end of the month and shall remit
payment of all monies due for the MDF to HP at that time,
along with each such report. Reports and payments shall be sent to:

	 	 	 
	 

	 	Hewlett-Packard Company
	 

	 	20555 S.H. 249
	 

	 	Houston, TX 77070
	 

	 	Attn: Rob Stevenson MS 100801

	 	(b)	 	Company shall not withhold or delay payment of any monies due for the MDF for any
reason other than a breach by HP of this Amendment 2 which remains uncured more that thirty
(30) days after receipt of written notice of such breach. Without limiting the foregoing,
Company shall not withhold or delay payment of any monies due for the MDF based on any
claim or dispute arising out of or related to any other agreement or transaction between
Company and HP.

	5.0	 	Project Management

Market
Development Funds

Page 2 of 4

 

	 	 	Each party agrees to appoint a Project Manager to coordinate its respective
responsibilities hereunder. The Project Managers are:

	 	 	 
	For HP:

	 	Hewlett – Packard Company
	 

	 	20555 SH 249
	 

	 	Houston, TX 77070-2698
	 

	 	Attn: McLeod Glass
	 

	 	Phone: 281-518-8641
	 
	 	 
	For Company:

	 	SMART Technologies, Inc.
	 

	 	Attn: Frank Perezalonso
	 

	 	4211 Starboard Dr.
	 

	 	Fremonl, CA 98538
	 

	 	Phone: 510-624-8133

The Project Managers shall oversee the funding and marketing activities so as to support the
purpose of the MDF.

	6.0	 	Term and Termination
	 
	 	 	This Amendment 2 shall be effective as of the first business day of the month in which it is executed
by the parties (“Effective Date”), and shall remain in effect for a period of (12) months from
the Effective Date, unless earlier terminated as provided herein.
Following the initial term,
this Amendment 2 shall be automatically renewed for up to two (2) additional one (1) year
periods unless either party provides written notice to the other
party of its intent not to
renew at least thirty (30) days prior to the expiration of the
then-current term.
	 
	 	 	Either party shall have the option to terminate this Amendment 2 in the event that the other party
materially breaches any of its obligations hereunder and the breach
remains uncured for thirty
(30) days after receipt of written notice of such breach.
	 
	 	 	This Amendment 2 may be terminated by either party for good cause, which cause does not rise to
the level of material breach as set forth herein above but which materially impairs the
ability of the parties to accomplish the Purpose of this Amendment 2 upon ninety (90) days
advance written notice to the other party. In the event of termination in accordance with this
paragraph, Company shall not be entitled to receive a refund of any moneys remaining in the MDF
at the time of such termination. Further, in the event of such termination, neither party
shall be relieved of its obligations incurred prior to the effective
date of such termination
to provide payments or perform services, even if the due date for such payment or services
falls after the effective date of such termination.
	 
	 	 	This Amendment 2 may be terminated, with or without cause,
upon the mutual agreement of the
parties, which agreement shall be documented in a writing signed by both parties stating the
parties intent to terminate this Amendment 2.

Market Development Funds

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IN
WITNESS WHEREOF, the persons signing below warrant that they are
duly authorized to sign for, and on behalf of, the respective parties,

	 	 	 	 	 	 	 	 	 	 	 
	EFFECTIVE
DATE: February 1, 2005	 	 	 	 	 	 
	 
	HEWLETT-PACKARD COMPANY	 	 	 	SMART MODULAR TECHNOLOGIES, INC.	 	 
	 
	By:

	 	/s/ Paul Perez
 

	 	 	 	By:
	 	/s/ Jack Pacheco
 

	 	 
	Name:

	 	Paul Perez
	 	 	 	Name:
	 	Jack Pacheco	 	 
	Title:

	 	VP, SNL, ISS
	 	 	 	Title:
	 	CFO/VP	 	 
	Date:

	 	January 20, 2005
	 	 	 	Date:
	 	January 18, 2005	 	 

Market
Development Funds

Page 4 of 4exv4w1

 

EXHIBIT 4.1

SMITH MICRO SOFTWARE, INC.

2005 STOCK OPTION/STOCK ISSUANCE PLAN

ARTICLE ONE

GENERAL

	 	I.	 	PURPOSE OF THE PLAN

          This 2005 Stock Option/Stock Issuance Plan (the “Plan”) is intended to promote the interests
of Smith Micro Software, Inc., a Delaware corporation (the “Corporation”), by providing eligible
individuals with the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in the service of the
Corporation (or its parent or subsidiary corporations).

	 	II.	 	DEFINITIONS

          A. For purposes of the Plan, the following definitions shall be in effect:

          Board: the Corporation’s Board of Directors.

          Change in Control: a change in ownership or control of the Corporation effected through
either of the following transactions:

               (i) the acquisition directly or indirectly by any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders which the Board does not recommend such
stockholders to accept; or

               (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive
months or less such that a majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board members described
in clause (A) who were still in office at the time such election or nomination was approved by the
Board.

          Code: the Internal Revenue Code of 1986, as amended.

          Common Stock: shares of the Corporation’s common stock.

          Compensation Committee: the Committee appointed by the Board of Directors to supervise the
Corporation’s compensation policies, and to administer the Discretionary Option

 

 

Grant and Stock Issuance programs. Each member of the Compensation Committee must also be a
“Non-Employee Director” within the meaning of Rule 16b-3 and an “outside director” within the
meaning of Section 162(m) of the Code.

          Corporate Transaction: any of the following stockholder-approved transactions to which the
Corporation is a party:

               (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation’s outstanding securities are transferred to a
person or persons different from the persons holding those securities immediately prior to such
transaction, or

               (ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s
assets in complete liquidation or dissolution of the Corporation.

          Disability: the inability of an individual to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which is expected to result in
death or has lasted or can be expected to last for a continuous period of not less than twelve (12)
months. However, for purposes of the Automatic Option Grant Program, Disability shall mean the
inability of the non-employee Board member to perform his or her usual duties as a Board member by
reason of any medically determinable physical or mental impairment expected to result in death or
to be of continuous duration of twelve (12) months or more.

          Employee: an individual who performs services while in the employ of the Corporation or one
or more parent or subsidiary corporations, subject to the control and direction of the employer
entity not only as to the work to be performed but also as to the manner and method of performance.

          Exercise Date: the date on which the Corporation shall have received written notice of the
option exercise.

          Fair Market Value: the Fair Market Value per share of Common Stock determined in accordance
with the following provisions:

               (i) If the Common Stock is not at the time listed or admitted to trading on any national
securities exchange but is traded on the Nasdaq National Market, then the Fair Market Value shall
be the closing selling price per share on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market. If there is no reported
closing selling price for the Common Stock on the date in question, then the closing selling price
on the last preceding date for which such quotation exists shall be determinative of Fair Market
Value.

               (ii) If the Common Stock is at the time listed or admitted to trading on any national
securities exchange, then the Fair Market Value shall be the closing selling price per share on the
date in question on the exchange determined by the Compensation Committee to be the primary market
for the Common Stock, as such price is officially quoted in the composite

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tape of transactions on such exchange. If there is no reported sale of Common Stock on such
exchange on the date in question, then the Fair Market Value shall be the closing selling price on
the exchange on the last preceding date for which such quotation exists.

               (iii) If the Common Stock is on the date in question neither listed nor admitted to trading on
any national securities exchange nor traded on the Nasdaq National Market, then the Fair Market
Value of the Common Stock on such date shall be determined by the Compensation Committee after
taking into account such factors as the Compensation Committee shall deem appropriate.

          Incentive Option: a stock option which satisfies the requirements of Code Section 422.

          Involuntary Termination: the termination of the Service of any individual which occurs by
reason of:

               (i) such individual’s involuntary dismissal or discharge by the Corporation for reasons other
than Misconduct, or

               (ii) such individual’s voluntary resignation following (A) a change in his or her position
with the Corporation which materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or bonus award) by more than fifteen
percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by the Corporation
without the individual’s consent.

          Misconduct: the commission of any act of fraud, embezzlement or dishonesty by the Optionee or
Participant, any unauthorized use or disclosure by such person of confidential information or trade
secrets of the Corporation (or any parent or subsidiary), or any other intentional misconduct by
such person adversely affecting the business or affairs of the Corporation (or any parent or
subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any parent or subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service
of the Corporation (or any parent or subsidiary).

          1934 Act: the Securities Exchange Act of 1934, as amended from time to time.

          Non-Statutory Option: a stock option not intended to meet the requirements of Code Section
422.

          Optionee: a person to whom an option is granted under the Discretionary Option Grant or
Automatic Option Grant Program.

          Participant: a person who is issued Common Stock under the Stock Issuance Program.

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          Section 12(g) Registration Date: the date on which the initial registration of the Common
Stock under Section 12(g) of the 1934 Act became effective.

          Section 16 Insider: an officer or director of the Corporation subject to the short-swing
profit liabilities of Section 16 of the 1934 Act.

          Service: the performance of services on a periodic basis for the Corporation (or any parent
or subsidiary corporation) in the capacity of an Employee, a non-employee member of the board of
directors or an independent consultant or advisor, except to the extent otherwise specifically
provided in the applicable stock option or stock issuance agreement.

          10% Stockholder: the owner of stock (as determined under Code Section 424(d)) possessing more
than ten percent (10%) of the total combined voting power of all classes of stock of the
Corporation or any parent or subsidiary corporation.

          B. The following provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:

          Any corporation (other than the Corporation) in an unbroken chain of corporations ending with
the Corporation shall be considered to be a parent of the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) 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.

          Each corporation (other than the Corporation) in an unbroken chain of corporations beginning
with the Corporation shall be considered to be a subsidiary of the Corporation, provided each such
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.

	 	III.	 	STRUCTURE OF THE PLAN

          A. Stock Programs. The Plan shall be divided into three (3) separate components: the
Discretionary Option Grant Program specified in Article Two, the Stock Issuance Program specified
in Article Three and the Automatic Option Grant Program specified in Article Four. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion of the Compensation
Committee, be granted options to purchase shares of Common Stock in accordance with the provisions
of Article Two. Under the Stock Issuance Program, eligible individuals may be issued shares of
Common Stock directly, either through the immediate purchase of such shares at a price not less
than one hundred percent (100%) of the Fair Market Value of the shares at the time of issuance or
as a bonus for services rendered the Corporation or the Corporation’s attainment of financial
objectives. Under the Automatic Option Grant Program, each individual serving as a non-employee
Board member on the Automatic Option Grant Program Effective Date and each individual who first
joins the Board as a non-employee director at any time after such Effective Date shall at periodic
intervals receive option grants to purchase shares of Common Stock in accordance with the
provisions of Article Four.

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          B. General Provisions. Unless the context clearly indicates otherwise, the provisions
of Articles One and Five shall apply to the Discretionary Option Grant Program, the Automatic
Option Grant Program and the Stock Issuance Program and shall accordingly govern the interests of
all individuals under the Plan.

	 	IV.	 	ADMINISTRATION OF THE PLAN

          A. The Compensation shall have the authority to administer the Discretionary Option Grant and
Stock Issuance Programs. Each member of the Compensation Committee and the Compensation Committee
must be a “Non-Employee Director” within the meaning of Rule 16b-3 and an “outside director” with
the meaning of Section 162(m) of the Code.

          B. Members of the Compensation Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may also at any time terminate
the functions of any Compensation Committee and reassume all powers and authority previously
delegated to such committee.

          C. Each Compensation Committee shall, within the scope of its administrative functions under
the Plan, have full power and authority (subject to the provisions of the Plan) to establish rules
and regulations for the proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations of, the provisions
of such programs and any outstanding options or stock issuances thereunder as it may deem necessary
or advisable. Decisions of the Compensation Committee shall be final and binding on all parties
who have an interest in the Discretionary Option Grant and Stock Issuance Programs or any option or
share issuance thereunder.

          D. Service on the Compensation Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member of the Compensation
Committee shall be liable for any act or omission made in good faith with respect to the Plan or
any option grants or stock issuances under the Plan.

          E. Administration of the Automatic Option Grant Program shall be self-executing in accordance
with the express terms and conditions of Article Four, and the Compensation Committee shall
exercise no discretionary functions with respect to option grants made pursuant to that program.

	 	V.	 	OPTION GRANTS AND STOCK ISSUANCES

          A. The persons eligible to participate in the Discretionary Option Grant Program under Article
Two and the Stock Issuance Program under Article Three shall be limited to the following:

               (i) officers and other key employees of the Corporation (or its parent or subsidiary
corporations) who render services which contribute to the management, growth and financial success
of the Corporation (or its parent or subsidiary corporations);

5

 

               (ii) non-employee members of the Board; and

               (iii) those consultants or other independent advisors who provide valuable services to the
Corporation (or its parent or subsidiary corporations).

          B. Only non-employee Board members shall be eligible to receive automatic option grants
pursuant to Article Four.

          C. The Compensation Committee shall have full authority to determine, (i) with respect to the
option grants made under the Discretionary Option Grant Program, which eligible individuals are to
receive option grants, the time or times when such options are to be granted, the number of shares
to be covered by each such grant, the status of the granted option as either an Incentive Option or
a Non-Statutory Option, the time or times at which each granted option is to become exercisable and
the maximum term for which the option may remain outstanding and (ii), with respect to stock
issuances under the Stock Issuance Program, the number of shares to be issued to each Participant,
the vesting schedule (if any) to be applicable to the issued shares and the consideration for which
such shares are to be issued.

	 	VI.	 	STOCK SUBJECT TO THE PLAN

          A. Shares of Common Stock shall be available for issuance under the Plan and shall be drawn
from either the Corporation’s authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the open market. The
stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common
Stock, including shares repurchased by the Corporation on the open market. The number of shares of
Common Stock reserved for issuance over the term of the Plan shall not exceed the sum of (i)
5,000,000 shares plus (ii) the additional shares of Common Stock automatically added to the share
reserve each year pursuant to the provisions of Section VI.B. of this Article One.

          B. The number of shares of Common Stock available for issuance under the Plan shall
automatically increase on the first trading day of January each calendar year during the term of
the Plan, beginning with calendar year 2006, by an amount equal to two and one half percent (2.5%)
of the total number of shares of Common Stock outstanding on the last trading day in December of
the immediately preceding calendar year, but in no event shall any such annual increase exceed
750,000 shares.

          C. In no event shall the aggregate number of shares of Common Stock for which any one
individual participating in the Plan may be granted stock options and direct stock issuances exceed
400,000 shares per calendar year. In no event shall the number of Incentive Options granted
pursuant to the Plan exceed 2,000,000 shares.

          D. Should one or more outstanding options under this Plan expire or terminate for any reason
prior to exercise in full (including any option cancelled in accordance with the
cancellation-regrant provisions of Section IV of Article Two of the Plan), then the shares subject
to the portion of each option not so exercised shall be available for subsequent option grants
under the Plan. Unvested shares issued under the Plan and subsequently repurchased by the

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Corporation pursuant to its repurchase rights under the Plan, shall be added back to the
number of shares of Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an outstanding option under the Plan be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan or the vesting of a direct share issuance made under the Plan,
then the number of shares of Common Stock available for issuance under the Plan shall be reduced by
the net number of shares of Common Stock actually issued to the holder of such option or share
issuance.

          E. Should any change be made to the Common Stock issuable under the Plan by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the Corporation’s receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of securities for which
any one individual participating in the Plan may be granted stock options and direct stock
issuances in the aggregate per calendar year, (iii) the number and/or class of securities for which
automatic option grants are to be subsequently made per eligible non-employee Board member under
the Automatic Option Grant Program, (iv) the number and/or class of securities and price per share
in effect under each option outstanding under either the Discretionary Option Grant or Automatic
Option Grant Program and (v) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year pursuant to the provisions of Section VI.B.
of this Article One. Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Compensation Committee shall be final, binding and conclusive.

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

	 	I.	 	TERMS AND CONDITIONS OF OPTIONS

          Options granted pursuant to the Discretionary Option Grant Program shall be authorized by
action of the Compensation Committee and may, at the Compensation Committee’s discretion, be either
Incentive Options or Non-Statutory Options. Individuals who are not Employees of the Corporation
or its parent or subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the Compensation
Committee; provided, however, that each such instrument shall comply with the terms and conditions
specified below. Each instrument evidencing an Incentive Option shall, in addition, be subject to
the applicable provisions of Section II of this Article Two.

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          A. Exercise Price.

               1. The exercise price per share of Common Stock subject to either an Incentive Option or a
Non-Statutory Option shall in no event be less than one hundred percent (100%) of the Fair Market
Value of such Common Stock on the grant date.

               2. The exercise price shall become immediately due upon exercise of the option and shall,
subject to the provisions of Section I of Article Five, be payable in cash or check made payable to
the Corporation. Should the Corporation’s outstanding Common Stock be registered under Section
12(g) of the 1934 Act at the time the option is exercised, then the exercise price may also be paid
as follows:

               (i) in shares of Common Stock held by the Optionee for the requisite period necessary to avoid
a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or

               (ii) to the extent the option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (b) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete the sale transaction.

               3. Except to the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise Date.

          B. Term and Exercise of Options. Each option granted under this Discretionary Option
Grant Program shall be exercisable at such time or times and during such period as is determined by
the Compensation Committee and set forth in the instrument evidencing the grant. No such option,
however, shall have a maximum term in excess of ten (10) years from the grant date.

          During the lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee other than by will or by the
laws of descent and distribution following the Optionee’s death. However, a Non-Statutory Option
may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the
Optionee’s immediate family or to a trust established exclusively for one or more such family
members. The assigned option may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms applicable to the
assigned option (or portion thereof) shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents issued to the
assignee as the Compensation Committee may deem appropriate.

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          C. Termination of Service.

               1. Except to the extent otherwise provided pursuant to subsection C.2 below, the following
provisions shall govern the exercise period applicable to any options held by the Optionee at the
time of cessation of Service or death:

               (i) Should the Optionee cease to remain in Service for any reason other than death or
Disability, then the period during which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the date of such cessation of
Service.

               (ii) Should such Service terminate by reason of Disability, then the period during which each
outstanding option held by the Optionee is to remain exercisable shall be limited to the twelve
(12)-month period following the date of such cessation of Service.

               (iii) Should the Optionee die while holding one or more outstanding options, then the period
during which each such option is to remain exercisable shall be limited to the twelve (12)-month
period following the date of the Optionee’s death. During such limited period, the option may be
exercised by the personal representative of the Optionee’s estate or by the person or persons to
whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of
descent and distribution.

               (iv) Should the Optionee’s Service be terminated for Misconduct, then all outstanding options
held by the Optionee shall terminate immediately and cease to be outstanding.

               (v) Under no circumstances, however, shall any such option be exercisable after the specified
expiration date of the option term.

               (vi) During the applicable post-Service exercise period, the option may not be exercised in
the aggregate for more than the number of vested shares for which the option is exercisable on the
date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period
or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be
exercisable for any vested shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee’s cessation of Service for any reason, terminate and cease to
be outstanding with respect to any option shares for which the option is not at that time
exercisable or in which the Optionee is not otherwise at that time vested.

               2. The Compensation Committee shall have complete discretion, exercisable either at the time
the option is granted or at any time while the option remains outstanding,

               (i) to extend the period of time for which the option is to remain exercisable following the
Optionee’s cessation of Service or death from the limited period in effect under subsection C.1 of
this Article Two to such greater period of time as the Compensation Committee shall deem
appropriate; provided, that in no event shall such option be exercisable after the specified
expiration date of the option term; and/or

9

 

               (ii) to permit one or more options held by the Optionee under this Article Two to be
exercised, during the limited post-Service exercise period applicable under this paragraph C., not
only with respect to the number of vested shares of Common Stock for which each such option is
exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more
subsequent installments in which the Optionee would otherwise have vested had such cessation of
Service not occurred.

          D. Stockholder Rights. An Optionee shall have no stockholder rights with respect to
any shares covered by the option until such individual shall have exercised the option, paid the
exercise price and become the holder of record of the purchased shares.

          E. Unvested Shares. The Compensation Committee shall have the discretion to authorize
the issuance of unvested shares of Common Stock under this Discretionary Option Grant Program.
Should the Optionee cease Service while holding such unvested shares, the Corporation shall have
the right to repurchase, at the exercise price paid per share, all or (at the discretion of the
Corporation and with the consent of the Optionee) any of those unvested shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Compensation Committee and set forth in the agreement evidencing such repurchase
right.

	 	II.	 	INCENTIVE OPTIONS

          Incentive Options may only be granted to individuals who are Employees, and the terms and
conditions specified below shall be applicable to all Incentive Options granted under the Plan.
Except as modified by the provisions of this Section II, all the provisions of Articles One, Two
and Five shall be applicable to Incentive Options. Any Options specifically designated as
Non-Statutory shall not be subject to such terms and conditions.

          A. Dollar Limitation. The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which one or more options granted to any
Employee under this Plan (or any other option plan of the Corporation or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock options under the
Federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. Should the number of shares
of Common Stock for which any Incentive Option first becomes exercisable in any calendar year
exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, then that option may
nevertheless be exercised in that calendar year for the excess number of shares as a Non-Statutory
Option under the Federal tax laws.

          B. 10% Stockholder. If any individual to whom an Incentive Option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the grant date, and the option term
shall not exceed five (5) years measured from the grant date.

10

 

	 	III.	 	CORPORATE TRANSACTION/CHANGE IN CONTROL

          A. In the event of any Corporate Transaction, each outstanding option shall automatically
accelerate so that each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate if and to the
extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by
the successor corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the successor corporation which preserves
the spread existing on the unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule applicable to such
option or (iii) the acceleration of such option is subject to other limitations imposed by the
Compensation Committee at the time of the option grant. The determination of option comparability
under clause (i) above shall be made by the Compensation Committee, and its determination shall be
final, binding and conclusive.

          B. All outstanding repurchase rights shall also terminate automatically, and the shares of
Common Stock subject to those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii)
such accelerated vesting is precluded by other limitations imposed by the Compensation Committee at
the time the repurchase right is issued.

          C. Immediately following the consummation of the Corporate Transaction, all outstanding
options shall terminate and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof).

          D. Each option which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to the Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to
(i) the exercise price payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same, (ii) the maximum number and/or
class of securities available for issuance under the remaining term of the Plan, (iii) the maximum
number and/or class of securities for which any one person may be granted stock options and direct
stock issuances under the Plan per calendar year and (iv) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar year.

          E. The Compensation Committee shall have full power and authority to grant options under the
Discretionary Option Grant Program which will automatically accelerate in the event the Optionee’s
Service subsequently terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of

11

 

any Corporate Transaction in which those options are assumed or replaced and do not otherwise
accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the
earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination. In addition, the Compensation
Committee may provide that one or more of the Corporation’s outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.

          F. The Compensation Committee shall have full power and authority to grant options under the
Discretionary Option Grant Program which will automatically accelerate in the event the Optionee’s
Service subsequently terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change in Control. Each
option so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination. In addition, the Compensation Committee may provide
that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by
the Optionee at the time of such Involuntary Termination shall immediately terminate, and the
shares subject to those terminated repurchase rights shall accordingly vest in full.

          G. The portion of any Incentive Option accelerated in connection with a Corporate Transaction
or Change in Control shall remain exercisable as an Incentive Option only to the extent the
applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

          H. The outstanding options shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

12

 

ARTICLE THREE

STOCK ISSUANCE PROGRAM

	 	I.	 	TERMS AND CONDITIONS OF STOCK ISSUANCES

          Shares of Common Stock may be issued under the Stock Issuance Program directly without any
intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.

          A. The shares shall be issued for such valid consideration under the Delaware General
Corporation Law as the Compensation Committee may deem appropriate, but the value of such
consideration as determined by the Compensation Committee shall not be less than one hundred
percent (100%) of the Fair Market Value of the issued shares of Common Stock on the issuance date.

          B. The Compensation Committee shall have full power and authority to issue shares of Common
Stock under the Stock Issuance Program as a bonus for past services rendered to the Corporation (or
any parent or subsidiary). All such bonus shares shall be fully and immediately vested upon
issuance.

          C. All other shares of Common Stock authorized for issuance under the Stock Issuance Program
by the Compensation Committee shall have a minimum vesting schedule determined in accordance with
the following requirements:

               (i) For any shares which are to vest solely by reason of Service to be performed by the
Participant, the Compensation Committee shall impose a minimum Service period of at least two (2)
years measured from the issue date of such shares.

               (ii) For any shares which are to vest upon the Participant’s completion of a designated
Service requirement and the Corporation’s attainment of one or more prescribed performance
milestones, the Compensation Committee shall impose a minimum Service period of at least one (1)
year measured from the issue date of such shares.

          D. Any new, substituted or additional securities or other property (including money paid other
than as a regular cash dividend) which the Participant may have the right to receive with respect
to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares
of Common Stock and (ii) such escrow arrangements as the Compensation Committee shall deem
appropriate.

          E. The Participant shall have full stockholder rights with respect to any shares of Common
Stock issued to the Participant under the Stock Issuance Program, whether or not the

13

 

Participant’s interest in those shares is vested. Accordingly, the Participant shall have the
right to vote such shares and to receive any regular cash dividends paid on such shares.

          F. Should the Participant cease to remain in Service while holding one or more unvested shares
of Common Stock issued under the Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock, then those shares shall
be immediately surrendered to the Corporation for cancellation, and the Participant shall have no
further stockholder rights with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash equivalent (including
the Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of
any outstanding purchase-money note of the Participant attributable to such surrendered shares.

          G. The Compensation Committee shall have full power and authority, exercisable upon a
Participant’s termination of Service, to waive the surrender and cancellation of any or all
unvested shares of Common Stock (or other assets attributable thereto) at the time held by that
Participant, if the Compensation Committee determines such waiver to be an appropriate severance
benefit for the Participant.

	 	II.	 	CORPORATE TRANSACTION/CHANGE IN CONTROL

          A. All of the Corporation’s outstanding repurchase/cancellation rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except
to the extent (i) those rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.

          B. The Compensation Committee shall have the discretionary authority to structure one or more
of the Corporation’s repurchase/cancellation rights under the Stock Issuance Program in such manner
that those rights shall automatically terminate, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event the Participant’s Service
should subsequently terminate by reason of an Involuntary Termination within eighteen (18) months
following the effective date of any Corporate Transaction in which those rights are assigned to the
successor corporation (or parent thereof).

          C. The Compensation Committee shall have the discretionary authority to structure one or more
of the Corporation’s repurchase/cancellation rights under the Stock Issuance Program in such manner
that those rights shall automatically terminate, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event the Participant’s Service
should subsequently terminate by reason of an Involuntary Termination within eighteen (18) months
following the effective date of any Change in Control.

14

 

	 	III.	 	SHARE ESCROW/LEGENDS

          Unvested shares may, in the Compensation Committee’s discretion, be held in escrow by the
Corporation until the Participant’s interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those unvested shares.

15

 

ARTICLE FOUR

AUTOMATIC OPTION GRANT PROGRAM

	 	I.	 	ELIGIBILITY

          The individuals eligible to receive automatic option grants pursuant to the provisions of this
Article Four program shall be limited to those individuals who are serving as non-employee Board
members on the Automatic Option Grant Program Effective Date or who are first elected or appointed
as non-employee Board members on or after such Effective Date, whether through appointment by the
Board or election by the Corporation’s stockholders.

	 	II.	 	TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

          A. Grant Dates. Option grants shall be made under this Article Four on the dates
specified below:

               1. Initial Grant. Each individual serving as a non-employee Board member on the
Automatic Option Grant Program Effective Date and each individual who is first elected or appointed
as a non-employee Board member after such Effective Date shall automatically be granted, on the
Automatic Option Grant Program Effective Date or on the date of such initial election or
appointment (as the case may be), a Non-Statutory Option to purchase 10,000 shares of Common Stock
upon the terms and conditions of this Article Four. In no event, however, shall a non-employee
Board member be eligible to receive such an initial option grant if such individual has at any time
been in the prior employ of the Corporation (or any parent or subsidiary corporation).

               2. Annual Grant. On the date of each Annual Stockholders Meeting, beginning with the
first Annual Meeting held after the Section 12(g) Registration Date, each individual who will
continue to serve as a non-employee Board member shall automatically be granted, whether or not
such individual is standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 2,500 shares of Common Stock upon the terms and
conditions of this Article Four, provided he or she has served as a non-employee Board member for
at least six (6) months prior to the date of such Annual Meeting. Non-employee Board members who
have previously been in the employ of the Corporation (or any parent or subsidiary) shall be
eligible to receive such annual option grants over their continued period of Board service through
one or more Annual Stockholders Meetings.

               3. No Limitation. There shall be no limit on the number of shares for which any one
non-employee Board member may be granted stock options under this Article Four over his or her
period of Board service.

          B. Exercise Price. The exercise price per share of Common Stock subject to each
automatic option grant made under this Article Four shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the automatic grant date.

16

 

          C. Payment. The exercise price shall be payable in one of the alternative forms
specified below:

               (i) full payment in cash or check drawn to the Corporation’s order;

               (ii) full payment in shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date (as such term is defined below);

               (iii) full payment in a combination of shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date and cash or check drawn to the Corporation’s
order; or

               (iv) to the extent the option is exercised for vested shares, full payment through a sale and
remittance procedure pursuant to which the Optionee shall provide irrevocable written instructions
to (I) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased shares and (II) the
Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.

          Except to the extent the sale and remittance procedure specified above is used for the
exercise of the option for vested shares, payment of the exercise price for the purchased shares
must accompany the exercise notice.

          D. Option Term. Each automatic grant under this Article Four shall have a maximum
term of ten (10) years measured from the automatic grant date.

          E. Exercisability/Vesting. Each automatic grant shall be immediately exercisable for
any or all of the option shares. However, any shares purchased under the option shall be subject
to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s
cessation of Board service prior to vesting in those shares in accordance with the applicable
schedule below:

               Initial Grant. Each initial 10,000-share automatic grant shall vest, and the Corporation’s
repurchase right shall lapse, in a series of four (4) equal and successive annual installments over
the Optionee’s period of continued service as a Board member, with the first such installment to
vest upon Optionee’s completion of one (1) year of Board service measured from the automatic grant
date.

               Annual Grant. Each additional 2,500-share automatic grant shall vest, and the Corporation’s
repurchase right shall lapse, upon the Optionee’s completion of one (1) year of Board service
measured from the automatic grant date.

          F. Limited Transferability. During the lifetime of the Optionee, each automatic
option grant may be assigned in whole or in part to one or more members of the Optionee’s

17

 

immediate family or to a trust established exclusively for one or more such family members.
The assigned portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the assigned option (or
portion thereof) shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as the Compensation
Committee may deem appropriate.

          G. Effect of Termination of Board Membership. The following provisions shall govern
the exercise of any outstanding options held by the Optionee under this Article Four at the time
the Optionee ceases to serve as a Board member:

               (i) The Optionee (or, in the event of Optionee’s death, the personal representative of the
Optionee’s estate or the person or persons to whom the option is transferred pursuant to the
Optionee’s will or in accordance with the laws of descent and distribution) shall have a twelve
(12)-month period following the date of such cessation of Board service in which to exercise each
such option. However, each option shall, immediately upon the Optionee’s cessation of Board
service, terminate and cease to remain outstanding with respect to any option shares in which the
Optionee is not vested on the date of such cessation of Board service.

               (ii) During the twelve (12)-month exercise period, the option may not be exercised in the
aggregate for more than the number of vested shares for which the option is exercisable at the time
of the Optionee’s cessation of Board service. However, should the Optionee cease to serve as a
Board member by reason of death or Permanent Disability, then all shares at the time subject to the
option shall immediately vest so that such option may, during the twelve (12)-month exercise period
following such cessation of Board service, be exercised for all or any portion of such shares as
fully-vested shares.

               (iii) In no event shall the option remain exercisable after the expiration of the option term.

          H. Stockholder Rights. The holder of an automatic option grant under this Article
Three shall have none of the rights of a stockholder with respect to any shares subject to such
option until such individual shall have exercised the option, paid the exercise price and become
the holder of record of the purchased shares.

          I. Remaining Terms. The remaining terms and conditions of each automatic option grant
shall be the same as the terms for option grants made under the Discretionary Option Grant Program.

	 	III.	 	CORPORATE TRANSACTION/CHANGE IN CONTROL

          A. In the event of any Corporate Transaction, the shares of Common Stock at the time subject
to each outstanding option under this Article Four but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the
time subject to that option and may be exercised for all or any portion of those shares as fully
vested shares of Common Stock. Immediately following the consummation

18

 

of the Corporate Transaction, all automatic option grants under this Article Four shall
terminate and cease to be outstanding, except to the extent assumed by the successor corporation or
parent thereof.

          B. Each outstanding option under this Article Four which is assumed in connection with a
Corporate Transaction outstanding shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which would have been
issuable to the Optionee in the consummation of such Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be
made to (i) the class and number of securities available for issuance under the Plan following the
consummation of such Corporate Transaction, and (ii) the exercise price payable per share, provided
the aggregate exercise price payable for such securities shall remain the same.

          C. In connection with any Change in Control of the Corporation, the shares of Common Stock at
the time subject to each outstanding option under this Article Four but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any portion of those
shares as fully vested shares of Common Stock. Each such option shall remain so exercisable for
all the option shares following the Change in Control, until the expiration or sooner termination
of the option term.

          D. The automatic option grants outstanding under this Article Four shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.

19

 

ARTICLE FIVE

MISCELLANEOUS

	 	I.	 	AMENDMENT OF THE PLAN AND AWARDS

          The Board has complete and exclusive power and authority to amend or modify the Plan (or any
component thereof) in any or all respects whatsoever. However, no such amendment or modification
shall adversely affect rights and obligations with respect to options at the time outstanding under
the Plan, nor adversely affect the rights of any Participant with respect to Common Stock issued
under the Stock Issuance Program prior to such action, unless the Optionee or Participant consents
to such amendment. In addition, certain amendments to the Plan may require stockholder approval
pursuant to applicable laws or regulations.

	 	II.	 	TAX WITHHOLDING

          A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of stock
options for such shares or the vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income tax and employment tax withholding
requirements.

          B. The Compensation Committee may, in its discretion and in accordance with the provisions of
this Section III of this Article Five and such supplemental rules as the Compensation Committee may
from time to time adopt (including the applicable safe-harbor provisions of Rule 16b-3 of the
Securities and Exchange Commission), provide any or all holders of Non-Statutory Options (other
than the automatic grants made pursuant to Article Four of the Plan) or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part of the Federal,
state and local income and employment tax liabilities incurred by such holders in connection with
the exercise of their options or the vesting of their shares (the “Taxes”). Such right may be
provided to any such holder in either or both of the following formats:

               (i) The holder of the Non-Statutory Option or unvested shares may be provided with the
election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the applicable Taxes (not to exceed
one hundred percent (100%)) designated by the holder.

               (ii) The Compensation Committee may, in its discretion, provide the holder of the
Non-Statutory Option or the unvested shares with the election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock
previously acquired by such individual (other than in connection with the option exercise or share
vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes incurred in connection with such option exercise or share vesting (not to exceed one hundred
percent (100%)) designated by the holder.

20

 

	 	III.	 	EFFECTIVE DATE AND TERM OF PLAN

          A. The Plan has been approved by the Board of directors and is subject to approval by the
stockholders of the Corporation at the annual meeting of stockholders to be held on May ___, 2005,
and will become effective as of the date of such stockholder approval.

          B. The Plan shall terminate upon the earlier of (i) the day prior to the tenth anniversary of
the approval of the Plan by the stockholders of the Corporation, or (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to the exercise of the
options granted under the Plan or the issuance of shares (whether vested or unvested) under the
Stock Issuance Program. If the date of termination is determined under clause (i) above, then all
option grants and unvested share issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments evidencing such grants
or issuance.

	 	IV.	 	REGULATORY APPROVALS

          The implementation of the Plan, the granting of any option under the Plan, the issuance of any
shares under the Stock Issuance Program, and the issuance of Common Stock upon the exercise of the
option grants made hereunder shall be subject to the Corporation’s procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan, the options granted
under it, and the Common Stock issued pursuant to it.

	 	V.	 	USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares pursuant to option
grants or share issuances under the Plan shall be used for general corporate purposes.

	 	VI.	 	NO EMPLOYMENT/SERVICE RIGHTS

          Neither the action of the Corporation in establishing the Plan, nor any action taken by the
Compensation Committee hereunder, nor any provision of the Plan shall be construed so as to grant
any individual the right to remain in the employ or service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate such individual’s
employment or service at any time and for any reason, with or without cause.

	 	VII.	 	MISCELLANEOUS PROVISIONS

          A. Except as otherwise expressly provided under the Plan, the right to acquire Common Stock or
other assets under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee or Participant.

21

 

          B. The provisions of the Plan relating to the exercise of options and the vesting of shares
shall be governed by the laws of the State of California as such laws are applied to contracts
entered into and performed in such State.

          C. The provisions of the Plan shall inure to the benefit of, and be binding upon, the
Corporation and its successors or assigns, whether by Corporate Transaction or otherwise, and the
Participants and Optionees, the legal representatives of their respective estates, their respective
heirs or legatees and their permitted assignees.

22

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