Document:

exv10w38

 

EXHIBIT 10.38

CATENA NETWORKS, INC.

1998 EQUITY INCENTIVE PLAN

Adopted December 16, 1998

Amended November 1, 1999, December 9, 1999, December 5, 2000, December 13, 2001, January 16, 2003

and July 23, 2003

Approved By Stockholders February 2, 1999, December 9, 1999, December 5, 2000, January 17, 2002 and

August 7, 2003

Termination Date: December 15, 2008

1. PURPOSES.

	(a)	 	Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
	 
	(b)	 	Available Stock Awards. The purpose of the Plan is to provide a means by
which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting
of the following Stock Awards: (1) Incentive Stock Options, (2)
Nonstatutory Stock Options, (3) stock bonuses and (4) rights to acquire
restricted stock.
	 
	(c)	 	General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.

2. Definitions.

	(a)	 	“Affiliate” means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
	 
	(b)	 	“Board” means the Board of Directors of the Company.
	 
	(c)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	(d)	 	“Committee” means a Committee appointed by the Board in accordance with
subsection 3(c).
	 
	(e)	 	“Common Stock” means the common stock of the Company.
	 
	(f)	 	“Company” means Catena Networks, Inc., a Delaware corporation.
	 
	(g)	 	“Consultant” means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (2) who is a member of the Board of
Directors of an Affiliate. However, the term “Consultant” shall not
include either Directors of the Company who are not compensated by the
Company

 

 

	 	 	for their services as Directors or Directors of the Company who are merely
paid a director’s fee by the Company for their services as Directors.
	 
	(h)	 	“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. The Participant’s Continuous Service
shall not be deemed to have terminated merely because of 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 Continuous Service. For
example, a change in status from an Employee of the Company to a
Consultant of an Affiliate or a Director of the Company will not
constitute an interruption of Continuous Service. 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.
	 
	(i)	 	“Covered Employee” means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
	 
	(j)	 	“Director” means a member of the Board of Directors of the Company.
	 
	(k)	 	“Disability” means (1) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company,
to perform the major duties of that person’s position with the Company or
an Affiliate of the Company because of the sickness or injury of the
person and (2) after the Listing Date, the permanent and total disability
of a person within the meaning of Section 22(e)(3) of the Code.
	 
	(l)	 	“Employee” means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director’s fee by the Company
or an Affiliate shall not be sufficient to constitute “employment” by the
Company or an Affiliate.
	 
	(m)	 	“Exchange Act” means the Securities Exchange Act of 1934, as amended.
	 
	(n)	 	“Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:
	 
	(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 last market trading day
prior to the day of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable.
	 
	(ii)	 	In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.

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	(iii)	 	Prior to the Listing Date, the value of the Common Stock shall be
determined in a manner consistent with Section 260.140.50 of Title 10 of
the California Code of Regulations.
	 
	(o)	 	“Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
	 
	(p)	 	“Listing Date” means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon
notice of issuance as a national market security on an interdealer
quotation system if such securities exchange or interdealer quotation
system has been certified in accordance with the provisions of Section
25100(o) of the California Corporate Securities Law of 1968.
	 
	(q)	 	“Non-Employee Director” means a Director of the Company who either (1) is
not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from
the Company or its parent or a subsidiary 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 as to which
disclosure would be required under Item 404(a) of Regulation S-K and is
not engaged in a business relationship as to which disclosure would be
required under Item 404(b) of Regulation S-K; or (2) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.
	 
	(r)	 	“Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
	 
	(s)	 	“Officer” means (1) before the Listing Date, any person designated by the
Company as an officer and (2) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
	 
	(t)	 	“Option” means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
	 
	(u)	 	“Option Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
	 
	(v)	 	“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.
	 
	(w)	 	“Outside Director” means a Director of the Company who either (1) is not
a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the
Company or an “affiliated corporation” at any time and is not currently
receiving direct or indirect remuneration from the Company or

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	 	 	an “affiliated corporation” for services in any capacity other than as a
Director or (2) is otherwise considered an “outside director” for purposes
of Section 162(m) of the Code.
	 
	(x)	 	“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.
	 
	(y)	 	“Plan” means this Catena Networks, Inc. 1998 Equity Incentive Plan.
	 
	(z)	 	“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.
	 
	(aa)	 	“Securities Act” means the Securities Act of 1933, as amended.
	 
	(bb)	 	“Stock Award” means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
	 
	(cc)	 	“Stock Award Agreement” means a written agreement between the Company and
a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
	 
	(dd)	 	“Ten Percent Stockholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or of any of its Affiliates.

3. Administration.

	(a)	 	Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
	 
	(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 which of the persons eligible under the
Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock Award shall be
granted; 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 stock pursuant to a Stock Award; and the number of shares 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 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 12.
	 
	(iv)	 	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
which are not in conflict with the provisions of the Plan.

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	(c)	 	Delegation to Committee.
	 
	(i)	 	General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
“Committee” shall apply to any person or persons to whom such authority
has been delegated. 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, 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 abolish the
Committee at any time and revest in the Board the administration of the
Plan.
	 
	(ii)	 	Committee Composition when Common Stock is Publicly Traded. At such time
as the Common Stock is publicly traded, in the discretion of the Board, a
Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope
of such authority, the Board or the Committee may (A) delegate to a
committee of one or more members of the Board who are not Outside
Directors the authority to grant Stock Awards to eligible persons who are
either (1) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock
Award or (2) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code and/or (B) delegate to a committee of one
or more members of the Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act.

4. Shares Subject to the Plan.

	(a)	 	Share Reserve. Subject to the provisions of Section 11 in the case of
increases in shares merely reflecting a change in capitalization such as a
stock dividend or stock split, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate twenty million four hundred
seventy-four thousand one hundred sixty-five (20,474,165) 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 (or vested in the case of restricted stock),
the stock not acquired under such Stock Award shall revert to and again
become available for issuance under the Plan. If any Common Stock
acquired pursuant to the exercise of an Option shall for any reason be
repurchased by the Company under an unvested share repurchase option
provided under the Plan, the stock repurchased by the Company under such
repurchase option shall not revert to and again become available for
issuance under the Plan.
	 
	(c)	 	Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
	 
	(d)	 	Share Reserve Limitation. Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock bonus
or similar plan of the Company exceed the applicable

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	 	 	percentage as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of Title 10 of the California Code of Regulations, based
on the shares of the Company which are outstanding at the time the
calculation is made.

5. Eligibility.

	(a)	 	Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
	 
	(b)	 	Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

               Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for the grant of a Nonstatutory Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant.

               Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for a restricted stock award unless the purchase price of the restricted stock
is at least one hundred percent (100%) of the Fair Market Value of the Common
Stock at the date of grant.

	(c)	 	Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be
eligible to be granted Options covering more than seven hundred fifty
thousand (750,000) shares of the Common Stock during any calendar year.
This subsection 5(c) shall not apply prior to the Listing Date and,
following the Listing Date, this subsection 5(c) shall not apply until (1)
the earliest of: (A) the first material modification of the Plan
(including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 4); (B) the issuance of all of
the shares of Common Stock reserved for issuance under the Plan; (C) the
expiration of the Plan; or (D) the first meeting of stockholders at which
Directors of the Company are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the
first registration of an equity security under Section 12 of the Exchange
Act; or (2) such other date required by Section 162(m) of the Code and the
rules and regulations promulgated thereunder.

6. 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
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and a separate certificate or certificates will be issued
for shares purchased on exercise of each type of Option. The provisions of
separate Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

	(a)	 	Term. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
	 
	(b)	 	Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price
of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive
Stock

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	 	 	Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption
or substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
	 
	(c)	 	Exercise Price of a Nonstatutory Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price
of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the
Listing Date shall be not less than eighty-five percent (85%) of the Fair
Market Value of the 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 satisfying the provisions of
Section 424(a) of the Code.
	 
	(d)	 	Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (1) in cash at the time the Option is exercised or (2)
at the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (A) delivery
to the Company of other Common Stock, (B) according to a deferred payment
or other arrangement (which may include, without limiting the generality
of the foregoing, the use of other Common Stock) with the Participant or
(C) in any other form of legal consideration that may be acceptable to the
Board; provided, however, that at any time that the Company is
incorporated in Delaware, payment of the Common Stock’s “par value,” as
defined in the Delaware General Corporation Law, shall not be made by
deferred payment.

               In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

	(e)	 	Transferability of an Incentive Stock Option. An Incentive Stock 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. Notwithstanding the foregoing
provisions of this subsection 6(e), the Optionholder may, by delivering
written notice to the Company, in a form 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.
	 
	(f)	 	Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option granted prior to the Listing Date 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. A Nonstatutory Stock Option granted on or after the Listing
Date shall be transferable to the extent provided in the Option Agreement.
If the Nonstatutory Stock Option does not provide for transferability,
then the Nonstatutory Stock 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.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
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.

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	(g)	 	Vesting Generally. The total number of shares of Common Stock subject to
an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may
be subject to such other terms and conditions on the time or times when it
may 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 subsection 6(g) are subject to
any Option provisions governing the minimum number of shares as to which
an Option may be exercised.
	 
	(h)	 	Minimum Vesting Prior to the Listing Date. Notwithstanding the foregoing
subsection 6(g), Options granted prior to the Listing Date shall provide
for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was
granted, subject to reasonable conditions such as continued employment.
However, in the case of such Options granted to Officers, Directors or
Consultants, the Option may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during
any period established by the Company; for example, the vesting provision
of the Option may provide for vesting of less than twenty percent (20%)
per year of the total number of shares subject to the Option.
	 
	(i)	 	Termination of Continuous Service. In the event 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 it as of the date of
termination) but only within such period of time ending on the date three
months following the termination of the Optionholder’s Continuous Service
(or such longer or shorter period specified in the Option Agreement,
which, for Options granted prior to the Listing Date, shall not be less
than 30 days, unless such termination is for cause), or the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
	 
	(j)	 	Extension of Termination Date. An Optionholder’s Option Agreement may
also 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) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier
of (1) the expiration of the term of the Option set forth in subsection
6(a) or (2) the expiration of a period of three months after the
termination of the Optionholder’s Continuous Service (or such longer or
shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than 30 days, unless
such termination is for cause), during which the exercise of the Option
would not be in violation of such registration requirements.
	 
	(k)	 	Disability of Optionholder. In the event 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 it as of the date of termination),
but only within such period of time ending on the earlier of (1) the date
12 months following such termination (or such longer or shorter period
specified in the Option Agreement, which, for Options granted prior to the
Listing Date, shall not be less than six months) or (2) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination,

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	 	 	the Optionholder does not exercise his or her Option within the time
specified herein, the Option shall terminate.
	 
	(l)	 	Death of Optionholder. In the event (1) an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s death or (2) 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 the 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 pursuant to
subsection 6(e) or 6(f), but only within the period ending on the earlier
of (A) the date 18 months following the date of death (or such longer or
shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than six months) or
(B) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
	 
	(m)	 	Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder’s
Continuous Service terminates to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Subject to the “Repurchase Limitation” in subsection 10(h), any
unvested shares so purchased may be subject to an unvested share
repurchase option in favor of the Company or to any other restriction the
Board determines to be appropriate.
	 
	(n)	 	Right of Repurchase. Subject to the “Repurchase Limitation” in
subsection 10(h), the Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase
all or any part of the vested shares acquired by the Optionholder pursuant
to the exercise of the Option.
	 
	(o)	 	Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal pursuant to the Investor Rights
Agreement dated December 16, 1998 by and between the Company and certain
stockholders and investors therein, following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares
exercised pursuant to the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply with
any applicable provisions of the Bylaws of the Company, as amended from
time to time.
	 
	(p)	 	Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a
“Re-Load Option”) in the event the Optionholder exercises the Option
evidenced by the Option Agreement, in whole or in part, by surrendering
other shares of Common Stock in accordance with this Plan and the terms
and conditions of the Option Agreement. Any such Re-Load Option shall (1)
provide for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of such Option; (2) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (3) have an
exercise price which is equal to 100% of the Fair Market Value of the
Common Stock subject to the Re-Load Option on the date of exercise of the

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	 	 	original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described
for Options under the Plan.

               Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the “Section 162(m) Limitation” on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7. Provisions of Stock Awards other than Options.

	(a)	 	Stock Bonus Awards. Each stock bonus agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may
change from time to time, and the terms and conditions of separate stock
bonus agreements need not be identical, but each stock bonus agreement
shall include (through incorporation of provisions hereof by reference in
the agreement or otherwise) the substance of each of the following
provisions:
	 
	(i)	 	Consideration. A stock bonus shall be awarded in consideration for past
services actually rendered to the Company for its benefit.
	 
	(ii)	 	Vesting. Subject to the “Repurchase Limitation” in subsection 10(h),
shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board.
	 
	(iii)	 	Termination of Participant’s Continuous Service. Subject to the
“Repurchase Limitation” in subsection 10(h), in the event a Participant’s
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of
the date of termination under the terms of the stock bonus agreement.
	 
	(iv)	 	Transferability. For a stock bonus award made before the Listing Date,
rights to acquire shares under the stock bonus agreement shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date,
rights to acquire shares under the stock bonus agreement shall be
transferable by the Participant only upon such terms and conditions as are
set forth in the stock bonus agreement, as the Board shall determine in
its discretion, so long as stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
	 
	(b)	 	Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include
(through incorporation of provisions

10

 

	 	 	hereof by reference in the agreement or otherwise) the substance of each of
the following provisions:
	 
	(i)	 	Purchase Price. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, the purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted
stock awards made prior to the Listing Date, the purchase price shall not
be less than eighty-five percent (85%) of the stock’s Fair Market Value on
the date such award is made or at the time the purchase is consummated.
For restricted stock awards made on or after the Listing Date, the
purchase price shall not be less than eighty-five percent (85%) of the
stock’s Fair Market Value on the date such award is made or at the time
the purchase is consummated.
	 
	(ii)	 	Consideration. The purchase price of stock acquired pursuant to the
restricted stock purchase agreement shall be paid either: (A) in cash at
the time of purchase; (B) at the discretion of the Board, according to a
deferred payment or other arrangement with the Participant; or (C) in any
other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock’s “par value,”
as defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
	 
	(iii)	 	Vesting. Subject to the “Repurchase Limitation” in subsection 10(h),
shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be
determined by the Board.
	 
	(iv)	 	Termination of Participant’s Continuous Service. Subject to the
“Repurchase Limitation” in subsection 10(h), in the event a Participant’s
Continuous Service terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the
restricted stock purchase agreement.
	 
	(v)	 	Transferability. For a restricted stock award made before the Listing
Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of
the Participant only by the Participant. For a restricted stock award
made on or after the Listing Date, rights to acquire shares under the
restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

8. 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

11

 

	 	 	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 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 which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Stock Awards unless and until such
authority is obtained.

9. Use of Proceeds from Stock.

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

10. 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
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 or any
instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant or other holder of Stock Awards 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 (1) the employment of an Employee with or without
notice and with or without cause, (2) the service of a Consultant pursuant
to the terms of such Consultant’s agreement with the Company or an
Affiliate or (3) 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)	 	Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock
with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans
of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
	 
	(e)	 	Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances 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 (2) to give written assurances satisfactory to the
Company

12

 

	 	 	stating that the Participant is acquiring the stock subject to the Stock
Award for the Participant’s own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative
if (iii) the issuance of the shares upon the exercise or acquisition of
stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) 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 stock.
	 
	(f)	 	Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of
stock under 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: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares
from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award;
or (3) delivering to the Company owned and unencumbered shares of the
Common Stock.
	 
	(g)	 	Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to
Participants at least annually. This subsection 10(g) shall not apply to
key Employees whose duties in connection with the Company assure them
access to equivalent information.
	 
	(h)	 	Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the
time of repurchase or at not less than the original purchase price. To
the extent required by Section 260.140.41 and Section 260.140.42 of Title
10 of the California Code of Regulations, any repurchase option contained
in a Stock Award granted prior to the Listing Date to a person who is not
an Officer, Director or Consultant shall be upon the terms described
below:
	 
	(i)	 	Fair Market Value. If the repurchase option gives the Company the right
to repurchase the shares upon termination of employment at not less than
the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (1) the right to repurchase shall
be exercised for cash or cancellation of purchase money indebtedness for
the shares within 90 days of termination of Continuous Service (or in the
case of shares issued upon exercise of Stock Awards after such date of
termination, within 90 days after the date of the exercise) or such longer
period as may be agreed to by the Company and the Participant (for
example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Code regarding “qualified small business stock”) and (2) the right
terminates when the shares become publicly traded.
	 
	(ii)	 	Original Purchase Price. If the repurchase option gives the Company the
right to repurchase the shares upon termination of Continuous Service at
the original purchase price, then (A) the right to repurchase at the
original purchase price shall lapse at the rate of at least 20% of the

13

 

	 	 	shares per year over five years from the date the Stock Award is granted
(without respect to the date the Stock Award was exercised or became
exercisable) and (B) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within 90 days of
termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within 90 days after the
date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding “qualified small
business stock”).

11. Adjustments upon Changes in Stock.

	(a)	 	Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, 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), the Plan will be appropriately adjusted in the class(es) and
maximum number of securities subject to the Plan pursuant to subsection
4(a) and the maximum number of securities subject to award to any person
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price
per share of stock subject to such outstanding Stock Awards. The Board,
the determination of which shall be final, binding and conclusive, shall
make such adjustments. (The conversion of any convertible securities of
the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)
	 
	(b)	 	Dissolution or Liquidation. In the event of a dissolution or liquidation
of the Company, then such Stock Awards shall be terminated if not
exercised (if applicable) prior to such event.
	 
	(c)	 	Asset Sale, Merger, Consolidation or Reverse Merger. In the event of (1)
a sale of substantially all of the assets of the Company, (2) a merger or
consolidation in which the Company is not the surviving corporation or (3)
a reverse merger in which the Company is the surviving corporation but the
            shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the
Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(c)) for those outstanding under the Plan.
In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock
Awards may be exercised) shall be accelerated in full, and the Stock
Awards shall terminate if not exercised (if applicable) at or prior to
such event. With respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.

14

 

12. Amendment of the Plan and Stock Awards.

	(a)	 	Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy the requirements of Section 422 of the
Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.
	 
	(b)	 	Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
	 
	(c)	 	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 or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.
	 
	(d)	 	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 (1) the Company requests the consent of the Participant and (2) the
Participant consents in writing.
	 
	(e)	 	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; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (1) the Company requests the consent of the Participant
and (2) the Participant consents in writing.

13. 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 anniversary of the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. 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 Participant.

14. Effective Date of Plan.

               The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve months before or after the date the Plan
is adopted by the Board.

15exv10w39

 

EXHIBIT 10.39

INTERNET PHOTONICS, INC.

AMENDED AND RESTATED

2000 CORPORATE STOCK OPTION PLAN

1 GENERAL

1.1 Purpose.

The purposes of this Amended and Restated 2000 Corporate Stock Option Plan (the
“Plan”) are to: (1) closely associate the interests of the employees of
Internet Photonics, Inc., a Delaware corporation (the “Company”) and its
Subsidiaries and Affiliates with the shareholders by reinforcing the
relationship between participants’ rewards and shareholder gains; (2) provide
employees and other interested persons with an equity ownership in the Company
commensurate with Company performance, as reflected in increased shareholder
value; (3) maintain competitive compensation levels for employees; (4) provide
an incentive to employees for continuous employment with the Company; and (5)
offer a means to deliver equity-based rewards to non-employee directors,
consultants, advisors and service providers. This Plan amends and restates in
its entirety the Internet Photonics, Inc. 2000 Corporate Stock Option Plan
adopted on October 1, 2000, as modified on March 6, 2001, May 18, 2001 and
September 30, 2001.

1.2 Administration.

	1.2.1	 	The Plan shall be administered by the Board of Directors of the Company
(the “Board”) or a committee of individuals appointed by the Board (the
“Committee”), as constituted from time to time. The Committee shall
consist of at least one member of the Board. Notwithstanding the
foregoing, all references in this Plan to the “Committee” shall mean the
Board if no Committee has been appointed. At any time after any of the
common stock of the Company (the “Common Stock”) is registered pursuant to
the Securities Act of 1933, as amended, the Committee members will not
participate in the Plan and for a period of one year after service on the
Committee, Committee members shall not be eligible for selection as
persons to whom stock options may be granted under the Plan.
	 
	1.2.2	 	The Committee shall have the authority, in its sole discretion and from time to time to:
	 
	1.2.2.1	 	designate the employees, classes of employees or other persons eligible to participate in the Plan;
	 
	1.2.2.2	 	grant awards provided in the Plan in such form and amount as the Committee shall determine;
	 
	1.2.2.3	 	impose such limitations, restrictions and conditions upon any such
award as the Committee shall deem appropriate; and
	 
	1.2.2.4	 	interpret the Plan, adopt, amend and rescind rules and regulations
relating to the Plan, and make all other determinations and take all other
action necessary or advisable for the implementation and administration of
the Plan.
	 
	1.2.3	 	Decisions and determinations of the Committee on all matters relating to
the Plan shall be in its sole discretion and shall be conclusive. No
member of the Committee shall be liable for any action taken or decision
made in good faith relating to the Plan or any award thereunder.

1.3 Eligibility for Participation.

Participants in the Plan shall be selected by the Committee and may be any
employees, officers, directors (whether or not also employees), consultants,
advisors or service providers of, or to, the Company and its Subsidiaries and
Affiliates. In making this selection and in determining the form and amount of
awards, the Committee shall consider any factors deemed relevant, including the
individual’s functions, responsibilities, value of services to the Company and
past and potential contributions to the Company’s profitability, success and
sound growth.

1.4 Types of Awards Under Plan.

Awards under the Plan may be in the form of Incentive Stock Options, as
described in Article II, or in the form of Nonqualified Stock Options, as
described in Article III, provided that Incentive Stock Options may not be
granted in tandem with Nonqualified Stock Options. Incentive Stock Options and
Nonqualified Stock Options are collectively referred to herein as an “Option”
or as “Options.” The Committee may take into consideration a recipient’s
individual circumstances in determining whether to grant an Incentive Stock
Option or a Nonqualified Stock Option. The granting of an Option shall not
entitle a person to, nor disqualify such person from, participation in any
other grant of Options or other awards.

1.5 Aggregate Limitation on Awards.

	1.5.1.1.1	 	Shares of stock which may be issued under the Plan shall be
authorized but unissued or treasury shares, or partly each, of Common
Stock. The maximum number of shares of Common Stock which may be issued
under the Plan shall be 195,468,897 (including the 430,728 shares of
Common Stock issued prior to June 1, 2002 pursuant to the exercise of
Options previously granted hereunder), subject to adjustment as provided
in Section 4.10.

 

 

	 	 	From time to time, the Board (with shareholder approval, as and when
required by applicable law) may adjust the maximum number of shares of
Common Stock which may be issued under the Plan.
	 
	1.5.1.1.2	 	For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan, all the shares issued (including
the shares, if any, withheld for tax withholding requirements) shall be
counted.
	 
	1.5.1.1.3	 	Any shares of Common Stock subject to an Option which for any reason
is terminated unexercised, or expires, shall again be available for
issuance under the Plan.
	 
	1.5.1.1.4	 	If any Option is exercised by delivering previously owned shares in
payment of the option price, the number of shares so delivered to the
Company shall not again be available for purposes of the Plan. If any
Option is canceled by mutual consent or terminates or expires for any
reason without having been exercised in full, the number of shares subject
thereto and not issued thereunder shall again be available for purposes of
the Plan.

1.6 Effective Date and Term of Plan.

The Plan has been adopted and implemented by the Board with a term to be
effective beginning October 1, 2000, the date of Board approval of the Plan.
The term of this Plan shall be for ten (10) years from the effective date. No
Options or other awards may be granted under this Plan subsequent to September
30, 2010.

2 INCENTIVE STOCK OPTIONS

2.1 Award of Incentive Stock Options.

The Committee may, from time to time and subject to the provisions of the Plan
and such other terms and conditions as the Committee may prescribe, grant to
any participant in the Plan who is an employee of the Company or its
Subsidiaries one or more “incentive stock options” (“Incentive Stock Options”)
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”) to purchase the number of shares of Common Stock allotted by the
Committee. The date of grant of an Incentive Stock Option shall be the date
selected by the Committee as of which the Committee allots a specific number of
shares to a participant pursuant to the Plan.

2.2 Incentive Stock Option Agreements.

The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option agreement, executed by the Company and the optionee,
stating the number of shares of Common Stock subject to the Incentive Stock
Option evidenced thereby, and such other terms and conditions, in such form as
the Committee may from time to time determine. The provisions of such
agreements, or amendments thereto, need not be identical.

2.3 Incentive Stock Option Price.

The option price per share of Common Stock deliverable upon the exercise of an
Incentive Stock Option shall be not less than 100% of the fair market value of
a share of Common Stock on the date the Incentive Stock Option is granted,
except that in the case of an Incentive Stock Option granted to an employee
who, immediately prior to such grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (a “Ten Percent Employee”), the option price shall not be less than one
hundred ten percent (110%) of such fair market value on the date of grant. For
purposes of this Section 2.03, an individual (i) shall be considered as owning
not only shares of stock owned individually but also all shares of stock that
are at the time owned, directly or indirectly, by or for the spouse, ancestors,
lineal descendants and brothers and sisters (whether by the whole or half
blood) of such individual and (ii) shall be considered as owning
proportionately any shares owned, directly or indirectly, by or for any
corporation, partnership, estate or trust in which such individual is a
shareholder, partner or beneficiary.

2.4 Term and Exercise.

Each Incentive Stock Option shall vest and become exercisable at such time or
times and/or upon the occurrence of such event or events as provided by the
Committee. Unless otherwise determined by the Committee and reflected in the
Incentive Stock Option agreement or an amendment thereto, a stock option shall
be vested and exercisable from its date of grant. Unless a shorter period is
provided by the Committee or another Section of this Plan, each Incentive Stock
Option may be exercised during a period of no more than ten years from the date
of grant thereof, or five years in the case of an Incentive Stock Option
granted to a Ten Percent Employee. No Incentive Stock Option shall be
exercised after the expiration of its option term. An Incentive Stock Option
to the extent exercisable at any time may be exercised in whole or in part.

2.5 Maximum Amount of Incentive Stock Option Grant.

Subject to the possible exercise of discretion contemplated in the last
sentence of this Section 2.05, the aggregate fair market value (determined on
the date the option is granted) of Common Stock subject to an Incentive Stock
Option granted to an optionee by the Committee that becomes first exercisable
in any calendar year under all plans of the corporation employing such
employee, any parent or subsidiary corporation of such corporation and any
predecessor corporation of any such corporation shall not exceed $100,000. If
the date on which one or more of such Incentive Stock Options could first be
exercised would be accelerated pursuant to any provision of the Plan or any
Incentive Stock Option agreement, and the acceleration of such exercise date
would result in a violation of the restriction set

2

 

forth in the preceding sentence, then, notwithstanding any such provision, but
subject to the provisions of the next succeeding sentence, the exercise dates
of such Incentive Stock Options shall be accelerated only to the date or dates,
if any, that do not result in a violation of such restriction and, in such
event, the exercise dates of the Incentive Stock Options with the lowest option
prices shall be accelerated to the earliest such dates. The Committee may, in
its discretion, authorize the acceleration of the exercise date of one or more
Incentive Stock Options even if such acceleration would violate the $100,000
restriction set forth in the first sentence of this paragraph and even if such
Incentive Stock Options are thereby converted in whole or in part to
Nonqualified Stock Options.

2.6 Death of Optionee.

	2.6.1	 	Upon the death of the optionee, any Incentive Stock Option exercisable
on the date of death may be exercised by the optionee’s estate or by a
person who acquires the right to exercise such Incentive Stock Option by
bequest or inheritance or by reason of the death of the optionee during
such exercise period as may be set by the Committee, provided that such
exercise occurs prior to the expiration date of the Incentive Stock Option
or within one year after the date of the optionee’s death, whichever is
the shorter period.
	 
	2.6.2	 	The provisions of this Section 2.06 shall apply notwithstanding the fact
that the optionee’s employment may have terminated prior to death,
provided that also in such case the Incentive Stock Option may only be
exercised to the extent exercisable on the date of death.

2.7 Termination for Retirement or Disability.

Upon the termination of the optionee’s employment by reason of permanent
disability (as determined under any employment agreement executed and delivered
between the optionee and the Company, or, if no such employment agreement
exists, then within the meaning of Section 22(e)(3) of the Code) or retirement
under any retirement plan of the Company (as each is determined by the
Committee), the optionee may, within a period set by the Committee of up to one
year from the date of such termination of employment, exercise any Incentive
Stock Options to the extent such Incentive Stock Options were exercisable at
the date of such termination of employment.

2.8 Termination for Other Reasons.

Except as specifically provided in Sections 2.06 and 2.07, or except as
otherwise determined by the Committee, all Incentive Stock Options shall
terminate at such time as may be specified in the Incentive Stock Option
agreement.

2.9 Manner of Payment.

Each Incentive Stock Option Agreement shall set forth the procedure governing
the exercise of the Incentive Stock Option granted thereunder, and shall
provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the optionee shall pay to the Company, in full, the option
price for such shares with cash or, if the Committee determines upon the grant
of an Incentive Stock Option, with the proceeds of a loan from the Company;
provided that such loan shall be evidenced by a promissory note containing
terms and conditions deemed appropriate by the Committee, except that any loan
made with respect to an Incentive Stock Option shall bear interest at a rate
such that no portion of the principal amount of the loan shall be treated as
unstated or imputed interest or result in original issue discount under
Treasury Regulation § 1.421-7(e) and Sections 483 or 1272-1275 of the Code, or
under corresponding provisions of any future Internal Revenue laws or
regulations; provided further, that upon consummation of an initial public
offering of the Common Stock pursuant to a registration statement under the
Securities Act of 1933, as amended, if and to the extent permitted by the
Committee, payment may be made with previously owned Common Stock. If the
option price is paid in cash, the exercise of the Incentive Stock Option shall
not be deemed to occur and no shares of Common Stock will be issued until the
Company has received full payment in cash (including check, bank draft or money
order) for the option price. The date of exercise of an Option shall be
determined under procedures established by the Committee.

2.10 Restrictions on Certain Shares.

As soon as practicable after the date of exercise, the Company shall deliver to
the optionee a certificate or certificates for such shares of Common Stock.
The optionee shall become a shareholder of the Company with respect to Common
Stock represented by share certificates so issued and as such shall be fully
entitled to receive dividends, to vote and to exercise all other rights of a
shareholder. Notwithstanding the foregoing, a number of shares of Common Stock
received upon the exercise of the Options shall be subject to certain
restrictions. The number of shares subject to the restrictions shall be equal
to the total number of shares received in the exercise of the Options minus:
(i) the number of unrestricted shares received from the optionee upon exercise
which have a fair market value on the date of the Option exercise equal to all,
or that portion of the option price paid in shares for shares received; and
(ii) the number of shares which have a fair market value on the date of the
Option exercise equal to the applicable federal, state and local withholding
tax on the total Option exercise and any brokerage commission or interest
charges, if applicable, to the exercise. The restrictions on these shares of
Common Stock, each of which may be set forth in separate agreements or
documents, shall be as follows:

	2.10.1	 	The shares of Common Stock acquired hereunder may be the subject of a
buy-back agreement in the form determined by the Committee and the
obligation of the Company to issue shares hereunder shall be contingent
upon the optionee’s execution of such buy-back agreement. In addition, and
subject to any restrictions which may arise by any separate

3

 

	 	 	shareholder agreements or other similar obligations, unless otherwise
consented or agreed to by the Committee, prior to the consummation of an
initial public offering of the Company’s Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended, the
optionee shall be prohibited from the sale, exchange, transfer, pledge,
hypothecation, gift or other disposition of such shares of Common Stock
until the earlier of the expiration of the Option term or termination of
the optionee’s employment for any reason.
	 
	2.10.2	 	The restrictions shall apply to any new, additional or different
securities the optionee may become entitled to receive with respect to
such shares by virtue of a stock split or stock dividend or any other
change in the corporate or capital structure of the Company, and to any
permitted transferee.
	 
	2.10.3	 	Until such time as the restrictions hereunder lapse, the share
certificate representing such shares shall contain a restrictive legend
evidencing said restrictions. Alternatively, the optionee shall be
required to deposit the share certificates with the Company or its agent,
endorsed in blank or accompanied by a duly executed irrevocable stock
power or other instrument of transfer.
	 
	2.10.4	 	By accepting an Incentive Stock Option granted under the Plan, each
optionee agrees to notify the Company in writing within five days after
such optionee makes a Disqualifying Disposition (as described in Sections
421, 422 and 424 of the Code and regulations thereunder) of any stock
acquired pursuant to the exercise of Incentive Stock Option granted under
the Plan. A Disqualifying Disposition is generally any disposition
occurring on or before the later of (a) the date two (2) years following
the date the Incentive Stock Option was granted, or (b) the date one year
following the date the Incentive Stock Option was exercised.

3 NONQUALIFIED STOCK OPTIONS

3.1 Award of Nonqualified Stock Options.

The Committee may, from time to time and subject to the provisions of the Plan
and such other terms and conditions as the Committee may prescribe, grant to
any participant in the Plan one or more “nonqualified stock options”
(“Nonqualified Stock Options”) (i.e., stock options which do not qualify
under Sections 422 or 423 of the Code) to purchase the number of shares of
Common Stock allotted by the Committee. Nonqualified Stock Options may be
granted to any employee, officer or director (whether or not also an employee),
consultant or advisor of, or provider of services to, the Company, its
Subsidiaries and affiliates. The date of grant of a Nonqualified Stock Option
shall be the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan.

3.2 Nonqualified Stock Option Agreements.

The grant of a Nonqualified Stock Option shall be evidenced by a written
Nonqualified Stock Option agreement, executed by the Company and the optionee,
stating the number of shares of Common Stock subject to the Nonqualified Stock
Option evidenced thereby, and in such form as the Committee may from time to
time determine. The provisions of such agreements, or amendments thereto, need
not be identical.

3.3 Option Price; Term and Exercise; Expiration.

The option price per share of Common Stock deliverable upon the exercise of a
Nonqualified Stock Option shall not be less than 100% of the fair market value
of a share of Common Stock on the date the Nonqualified Stock Option is
granted.

3.4 Term and Exercise.

Each Nonqualified Stock Option shall vest and become exercisable at such time
or times, and/or upon the occurrence of such event or events as provided by the
Committee. Unless otherwise determined by the Committee and reflected in the
Nonqualified Stock Option agreement or an amendment thereto, a stock option
shall be vested and exercisable from its date of grant. Unless a shorter
period is provided by the Committee or another Section of this Plan, each
Nonqualified Stock Option may be exercised during a period of no more than ten
years from the date of grant thereof. The Committee, in its discretion, may
specify certain events, including but not limited to those set forth in
Sections 2.06, 2.07 and 2.08, which may extend or terminate the option term and
which may be applicable to Nonqualified Stock Options issued pursuant to this
Plan. No Nonqualified Stock Option shall be exercised after the expiration of
its option term. A Nonqualified Stock Option to the extent exercisable at any
time may be exercised in whole or in part.

3.5 Manner of Payment.

Each Nonqualified Stock Option Agreement shall set forth the procedure
governing the exercise of the Nonqualified Stock Option granted thereunder, and
shall provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the optionee shall pay to the Company, in full, the option
price for such shares with cash or, subject to the prior approval of the
Committee, with the proceeds of a loan from the Company; provided that such
loan shall be evidenced by a promissory note containing terms and conditions
deemed appropriate by the Committee; provided further, that upon consummation
of an initial public offering of the Common Stock pursuant to a registration
statement under the Securities Act of 1933, as amended, if and to the extent
permitted by the Committee, payment may be made with previously owned Common
Stock. If the option price is paid in cash, the exercise of the Nonqualified
Stock Option shall not be deemed to occur and no shares of Common Stock will be
issued until the Company has received full payment in cash (including check,
bank draft or money order) for the option price. The date of exercise
of an Option shall be determined under procedures established by the Committee.

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3.6 Restrictions on Certain Shares.

As soon as practical after the date of exercise, the Company shall deliver to
the optionee a certificate or certificates for such shares of Common Stock.
The optionee shall become a shareholder of the Company with respect to Common
Stock represented by share certificates so issued and as such shall be fully
entitled to receive dividends, to vote and to exercise all other rights of a
shareholder. Notwithstanding the foregoing, the shares issued shall be subject
to certain restrictions and limitations, as may be determined by the Company or
the Committee, to the extent provided in and consistent with Section 2.10.

4 MISCELLANEOUS

4.1 General Restriction.

Each award under the Plan shall be subject to the requirement that, if at any
time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or Federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
optionee of an award with respect to the disposition of shares of Common Stock,
is necessary or desirable as a condition of, or in connection with, the
granting of such award or the issue or purchase of shares of Common Stock
thereunder, such award may not be consummated in whole or in part and no shares
shall be issued unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.

4.2 Non-Assignability.

No award under the Plan shall be assignable or transferable by the recipient
thereof, except by will or by the laws of descent and distribution. During the
life of the recipient, such award shall be exercisable only by such person or,
in the case of the disability of the recipient, by such person’s guardian or
legal representative.

4.3 Withholding Taxes.

Upon the exercise of a Stock Option or transfer of shares of Common Stock under
the Plan, the Company shall have the right to require the optionee to remit to
the Company an amount sufficient to satisfy any Federal, state, local or
foreign income and employment withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. Alternatively,
the Company may issue or transfer such shares of Common Stock net of the number
of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Common Stock shall be valued on the
date the withholding obligation is incurred.

4.4 Right to Terminate Employment.

Nothing in the Plan or in any agreement entered into pursuant to the Plan shall
confer upon any participant the right to continue in the employment of or other
service relationship with the Company or affect any right which the Company may
have to terminate the employment of or other service relationship with such
participant, or of the Board or shareholders to elect and remove non-employee
directors.

4.5 Non-Uniform Determinations.

The Committee’s determinations under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, awards under the Plan, whether
or not such persons are similarly situated.

4.6 Rights as a Shareholder.

The recipient of any award under the Plan shall have no rights as a shareholder
with respect thereto unless and until certificates for shares of Common Stock
are issued to the recipient.

4.7 Definitions.

In this Plan the following definitions shall apply:

	4.7.1	 	“Subsidiary” means any corporation of which, at the time more than 50%
of the shares entitled to vote generally in an election of directors are
owned directly or indirectly by the Company or any subsidiary thereof.
	 
	4.7.2	 	“Affiliate” means any person or entity which directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with the Company.
	 
	4.7.3	 	“Fair market value” as of any date and in respect of any share of Common
Stock means the fair market value of shares of Common Stock as determined
by the Committee in such manner as it may in good faith deem appropriate.
In no event shall the fair market value of any share of Common Stock be
less than its par value; provided further that fair market value may not,
in the case of an Incentive Stock Option, be less than the fair market
value as required by Section 422 of the Code. Notwithstanding the
foregoing ability of the Committee to determine the fair market value of
the Common Stock, if the Common Stock is listed on any such stock exchange
listed below, the fair market value of the Common Stock shall be the mean
between the following prices, as applicable, for the date as of which fair
market value is to be determined as quoted in The Wall Street
Journal (or in such other reliable publication as the Committee, in
its discretion, may determine to rely upon): (a) if the Common Stock is
listed on the New York Stock Exchange, the highest and lowest sales prices
per share of the Common Stock as quoted in the NYSE-Composite Transactions
listing for such

5

 

	 	 	date, (b) if the Common Stock is not listed
on such exchange, the highest and lowest
sales prices per share of Common Stock for
such date on (or on any composite index
including) the principal United States
securities exchange registered under the
Securities Exchange Act of 1934 on which
the Common Stock is listed, or (c) if the
Common Stock is not listed on any such
exchange, the highest and lowest sales
prices per share of Common Stock for such
date on the National Association of
Securities Dealers Automated Quotations
System or any successor system then in use
(“NASDAQ”). If there are no sale price
quotations for any particular date as of
which fair market value is to be
determined, the Committee shall use such
average of sale price quotations available
as the Committee shall in good faith
determine are applicable to the fair market
value of the Common Stock.

4.8 Leaves of Absence.

The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave
of absence taken by the recipient of any award. Without limiting the generality
of the foregoing, the Committee shall be entitled to determine (i) whether or
not any such leave of absence shall constitute a termination of employment
within the meaning of the Plan and (ii) the impact, if any, of any such leave
of absence on awards under the Plan theretofore made to any recipient who takes
such leave of absence.

4.9 Newly Eligible Employees.

The Committee shall be entitled to make such rules, regulations, determinations
and awards as it deems appropriate in respect of any employee who becomes
eligible to participate in the Plan or any portion thereof after the
commencement of an award or incentive period.

4.10 Adjustments.

If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock then
subject to any outstanding Options and the number of shares of Common Stock
which may be issued under the Plan but are not then subject to outstanding
Options shall be adjusted by adding thereto the number of shares of Common
Stock which would have been distributable thereon if such stock had been
outstanding on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution.
If the outstanding shares of Common Stock shall be changed into or exchangeable
for a different number or kind of shares of stock or other securities of the
Company or another corporation, or cash or other property, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of Common Stock subject to any then outstanding Option and for each share
of Common Stock which may be issued under the Plan but which is not then
subject to any outstanding Option, the number and kind of shares of stock or
other securities (and in the case of outstanding Options, the cash or other
property) into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchangeable.

In case of any adjustment or substitution as provided for in this Section 4.10,
the aggregate option price for all shares subject to each then outstanding
Option prior to such adjustment or substitution shall be the aggregate option
price for all shares of stock or other securities (including any fraction),
cash or other property to which such shares shall have been adjusted or which
shall have been substituted for such shares. Any new option price per share or
other unit shall be carried to at least three decimal places with the last
decimal place rounded upwards to the nearest whole number.
No adjustment or substitution provided for in this Section 4.10 shall require
the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.

If any such adjustment or substitution provided for in this Section 4.10
requires the approval of shareholders in order to enable the Company to grant
Incentive Stock Options, then no such adjustment or substitution shall be made
without the required shareholder approval. Notwithstanding the foregoing, in
the case of Incentive Stock Options, if the effect of any such adjustment or
substitution would be to cause the Option to fail to continue to qualify as an
Incentive Stock Option or to cause a modification, extension or renewal of such
Option within the meaning of Section 424 of the Code, the Committee may elect
that such adjustment or substitution not be made but rather shall use
reasonable efforts to effect such other adjustment of each then outstanding
Option as the Committee, in its discretion, shall deem equitable and which will
not result in any disqualification, modification, extension or renewal (within
the meaning of Section 424 of the Code) of such Incentive Stock Option.

4.11 Amendment of the Plan.

The right to amend the Plan at any time and from time to time and the right to
revoke or terminate the Plan are hereby specifically reserved to the Board;
provided that no amendment of the Plan shall be made without shareholder
approval (1) if the effect of the amendment is (a) to make any changes in the
class of employees eligible to receive Incentive Stock Options under the Plan,
(b) to increase the number of shares with respect to which Incentive Stock
Options may be granted under the Plan, (c) to extend the term of the Plan or
(2) if shareholder approval of the amendment is at the time required by the
rules of any stock exchange on which the Common Stock may then be listed or
under applicable law. No alteration, amendment, revocation or termination of
the Plan shall, without the written consent of the holder of an Option under
the Plan, adversely affect the rights of such holder with respect thereto.

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CERTIFICATE

     The undersigned, Steven M. Waszak, Chief Financial Officer of Internet
Photonics, Inc. (the “Company”) hereby certifies that the Internet
Photonics, Inc. Amended and Restated 2000 Corporate Stock Option Plan was
approved by the Board of Directors of the Company on June 30, 2002 and the
stockholders of the Company on July 1, 2002.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the 1st day of July 2002.

	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven Waszak
	

	 	 	 	
 
	 

	 	Name:
	 	Steven Waszak
	 

	 	Title:
	 	Chief Financial Officer

7

 

ADDENDUM

Effective upon the filing of the Fourth Amended and Restated Certificate of
Incorporation of Internet Photonics, Inc. (the “Company”) with the
Secretary of State if the State of Delaware on August 20, 2002, pursuant to
which the Company is effecting a one for twenty reverse stock split, the text
in Section 1.05(a) of the Company’s Amended and Restated 2000 Corporate Stock
Option Plan which reads “195,468,897 (including the 430,728 shares of Common
Stock issued prior to June 1, 2002 pursuant to the exercise of Options
previously granted hereunder)” shall be properly read as follows “9,773,442
(including 21,534 shares of Common Stock issued prior to June 1, 2002 pursuant
to the exercise of Options previously granted hereunder (which number of shares
has been adjusted to give effect to the reverse stock split))”.

	 	 	 
	By:

	 	/s/ Steven M. Waszak
	

	 	

	

	 	Steven M. Waszak
	

	 	Corporate Secretary

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SECOND ADDENDUM

Effective upon the filing of the Fifth Amended and Restated Certificate of
Incorporation of Internet Photonics, Inc. (the “Company”) with the
Secretary of State of the State of Delaware on September 26, 2003, the text in
Section 1.05(a) of the Company’s Amended and Restated 2000 Corporate Stock
Option Plan, as amended by the Addendum, which reads “9,773,442 (including
21,534 shares of Common Stock issued prior to June 1, 2002 pursuant to the
exercise of Options previously granted hereunder (which number of shares has
been adjusted to give effect to the reverse stock split))” shall properly read
as follows: “14,189,415 (including the shares of Common Stock issued pursuant
to the exercise of Options previously granted hereunder)”.

	 	 	 
	By:

	 	/s/ Steven M. Waszak
	

	 	

	

	 	Steven M. Waszak
	

	 	Corporate Secretary

9

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